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 March 31, 2019

☐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 001-38884

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, PA	17201-0819
(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of classSymbolName of exchange on which registered

Common stock FRAFNasdaq Stock Market, Inc.

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 every Interactive Data File required to be submitted 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 such files). Yes ☒  No ☐

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

Large accelerated filer  ☐     Accelerated filer  ☒     Non-accelerated filer  ☐Smaller reporting company  ☒       Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

There were 4,389,414 outstanding shares of the Registrant’s common stock as of April  30, 2019.

INDEX

Part I - FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets as of March  31, 2019 and December 31, 2018 (unaudited)	1
	Consolidated Statements of Income for the ThreeMonths ended March  31, 2019	2
	and 2018 (unaudited)
	Consolidated Statements of Comprehensive Income for the ThreeMonths ended	3
	March  31, 2019 and 2018 (unaudited)
	Consolidated Statements of Changes in Shareholders’ Equity for the Three Months	3
	ended March31, 2019and 2018 (unaudited)
	Consolidated Statements of Cash Flows for the ThreeMonths ended March  31, 2019	4
	and 2018 (unaudited)
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2	Management’s Discussion and Analysis ofResults of Operations and Financial Condition	24
Item 3	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4	Controls and Procedures	40
Part II - OTHER INFORMATION
Item 1	Legal Proceedings	41
Item 1A	Risk Factors	41
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3	Defaults Upon Senior Securities	42
Item 4	Mine Safety Disclosures	42
Item 5	Other Information	43
Item 6	Exhibits	43
SIGNATURE PAGE		44

Part I FINANCIAL INFORMATION

Item 1 Financial Statements

Consolidated Balance Sheets

(Dollars in thousands, except share and per share data)(unaudited)	March 31,		December 31,
	2019		2018
Assets
Cash and due from banks	$	11,771	$	16,957
Interest-bearing deposits in other banks		35,262		36,000
Total cash and cash equivalents		47,033		52,957
Debt securities available for sale, at fair value		127,881		131,472
Equity securities		377		374
Restricted stock		452		452
Loans held for sale		195		118
Loans		980,466		973,375
Allowance for loan losses		(12,681)		(12,415)
Net Loans		967,785		960,960
Premises and equipment, net		13,347		13,521
Right of use asset		6,099		—
Bank owned life insurance		23,623		23,496
Goodwill		9,016		9,016
Other real estate owned		2,684		2,684
Deferred tax asset, net		5,700		5,992
Other assets		8,768		8,545
Total assets	$	1,212,960	$	1,209,587
Liabilities
Deposits
Non-interest bearing checking	$	192,004	$	197,417
Money management, savings and interest checking		795,411		823,619
Time		89,076		61,593
Total deposits		1,076,491		1,082,629
Lease liability		6,113		—
Other liabilities		8,865		8,562
Total liabilities		1,091,469		1,091,191
Shareholders' equity
Common stock, $1 par value per share,15,000,000 shares authorized with
4,708,349 shares issued and 4,410,880 shares outstanding at March 31, 2019 and
4,701,367 shares issued and 4,408,761 shares outstanding at December 31, 2018		4,708		4,701
Capital stock without par value, 5,000,000 shares authorized with no
shares issued and outstanding		—		—
Additional paid-in capital		41,841		41,530
Retained earnings		85,991		83,946
Accumulated other comprehensive loss		(5,281)		(6,380)
Treasury stock, 297,469 shares at March 31, 2019 and 292,606 shares at
December 31, 2018, at cost		(5,768)		(5,401)
Total shareholders' equity		121,491		118,396
Total liabilities and shareholders' equity	$	1,212,960	$	1,209,587

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

1

Consolidated Statements of Income

	For the Three Months Ended
(Dollars in thousands, except per share data) (unaudited)	March 31,
	2019		2018
Interest income
Loans, including fees	$	11,009	$	9,577
Interest and dividends on investments:
Taxable interest		540		513
Tax exempt interest		338		274
Dividend income		5		6
Deposits and obligations of other banks		97		118
Total interest income		11,989		10,488
Interest expense
Deposits		1,624		795
Short-term borrowings		36		—
Total interest expense		1,660		795
Net interest income		10,329		9,693
Provision for loan losses		399		200
Net interest income after provision for loan losses		9,930		9,493
Noninterest income
Investment and trust services fees		1,452		1,397
Loan service charges		203		231
Deposit service charges and fees		545		574
Other service charges and fees		353		333
Debit card income		402		385
Increase in cash surrender value of life insurance		127		128
Debt securities gains, net		24		—
Change in fair value of equity securities		3		45
Other		56		55
Total noninterest income		3,165		3,148
Noninterest Expense
Salaries and employee benefits		5,442		4,986
Net occupancy		856		815
Advertising		402		427
Legal and professional		430		329
Data processing		705		596
Pennsylvania bank shares tax		243		239
FDIC Insurance		65		129
ATM/debit card processing		258		238
Foreclosed real estate		17		14
Telecommunications		105		109
Other		889		766
Total noninterest expense		9,412		8,648
Income before federal income taxes		3,683		3,993
Federal income tax expense		446		491
Net income	$	3,237	$	3,502
Per share
Basic earnings per share	$	0.73	$	0.80
Diluted earnings per share	$	0.73	$	0.80
Cash dividends declared	$	0.27	$	0.24

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

2

Consolidated Statements of Comprehensive Income

	For the Three Months Ended
	March 31,
(Dollars in thousands) (unaudited)	2019		2018
Net Income	$	3,237	$	3,502
Debt Securities:
Unrealized gains (losses) arising during the period		1,414		(1,043)
Reclassification adjustment included in net income (1)		(24)		—
Net unrealized gains (losses)		1,390		(1,043)
Tax effect		(291)		262
Net of tax amount		1,099		(781)
Total other comprehensive income (loss)		1,099		(781)
Total Comprehensive Income	$	4,336	$	2,721
Reclassification adjustment / Statement line item	Tax  expense (benefit)
(1) Debt securities gains, net	$	5	$	—

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

Consolidated Statements of Changes in Shareholders' Equity

For the three months ended March 31, 2019 and 2018

							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, 2018	$	4,701	$	41,530	$	83,946	$	(6,380)	$	(5,401)	$	118,396
Net income		—		—		3,237		—		—		3,237
Other comprehensive income		—		—		—		1,099		—		1,099
Cash dividends declared, $.27 per share		—		—		(1,192)		—		—		(1,192)
Acquisition of 15,163 shares of treasury stock		—		—		—		—		(560)		(560)
Treasury shares issued under employee stock purchase plan, 150 shares		—		2		—		—		3		5
Treasury shares issued under dividend reinvestment plan, 10,150 shares		—		161		—		—		190		351
Common stock issued under incentive stock option plan, 6,982 shares		7		148		—		—		—		155
Balance at March 31, 2019	$	4,708	$	41,841	$	85,991	$	(5,281)	$	(5,768)	$	121,491

Balance at December 31, 2017	$	4,689	$	40,396	$	82,218	$	(6,028)	$	(6,131)	$	115,144
Cumulative adjustment for fair value of equity securities		—		—		201		(201)		—		—
Net income		—		—		3,502		—		—		3,502
Other comprehensive (loss)		—		—		—		(781)		—		(781)
Cash dividends declared, $.24 per share		—		—		(1,045)		—		—		(1,045)
Acquisition of 2,605 shares of treasury stock		—		—		—		—		(88)		(88)
Treasury shares issued under employee stock purchase plan, 200 shares		—		2		—		—		4		6
Treasury shares issued under dividend reinvestment plan, 5,911 shares		—		97		—		—		109		206
Common stock issued under incentive stock option plan, 6,518 shares		7		142		—		—		—		149
Stock option compensation expense		—		31		—		—		—		31
Balance at March 31, 2018	$	4,696	$	40,668	$	84,876	$	(7,010)	$	(6,106)	$	117,124

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

3

Consolidated Statements of Cash Flows

	Three Months Ended March 31,
	2019		2018
(Dollars in thousands) (unaudited)
Cash flows from operating activities
Net income	$	3,237	$	3,502
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		338		333
Net amortization of loans and investment securities		409		438
Provision for loan losses		399		200
Change in fair value of equity securities		(3)		(45)
Debt securities gains, net		(24)		—
Loans originated for sale		(6,467)		(2,527)
Proceeds from sale of loans		6,390		2,969
Write-down of other real estate owned		—		6
Loss on sale of premises		—		17
Increase in cash surrender value of life insurance		(127)		(128)
Stock option compensation		—		31
Contribution to pension plan		—		(1,000)
Increase in other assets		(50)		(448)
Increase in other liabilities		118		148
Net cash provided by operating activities		4,220		3,496
Cash flows from investing activities
Proceeds from sales and calls of investment securities available for sale		3,876		—
Proceeds from maturities and pay-downs of securities available for sale		6,084		5,726
Purchase of investment securities available for sale		(5,344)		(13,380)
Net (increase) decrease in loans		(7,245)		1,031
Capital expenditures		(136)		(107)
Proceeds from sale of other assets		—		117
Net cash used in investing activities		(2,765)		(6,613)
Cash flows from financing activities
Net decrease in demand deposits, interest-bearing checking, and savings accounts		(33,621)		(3,636)
Net increase (decrease) in time deposits		27,483		(9,084)
Dividends paid		(1,192)		(1,045)
Purchase of Treasury shares		(560)		—
Cash received from option exercises		160		206
Treasury shares under dividend reinvestment plan		351		155
Net cash used in financing activities		(7,379)		(13,404)
Decrease in cash and cash equivalents		(5,924)		(16,521)
Cash and cash equivalents as of January 1		52,957		58,603
Cash and cash equivalents as of March 31	$	47,033	$	42,082
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest on deposits and other borrowed funds	$	1,562	$	792
Noncash Activities
Recognition of Operating Lease Right-of-Use Asset	$	6,236	$	—
Recognition of Operating Lease Liability	$	6,236	$	—

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

4

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 March 31, 2019, 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 2018 Annual Report on Form 10-K.  The consolidated results of operations for thethreemonth period ended March 31, 2019 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, 2018 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
	March 31,
(Dollars and shares in thousands, except per share data)	2019		2018
Weighted average shares outstanding (basic)		4,412		4,359
Impact of common stock equivalents		21		28
Weighted average shares outstanding (diluted)		4,433		4,387
Anti-dilutive options excluded from calculation		—		—
Net income	$	3,237	$	3,502
Basic earnings per share	$	0.73	$	0.80
Diluted earnings per share	$	0.73	$	0.80

5

Note 2. Recent Accounting Pronouncements

The following accounting pronouncements have recently been adopted or will be adopted in future periods.  For information on accounting pronouncements previously adopted, please refer to the Corporation’s report on Form 10-K for the year-ended December 31, 2018.

Standard	Description	Effective Date	Effect on the financial statements or other significant matters
ASU 2016-02, Leases (Topic 842) and all subsequently issued amendments	In February 2016, the FASB issued ASU 2016-02, "Leases (Subtopic 842)."  This ASU requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date.  Lessor accounting remains largely unchanged under the new guidance.  FASB subsequently issued various amendments that provided implementation guidance designed to provide entities with relief from the costs of implementing certain aspects of the new standard.  From the lessee's perspective, the new standard requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases.  Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for lessees. ASU 2016-02 and all subsequent amendments are effective for fiscal years, including interim periods, beginning after December 15, 2018.  Early adoption of ASU 2016-02 is permitted.	January 1, 2019	The Corporation adopted ASU 2016-02, "Leases (Topic 842)" and all subsequent amendments on January 1, 2019 using the modified retrospective approach, and it did not have a material effect on its consolidated results of operations. Adoption of the new standard resulted in the recognition of a lease liability and a right-of-use asset of $6.2 million without a cumulative effect adjustment to retained earnings.  The Corporation did not restate any prior period results. The Corporation adopted the package of practical expedients offered in ASU 2016-02 and therefore, existing lease classifications were not reassessed, expired or existing contracts were not reassessed for a lease, and the initial direct costs for any existing leases were not reassessed.  In addition to the package of practical expedients, the Corporation also utilized other practical expedients offered: (1) the hindsight expedient which allows entities to use hindsight to determine the lease term was not adopted, (2) leases, for all underlying asset classes, with a term less than 12 months and no purchase option were excluded, (3) the option to not separate lease and non-lease components and account for them as a single component was adopted for real estate leases, and (4) the option to not apply lease accounting to existing land easements was adopted.  See Note 7 for additional information on the adoption of the new standard.
ASU 2018-13, Disclosure Framework (Topic 820)	This guidance eliminates, adds and modifies certain disclosure requirements for fair value measurements.  Among the changes, entities will no longer be required to disclose the amount of and reason for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.	January 1, 2019	The Corporation adopted the standard on January 1, 2019 and it did not have a material effect on its consolidated results of operations.
ASU 2018-15, Accounting for Implementation Costs in a Cloud Computing Arrangement (Topic 350)	This ASU required an entity in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.  Capitalized implementation costs should be presented in the same line item on the balance sheet as amounts prepaid for the hosted service, if any (generally as an "other asset").  The capitalized costs will be amortized over the term of the hosting arrangement, with the amortization expense being presented in the same income statement line item as the fees paid for the hosted service.  The ASU is effective January 1, 2020 with early adoption permitted.	January 1, 2020	The Corporation adopted the standard on January 1, 2019 and it did not have a material effect on its consolidated results of operations.

6

ASU 2017-04, Goodwill (Topic 350)	This guidance, among other things, removes step 2 of the goodwill impairment test thus eliminating the need to determine the fair value of individual assets and liabilities of the reporting unit.  Upon adoption of this standard, goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  This may result in more or less impairment being recognized than under the current guidance. Early adoption is permitted for any impairment tests performed after January 1, 2017, applied prospectively.	January 1, 2020	The Corporation early adopted the ASU in the fourth quarter of 2018 with the completion of the 2018 impairment analysis.  The Corporation is still evaluating the effect of the standard on its consolidated financial statements.
ASU 2018-14, Disclosure Framework (Topic 715): Changes to the Disclosure Requirements for Defined Benefit Plans	This ASU makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020; early adoption is permitted.	January 1, 2020	The Corporation will adopt the provisions of the ASU on January 1, 2020.  As the ASU only revises disclosure requirements, it is not expected to have a material effect on the consolidated financial statements.
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	This standard requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model).  Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.  The ASU replaces the current accounting model for purchased credit impaired loans and debt securities.  The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis.  However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis.  The subsequent accounting for PCD financial assets is the same expected loss model described above.	January 1, 2020	We have formed an implementation team led by the Corporation's Risk Management function. The team is reviewing the requirements of the ASU and evaluating methods and models for implementation.  The new standard will result in earlier recognition of additions to the allowance for loan losses and possibly a larger allowance for loan loss balance with a corresponding increase in the provision for loan losses in results of operations; however, the Corporation is continuing to evaluate the impact of the pending adoption of the new standard on its consolidated financial statements.  A third-party vendor has been selected to assist with the CECL calculations and the implementation process has started.  The Corporation expects to be able to run the CECL model in test mode starting in the second quarter of 2019.

Note 3. Accumulated Other Comprehensive Loss

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

	March 31,		December 31,
	2019		2018
(Dollars in thousands)
Net unrealized (losses) gains on debt securities	$	290	$	(1,100)
Tax effect		(61)		230
Net of tax amount		229		(870)
Accumulated pension adjustment		(6,975)		(6,975)
Tax effect		1,465		1,465
Net of tax amount		(5,510)		(5,510)
Total accumulated other comprehensive loss	$	(5,281)	$	(6,380)

7

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of March 31, 2019 and December 31, 2018are as follows:

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
March 31, 2019	cost		gains		losses		value
U.S. Government and Agency securities	$	9,634	$	24	$	(40)	$	9,618
Municipal securities		63,820		845		(108)		64,557
Trust preferred securities		4,080		—		(180)		3,900
Agency mortgage-backed securities		42,818		135		(364)		42,589
Private-label mortgage-backed securities		448		30		—		478
Asset-backed securities		6,791		—		(52)		6,739
	$	127,591	$	1,034	$	(744)	$	127,881

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2018	cost		gains		losses		value
U.S. Government and Agency securities	$	9,120	$	21	$	(65)	$	9,076
Municipal securities		67,811		320		(484)		67,647
Trust preferred securities		4,074		—		(316)		3,758
Agency mortgage-backed securities		45,241		65		(648)		44,658
Private-label mortgage-backed securities		457		31		—		488
Asset-backed securities		5,869		—		(24)		5,845
	$	132,572	$	437	$	(1,537)	$	131,472

At March 31, 2019and December 31, 2018, the fair value of AFS securities pledged to secure public funds and trust depositstotaled $76.7 million and  $84.6 million, respectively.

The amortized cost and estimated fair value of debt securities at March 31, 2019, 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	$	21,030	$	21,084
Due after one year through five years		25,764		25,839
Due after five years through ten years		35,173		35,467
Due after ten years		2,358		2,424
		84,325		84,814
Mortgage-backed securities		43,266		43,067
	$	127,591	$	127,881

The composition of the net realized gains on AFS securities for the threemonths ended are as follows:

	For the Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Gross gains realized	$	33	$	—
Gross losses realized		(9)		—
Net gains realized	$	24	$	—

Impairment:

The AFS securities portfolio contained 125 securities with $57.7 million of temporarily impaired fair value and $744 thousand in unrealized losses at March 31, 2019. The total unrealized loss position has decreased $793 thousand since year-end 2018. 

8

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. The impairment identified on debt securities and subject to assessment at March 31, 2019, 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 AFS portfolio, 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 March 31, 2019 and December 31, 2018:

	March 31, 2019
	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	$	—	$	—	—	$	4,777	$	(40)	14	$	4,777	$	(40)	14
Municipal securities		238		—	1		12,377		(108)	21		12,615		(108)	22
Trust preferred securities		1,166		(33)	2		2,734		(147)	3		3,900		(180)	5
Agency mortgage-backed securities		895		(1)	4		28,746		(363)	71		29,641		(364)	75
Asset-backed securities		6,721		(51)	7		18		(1)	2		6,739		(52)	9
Total temporarily impaired   securities	$	9,020	$	(85)	14	$	48,652	$	(659)	111	$	57,672	$	(744)	125

	December 31, 2018
	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	$	2,071	$	(6)	2	$	5,175	$	(59)	14	$	7,246	$	(65)	16
Municipal securities		5,832		(12)	10		25,091		(472)	42		30,923		(484)	52
Trust preferred securities		2,008		(159)	3		1,750		(157)	2		3,758		(316)	5
Agency mortgage-backed securities		7,687		(46)	16		30,511		(602)	74		38,198		(648)	90
Asset-backed securities		5,826		(22)	6		19		(2)	2		5,845		(24)	8
Total temporarily impaired   securities	$	23,424	$	(245)	37	$	62,546	$	(1,292)	134	$	85,970	$	(1,537)	171

The following table represents the cumulative credit losses on AFS securities recognized in earnings for:

	Three Months Ended
(Dollars in thousands)	March 31,
	2019		2018
Balance of cumulative credit-related OTTI at January 1	$	272	$	595
Additions for credit-related OTTI not previously recognized		—		—
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 March 31	$	272	$	595

Equity securities at Fair Value

The Corporation owns one equity investment. At March 31, 2019 and December 31, 2018, this investment was reported at fair value of $377 thousand and $374 thousand, respectively, with changes in value reported through income. 

9

Restricted Stock at Cost

The Bank held $452 thousand of restricted stock at March 31, 2019.  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. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. 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.

Note 5. 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. 

10

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

	March 31,		December 31,
(Dollars in thousands)	2019		2018
Residential Real Estate 1-4 Family
Consumer first liens	$	89,212	$	89,673
Commercial first lien		58,210		59,227
Total first liens		147,422		148,900
Consumer junior liens and lines of credit		41,831		42,504
Commercial junior liens and lines of credit		4,859		4,716
Total junior liens and lines of credit		46,690		47,220
Total residential real estate 1-4 family		194,112		196,120
Residential real estate - construction
Consumer		2,750		1,667
Commercial		11,231		8,558
Total residential real estate construction		13,981		10,225
Commercial real estate		497,974		487,980
Commercial		269,243		274,054
Total commercial		767,217		762,034
Consumer		5,156		4,996
		980,466		973,375
Less: Allowance for loan losses		(12,681)		(12,415)
Net Loans	$	967,785	$	960,960
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	125	$	123
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	787,055	$	772,564
Federal Reserve Bank		33,645		34,160
	$	820,700	$	806,724

Note 6. Loan Quality and Allowance for Loan Losses

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

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415
Charge-offs		(33)		(1)		(3)		(63)		(61)		(26)		—		(187)
Recoveries		1		—		—		1		42		10		—		54
Provision		28		—		47		270		70		18		(34)		399
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681
ALL at December 31, 2017	$	1,060	$	330	$	224	$	6,526	$	2,110	$	105	$	1,437	$	11,792
Charge-offs		-		—		—		—		—		(26)		—		(26)
Recoveries		1		—		—		—		8		14		—		23
Provision		(18)		(10)		36		172		(45)		11		54		200
ALL at March 31, 2018	$	1,043	$	320	$	260	$	6,698	$	2,073	$	104	$	1,491	$	11,989

11

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 March 31, 2019and December 31, 2018:

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
March 31, 2019
Loans evaluated for ALL:
Individually	$	401	$	—	$	652	$	13,247	$	—	$	—	$	—	$	14,300
Collectively		147,021		46,690		13,329		484,727		269,243		5,156		—		966,166
Total	$	147,422	$	46,690	$	13,981	$	497,974	$	269,243	$	5,156	$	—	$	980,466
ALL established for   loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		487		132		152		5,906		4,562		72		1,370		12,681
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681
December 31, 2018
Loans evaluated for ALL:
Individually	$	405	$	—	$	455	$	10,099	$	181	$	—	$	—	$	11,140
Collectively		148,495		47,220		9,770		477,881		273,873		4,996		—		962,235
Total	$	148,900	$	47,220	$	10,225	$	487,980	$	274,054	$	4,996	$	—	$	973,375
ALL established for   loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		491		133		108		5,698		4,511		70		1,404		12,415
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415

12

The following table shows additional information about those loans considered to be impaired at March 31, 2019and December 31, 2018:

	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal		Related
March 31, 2019	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	889	$	889	$	—	$	—	$	—
Junior liens and lines of credit		44		44		—		—		—
Total		933		933		—		—		—
Residential real estate - construction		652		729		—		—		—
Commercial real estate		13,446		14,022		—		—		—
Commercial		129		146		—		—		—
Total	$	15,160	$	15,830	$	—	$	—	$	—

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	871	$	958	$	—	$	—	$	—
Junior liens and lines of credit		49		49		—		—		—
Total		920		1,007		—		—		—
Residential real estate - construction		455		531		—		—		—
Commercial real estate		10,236		10,808		—		—		—
Commercial		315		9,763		—		—		—
Total	$	11,926	$	22,109	$	—	$	—	$	—

The following table shows the average of impaired loans and related interest income for the threemonthsended March 31, 2019and 2018:

	Three Months Ended				Three Months Ended
	March 31, 2019				March 31, 2018
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	893	$	11	$	805	$	11
Junior liens and lines of credit		44		—		—		—
Total		937		11		805		11
Residential real estate - construction		653		—		466		—
Commercial real estate		13,494		102		10,994		105
Commercial		129		—		185		—
Total	$	15,213	$	113	$	12,450	$	116

13

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
March 31, 2019
Residential Real Estate 1-4 Family
First liens	$	146,866	$	309	$	30	$	137	$	476	$	80	$	147,422
Junior liens and lines of credit		46,588		29		29		18		76		26		46,690
Total		193,454		338		59		155		552		106		194,112
Residential real estate - construction		13,329		—		—		—		—		652		13,981
Commercial real estate		491,462		438		1,331		—		1,769		4,743		497,974
Commercial		268,527		273		262		52		587		129		269,243
Consumer		5,135		21		—		—		21		—		5,156
Total	$	971,907	$	1,070	$	1,652	$	207	$	2,929	$	5,630	$	980,466

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	148,183	$	322	$	202	$	113	$	637	$	80	$	148,900
Junior liens and lines of credit		47,040		131		—		26		157		23		47,220
Total		195,223		453		202		139		794		103		196,120
Residential real estate - construction		9,572		—		198		—		198		455		10,225
Commercial real estate		481,774		1,343		3,323		113		4,779		1,427		487,980
Commercial		273,534		65		40		100		205		315		274,054
Consumer		4,933		46		12		5		63		—		4,996
Total	$	965,036	$	1,907	$	3,775	$	357	$	6,039	$	2,300	$	973,375

The following table reports the risk rating for those loans in the portfolio that are assigned an individual risk rating.  Consumer purpose loans are assigned a rating of either pass or substandard based on the performance status of the loans.  Substandard consumer loans are comprised of loans 90 days or more past due and still accruing, and nonaccrual loans.  Commercial purpose loans may be assigned any rating in accordance with the Bank’s internal risk rating system.

	Pass		Special Mention		Substandard		Doubtful
(Dollars in thousands)	(1-5)		(6)		(7)		(8)		Total
March 31, 2019
Residential Real Estate 1-4 Family
First liens	$	146,986	$	—	$	436	$	—	$	147,422
Junior liens and lines of credit		46,646		—		44		—		46,690
Total		193,632		—		480		—		194,112
Residential real estate - construction		13,329		—		652		—		13,981
Commercial real estate		490,057		655		7,262		—		497,974
Commercial		268,345		—		898		—		269,243
Consumer		5,156		—		—		—		5,156
Total	$	970,519	$	655	$	9,292	$	—	$	980,466

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	148,453	$	—	$	447	$	—	$	148,900
Junior liens and lines of credit		47,171		—		49		—		47,220
Total		195,624		—		496		—		196,120
Residential real estate - construction		9,572		—		653		—		10,225
Commercial real estate		479,969		660		7,351		—		487,980
Commercial		272,959		—		1,095		—		274,054
Consumer		4,991		—		5		—		4,996
Total	$	963,115	$	660	$	9,600	$	—	$	973,375

14

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

								Troubled Debt Restructurings
								Within the Last 12 Months
								That Have Defaulted
(Dollars in thousands)	Troubled Debt Restructurings							On Modified Terms
	Number of	Recorded						Number of	Recorded
	Contracts	Investment		Performing*		Nonperforming*		Contracts	Investment
March 31, 2019
Residential real estate - construction	1	$	454	$	—	$	454	—	$	—
Residential real estate	4		673		673		—	—		—
Commercial real estate	11		9,982		8,703		1,279	—		—
Total	16	$	11,109	$	9,376	$	1,733	—	$	—
December 31, 2018
Residential real estate - construction	1	$	455	$	—	$	455	—	$	—
Residential real estate	4		678		678		—	—		—
Commercial real estate	11		10,099		8,809		1,290	—		—
Total	16	$	11,232	$	9,487	$	1,745	—	$	—

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

There were no new TDR loans during 2019 and 2018.

Note 7. Leases

The Corporation adopted ASU 2016-02 “Leases (Topic 842)” and all subsequent amendments on January 1, 2019 using the modified retrospective method.  The Corporation has elected the option to apply the new standard as of January 1, 2019 without restatement of any prior period results. Adoption of the new standard resulted in the recognition of a lease liability and a right-of-use asset of $6.2million without a cumulative effect adjustment to retained earnings.   

The Corporation leases various assets in the course of its operations that are subject to recognition under the new standard. The Corporation considers all of its leases to be operating leases and it has no finance leases. The leased assets are comprised of equipment; and buildings and land (collectively real estate).  The equipment leases are shorter-term than the real estate leases, and generally have a fixed payment over a defined term without renewal options. Certain equipment leases have purchase options and it was determined the option was not reasonably certain to be exercised.  The real estate leases are longer-term and may contain renewal options after the initial term, but none of the real estate leases contain a purchase option. The renewal options on real estate leases were reviewed and if it was determined the option was reasonably certain to be renewed, the option term was considered in the determination of the lease liability.  There is only one real estate lease with a variable payment based on an index included in the lease liability. None of the leases contain any restrictive covenants and there are no significant leases that have not yet commenced.  The discount rate used to determine the lease liability is based on the Bank’s fully secured borrowing rate from the Federal Home Loan Bank for a term similar to the lease term.  Adoption of the new standard did not affect the Corporation’s status as a “well-capitalized” institution.  The Corporation has one real estate lease to a related party with a liability value of $1.8 million.  Operating lease expense is included in net occupancy expense in the consolidated statements of income. See Note 1 for additional information on the adoption of the new standard.

Lease costs for the three months ended March 31, 2019 were as follows:

	Three Months Ended
(Dollars in thousands)	March 31, 2019
Operating lease cost	$	188
Short-term lease cost		6
Variable lease cost		11
Total lease cost	$	205

15

Cash paid for amounts included in the measurement of lease liabilities and the weighted-average remaining lease term and discount rate were as follows:

	Three Months Ended
(Dollars in thousands)	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	123
Weighted-average remaining lease term		13.7 years
Weighted-average discount rate		3.54%

As of March 31, 2019, the future minimum payments for operating leases having initial or remaining lease terms in excess of one year were as follows:

(Dollars in thousands)
2019	$	706
2020		664
2021		651
2022		543
2023		539
2024 and beyond		4,790
Total undiscounted cash flows		7,893
Discounted cash flows		(1,780)
Total lease liability	$	6,113

Note 8. Other Real Estate Owned

Changes in other real estate owned were as follows:

	Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Balance at beginning of the period	$	2,684	$	2,598
Additions		—		—
Proceeds from dispositions		—		—
Loss on sales, net		—		—
Valuation adjustment		—		(6)
Balance at the end of the period	$	2,684	$	2,592

Note 9. Pension

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

	Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Components of net periodic cost:
Service cost	$	80	$	90
Interest cost		158		138
Expected return on plan assets		(270)		(279)
Recognized net actuarial loss		152		176
Net period cost	$	120	$	125

The Bank expects its pension expense to decrease to approximately $420 thousand in 2019 compared to $500 thousand in 2018, due primarily to decreases in service costs and recognized net actuarial losses.  The service cost component of pension expense is in the salaries and employee benefits line on the income statement. All other cost components are in the other expense line on the income statement.

16

Note 10.  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.The Corporation uses the exit price notion to measure the fair value of financial instruments.

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 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. 

17

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

	March 31, 2019
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	47,033	$	47,033	$	47,033	$	—	$	—
Restricted stock		452		452		—		452		—
Loans held for sale		195		195				195
Net loans		967,785		952,024		—		—		952,024
Accrued interest receivable		3,963		3,963		—		3,963		—
Financial assets, available for sale
Debt securities		127,881		127,881		—		127,881		—
Financial assets, fair value
Equity securities		377		377		377		—		—
Financial liabilities:
Deposits	$	1,076,491	$	1,076,572	$	—	$	1,076,572	$	—
Accrued interest payable		291		291		—		291		—
	December 31, 2018
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	52,957	$	52,957	$	52,957	$	—	$	—
Restricted stock		452		452		—		452		—
Loans held for sale		118		118		—		118		—
Net loans		960,960		941,930		—		—		941,930
Accrued interest receivable		4,103		4,103		—		4,103		—
Financial assets, available for sale
Debt securities		131,472		131,472		—		131,472		—
Financial assets, fair value
Equity securities		374		374		374		—		—
Financial liabilities:
Deposits	$	1,082,629	$	1,082,425	$	—	$	1,082,425	$	—
Accrued interest payable		193		193		—		193		—

18

Recurring Fair Value Measurements

For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2019and December 31, 2018 are as follows:

(Dollars in Thousands	Fair Value at March 31, 2019
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	377	$	—	$	—	$	377
Available for sale:
U.S. Government and Agency securities		—		9,618		—		9,618
Municipal securities		—		64,557		—		64,557
Trust Preferred Securities		—		3,900		—		3,900
Agency mortgage-backed securities		—		42,589		—		42,589
Private-label mortgage-backed securities		—		478		—		478
Asset-backed securities		—		6,739		—		6,739
Total assets	$	377	$	127,881	$	—	$	128,258

(Dollars in Thousands)	Fair Value at December 31, 2018
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	374	$	—	$	—	$	374
Available for sale:
U.S. Government and Agency securities		—		9,076		—		9,076
Municipal securities		—		67,647		—		67,647
Trust Preferred Securities		—		3,758		—		3,758
Agency mortgage-backed securities		—		44,658		—		44,658
Private-label mortgage-backed securities		—		488		—		488
Asset-backed securities		—		5,845		—		5,845
Total assets	$	374	$	131,472	$	—	$	131,846

Investment securities:  Level 1 securities represent equity securities that are valued using quoted market prices form 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.

Nonrecurring Fair Value Measurements

The Corporation did not record any assets at fair value for which measurement of the fair value was made on a nonrecurring basis at March 31, 2019.  For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2018was as follows:

(Dollars in Thousands)	Fair Value at December 31, 2018
Asset  Description	Level 1		Level 2		Level 3		Total
Other real estate owned (1)	$	—	$	—	$	71	$	71
Total assets	$	—	$	—	$	71	$	71

(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.

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.

The Corporation did not record any liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis at March 31, 2019. 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 March 31, 2019.

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

(Dollars in Thousands)
December 31, 2018		Fair Value	Valuation Technique	Unobservable Input	Weighted Average
Other real estate owned (1)	$	71	Appraisal	Cost to sell	8% (8%)
(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.

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 bank holding companies and U.S banks, generally referred to as “Basel III.” The Basel III standards were effective for the Corporation and the Bank, effective January 1, 2015 (subject to a phase-in period for certain provisions).  Basel III imposes significantly higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place.  The capital ratios to be considered “well capitalized” under Basel III are: (1) Common Equity Tier 1(CET1) of 6.5%, (2) Tier 1 Leverage of 5%, (3)Tier 1 Risk-Based Capital of 8%, and (4) Total Risk-Based Capital of 10%.  The CET1 ratio is a new capital ratio under Basel III and the Tier 1 risk-based capital ratio of 8% has been increased from 6%. The rules also include changes in the risk weights of certain assets to better reflect credit and other risk exposures. In addition, a capital conservation buffer will be phased-in beginning January 1, 2016 at 0.625%,  1.25% for 2017, 1.875% for 2018 and 2.50% for 2019 and thereafter.  The capital conservation buffer will be applicable to all of the capital ratios except for the Tier1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement.  The Bank’s capital conservation buffer at March 31, 2019 was 6.95% (total risk-based capital 14.95% less 8.00%) compared to the 2019 regulatory buffer of 2.50%.  Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions.  As of March 31, 2019, the Bank was “well capitalized’ under the Basel III requirements.

The following table summarizes regulatory capital information as of March 31, 2019 and December 31, 2018for the Corporation and the Bank:

			Regulatory Ratios
			Adequately	Well
	March 31,	December 31,	Capitalized	Capitalized
(Dollars in thousands)	2019	2018	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	13.78%	13.96%	4.500%	N/A
Farmers & Merchants Trust Company	13.69%	13.80%	4.500%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	13.78%	13.96%	6.000%	N/A
Farmers & Merchants Trust Company	13.69%	13.80%	6.000%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	15.04%	15.21%	8.000%	N/A
Farmers & Merchants Trust Company	14.95%	15.06%	8.000%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	9.88%	9.78%	4.000%	N/A
Farmers & Merchants Trust Company	9.82%	9.68%	4.000%	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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Note 12. Revenue Recognition

The Corporation adopted ASC 606 on January 1, 2018 using the modified retrospective approach applied to all contracts initiated on or after the effective date, and for contracts which have remaining obligations as of the effective date. Results for the reporting period beginning January 1, 2018 are presented under ASC 606 while the prior period results continue to be reported under legacy GAAP. Adoption of the standard did not have a material effect on any of the reported periods. The Corporation did not record a cumulative effect adjustment to the beginning retained earnings balance as of January 1, 2018 from the adoption of ASC 606 as it was determined the transition adjustment was immaterial to Corporation’s consolidated financial statements.

All of the Corporation’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income as presented in our consolidated statements of income. Revenue generating activities that fall within the scope of ASC 606 are described as follows:

Investment and Trust Service Fees - these represent fees from wealth management (assets under management), fees from the management and settlement of estates and commissions from the sale of investment and insurance products.

· Asset management fees are generally assessed based on a tiered fee schedule, based on the value of assets under management, and are recognized monthly when the service obligation is completed. Fees recognized were$1.3 million for the first quarters of 2019 and 2018.

· Fees for estate management services are based on the estimated fair value of the estate. These fees are generally recognized monthly over an 18 month period that Management has determined to represent the average time to fulfill the performance obligations of the contract. Management has the discretion to adjust this time period as needed based upon the nature and complexity of an individual estate. Fees recognized were $70 thousand for the first quarter of 2019, compared to $61 thousand for the first quarter of 2018.

· Commissions from the sale of investment and insurance products are recognized upon the completion of the transaction.  Fees recognized were $68 thousand for the first quarters of 2019 and 2018.

Loan Service Charges – these represent fees on loans for services or charges that occur after the loan has been booked, for example, late payment fees. These also include fees for mortgages settled for a third party mortgage company. All of these fees are transactional in nature and are recognized upon completion of the transaction which represents the performance obligation.

Deposit Service Charges and Fees – these represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to stop payment fees and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fee are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly.

Debit Card Income – this represents interchange fees from cardholder transactions conducted through the card payment network. Cardholders use the debit card to conduct point-of-sale transactions that produce interchange fees. The fees are transaction based and the fee is recognized with the processing of the transaction.  These fees are reported net of cardholder rewards.

Other Service Charges and Fees – these are comprised primarily of merchant card fees, credit card fees, ATM surcharges and interchange fees and wire transfer fees. Merchant card fees represent fees the Bank earns from a third party for enrolling a customer in the processor’s program. Credit card fees represent a fee earned by the Bank for a successful referral to a card-issuing company. ATM surcharges and interchange fees are the result of Bank customers conducting ATM transactions that generate fee income and are processed through multiple card networks. All of these fees are transaction based and are recognized at the time of the transaction.

Gains/Losses on the Sale of Other Real Estate – these are recognized when control of the property transfers to the buyer.

Increases in the cash surrender value of life insurance and security transactions are not within the scope of ASC 606.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset).  A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values.  Consideration is often received immediately or shortly after the Company satisfies its performance obligation and

21

revenue is recognized.  The Company does not typically enter into longer-term revenue contracts with customers, and therefore, does not experience significant contract balances. 

Contract Acquisition Costs

The Corporation expenses all contract acquisition costs as costs are incurred.

1Note 13.  Commitments and Contingencies

In the normal course of business, the Bank is a party to financial instruments that are not reflected in the accompanying financial statements and are commonly referred to as off-balance-sheet instruments.  These financial instruments are entered into primarily to meet the financing needs of the Bank’s customers and include commitments to extend credit and standby letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the consolidated balance sheet.

The Corporation’s exposure to credit loss in the event of nonperformance by other parties to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments.

The Bank had the following outstanding commitments for the periods presented:

	March 31,		December 31,
(Dollars in thousands)	2019		2018
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit	$	231,555	$	216,913
Consumer commitments to extend credit (secured)		50,950		49,221
Consumer commitments to extend credit (unsecured)		5,506		5,605
	$	288,011	$	271,739
Standby letters of credit	$	25,306	$	25,429

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses with the exception of home equity lines and personal lines of credit and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Bank evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank, is based on Management’s credit evaluation of the counterparty.  Collateral for most commercial commitments varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties.  Collateral for secured consumer commitments consists of liens on residential real estate.

Standby letters of credit are instruments issued by the Bank, which guarantee the beneficiary payment by the Bank in the event of default by the Bank’s customer in the nonperformance of an obligation or service.  Most standby letters of credit are extended for one-year periods.  Generally, the credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank holds collateral supporting those commitments for which collateral is deemed necessary primarily in the form of certificates of deposit and liens on real estate. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.  As of June 30, 2018, the Bank established a $2.4 million allowance against letters of credit issued in connection with a commercial borrower that declared bankruptcy in the second quarter of 2018 which remains at March 31, 2019.  Except for the liability recorded for standby letters of credit, liabilities for credit loss associated with off-balance sheet commitments were not material at March 31, 2019 and December 31, 2018.

Most of the Bank’s business activity is with customers located within its primary market and does not involve any significant concentrations of credit to any one entity or industry.

Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation.

We establish accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probably and the amount of the loss can be reasonably estimated.  When we are able to do so, we also determine estimates of possible losses, whether in excess of any accrued liability or where there is no accrued liability.

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These assessments are based on our analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties.  As new information is obtained, we may change our assessments and, as a result, take or adjust the amounts of our accruals and change our estimates of possible losses or ranges of possible losses.  Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts that may be accrued or included in estimates of possible losses or ranges of possible losses may not represent the actual loss to the Corporation from any legal proceeding.  Our exposure and ultimate losses may be higher, possibly significantly higher, than amounts we may accrue or amounts we may estimate.

In management’s opinion, we do not anticipate, at the present time, that the ultimate aggregate liability, if any, arising out of all litigation to which the Corporation is a party at this time will have a material adverse effect on our financial position.  We cannot now determine, however, whether or not any claim asserted against us will have a material adverse effect on our results of operations in any future reporting period, which will depend on, amount other things, the amount of loss resulting from the claim and the amount of income otherwise reported for the reporting period.  Thus, at March 31, 2019, we are unable to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss with respect to such other matters and, accordingly, have not yet established any specific accrual for such other matters.

No material proceedings are pending or are known to be threatened or contemplated against us by governmental authorities.

23

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

For the Three Months Ended March  31, 2019and 2018

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.  We caution readers not to place undue reliance on these forward-looking statements.  They only reflect management’s analysis as of this date.  The Corporation does not revise or update these forward-looking statements to reflect events or changed circumstances.

Critical Accounting Policies

Management has identified critical accounting policies for the Corporation.  These policies are particularly sensitive, requiring significant judgements, estimates and assumptions to be made by Management. There were no changes to the critical accounting policies disclosed in the 2018 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 2018 Annual Report on Form 10-K for a more detailed disclosure of the critical accounting policies.

Results of Operations

Year-to-Date Summary

Reported net income of $3.2 million for the first quarter

· Net interest income increased $636 thousand quarter over quarter due to the growth in interest income from the loan portfolio that outpaced higher interest expense.  

· The provision for loan losses increased $199 thousand quarter over quarter due primarily to loan growth.  

· Noninterest income increased $17 thousand quarter over quarter primarily from asset management fees in the Bank’s Investment and Trust Services department, foreign ATM fees and fees from the merchant card program.

· Noninterest expense increased $764 thousand quarter over quarter primarily from increases in salaries and benefits.

Total assets were $1.213 billion at March  31, 2019, anincrease of $3.4 million from the 2018 year-end balance of $1.210 billion

· The loan portfolio increased approximately $7 million due to loan growth in commercial real estate loans for hotels and motels and land development. 

· A lease liability and a right-of-use asset of $6.2 million were recognized during the quarter.

· Deposits decreased $6.1 million in the first quarter,  primarily in municipal money management accounts.  

· Shareholders’ equityincreased $3.1 milliondue to net income of $3.2 million and $1.1 million increase in other comprehensive income for the quarter, offset bythe first quarter dividend of $1.2 million. 24

Key performance ratios as of, or for thethree months ended March 31, 2019 and 2018and the year ended December 31, 2018 are listed below:

	March 31,		December 31,		March 31,
	2019		2018		2018
(Dollars in thousands, except per share)
Balance Sheet Highlights
Total assets	$	1,212,960	$	1,209,587	$	1,168,542
Investment and equity securities		128,258		131,846		133,732
Loans, net		967,785		960,960		930,664
Deposits		1,076,491		1,082,629		1,034,461
Shareholders' equity		121,491		118,396		117,124
Summary of Operations
Interest income	$	11,989	$	44,868	$	10,488
Interest expense		1,660		4,214		795
Net interest income		10,329		40,654		9,693
Provision for loan losses		399		9,954		200
Net interest income after provision for loan losses		9,930		30,700		9,493
Noninterest income		3,165		12,629		3,148
Noninterest expense		9,412		37,369		8,648
Income before income taxes		3,683		5,960		3,993
Federal income tax (benefit) expense		446		(165)		491
Net income	$	3,237	$	6,125	$	3,502
Performance Measurements
Return on average assets*		1.08%		0.52%		1.21%
Return on average equity*		10.90%		5.34%		12.17%
Return on average tangible equity (1)*		11.79%		5.80%		13.20%
Efficiency ratio (1)		67.93%		68.27%		65.68%
Net interest margin*		3.86%		3.78%		3.72%
Shareholders' Value (per common share)
Diluted earnings per share	$	0.73	$	1.39	$	0.80
Basic earnings per share		0.73		1.40		0.80
Regular cash dividends declared		0.27		1.05		0.24
Book value		27.54		26.85		26.83
Tangible book value (1)		25.50		24.81		24.77
Market value		36.00		31.50		36.54
Market value/book value ratio		130.72%		117.32%		136.19%
Price/earnings multiple*		12.33		22.66		11.42
Current quarter dividend yield		3.00%		3.43%		2.63%
Dividend payout ratio year-to-date		36.82%		75.07%		29.84%
Safety and Soundness
Risk-based capital ratio (Total)		15.04%		15.21%		15.55%
Leverage ratio (Tier 1)		9.88%		9.78%		9.95%
Common equity ratio (Tier 1)		13.78%		13.96%		14.30%
Nonperforming loans/gross loans		0.60%		0.27%		0.29%
Nonperforming assets/total assets		0.70%		0.44%		0.46%
Allowance for loan losses as a % of loans		1.29%		1.28%		1.27%
Net loans charged-off/average loans*		0.05%		0.97%		0.00%
Assets under Management
Trust assets under management (fair value)	$	753,086	$	684,825	$	684,648
Held at third-party brokers (fair value)		127,515		122,213		152,728

*Year-to-date annualized

(1)   See the section titled “GAAP versus Non-GAAP Presentation” that follows.

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GAAP versus non-GAAP Presentations – The Corporation supplements its traditional GAAP measurements with certain non-GAAP measurements to evaluate its performance and to eliminate the effect of intangible assets.  By eliminating intangible assets (Goodwill), the Corporation believes it presents a measurement that is comparable to companies that have no intangible assets or to companies that have eliminated intangible assets in similar calculations. However, not all companies may use the same calculation method for each measurement. The non-GAAP measurements are not intended to be used as a substitute for the related GAAP measurements. The following table shows the calculation of the non-GAAP measurements.

(Dollars in thousands, except per share)	Three Months Ended		Twelve Months Ended		Three Months Ended
	March 31, 2019		December 31, 2018		March 31, 2018
Return on Tangible Equity (non-GAAP)
Net income	$	3,237	$	6,125	$	3,502
Average shareholders' equity		118,793		114,625		115,129
Less average intangible assets		(9,016)		(9,016)		(9,016)
Average shareholders' equity (non-GAAP)		109,777		105,609		106,113
Return on average tangible equity (non-GAAP)*		11.79%		5.80%		13.20%
Tangible Book Value (per share) (non-GAAP)
Shareholders' equity	$	121,491	$	118,396	$	117,124
Less intangible assets		(9,016)		(9,016)		(9,016)
Shareholders' equity (non-GAAP)		112,475		109,380		108,108
Shares outstanding (in thousands)		4,411		4,409		4,365
Tangible book value (non-GAAP)		25.50		24.81		24.77
Efficiency Ratio
Noninterest expense	$	9,412	$	37,369	$	8,648
Net interest income		10,329		40,654		9,693
Plus tax equivalent adjustment to net interest income		388		1,522		370
Plus noninterest income, net of securities transactions		3,138		12,564		3,103
Total revenue		13,855		54,740		13,166
Efficiency ratio		67.93%		68.27%		65.68%
* Year-to-date annualized

Net Interest Income

The largest 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, 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 21% Federal statutory rate. 

26

Comparison of the three months ended March 31, 2019 to the three months ended March 31, 2018:

Tax equivalent net interest income increased $654 thousand to $10.7 million in the first quarter of 2019 compared to $10.1 million in the same period in 2018.  Balance sheet volume contributed $348 thousand to this increase and $306 thousand was the result of changes in rates.

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 21%.

	For the Three Months Ended March 31,
	2019					2018
	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	$	15,112	$	97	2.60%	$	29,478	$	118	1.62%
Investment securities:
Taxable		82,297		545	2.69%		86,783		519	2.43%
Tax Exempt		51,167		425	3.33%		44,253		344	3.11%
Investments		133,464		970	2.95%		131,036		863	2.67%
Loans:
Commercial, industrial and agricultural		837,906		9,644	4.60%		787,614		8,261	4.20%
Residential mortgage		69,466		752	4.32%		71,927		733	4.07%
Home equity loans and lines		65,981		832	5.11%		71,423		809	4.59%
Consumer		5,124		82	6.49%		5,075		74	5.91%
Loans		978,477		11,310	4.63%		936,039		9,877	4.23%
Total interest-earning assets		1,127,053	$	12,377	4.45%		1,096,553	$	10,858	4.02%
Other assets		67,718					62,845
Total assets	$	1,194,771				$	1,159,398
Interest-bearing liabilities:
Deposits:
Interest-bearing checking	$	295,786	$	263	0.36%	$	281,421	$	177	0.26%
Money Management		424,969		1,046	1.00%		416,555		442	0.43%
Savings		81,156		107	0.54%		80,253		56	0.28%
Time		72,481		208	1.16%		71,452		120	0.68%
Total interest-bearing deposits		874,392		1,624	0.75%		849,681		795	0.38%
Other borrowings		5,386		36	2.61%		22		—	2.02%
Total interest-bearing liabilities		879,778		1,660	0.77%		849,703		795	0.38%
Noninterest-bearing deposits		183,809					177,101
Other liabilities		12,391					17,465
Shareholders' equity		118,793					115,129
Total liabilities and shareholders' equity	$	1,194,771				$	1,159,398
T/E net interest income/Net interest margin				10,717	3.86%				10,063	3.72%
Tax equivalent adjustment				(388)					(370)
Net interest income			$	10,329				$	9,693

27

Provision for Loan Losses

Provision for loan loss expense for the first quarter was $399 thousand,  $199 thousand higher than in 2018.  For more information refer to the Loan Quality and Allowance for Loan Losses discussion in the Financial Condition section.

Noninterest Income

For the first quarter of 2019, noninterest income increased$17 thousand from the same period in 2018.  Investment and trust service fees increased due to growth in assets under management.  Loan service charges were less than the same period in 2018 due to a lower volume of commercial loan originations. Deposit service charges were less than the same period in 2018 due to fewer fees from the Bank’s overdraft protection program, partially offset by increased fees from retail checking accounts. Other service charges and fees were higher from increased income from the Bank’s merchant card program. Debit card income was higher due to an increase in transaction volume.  The change in the fair value of equity investments recorded through income was a gain of $3 thousand compared to a gain of $45 thousand in the same period in 2018. 

The following table presents a comparison of noninterest income for the three months ended March 31, 2019 and 2018

	For the Three Months Ended
	March 31,				Change
(Dollars in thousands)	2019		2018		Amount		%
Noninterest Income
Investment and trust services fees	$	1,452	$	1,397	$	55	3.9
Loan service charges		203		231		(28)	(12.1)
Deposit service charges and fees		545		574		(29)	(5.1)
Other service charges and fees		353		333		20	6.0
Debit card income		402		385		17	4.4
Increase in cash surrender value of life insurance		127		128		(1)	(0.8)
Debt securities gains, net		24		—		24	NA
Change in fair value of equity securities		3		45		(42)	(93.3)
Other		56		55		1	1.8
Total noninterest income	$	3,165	$	3,148	$	17	0.5

Noninterest Expense

Noninterest expense for the first quarter of 2018 increased $764 thousandcompared to the same period in 2018.  The increase in salaries and benefits was primarily due to an increase in salary expense ($389 thousand) from merit increases and incentive plans ($90 thousand) compared to the same period in 2018.  Legal and professional increased due to fees for various consulting services.FDIC insurance expense decreased due to a reduction in the Bank’s base assessment rate.  Other expenses increased related to the Nasdaq listing fee, increased director’s fees and recruiting fees.

The following table presents a comparison of noninterest expense for the three months ended March 31, 2019 and 2018

	For the Three Months Ended
(Dollars in thousands)	March 31,				Change
Noninterest Expense	2019		2018		Amount		%
Salaries and benefits	$	5,442	$	4,986	$	456	9.1
Net occupancy		856		815		41	5.0
Advertising		402		427		(25)	(5.9)
Legal and professional		430		329		101	30.7
Data processing		705		596		109	18.3
Pennsylvania bank shares tax		243		239		4	1.7
FDIC insurance		65		129		(64)	(49.6)
ATM/debit card processing		258		238		20	8.4
Foreclosed real estate		17		14		3	21.4
Telecommunications		105		109		(4)	(3.7)
Other		889		766		123	16.1
Total noninterest expense	$	9,412	$	8,648	$	764	8.8

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Provision for Income Taxes

For the first quarter, the Corporation recorded a Federal income tax expense of $446 thousand compared to $491 thousand for the same quarter in  2018.   The effective tax rate for the first quarter of 2019 was 12.1% compared to 12.3% for the same period in 2018. The federal statutory tax rate is 21% for 2019 and 2018.

Financial Condition

Cash and Cash Equivalents:

Cash and cash equivalents totaled $47.0 million at March 31, 2019, a decrease of $6.0 million from the prior year-end balance of $53.0 million. The decrease was mainly due to a reduction in non-interest bearing balances at the Federal Reserve. Interest-bearing deposits are held primarily at the Federal Reserve ($26.8 million) and in short-term bank owned certificates of deposit ($8.0 million).

Investment Securities: 

AFS Securities:The AFS securities portfolio has decreased $5.0 million on a cost basis, since year-end 2018. The composition of the portfolio has remained consistent with municipal securities and U.S. Agency mortgage-backed securities comprising the greatest portion of the portfolio at approximately 50% and 33% of the portfolio fair value, respectively.  The average life of the portfolio was 3.98 years. 

The AFS securities portfolio had a net unrealized gain of $290 thousand at March 31, 2019 compared to a net unrealized loss of $1.1 million at the prior year-end.  The portfolio averaged $133.5 million with a yield of 2.95% for the first three months of 2019. This compares to an average of $131.0 million and a yield of 2.67% for the same period in 2018.

The municipal bond portfolio is well diversified geographically (issuers from within 27 states) and is comprised primarily of general obligation bonds (67.4%).  Many municipal bonds have credit enhancements in the form of private bond insurance or other credit support. The largest geographic municipal bond exposure is in the states of Texas (13.5%), Washington (10.3%), and Ohio (9.1%).  The average rating of the municipal portfolio from Moody’s is AA.  No municipal bonds are rated below investment grade.

The amortized cost and estimated fair value of AFS securities available for sale as of March 31, 2019 and December 31, 2018 is as follows:

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
March 31, 2019	cost		gains		losses		value
U.S. Government and Agency securities	$	9,634	$	24	$	(40)	$	9,618
Municipal securities		63,820		845		(108)		64,557
Trust preferred securities		4,080		—		(180)		3,900
Agency mortgage-backed securities		42,818		135		(364)		42,589
Private-label mortgage-backed securities		448		30		—		478
Asset-backed securities		6,791		—		(52)		6,739
	$	127,591	$	1,034	$	(744)	$	127,881

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2018	cost		gains		losses		value
U.S. Government and Agency securities	$	9,120	$	21	$	(65)	$	9,076
Municipal securities		67,811		320		(484)		67,647
Trust preferred securities		4,074		—		(316)		3,758
Agency mortgage-backed securities		45,241		65		(648)		44,658
Private-label mortgage-backed securities		457		31		—		488
Asset-backed securities		5,869		—		(24)		5,845
	$	132,572	$	437	$	(1,537)	$	131,472

The AFS securities portfolio contained 125 securities with $57.7 million of temporarily impaired fair value and $744 thousand in unrealized losses at March 31, 2019. The total unrealized loss position has decreased $793 thousand since year-end 2018. 

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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. The impairment identified on debt securities and subject to assessment at March 31, 2019, 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 AFS securities portfolio, 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 March 31, 2019 and December 31, 2018:

	March 31, 2019
	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	$	—	$	—	—	$	4,777	$	(40)	14	$	4,777	$	(40)	14
Municipal securities		238		—	1		12,377		(108)	21		12,615		(108)	22
Trust preferred securities		1,166		(33)	2		2,734		(147)	3		3,900		(180)	5
Agency mortgage-backed securities		895		(1)	4		28,746		(363)	71		29,641		(364)	75
Asset-backed securities		6,721		(51)	7		18		(1)	2		6,739		(52)	9
Total temporarily impaired   securities	$	9,020	$	(85)	14	$	48,652	$	(659)	111	$	57,672	$	(744)	125

	December 31, 2018
	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	$	2,071	$	(6)	2	$	5,175	$	(59)	14	$	7,246	$	(65)	16
Municipal securities		5,832		(12)	10		25,091		(472)	42		30,923		(484)	52
Trust preferred securities		2,008		(159)	3		1,750		(157)	2		3,758		(316)	5
Agency mortgage-backed securities		7,687		(46)	16		30,511		(602)	74		38,198		(648)	90
Asset-backed securities		5,826		(22)	6		19		(2)	2		5,845		(24)	8
Total temporarily impaired   securities	$	23,424	$	(245)	37	$	62,546	$	(1,292)	134	$	85,970	$	(1,537)	171

The unrealized loss in the municipal bond portfolio decreased to $108 thousand from $484 thousand at December 31, 2018 as interest rates remained flat during the year.  There are twenty-two securities in this portfolio with an unrealized loss 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 five securities with a fair value of $3.9 million and an unrealized loss of $180 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 March 31, 2019, 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.

Equity securities at Fair Value:  The Corporation owns one equity investment. At March 31, 2019 and December 31, 2018, this investment was reported at fair value of $377 thousand and $374 thousand, respectively, with changes in value reported through income. 

Restricted Stock at Cost:  The Bank held $452 thousand of restricted stock at March 31, 2019.  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. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. FHLB stock is evaluated for impairment primarily

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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 decreased $2.0 million over year-end 2018,  as the Bank retained a lower percentage of its originations.  For the first three months of 2019, the Bank originated and sold $6.2 million in mortgages 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 ($11.2 million), while loans for individuals to construct personal residences totaled $2.8 millionat March 31, 2019.  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.

At March  31, 2019, the Bank had $8.7 million in real estate construction loans funded with an interest reserve and capitalized $23 thousand of interest in 2019 from these reserves on active projects.  These loans were comprised of $2.5 million in residential construction and $6.2 million in commercial construction. 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 (depending on the complexity of the project) detailing costs incurred by the borrower, on-site inspections, and a signature by the assigned loan officer for disbursement of funds. 

Commercial real estate (CRE): This category includes commercial, industrial, farm and agricultural loans, where real estate serves as the primary collateral for the loans. Total commercial real estate loans increased to $498.0 million from $488.0 million at the end of 2018, an increase of $10.0 million.  The increase was primarily in hotels and motels ($4.0 million) and land development ($5.1 million).  The largest sectors (by collateral) in the commercial real estate category are: hotels and motels ($74.5 million), office buildings ($62.6 million), land development ($48.3 million), manufacturing facilities ($41.5 million) and auto dealerships ($32.8 million).

Commercial (C&I): This category includes commercial, industrial, farm, agricultural, and municipal loans.  C&I loans decreased $4.8 million to $269.2 million at March 31, 2019, compared to $274.1 million at the end of 2018, primarily due to a $3.9 million tax free loan pay-off. At March 31, 2019, the Bank had approximately $162 million in tax-free loans in the C&I portfolio. The largest sectors (by industry) in the commercial C&I category are: public administration ($84.4 million), utilities ($34.8 million), educational services ($25.0 million) and real estate rental and leasing ($15.2 million).  The Bank expects that commercial lending will continue to be the primary area of loan growth in the future via in-market lending.

Participations: The Bank may supplement its own commercial loan production by purchasing loan participations.  These participations are primarily located in south-central Pennsylvania. At March 31, 2019, the outstanding commercial participations accounted for 9.3%, or $91.0 million, of total gross loans compared to 9.6% and $93.4 million at December 31, 2018.  The Bank’s total exposure (including outstanding balances and unfunded commitments) to purchased participations is $115.2 million, compared to $120.4 million at December 31, 2018. The commercial loan participations are comprised of $21.6 million of C&I loans and $69.4 million of CRE loans, reported in the respective loan class. The above results indicate that Management has been executing its strategy to emphasize loan originations over purchasing participations.

Consumer loans: This category remained unchanged over year-end and is mainly comprised of unsecured personal lines of credit.

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

	March 31,		December 31,			Change
(Dollars in thousands)	2019		2018			Amount	%
Residential Real Estate 1-4 Family
Consumer first liens	$	89,212	$	89,673	$	(461)	(0.5)
Commercial first lien		58,210		59,227		(1,017)	(1.7)
Total first liens		147,422		148,900		(1,478)	(1.0)
Consumer junior liens and lines of credit		41,831		42,504		(673)	(1.6)
Commercial junior liens and lines of credit		4,859		4,716		143	3.0
Total junior liens and lines of credit		46,690		47,220		(530)	(1.1)
Total residential real estate 1-4 family		194,112		196,120		(2,008)	(1.0)
Residential real estate - construction
Consumer		2,750		1,667		1,083	65.0
Commercial		11,231		8,558		2,673	31.2
Total residential real estate construction		13,981		10,225		3,756	36.7
Commercial real estate		497,974		487,980		9,994	2.0
Commercial		269,243		274,054		(4,811)	(1.8)
Total commercial		767,217		762,034		5,183	0.7
Consumer		5,156		4,996		160	3.2
		980,466		973,375		7,091	0.7
Less: Allowance for loan losses		(12,681)		(12,415)		(266)	2.1
Net Loans	$	967,785	$	960,960	$	6,825	0.7

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 based on the performance status of the loans. 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-Substandard.   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 three primary measurements: (1) loans rated 6-Special Mention or worse (collectively “watch list”), (2) delinquent loans, and (3) net-charge-offs.,

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 totaled $9.9 million at quarter end, compared to $10.3 million at December 31, 2018. The watch list includes both performing and nonperforming loans.  It is comprised entirely of loans rate 6-Special Mention and 7-Substandard. Included in the substandard total are $5.6 million of nonaccrual loans.  The credit composition of the watch list (loans rate 6, 7, or 8), by primary collateral is shown in Note 6 of the accompanying financial statements.

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 6 in the accompanying financial statements for a table 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

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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.

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 and all credits rated 7-Substandard 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. However, in certain instances, the Bank may make a loan that exceeds the supervisory loan-to-value limit.  At March 31, 2019 the Bank had loans of $18.8 million (1.9% of gross loans) that exceeded the supervisory limit, compared to 1.9% at year-end 2018.

Loan quality has declined since year-end 2018, as measured by the balance of nonaccrual loans.  Nonaccrual loans increased $3.3 million from year-end 2018 as one commercial real estate credit ($3.5 million) moved from 60-89 days past due to nonaccrual during the first quarter of 2019. Potential problem loans, defined as watch list loans less loans on nonaccrual or past due more than 90 days declined to $4.1 million at March 31, 2019 compared to $7.6 million at December 31, 2018 as a result of the commercial real estate loan moving to nonaccrual. 

The following table presents a summary of nonperforming assets as of:

	March 31,		December 31,
(Dollars in thousands)	2019		2018
Nonaccrual loans
Residential Real Estate 1-4 Family
First liens	$	80	$	80
Junior liens and lines of credit		26		23
Total		106		103
Residential real estate - construction		652		455
Commercial real estate		4,743		1,427
Commercial		129		315
Total nonaccrual loans		5,630		2,300
Loans past due 90 days or more and still accruing
Residential Real Estate 1-4 Family
First liens		137		113
Junior liens and lines of credit		18		26
Total		155		139
Commercial real estate		—		113
Commercial		52		100
Consumer		—		5
Total loans past due 90 days or more and still accruing		207		357
Total nonperforming loans		5,837		2,657
Other real estate owned		2,684		2,684
Total nonperforming assets	$	8,521	$	5,341
Nonperforming loans to total gross loans		0.60%		0.27%
Nonperforming assets to total assets		0.70%		0.44%
Allowance for loan losses to nonperforming loans		217.25%		467.26%

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The following table identifies the most significant loans in nonaccrual status. These two nonaccrual loans account for 87% of the total nonaccrual balance.

(Dollars in thousands)
				ALL	Nonaccrual	TDR			Collateral
		Balance		Reserve	Date	Status	Collateral	Location	Value
Credit 1	$	1,408	$	—	Mar-12	Y	1st and 2nd liens on commercial real estate, residential real estate and business assets	PA	$	3,267
Credit 2		3,464		—	Mar-19	N	land for residential development, residential and commercial real estate	PA	$	5,203
	$	4,872	$	—

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 (excluding consumer purpose loans) and TDR loans are considered impaired.

A loan is considered a troubled debt restructuring 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, re-amortization of the payment, or a combination of multiple concessions. The Bank reviews all loans rated 6-Special Mention or worse when it is providing a loan restructure, modification 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.

In accordance with financial accounting standards, TDR loans are always considered impaired until they are paid off or in certain circumstances, refinanced.  However, an impaired TDR loan can be a performing loan.  Impaired loans increased to $15.2 million at quarter-end compared to $11.9 million at year-end 2018, primarily from the new nonaccrual loan previously discussed.

The following table shows the composition of impaired loans as of:

	March 31, 2019
(Dollars in thousands)	Nonaccrual				Accruing			Accruing	Total
	Non-TDR		TDR		TDR			Other (1)	Impaired
Residential Real Estate 1-4 Family
First liens	$	80	$	—	$	673	$	136	$	889
Junior liens and lines of credit		26		—		—		18		44
Total		106		—		673		154		933
Residential real estate - construction		198		454		—		—		652
Commercial real estate		3,464		1,279		8,703		—		13,446
Commercial		129		—		—		—		129
Total	$	3,897	$	1,733	$	9,376	$	154	$	15,160
(1) impaired consumer purpose loans not on nonaccrual

Allowance for Loan Losses:

Management monitors loan performance on a monthly basis and 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. 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-Special Mention or worse, and obtains a new appraisal or asset valuation for any placed on nonaccrual and 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

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Committee of the Board of Directors. Management believes that the allowance for loan losses at March 31, 2019 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 three components; specific, general and unallocated. 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. However, it is possible that as a result of the credit analysis, a specific reserve is not required for an impaired loan. For impaired 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.  These loans totaled $860 thousand at March 31, 2019 and are comprised primarily of loans secured by residential real estate.   Management does not believe that excluding these loans from the specific reserve analysis presents any additional risk. There was no specific reserve established for any of the impaired loans.  Note 6 of 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 segments 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.  Each segment may be further segregated by type of collateral, lien position, or owner/nonowner occupied properties.  The quantitative analysis uses the Bank’s twenty quarter rolling historical loan loss experience as determined for each loan segment to determine a loss factor applicable to each loan segment. The qualitative analysis utilizes a risk matrix that incorporates four primary risk factors:  economic conditions, delinquency, classified loans, and level of risk, and assigns a risk level (as measured in basis points) to each factor. In determining the risk level for these primary factors, consideration is given to operational factors such as: loan volume, management, loan review process, credit concentrations, competition, and legal and regulatory issues. The level of risk (as measured in basis points) for each primary factor is set for five risk levels ranging from minimal risk to very high risk and is determined independently for commercial loans, residential mortgage loans and consumer loans.

The unallocated component is maintained to cover uncertainties that could affect Management’s estimate of probable loss.  The unallocated component of the ALL reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

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 nonaccrual and a risk rating of 7-Substandard 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. We believe this practice complies with the regulatory guidance.

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 March 31, 2019 and December 31, 2018:

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
March 31, 2019
Loans evaluated for ALL:
Individually	$	401	$	—	$	652	$	13,247	$	—	$	—	$	—	$	14,300
Collectively		147,021		46,690		13,329		484,727		269,243		5,156		—		966,166
Total	$	147,422	$	46,690	$	13,981	$	497,974	$	269,243	$	5,156	$	—	$	980,466
ALL established for   loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		487		132		152		5,906		4,562		72		1,370		12,681
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681
December 31, 2018
Loans evaluated for ALL:
Individually	$	405	$	—	$	455	$	10,099	$	181	$	—	$	—	$	11,140
Collectively		148,495		47,220		9,770		477,881		273,873		4,996		—		962,235
Total	$	148,900	$	47,220	$	10,225	$	487,980	$	274,054	$	4,996	$	—	$	973,375
ALL established for   loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		491		133		108		5,698		4,511		70		1,404		12,415
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415

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

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415
Charge-offs		(33)		(1)		(3)		(63)		(61)		(26)		—		(187)
Recoveries		1		—		—		1		42		10		—		54
Provision		28		—		47		270		70		18		(34)		399
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681

The allocation of the allowance for loan losses is based on estimates and is not intended to imply limitations on the usage of the allowance.  The entire allowance is available to absorb any losses without regard to the category in which the loan is classified.

The following table shows the ALL and charge-off ratios for the periods ended:

	Three Months Ended		Year ended			Three Months Ended
	March 31, 2019			December 31, 2018		March 31, 2018
Net charge-offs (recoveries)/average loans*		0.05%			0.97%		0.00%
Net loan charge-offs (recoveries) as a percentage of the provision for loan losses		33.33%			93.74%		1.50%
Allowance for loan losses as a % of loans		1.29%			1.28%		1.27%
Net charge-offs (recoveries)	$	133		$	9,331	$	3
* Annualized

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Other Real Estate Owned:

The Bank holds $2.7 million of other real estate owned (OREO), comprised of two properties. The most significant OREO holding is one property carried at $2.6 million (98% of total OREO) that is secured by 196 acres of land intended for residential real estate development. The Bank has a contract on the property that is expected to settle in 2019 with no loss to the Bank. During 2019, the expense to hold and maintain OREO was $17 thousand. Note 8 of the accompanying financial statements provides additional information on activity in OREO.

Deposits: 

Total deposits decreased $6.1 million during the first three months of 2019 to $1.076 billion. Non-interest bearing deposits decreased $5.4 million (primarily in commercial checking deposits) and interest-bearing checking deposits decreased $28.2 million, while time deposits increased $27.5 million. Interest bearing checking decreased by $9.3 million, primarily in commercial and retail deposits while the Bank’s Money Management product decreased $19.8 million, primarily in retail accounts as customers moved funds to higher rate time deposits.  Time deposits increased since year-end from CD promotions.  The Bank acquired $10 million of short-term wholesale brokered CDs in the first quarter of 2019.

As of March 31, 2019, the Bank had $155.7 million placed in the ICS program ($108.7 million in interesting-bearing checking and $47.0 million in money management) and $3.3 million in reciprocal time deposits in the CDARS program included in time deposits.  These programs allow the Bank to offer full FDIC coverage to large depositors, but with the convenience to the customer of only having to deal with one bank.  The Bank solicits these deposits from within its market and it believes they present no greater risk than any other local deposit. 

	March 31,		December 31,			Change
(Dollars in thousands)	2019		2018			Amount	%
Noninterest-bearing checking	$	192,004	$	197,417	$	(5,413)	(2.7)
Interest-bearing checking		296,346		305,661		(9,315)	(3.0)
Money management		416,976		436,752		(19,776)	(4.5)
Savings		82,089		81,206		883	1.1
Total interest-bearing checking and savings		795,411		823,619		(28,208)	(3.4)
Time deposits		79,076		61,593		17,483	28.4
Brokered time deposits		10,000		—		10,000	N/A
Total time deposits		89,076		61,593		27,483	44.6
Total deposits	$	1,076,491	$	1,082,629	$	(6,138)	(0.6)
Overdrawn deposit accounts reclassified as loans	$	99	$	120

Borrowings:

The Corporation had no short-term borrowings at March 31, 2019 and December 31, 2018. 

Shareholders’ Equity:

Total shareholders’ equity increased $3.1 million to $121.5 million at March 31, 2019, from $118.4 million at the end of 2018.  The Corporation’s net earnings of $3.2 millionwere partially offset by the cash dividend of $1.2 million. The Corporation’s Dividend Reinvestment Plan (DRIP) added $161 thousand in new capital from optional cash contributions and $190 thousand from the reinvestment of quarterly dividends. The Corporation’s dividend payout ratio was 36.8% for the first three months of 2019 compared to 29.8% in 2018.

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. For the first quarter of 2019, the Corporation paid a $0.27 per share dividend, compared to $0.27 paid in the fourth quarter of 2018. On April 18, 2019 the Board of Directors declared a $0.30 per share regular quarterly dividend for the second quarter of 2019, which will be paid on May 22, 2019.

On December 20, 2018, the Board of Directors authorized the 2018 Repurchase Plan for the repurchase of up to 100,000 shares of the Corporation’s $1.00 par value common stock at market prices in open market or privately negotiated transactions beginning December 21, 2018 and continuing through December 21, 2019.  During the first three months of 2019, 14,553 shares were repurchased.  No shares were repurchased in the first three months of 2018.  The 2017 Repurchase Plan expired on September 30, 2018.

In July 2013, Federal banking regulators approved the final rules from the Basel Committee on Banking Supervision for the regulation of capital requirements for bank holding companies and U.S banks, generally referred to as “Basel III.” The Basel III standards were effective for the Corporation and the Bank, effective January 1, 2015 (subject to a phase-in

37

period for certain provisions).  Basel III imposes significantly higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place.  The capital ratios to be considered “well capitalized” under Basel III are: (1) Common Equity Tier 1 (CET1) of 6.5%, (2) Tier 1 Leverage of 5%, (3) Tier 1 Risk-Based Capital of 8%, and (4) Total Risk-Based Capital of 10%.  The CET1 ratio is a new capital ratio under Basel III and the Tier 1 risk-based capital ratio of 8% has been increased from 6%. The rules also include changes in the risk weights of certain assets to better reflect credit and other risk exposures. In addition, a capital conservation buffer will be phased-in beginning January 1, 2016 at 0.625%, 1.25% for 2017, 1.875% for 2018 and 2.50% for 2019 and thereafter.  The capital conservation buffer will be applicable to all of the capital ratios except for the Tier1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement.  The Bank’s capital conservation buffer at March 31, 2019 was 6.95% (total risk-based capital 14.95% less 8.00%) compared to the 2018 regulatory buffer of 2.50%.  Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions.  As of March 31, 2019, the Bank was “well capitalized” under the Basel III requirements and believes it would be “well capitalized” on a fully-phased in basis had such a requirement been in effect.

The following table summarizes regulatory capital information as of March 31, 2019 and December 31, 2018 for the Corporation and the Bank. 

			Regulatory Ratios
			Adequately	Well
	March 31,	December 31,	Capitalized	Capitalized
(Dollars in thousands)	2019	2018	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	13.78%	13.96%	4.500%	N/A
Farmers & Merchants Trust Company	13.69%	13.80%	4.500%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	13.78%	13.96%	6.000%	N/A
Farmers & Merchants Trust Company	13.69%	13.80%	6.000%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	15.04%	15.21%	8.000%	N/A
Farmers & Merchants Trust Company	14.95%	15.06%	8.000%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	9.88%	9.78%	4.000%	N/A
Farmers & Merchants Trust Company	9.82%	9.68%	4.000%	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 Counties, Pennsylvania.  This area is diverse in demographic and economic makeup.  County populations range from a low of approximately 15,000 in Fulton County to over 249,000 in Cumberland County. Unemployment in the Bank’s market area has remained virtually unchanged over the past year and ranges from a low of 3.1% in Cumberland County to 6.4% 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 PA 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 or business and Management believes that the Bank’s primary market area continues to be well suited for growth.

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

Economic Data

	March 31,	December 31,
	2019	2018
Unemployment Rate (seasonally adjusted)
Market area range (1)	3.1% - 6.4%	3.0 - 4.5%
Pennsylvania	4.0%	4.0%
United States	3.8%	3.7%
Housing Price Index - year over year change
PA, nonmetropolitan statistical area	3.0%	3.6%
United States	6.0%	6.6%
Building Permits - year over year change -12 months
Harrisburg-Carlisle, PA MSA & Chambersburg-Waynesboro, PA MSA
Residential, estimated	6.8%	15.9%
Multifamily, estimated	94.6%	136.0%
(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. FOMC members had estimated in December that two rate hikes would be appropriate in 2019 after four increases in 2018.  However, there now appears to be no likelihood of a hike unless conditions change significantly.  In its post-meeting statement, the FOMC indicated it would remain “patient” before adopting any further increases.

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 the measurements 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 helps 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 unencumbered (approximately $65.4 million fair value) 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. The Bank also has access to other wholesale funding via the brokered CD market.

The FHLB system has always been a major funding source for community banks.  The Bank’s maximum borrowing capacity with the FHLB at March 31, 2019 was $367.8 million with $367.8 million available to borrow.  There are no indicators that lead the Bank to believe the FHLB would discontinue its lending function or restrict the Bank’s ability to borrow. If either of these events would occur, it would have a negative effect on the Bank and it is unlikely that the Bank could replace the level of FHLB funding in a short time. 

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The Bank has established credit at the Federal Reserve Discount Window and as of quarter-end had the ability to borrow approximately $17.5 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 $288.0 million and  $271.7 million, respectively, at March 31, 2019 and December 31, 2018.As of June 30, 2018, the Bank established a $2.4 million allowance against letters of credit issued in connection with a commercial borrower that declared bankruptcy in the second quarter of 2018 which remains at March 31, 2019.

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 2018 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 threemonths ended March 31, 2019. For more information on market risk refer to the Corporation’s 2018 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 March 31, 2019, 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. There were no changes in the Corporation’s internal control over financial reporting during the quarterly period ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

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.

40

Part II – OTHER INFORMATION

Item 1.Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation. In management’s opinion, there are no proceedings pending to which the Corporation is a party or to which its property is subject which, if determined adversely to the Corporation, would be material.  No material proceedings are pending or are known to be threatened or contemplated against us by any governmental authorities.

As described in our current report on Form 8-K filed on August 3, 2018, the court entered an order on July 31, 2018 granting final approval of the settlement agreements in the Kalan et al. v. Farmers and Merchants Trust Company of Chambersburg, et al. (Case No. 2:15-CV-01435-WB) case filed against F&M Trust in the United States District Court for the Eastern District of Pennsylvania in March, 2015 and described in our current reports on Form 8-K filed July 29, 2016, July 28, 2017, November 3, 2017, January 2, 2018, April 13, 2018, May 7, 2018 and August 3, 2018. Among other things, the order also dismissed the case against F&M Trust with prejudice; certified the settlement class; and, permanently enjoined the named plaintiffs and the members of the settlement class from asserting any further claims arising out of or related to the claims alleged or that could have been alleged in the case against F&M Trust. The settlement agreements provide for the Bank to make a settlement payment of $10 million in full and final settlement of all such claims.  The settlement agreements further provide for general releases by all parties.  F&M Trust made the settlement payment in May, 2018, in accordance with the court’s earlier order preliminarily approving the settlement agreements. The Corporation previously accrued the $10 million settlement payment as an expense for the year ended December 31, 2017.

Item 1A. Risk Factors 

There were no material changes in the Corporation’s risk factors during the three months ended March 31, 2019. For more information, refer to the Corporation’s 2018 Annual Report on Form 10-K.

41

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

(Dollars in thousands, except per share)
Period	Number of Shares Purchased as Part of Publically Announced Program		Weighted Average Price Paid per Share		Dollar Amount of Shares Purchased as Part of Publically Announced Program	Shares Yet To Be Purchased Under Program
January 1, 2019	—	$	—	$	—	100,000
February 2019	7,387		37.16		275	92,613
March 2019	7,166		36.65		263	85,447
	14,553			$	538

On December 20, 2018, the Board of Directors authorized the 2018 Repurchase Plan for the repurchase of up to 100,000 shares of the Corporation’s $1.00 par value common stock at market prices in open market or privately negotiated transactions beginning December 21, 2018 and continuing through December 21, 2019. No shares were repurchased in the first three months of 2018.  The 2017 Repurchase Plan expired on September 30, 2018.

Item 3.   Defaults by the Company on its Senior Securities

None

Item 4.   Mine Safety Disclosures

Not Applicable

42

Item 5.   Other Information

None

Item 6.   Exhibits

Exhibits

3.1	Articles of Incorporationof 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 3.2 to Current Report on Form 8-K, as filed with the commission on December 21, 2018 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)

43

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

May8, 2019	/s/ Timothy G. Henry
	Timothy G. Henry
	Chief Executive Office and President
	(Principal Executive Officer)
May8, 2019	/s/ Mark R. Hollar
	Mark R. Hollar
	Treasurer and Chief Financial Officer
	(Principal Financial and Accounting Officer)

44

EX-31.1

Exhibit 31.1

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

I, TimothyG.  Henry, 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:  May8, 2019

/s/ TimothyG.  Henry

TimothyG.  Henry

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:  May 8, 2019

/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 March  31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, TimothyG.  Henry, 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/ TimothyG.  Henry

TimothyG.  Henry

President and Chief Executive Officer

May8, 2019

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 March  31, 2019 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

May8, 2019

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Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Apr. 30, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2019
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019
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		4,389,414
Trading Symbol	fraf
Entity Small Business	true
Entity Emerging Growth Company	false

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Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets
Cash and due from banks	$ 11,771	$ 16,957
Interest-bearing deposits in other banks	35,262	36,000
Total cash and cash equivalents	47,033	52,957
Debt securities available for sale, at fair value	127,881	131,472
Equity securities	377	374
Restricted stock	452	452
Loans held for sale	195	118
Loans	980,466	973,375
Allowance for loan losses	(12,681)	(12,415)
Net Loans	967,785	960,960
Premises and equipment, net	13,347	13,521
Right-of-use asset	6,099
Bank owned life insurance	23,623	23,496
Goodwill	9,016	9,016
Other real estate owned	2,684	2,684
Deferred tax asset, net	5,700	5,992
Other assets	8,768	8,545
Total assets	1,212,960	1,209,587
Deposits
Non-interest bearing checking	192,004	197,417
Money management, savings and interest checking	795,411	823,619
Time	89,076	61,593
Total deposits	1,076,491	1,082,629
Lease liability	6,113
Other liabilities	8,865	8,562
Total liabilities	1,091,469	1,091,191
Shareholders' equity
Common stock, $1 par value per share,15,000,000 shares authorized with 4,708,349 shares issued and 4,410,880 shares outstanding at March 31, 2019 and 4,701,367 shares issued and 4,408,761 shares outstanding at December 31, 2018	4,708	4,701
Capital stock without par value, 5,000,000 shares authorized with no shares issued and outstanding
Additional paid-in capital	41,841	41,530
Retained earnings	85,991	83,946
Accumulated other comprehensive loss	(5,281)	(6,380)
Treasury stock, 297,469 shares at March 31, 2019 and 292,606 shares at December 31, 2018, at cost	(5,768)	(5,401)
Total shareholders' equity	121,491	118,396
Total liabilities and shareholders' equity	$ 1,212,960	$ 1,209,587

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
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	4,708,349	4,701,367
Common Stock, Shares, Outstanding	4,410,880	4,408,761
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	297,469	292,606

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Consolidated Statements Of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Interest income
Loans, including fees	$ 11,009	$ 9,577
Interest and dividends on investments:
Taxable interest	540	513
Tax exempt interest	338	274
Dividend income	5	6
Deposits and obligations of other banks	97	118
Total interest income	11,989	10,488
Interest expense
Deposits	1,624	795
Short-term borrowings	36
Total interest expense	1,660	795
Net interest income	10,329	9,693
Provision for loan losses	399	200
Net interest income after provision for loan losses	9,930	9,493
Noninterest income
Investment and trust services fees	1,452	1,397
Loan service charges	203	231
Deposit service charges and fees	545	574
Other service charges and fees	353	333
Debit card income	402	385
Increase in cash surrender value of life insurance	127	128
OTTI gains on securities	(57,700)
Debt securities gains, net	24
Change in fair value of equity securities	3	45
Other	56	55
Total noninterest income	3,165	3,148
Noninterest Expense
Salaries and employee benefits	5,442	4,986
Occupancy, furniture and equipment, net	856	815
Advertising	402	427
Legal and professional	430	329
Data processing	705	596
Pennsylvania bank shares tax	243	239
FDIC Insurance	65	129
ATM/debit card processing	258	238
Foreclosed real estate	17	14
Telecommunications	105	109
Other	889	766
Total noninterest expense	9,412	8,648
Income before federal income taxes	3,683	3,993
Federal income tax expense (benefit)	446	491
Net income	$ 3,237	$ 3,502
Per share
Basic earnings per share	$ 0.73	$ 0.80
Diluted earnings per share	0.73	0.80
Cash dividends declared	$ 0.27	$ 0.24

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Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018
Consolidated Statements Of Comprehensive Income [Abstract]
Net income		$ 3,237	$ 3,502
Securities:
Unrealized gains (losses) arising during the period		1,414	(1,043)
Reclassification for net (gains) losses and OTTI included in net income	[1]	(24)
Net unrealized gains (losses)		1,390	(1,043)
Tax effect		(291)	262
Net of tax amount		1,099	(781)
Total other comprehensive income (loss)		1,099	(781)
Total Comprehensive Income		4,336	$ 2,721
Reclassification adjustment / Statement line item: Tax expense (benefit)
Debt securities gains, net		$ 5

[1] Debt securities gains, net

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Consolidated Statements Of Changes In Shareholders' Equity - USD ($) $ in Thousands	Common Stocks [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2017	$ 4,689	$ 40,396	$ 82,218	$ (6,028)	$ (6,131)	$ 115,144
Cumulative adjustment for fair value of equity securities			201	(201)
Net income			3,502			3,502
Other comprehensive income (loss)				(781)		(781)
Cash dividends declared			(1,045)			(1,045)
Acquisition of treasury stock					(88)	(88)
Treasury shares issued under employee stock purchase plan		2			4	6
Treasury shares issued under dividend reinvestment plan		97			109	206
Common stock issued under incentive stock option plan	7	142				149
Stock option compensation expense		31				31
Balance at Mar. 31, 2018	4,696	40,668	84,876	(7,010)	(6,106)	117,124
Balance at Dec. 31, 2018	4,701	41,530	83,946	(6,380)	(5,401)	118,396
Net income			3,237			3,237
Other comprehensive income (loss)				1,099		1,099
Cash dividends declared			(1,192)			(1,192)
Acquisition of treasury stock					(560)	(560)
Treasury shares issued under employee stock purchase plan		2			3	5
Treasury shares issued under dividend reinvestment plan		161			190	351
Common stock issued under incentive stock option plan	7	148				155
Balance at Mar. 31, 2019	$ 4,708	$ 41,841	$ 85,991	$ (5,281)	$ (5,768)	$ 121,491

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Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Consolidated Statements Of Changes In Shareholders' Equity [Abstract]
Cash dividends declared	$ 0.27	$ 0.24
Acquisition of treasury stock, shares	15,163	2,605
Treasury shares issued under employee stock purchase plan, shares	150	200
Treasury shares issued under dividend reinvestment plan, shares	10,150	5,911
Common stock issued under incentive stock option plans, shares	6,982	6,518

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Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities
Net income	$ 3,237	$ 3,502
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	338	333
Net amortization of loans and investment securities	409	438
Provision for loan losses	399	200
Change in fair value of equity securities	(3)	(45)
Debt securities gains, net	(24)
Loans originated for sale	(6,467)	(2,527)
Proceeds from sale of loans	6,390	2,969
Write-down of other real estate owned		6
Loss on sale of premises		17
Increase in cash surrender value of life insurance	(127)	(128)
Stock option compensation		31
Contribution to pension plan		(1,000)
(Increase) decrease in other assets	(50)	(448)
(Decrease) increase in other liabilities	118	148
Net cash provided by operating activities	4,220	3,496
Cash flows from investing activities
Proceeds from sales and calls of investment securities available for sale	3,876
Proceeds from maturities and pay-downs of securities available for sale	6,084	5,726
Purchase of investment securities available for sale	(5,344)	(13,380)
Net increase in loans	(7,245)	1,031
Proceeds from sale of other real estate/other repossessed assets		117
Capital expenditures	(136)	(107)
Net cash used in investing activities	(2,765)	(6,613)
Cash flows from financing activities
Net increase in demand deposits, interest-bearing checking, and savings accounts	(33,621)	(3,636)
Net (decrease) increase in time deposits	27,483	(9,084)
Dividends paid	(1,192)	(1,045)
Purchase of Treasury shares	(560)
Treasury shares issued under dividend reinvestment plan	160	206
Common stock issued under stock option plans	351	155
Net cash provided by financing activities	(7,379)	(13,404)
(Decrease) increase in cash and cash equivalents	(5,924)	(16,521)
Cash and cash equivalents as of January 1	52,957	58,603
Cash and cash equivalents as of September 30	47,033	42,082
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for: Interest on deposits and other borrowed funds	1,562	$ 792
Noncash Activities:
Recognition of Operating Lease Right-of-Use Asset	6,236
Recognition of Operating Lease Liability	$ 6,236

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Basis Of Presentation

3 Months Ended

Mar. 31, 2019

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 March 31, 2019, 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 2018 Annual Report on Form 10-K.  The consolidated results of operations for the three month period ended March 31, 2019 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, 2018 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
	March 31,
(Dollars and shares in thousands, except per share data)	2019		2018
Weighted average shares outstanding (basic)		4,412		4,359
Impact of common stock equivalents		21		28
Weighted average shares outstanding (diluted)		4,433		4,387
Anti-dilutive options excluded from calculation		—		—
Net income	$	3,237	$	3,502
Basic earnings per share	$	0.73	$	0.80
Diluted earnings per share	$	0.73	$	0.80

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2019

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 2. Recent Accounting Pronouncements

The following accounting pronouncements have recently been adopted or will be adopted in future periods.  For information on accounting pronouncements previously adopted, please refer to the Corporation’s report on Form 10-K for the year-ended December 31, 2018.

Standard	Description	Effective Date	Effect on the financial statements or other significant matters
ASU 2016-02, Leases (Topic 842) and all subsequently issued amendments	In February 2016, the FASB issued ASU 2016-02, "Leases (Subtopic 842)."  This ASU requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date.  Lessor accounting remains largely unchanged under the new guidance.  FASB subsequently issued various amendments that provided implementation guidance designed to provide entities with relief from the costs of implementing certain aspects of the new standard.  From the lessee's perspective, the new standard requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases.  Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for lessees. ASU 2016-02 and all subsequent amendments are effective for fiscal years, including interim periods, beginning after December 15, 2018.  Early adoption of ASU 2016-02 is permitted.	January 1, 2019	The Corporation adopted ASU 2016-02, "Leases (Topic 842)" and all subsequent amendments on January 1, 2019 using the modified retrospective approach, and it did not have a material effect on its consolidated results of operations. Adoption of the new standard resulted in the recognition of a lease liability and a right-of-use asset of $6.2 million without a cumulative effect adjustment to retained earnings.  The Corporation did not restate any prior period results. The Corporation adopted the package of practical expedients offered in ASU 2016-02 and therefore, existing lease classifications were not reassessed, expired or existing contracts were not reassessed for a lease, and the initial direct costs for any existing leases were not reassessed.  In addition to the package of practical expedients, the Corporation also utilized other practical expedients offered: (1) the hindsight expedient which allows entities to use hindsight to determine the lease term was not adopted, (2) leases, for all underlying asset classes, with a term less than 12 months and no purchase option were excluded, (3) the option to not separate lease and non-lease components and account for them as a single component was adopted for real estate leases, and (4) the option to not apply lease accounting to existing land easements was adopted.  See Note 7 for additional information on the adoption of the new standard.
ASU 2018-13, Disclosure Framework (Topic 820)	This guidance eliminates, adds and modifies certain disclosure requirements for fair value measurements.  Among the changes, entities will no longer be required to disclose the amount of and reason for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.	January 1, 2019	The Corporation adopted the standard on January 1, 2019 and it did not have a material effect on its consolidated results of operations.
ASU 2018-15, Accounting for Implementation Costs in a Cloud Computing Arrangement (Topic 350)	This ASU required an entity in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.  Capitalized implementation costs should be presented in the same line item on the balance sheet as amounts prepaid for the hosted service, if any (generally as an "other asset").  The capitalized costs will be amortized over the term of the hosting arrangement, with the amortization expense being presented in the same income statement line item as the fees paid for the hosted service.  The ASU is effective January 1, 2020 with early adoption permitted.	January 1, 2020	The Corporation adopted the standard on January 1, 2019 and it did not have a material effect on its consolidated results of operations.
ASU 2017-04, Goodwill (Topic 350)	This guidance, among other things, removes step 2 of the goodwill impairment test thus eliminating the need to determine the fair value of individual assets and liabilities of the reporting unit.  Upon adoption of this standard, goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  This may result in more or less impairment being recognized than under the current guidance. Early adoption is permitted for any impairment tests performed after January 1, 2017, applied prospectively.	January 1, 2020	The Corporation early adopted the ASU in the fourth quarter of 2018 with the completion of the 2018 impairment analysis.  The Corporation is still evaluating the effect of the standard on its consolidated financial statements.
ASU 2018-14, Disclosure Framework (Topic 715): Changes to the Disclosure Requirements for Defined Benefit Plans	This ASU makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020; early adoption is permitted.	January 1, 2020	The Corporation will adopt the provisions of the ASU on January 1, 2020.  As the ASU only revises disclosure requirements, it is not expected to have a material effect on the consolidated financial statements.
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	This standard requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model).  Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.  The ASU replaces the current accounting model for purchased credit impaired loans and debt securities.  The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis.  However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis.  The subsequent accounting for PCD financial assets is the same expected loss model described above.	January 1, 2020	We have formed an implementation team led by the Corporation's Risk Management function. The team is reviewing the requirements of the ASU and evaluating methods and models for implementation.  The new standard will result in earlier recognition of additions to the allowance for loan losses and possibly a larger allowance for loan loss balance with a corresponding increase in the provision for loan losses in results of operations; however, the Corporation is continuing to evaluate the impact of the pending adoption of the new standard on its consolidated financial statements.  A third-party vendor has been selected to assist with the CECL calculations and the implementation process has started.  The Corporation expects to be able to run the CECL model in test mode starting in the second quarter of 2019.

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Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2019

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

Note 3. Accumulated Other Comprehensive Loss

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

	March 31,		December 31,
	2019		2018
(Dollars in thousands)
Net unrealized (losses) gains on debt securities	$	290	$	(1,100)
Tax effect		(61)		230
Net of tax amount		229		(870)
Accumulated pension adjustment		(6,975)		(6,975)
Tax effect		1,465		1,465
Net of tax amount		(5,510)		(5,510)
Total accumulated other comprehensive loss	$	(5,281)	$	(6,380)

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Investments

3 Months Ended

Mar. 31, 2019

Investments [Abstract]

Investments

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of March 31, 2019 and December 31, 2018 are as follows:

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
March 31, 2019	cost		gains		losses		value
U.S. Government and Agency securities	$	9,634	$	24	$	(40)	$	9,618
Municipal securities		63,820		845		(108)		64,557
Trust preferred securities		4,080		—		(180)		3,900
Agency mortgage-backed securities		42,818		135		(364)		42,589
Private-label mortgage-backed securities		448		30		—		478
Asset-backed securities		6,791		—		(52)		6,739
	$	127,591	$	1,034	$	(744)	$	127,881

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2018	cost		gains		losses		value
U.S. Government and Agency securities	$	9,120	$	21	$	(65)	$	9,076
Municipal securities		67,811		320		(484)		67,647
Trust preferred securities		4,074		—		(316)		3,758
Agency mortgage-backed securities		45,241		65		(648)		44,658
Private-label mortgage-backed securities		457		31		—		488
Asset-backed securities		5,869		—		(24)		5,845
	$	132,572	$	437	$	(1,537)	$	131,472

At March 31, 2019and December 31, 2018, the fair value of AFS securities pledged to secure public funds and trust deposits totaled $76.7 million and  $84.6 million, respectively.

The amortized cost and estimated fair value of debt securities at March 31, 2019, 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	$	21,030	$	21,084
Due after one year through five years		25,764		25,839
Due after five years through ten years		35,173		35,467
Due after ten years		2,358		2,424
		84,325		84,814
Mortgage-backed securities		43,266		43,067
	$	127,591	$	127,881

The composition of the net realized gains on AFS securities for the three months ended are as follows:

	For the Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Gross gains realized	$	33	$	—
Gross losses realized		(9)		—
Net gains realized	$	24	$	—

Impairment:

The AFS securities portfolio contained 125 securities with $57.7 million of temporarily impaired fair value and $744 thousand in unrealized losses at March 31, 2019. The total unrealized loss position has decreased $793 thousand since year-end 2018. 

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. The impairment identified on debt securities and subject to assessment at March 31, 2019, 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 AFS portfolio, 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 March 31, 2019 and December 31, 2018:

	March 31, 2019
	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	$	—	$	—	—	$	4,777	$	(40)	14	$	4,777	$	(40)	14
Municipal securities		238		—	1		12,377		(108)	21		12,615		(108)	22
Trust preferred securities		1,166		(33)	2		2,734		(147)	3		3,900		(180)	5
Agency mortgage-backed securities		895		(1)	4		28,746		(363)	71		29,641		(364)	75
Asset-backed securities		6,721		(51)	7		18		(1)	2		6,739		(52)	9
Total temporarily impaired   securities	$	9,020	$	(85)	14	$	48,652	$	(659)	111	$	57,672	$	(744)	125

	December 31, 2018
	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	$	2,071	$	(6)	2	$	5,175	$	(59)	14	$	7,246	$	(65)	16
Municipal securities		5,832		(12)	10		25,091		(472)	42		30,923		(484)	52
Trust preferred securities		2,008		(159)	3		1,750		(157)	2		3,758		(316)	5
Agency mortgage-backed securities		7,687		(46)	16		30,511		(602)	74		38,198		(648)	90
Asset-backed securities		5,826		(22)	6		19		(2)	2		5,845		(24)	8
Total temporarily impaired   securities	$	23,424	$	(245)	37	$	62,546	$	(1,292)	134	$	85,970	$	(1,537)	171

The following table represents the cumulative credit losses on AFS securities recognized in earnings for:

	Three Months Ended
(Dollars in thousands)	March 31,
	2019		2018
Balance of cumulative credit-related OTTI at January 1	$	272	$	595
Additions for credit-related OTTI not previously recognized		—		—
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 March 31	$	272	$	595

Equity securities at Fair Value

The Corporation owns one equity investment. At March 31, 2019 and December 31, 2018, this investment was reported at fair value of $377 thousand and $374 thousand, respectively, with changes in value reported through income. 

Restricted Stock at Cost

The Bank held $452 thousand of restricted stock at March 31, 2019.  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. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. 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

3 Months Ended

Mar. 31, 2019

Loans [Abstract]

Loans

Note 5. 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 class, at the end of the reporting periods is as follows:

	March 31,		December 31,
(Dollars in thousands)	2019		2018
Residential Real Estate 1-4 Family
Consumer first liens	$	89,212	$	89,673
Commercial first lien		58,210		59,227
Total first liens		147,422		148,900
Consumer junior liens and lines of credit		41,831		42,504
Commercial junior liens and lines of credit		4,859		4,716
Total junior liens and lines of credit		46,690		47,220
Total residential real estate 1-4 family		194,112		196,120
Residential real estate - construction
Consumer		2,750		1,667
Commercial		11,231		8,558
Total residential real estate construction		13,981		10,225
Commercial real estate		497,974		487,980
Commercial		269,243		274,054
Total commercial		767,217		762,034
Consumer		5,156		4,996
		980,466		973,375
Less: Allowance for loan losses		(12,681)		(12,415)
Net Loans	$	967,785	$	960,960
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	125	$	123
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	787,055	$	772,564
Federal Reserve Bank		33,645		34,160
	$	820,700	$	806,724

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Loan Quality And Allowance for Loan Losses

3 Months Ended

Mar. 31, 2019

Loan Quality And Allowance for Loan Losses [Abstract]

Loan Quality and Allowance for Loan Losses

Note 6. Loan Quality and Allowance for Loan Losses

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

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415
Charge-offs		(33)		(1)		(3)		(63)		(61)		(26)		—		(187)
Recoveries		1		—		—		1		42		10		—		54
Provision		28		—		47		270		70		18		(34)		399
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681
ALL at December 31, 2017	$	1,060	$	330	$	224	$	6,526	$	2,110	$	105	$	1,437	$	11,792
Charge-offs		-		—		—		—		—		(26)		—		(26)
Recoveries		1		—		—		—		8		14		—		23
Provision		(18)		(10)		36		172		(45)		11		54		200
ALL at March 31, 2018	$	1,043	$	320	$	260	$	6,698	$	2,073	$	104	$	1,491	$	11,989

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 March 31, 2019and December 31, 2018:

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
March 31, 2019
Loans evaluated for ALL:
Individually	$	401	$	—	$	652	$	13,247	$	—	$	—	$	—	$	14,300
Collectively		147,021		46,690		13,329		484,727		269,243		5,156		—		966,166
Total	$	147,422	$	46,690	$	13,981	$	497,974	$	269,243	$	5,156	$	—	$	980,466
ALL established for   loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		487		132		152		5,906		4,562		72		1,370		12,681
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681
December 31, 2018
Loans evaluated for ALL:
Individually	$	405	$	—	$	455	$	10,099	$	181	$	—	$	—	$	11,140
Collectively		148,495		47,220		9,770		477,881		273,873		4,996		—		962,235
Total	$	148,900	$	47,220	$	10,225	$	487,980	$	274,054	$	4,996	$	—	$	973,375
ALL established for   loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		491		133		108		5,698		4,511		70		1,404		12,415
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415

The following table shows additional information about those loans considered to be impaired at March 31, 2019and December 31, 2018:

	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal		Related
March 31, 2019	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	889	$	889	$	—	$	—	$	—
Junior liens and lines of credit		44		44		—		—		—
Total		933		933		—		—		—
Residential real estate - construction		652		729		—		—		—
Commercial real estate		13,446		14,022		—		—		—
Commercial		129		146		—		—		—
Total	$	15,160	$	15,830	$	—	$	—	$	—

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	871	$	958	$	—	$	—	$	—
Junior liens and lines of credit		49		49		—		—		—
Total		920		1,007		—		—		—
Residential real estate - construction		455		531		—		—		—
Commercial real estate		10,236		10,808		—		—		—
Commercial		315		9,763		—		—		—
Total	$	11,926	$	22,109	$	—	$	—	$	—

The following table shows the average of impaired loans and related interest income for the three months ended March 31, 2019and 2018:

	Three Months Ended				Three Months Ended
	March 31, 2019				March 31, 2018
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	893	$	11	$	805	$	11
Junior liens and lines of credit		44		—		—		—
Total		937		11		805		11
Residential real estate - construction		653		—		466		—
Commercial real estate		13,494		102		10,994		105
Commercial		129		—		185		—
Total	$	15,213	$	113	$	12,450	$	116

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
March 31, 2019
Residential Real Estate 1-4 Family
First liens	$	146,866	$	309	$	30	$	137	$	476	$	80	$	147,422
Junior liens and lines of credit		46,588		29		29		18		76		26		46,690
Total		193,454		338		59		155		552		106		194,112
Residential real estate - construction		13,329		—		—		—		—		652		13,981
Commercial real estate		491,462		438		1,331		—		1,769		4,743		497,974
Commercial		268,527		273		262		52		587		129		269,243
Consumer		5,135		21		—		—		21		—		5,156
Total	$	971,907	$	1,070	$	1,652	$	207	$	2,929	$	5,630	$	980,466

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	148,183	$	322	$	202	$	113	$	637	$	80	$	148,900
Junior liens and lines of credit		47,040		131		—		26		157		23		47,220
Total		195,223		453		202		139		794		103		196,120
Residential real estate - construction		9,572		—		198		—		198		455		10,225
Commercial real estate		481,774		1,343		3,323		113		4,779		1,427		487,980
Commercial		273,534		65		40		100		205		315		274,054
Consumer		4,933		46		12		5		63		—		4,996
Total	$	965,036	$	1,907	$	3,775	$	357	$	6,039	$	2,300	$	973,375

The following table reports the risk rating for those loans in the portfolio that are assigned an individual risk rating.  Consumer purpose loans are assigned a rating of either pass or substandard based on the performance status of the loans.  Substandard consumer loans are comprised of loans 90 days or more past due and still accruing, and nonaccrual loans.  Commercial purpose loans may be assigned any rating in accordance with the Bank’s internal risk rating system.

	Pass		Special Mention		Substandard		Doubtful
(Dollars in thousands)	(1-5)		(6)		(7)		(8)		Total
March 31, 2019
Residential Real Estate 1-4 Family
First liens	$	146,986	$	—	$	436	$	—	$	147,422
Junior liens and lines of credit		46,646		—		44		—		46,690
Total		193,632		—		480		—		194,112
Residential real estate - construction		13,329		—		652		—		13,981
Commercial real estate		490,057		655		7,262		—		497,974
Commercial		268,345		—		898		—		269,243
Consumer		5,156		—		—		—		5,156
Total	$	970,519	$	655	$	9,292	$	—	$	980,466

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	148,453	$	—	$	447	$	—	$	148,900
Junior liens and lines of credit		47,171		—		49		—		47,220
Total		195,624		—		496		—		196,120
Residential real estate - construction		9,572		—		653		—		10,225
Commercial real estate		479,969		660		7,351		—		487,980
Commercial		272,959		—		1,095		—		274,054
Consumer		4,991		—		5		—		4,996
Total	$	963,115	$	660	$	9,600	$	—	$	973,375

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

								Troubled Debt Restructurings
								Within the Last 12 Months
								That Have Defaulted
(Dollars in thousands)	Troubled Debt Restructurings							On Modified Terms
	Number of	Recorded						Number of	Recorded
	Contracts	Investment		Performing*		Nonperforming*		Contracts	Investment
March 31, 2019
Residential real estate - construction	1	$	454	$	—	$	454	—	$	—
Residential real estate	4		673		673		—	—		—
Commercial real estate	11		9,982		8,703		1,279	—		—
Total	16	$	11,109	$	9,376	$	1,733	—	$	—
December 31, 2018
Residential real estate - construction	1	$	455	$	—	$	455	—	$	—
Residential real estate	4		678		678		—	—		—
Commercial real estate	11		10,099		8,809		1,290	—		—
Total	16	$	11,232	$	9,487	$	1,745	—	$	—

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

There were no new TDR loans during 2019 and 2018.

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Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

Note 7. Leases

The Corporation adopted ASU 2016-02 “Leases (Topic 842)” and all subsequent amendments on January 1, 2019 using the modified retrospective method.  The Corporation has elected the option to apply the new standard as of January 1, 2019 without restatement of any prior period results. Adoption of the new standard resulted in the recognition of a lease liability and a right-of-use asset of $6.2million without a cumulative effect adjustment to retained earnings.   

The Corporation leases various assets in the course of its operations that are subject to recognition under the new standard. The Corporation considers all of its leases to be operating leases and it has no finance leases. The leased assets are comprised of equipment; and buildings and land (collectively real estate).  The equipment leases are shorter-term than the real estate leases, and generally have a fixed payment over a defined term without renewal options. Certain equipment leases have purchase options and it was determined the option was not reasonably certain to be exercised.  The real estate leases are longer-term and may contain renewal options after the initial term, but none of the real estate leases contain a purchase option. The renewal options on real estate leases were reviewed and if it was determined the option was reasonably certain to be renewed, the option term was considered in the determination of the lease liability.  There is only one real estate lease with a variable payment based on an index included in the lease liability. None of the leases contain any restrictive covenants and there are no significant leases that have not yet commenced.  The discount rate used to determine the lease liability is based on the Bank’s fully secured borrowing rate from the Federal Home Loan Bank for a term similar to the lease term.  Adoption of the new standard did not affect the Corporation’s status as a “well-capitalized” institution.  The Corporation has one real estate lease to a related party with a liability value of $1.8 million.  Operating lease expense is included in net occupancy expense in the consolidated statements of income. See Note 1 for additional information on the adoption of the new standard.

Lease costs for the three months ended March 31, 2019 were as follows:

	Three Months Ended
(Dollars in thousands)	March 31, 2019
Operating lease cost	$	188
Short-term lease cost		6
Variable lease cost		11
Total lease cost	$	205

Cash paid for amounts included in the measurement of lease liabilities and the weighted-average remaining lease term and discount rate were as follows:

	Three Months Ended
(Dollars in thousands)	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	123
Weighted-average remaining lease term		13.7 years
Weighted-average discount rate		3.54%

As of March 31, 2019, the future minimum payments for operating leases having initial or remaining lease terms in excess of one year were as follows:

(Dollars in thousands)
2019	$	706
2020		664
2021		651
2022		543
2023		539
2024 and beyond		4,790
Total undiscounted cash flows		7,893
Discounted cash flows		(1,780)
Total lease liability	$	6,113

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Other Real Estate Owned

3 Months Ended

Mar. 31, 2019

Other Real Estate Owned [Abstract]

Other Real Estate Owned

Note 8. Other Real Estate Owned

Changes in other real estate owned were as follows:

	Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Balance at beginning of the period	$	2,684	$	2,598
Additions		—		—
Proceeds from dispositions		—		—
Loss on sales, net		—		—
Valuation adjustment		—		(6)
Balance at the end of the period	$	2,684	$	2,592

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Pension

3 Months Ended

Mar. 31, 2019

Pension [Abstract]

Pension

Note 9. Pension

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

	Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Components of net periodic cost:
Service cost	$	80	$	90
Interest cost		158		138
Expected return on plan assets		(270)		(279)
Recognized net actuarial loss		152		176
Net period cost	$	120	$	125

The Bank expects its pension expense to decrease to approximately $420 thousand in 2019 compared to $500 thousand in 2018, due primarily to decreases in service costs and recognized net actuarial losses.  The service cost component of pension expense is in the salaries and employee benefits line on the income statement. All other cost components are in the other expense line on the income statement.

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Fair Value Measurements And Fair Values Of Financial Instruments

3 Months Ended

Mar. 31, 2019

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

Fair Value Measurements And Fair Values Of Financial Instruments

Note 10.  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.The Corporation uses the exit price notion to measure the fair value of financial instruments.

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 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:

	March 31, 2019
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	47,033	$	47,033	$	47,033	$	—	$	—
Restricted stock		452		452		—		452		—
Loans held for sale		195		195				195
Net loans		967,785		952,024		—		—		952,024
Accrued interest receivable		3,963		3,963		—		3,963		—
Financial assets, available for sale
Debt securities		127,881		127,881		—		127,881		—
Financial assets, fair value
Equity securities		377		377		377		—		—
Financial liabilities:
Deposits	$	1,076,491	$	1,076,572	$	—	$	1,076,572	$	—
Accrued interest payable		291		291		—		291		—
	December 31, 2018
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	52,957	$	52,957	$	52,957	$	—	$	—
Restricted stock		452		452		—		452		—
Loans held for sale		118		118		—		118		—
Net loans		960,960		941,930		—		—		941,930
Accrued interest receivable		4,103		4,103		—		4,103		—
Financial assets, available for sale
Debt securities		131,472		131,472		—		131,472		—
Financial assets, fair value
Equity securities		374		374		374		—		—
Financial liabilities:
Deposits	$	1,082,629	$	1,082,425	$	—	$	1,082,425	$	—
Accrued interest payable		193		193		—		193		—

Recurring Fair Value Measurements

For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2019and December 31, 2018 are as follows:

(Dollars in Thousands	Fair Value at March 31, 2019
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	377	$	—	$	—	$	377
Available for sale:
U.S. Government and Agency securities		—		9,618		—		9,618
Municipal securities		—		64,557		—		64,557
Trust Preferred Securities		—		3,900		—		3,900
Agency mortgage-backed securities		—		42,589		—		42,589
Private-label mortgage-backed securities		—		478		—		478
Asset-backed securities		—		6,739		—		6,739
Total assets	$	377	$	127,881	$	—	$	128,258

(Dollars in Thousands)	Fair Value at December 31, 2018
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	374	$	—	$	—	$	374
Available for sale:
U.S. Government and Agency securities		—		9,076		—		9,076
Municipal securities		—		67,647		—		67,647
Trust Preferred Securities		—		3,758		—		3,758
Agency mortgage-backed securities		—		44,658		—		44,658
Private-label mortgage-backed securities		—		488		—		488
Asset-backed securities		—		5,845		—		5,845
Total assets	$	374	$	131,472	$	—	$	131,846

Investment securities:  Level 1 securities represent equity securities that are valued using quoted market prices form 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.

Nonrecurring Fair Value Measurements

The Corporation did not record any assets at fair value for which measurement of the fair value was made on a nonrecurring basis at March 31, 2019. For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2018was as follows:

(Dollars in Thousands)	Fair Value at December 31, 2018
Asset  Description	Level 1		Level 2		Level 3		Total
Other real estate owned (1)	$	—	$	—	$	71	$	71
Total assets	$	—	$	—	$	71	$	71

(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.

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.

The Corporation did not record any liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis at March 31, 2019. 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 March 31, 2019.

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

(Dollars in Thousands)
December 31, 2018		Fair Value	Valuation Technique	Unobservable Input	Weighted Average
Other real estate owned (1)	$	71	Appraisal	Cost to sell	8% (8%)
(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.

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Capital Ratios

3 Months Ended

Mar. 31, 2019

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 bank holding companies and U.S banks, generally referred to as “Basel III.” The Basel III standards were effective for the Corporation and the Bank, effective January 1, 2015 (subject to a phase-in period for certain provisions).  Basel III imposes significantly higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place.  The capital ratios to be considered “well capitalized” under Basel III are: (1) Common Equity Tier 1 (CET1) of 6.5%, (2) Tier 1 Leverage of 5%, (3) Tier 1 Risk-Based Capital of 8%, and (4) Total Risk-Based Capital of 10%.  The CET1 ratio is a new capital ratio under Basel III and the Tier 1 risk-based capital ratio of 8% has been increased from 6%. The rules also include changes in the risk weights of certain assets to better reflect credit and other risk exposures. In addition, a capital conservation buffer will be phased-in beginning January 1, 2016 at 0.625%,  1.25% for 2017, 1.875% for 2018 and 2.50% for 2019 and thereafter.  The capital conservation buffer will be applicable to all of the capital ratios except for the Tier1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement.  The Bank’s capital conservation buffer at March 31, 2019 was 6.95% (total risk-based capital 14.95% less 8.00%) compared to the 2019 regulatory buffer of 2.50%.  Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions.  As of March 31, 2019, the Bank was “well capitalized’ under the Basel III requirements.

The following table summarizes regulatory capital information as of March 31, 2019 and December 31, 2018 for the Corporation and the Bank:

			Regulatory Ratios
			Adequately	Well
	March 31,	December 31,	Capitalized	Capitalized
(Dollars in thousands)	2019	2018	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	13.78%	13.96%	4.500%	N/A
Farmers & Merchants Trust Company	13.69%	13.80%	4.500%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	13.78%	13.96%	6.000%	N/A
Farmers & Merchants Trust Company	13.69%	13.80%	6.000%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	15.04%	15.21%	8.000%	N/A
Farmers & Merchants Trust Company	14.95%	15.06%	8.000%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	9.88%	9.78%	4.000%	N/A
Farmers & Merchants Trust Company	9.82%	9.68%	4.000%	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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Revenue Recognition

3 Months Ended

Mar. 31, 2019

Revenue Recognition [Abstract]

Revenue Recognition

Note 12. Revenue Recognition

The Corporation adopted ASC 606 on January 1, 2018 using the modified retrospective approach applied to all contracts initiated on or after the effective date, and for contracts which have remaining obligations as of the effective date. Results for the reporting period beginning January 1, 2018 are presented under ASC 606 while the prior period results continue to be reported under legacy GAAP. Adoption of the standard did not have a material effect on any of the reported periods. The Corporation did not record a cumulative effect adjustment to the beginning retained earnings balance as of January 1, 2018 from the adoption of ASC 606 as it was determined the transition adjustment was immaterial to Corporation’s consolidated financial statements.

All of the Corporation’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income as presented in our consolidated statements of income. Revenue generating activities that fall within the scope of ASC 606 are described as follows:

Investment and Trust Service Fees - these represent fees from wealth management (assets under management), fees from the management and settlement of estates and commissions from the sale of investment and insurance products.

· Asset management fees are generally assessed based on a tiered fee schedule, based on the value of assets under management, and are recognized monthly when the service obligation is completed. Fees recognized were $1.3 million for the first quarters of 2019 and 2018.

· Fees for estate management services are based on the estimated fair value of the estate. These fees are generally recognized monthly over an 18 month period that Management has determined to represent the average time to fulfill the performance obligations of the contract. Management has the discretion to adjust this time period as needed based upon the nature and complexity of an individual estate. Fees recognized were $70 thousand for the first quarter of 2019, compared to $61 thousand for the first quarter of 2018.

· Commissions from the sale of investment and insurance products are recognized upon the completion of the transaction.  Fees recognized were $68 thousand for the first quarters of 2019 and 2018.

Loan Service Charges – these represent fees on loans for services or charges that occur after the loan has been booked, for example, late payment fees. These also include fees for mortgages settled for a third party mortgage company. All of these fees are transactional in nature and are recognized upon completion of the transaction which represents the performance obligation.

Deposit Service Charges and Fees – these represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to stop payment fees and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fee are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly.

Debit Card Income – this represents interchange fees from cardholder transactions conducted through the card payment network. Cardholders use the debit card to conduct point-of-sale transactions that produce interchange fees. The fees are transaction based and the fee is recognized with the processing of the transaction.  These fees are reported net of cardholder rewards.

Other Service Charges and Fees – these are comprised primarily of merchant card fees, credit card fees, ATM surcharges and interchange fees and wire transfer fees. Merchant card fees represent fees the Bank earns from a third party for enrolling a customer in the processor’s program. Credit card fees represent a fee earned by the Bank for a successful referral to a card-issuing company. ATM surcharges and interchange fees are the result of Bank customers conducting ATM transactions that generate fee income and are processed through multiple card networks. All of these fees are transaction based and are recognized at the time of the transaction.

Gains/Losses on the Sale of Other Real Estate – these are recognized when control of the property transfers to the buyer.

Increases in the cash surrender value of life insurance and security transactions are not within the scope of ASC 606.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset).  A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values.  Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized.  The Company does not typically enter into longer-term revenue contracts with customers, and therefore, does not experience significant contract balances. 

Contract Acquisition Costs

The Corporation expenses all contract acquisition costs as costs are incurred.

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Commitments And Contingencies

3 Months Ended

Mar. 31, 2019

Commitments And Contingencies [Abstract]

Commitments And Contingencies

1Note 13. Commitments and Contingencies

In the normal course of business, the Bank is a party to financial instruments that are not reflected in the accompanying financial statements and are commonly referred to as off-balance-sheet instruments.  These financial instruments are entered into primarily to meet the financing needs of the Bank’s customers and include commitments to extend credit and standby letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the consolidated balance sheet.

The Corporation’s exposure to credit loss in the event of nonperformance by other parties to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments.

The Bank had the following outstanding commitments for the periods presented:

	March 31,		December 31,
(Dollars in thousands)	2019		2018
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit	$	231,555	$	216,913
Consumer commitments to extend credit (secured)		50,950		49,221
Consumer commitments to extend credit (unsecured)		5,506		5,605
	$	288,011	$	271,739
Standby letters of credit	$	25,306	$	25,429

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses with the exception of home equity lines and personal lines of credit and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Bank evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank, is based on Management’s credit evaluation of the counterparty.  Collateral for most commercial commitments varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties.  Collateral for secured consumer commitments consists of liens on residential real estate.

Standby letters of credit are instruments issued by the Bank, which guarantee the beneficiary payment by the Bank in the event of default by the Bank’s customer in the nonperformance of an obligation or service.  Most standby letters of credit are extended for one-year periods.  Generally, the credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank holds collateral supporting those commitments for which collateral is deemed necessary primarily in the form of certificates of deposit and liens on real estate. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.  As of June 30, 2018, the Bank established a $2.4 million allowance against letters of credit issued in connection with a commercial borrower that declared bankruptcy in the second quarter of 2018 which remains at March 31, 2019.  Except for the liability recorded for standby letters of credit, liabilities for credit loss associated with off-balance sheet commitments were not material at March 31, 2019 and December 31, 2018.

Most of the Bank’s business activity is with customers located within its primary market and does not involve any significant concentrations of credit to any one entity or industry.

Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation.

We establish accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probably and the amount of the loss can be reasonably estimated.  When we are able to do so, we also determine estimates of possible losses, whether in excess of any accrued liability or where there is no accrued liability.

These assessments are based on our analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties.  As new information is obtained, we may change our assessments and, as a result, take or adjust the amounts of our accruals and change our estimates of possible losses or ranges of possible losses.  Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts that may be accrued or included in estimates of possible losses or ranges of possible losses may not represent the actual loss to the Corporation from any legal proceeding.  Our exposure and ultimate losses may be higher, possibly significantly higher, than amounts we may accrue or amounts we may estimate.

In management’s opinion, we do not anticipate, at the present time, that the ultimate aggregate liability, if any, arising out of all litigation to which the Corporation is a party at this time will have a material adverse effect on our financial position.  We cannot now determine, however, whether or not any claim asserted against us will have a material adverse effect on our results of operations in any future reporting period, which will depend on, amount other things, the amount of loss resulting from the claim and the amount of income otherwise reported for the reporting period.  Thus, at March 31, 2019, we are unable to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss with respect to such other matters and, accordingly, have not yet established any specific accrual for such other matters.

No material proceedings are pending or are known to be threatened or contemplated against us by governmental authorities.

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Basis Of Presentation (Policy)

3 Months Ended

Mar. 31, 2019

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 March 31, 2019, 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 2018 Annual Report on Form 10-K.  The consolidated results of operations for the three month period ended March 31, 2019 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, 2018 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
	March 31,
(Dollars and shares in thousands, except per share data)	2019		2018
Weighted average shares outstanding (basic)		4,412		4,359
Impact of common stock equivalents		21		28
Weighted average shares outstanding (diluted)		4,433		4,387
Anti-dilutive options excluded from calculation		—		—
Net income	$	3,237	$	3,502
Basic earnings per share	$	0.73	$	0.80
Diluted earnings per share	$	0.73	$	0.80

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Basis Of Presentation (Tables)

3 Months Ended

Mar. 31, 2019

Basis Of Presentation [Abstract]

Schedule Of Earnings Per Share, Basic And Diluted

	For the Three Months Ended
	March 31,
(Dollars and shares in thousands, except per share data)	2019		2018
Weighted average shares outstanding (basic)		4,412		4,359
Impact of common stock equivalents		21		28
Weighted average shares outstanding (diluted)		4,433		4,387
Anti-dilutive options excluded from calculation		—		—
Net income	$	3,237	$	3,502
Basic earnings per share	$	0.73	$	0.80
Diluted earnings per share	$	0.73	$	0.80

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Recent Accounting Pronouncements (Tables)

3 Months Ended

Mar. 31, 2019

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Standard	Description	Effective Date	Effect on the financial statements or other significant matters
ASU 2016-02, Leases (Topic 842) and all subsequently issued amendments	In February 2016, the FASB issued ASU 2016-02, "Leases (Subtopic 842)."  This ASU requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date.  Lessor accounting remains largely unchanged under the new guidance.  FASB subsequently issued various amendments that provided implementation guidance designed to provide entities with relief from the costs of implementing certain aspects of the new standard.  From the lessee's perspective, the new standard requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases.  Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for lessees. ASU 2016-02 and all subsequent amendments are effective for fiscal years, including interim periods, beginning after December 15, 2018.  Early adoption of ASU 2016-02 is permitted.	January 1, 2019	The Corporation adopted ASU 2016-02, "Leases (Topic 842)" and all subsequent amendments on January 1, 2019 using the modified retrospective approach, and it did not have a material effect on its consolidated results of operations. Adoption of the new standard resulted in the recognition of a lease liability and a right-of-use asset of $6.2 million without a cumulative effect adjustment to retained earnings.  The Corporation did not restate any prior period results. The Corporation adopted the package of practical expedients offered in ASU 2016-02 and therefore, existing lease classifications were not reassessed, expired or existing contracts were not reassessed for a lease, and the initial direct costs for any existing leases were not reassessed.  In addition to the package of practical expedients, the Corporation also utilized other practical expedients offered: (1) the hindsight expedient which allows entities to use hindsight to determine the lease term was not adopted, (2) leases, for all underlying asset classes, with a term less than 12 months and no purchase option were excluded, (3) the option to not separate lease and non-lease components and account for them as a single component was adopted for real estate leases, and (4) the option to not apply lease accounting to existing land easements was adopted.  See Note 7 for additional information on the adoption of the new standard.
ASU 2018-13, Disclosure Framework (Topic 820)	This guidance eliminates, adds and modifies certain disclosure requirements for fair value measurements.  Among the changes, entities will no longer be required to disclose the amount of and reason for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.	January 1, 2019	The Corporation adopted the standard on January 1, 2019 and it did not have a material effect on its consolidated results of operations.
ASU 2018-15, Accounting for Implementation Costs in a Cloud Computing Arrangement (Topic 350)	This ASU required an entity in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.  Capitalized implementation costs should be presented in the same line item on the balance sheet as amounts prepaid for the hosted service, if any (generally as an "other asset").  The capitalized costs will be amortized over the term of the hosting arrangement, with the amortization expense being presented in the same income statement line item as the fees paid for the hosted service.  The ASU is effective January 1, 2020 with early adoption permitted.	January 1, 2020	The Corporation adopted the standard on January 1, 2019 and it did not have a material effect on its consolidated results of operations.
ASU 2017-04, Goodwill (Topic 350)	This guidance, among other things, removes step 2 of the goodwill impairment test thus eliminating the need to determine the fair value of individual assets and liabilities of the reporting unit.  Upon adoption of this standard, goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  This may result in more or less impairment being recognized than under the current guidance. Early adoption is permitted for any impairment tests performed after January 1, 2017, applied prospectively.	January 1, 2020	The Corporation early adopted the ASU in the fourth quarter of 2018 with the completion of the 2018 impairment analysis.  The Corporation is still evaluating the effect of the standard on its consolidated financial statements.
ASU 2018-14, Disclosure Framework (Topic 715): Changes to the Disclosure Requirements for Defined Benefit Plans	This ASU makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020; early adoption is permitted.	January 1, 2020	The Corporation will adopt the provisions of the ASU on January 1, 2020.  As the ASU only revises disclosure requirements, it is not expected to have a material effect on the consolidated financial statements.
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	This standard requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model).  Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument.  The ASU replaces the current accounting model for purchased credit impaired loans and debt securities.  The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis.  However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis.  The subsequent accounting for PCD financial assets is the same expected loss model described above.	January 1, 2020	We have formed an implementation team led by the Corporation's Risk Management function. The team is reviewing the requirements of the ASU and evaluating methods and models for implementation.  The new standard will result in earlier recognition of additions to the allowance for loan losses and possibly a larger allowance for loan loss balance with a corresponding increase in the provision for loan losses in results of operations; however, the Corporation is continuing to evaluate the impact of the pending adoption of the new standard on its consolidated financial statements.  A third-party vendor has been selected to assist with the CECL calculations and the implementation process has started.  The Corporation expects to be able to run the CECL model in test mode starting in the second quarter of 2019.

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2019

Accumulated Other Comprehensive Loss [Abstract]

Schedule Of Accumulated Other Comprehensive Loss

	March 31,		December 31,
	2019		2018
(Dollars in thousands)
Net unrealized (losses) gains on debt securities	$	290	$	(1,100)
Tax effect		(61)		230
Net of tax amount		229		(870)
Accumulated pension adjustment		(6,975)		(6,975)
Tax effect		1,465		1,465
Net of tax amount		(5,510)		(5,510)
Total accumulated other comprehensive loss	$	(5,281)	$	(6,380)

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Investments (Tables)

3 Months Ended

Mar. 31, 2019

Investments [Abstract]

Unrealized Gain (Loss) On Investments

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
March 31, 2019	cost		gains		losses		value
U.S. Government and Agency securities	$	9,634	$	24	$	(40)	$	9,618
Municipal securities		63,820		845		(108)		64,557
Trust preferred securities		4,080		—		(180)		3,900
Agency mortgage-backed securities		42,818		135		(364)		42,589
Private-label mortgage-backed securities		448		30		—		478
Asset-backed securities		6,791		—		(52)		6,739
	$	127,591	$	1,034	$	(744)	$	127,881

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2018	cost		gains		losses		value
U.S. Government and Agency securities	$	9,120	$	21	$	(65)	$	9,076
Municipal securities		67,811		320		(484)		67,647
Trust preferred securities		4,074		—		(316)		3,758
Agency mortgage-backed securities		45,241		65		(648)		44,658
Private-label mortgage-backed securities		457		31		—		488
Asset-backed securities		5,869		—		(24)		5,845
	$	132,572	$	437	$	(1,537)	$	131,472

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

(Dollars in thousands)	Amortized cost		Fair value
Due in one year or less	$	21,030	$	21,084
Due after one year through five years		25,764		25,839
Due after five years through ten years		35,173		35,467
Due after ten years		2,358		2,424
		84,325		84,814
Mortgage-backed securities		43,266		43,067
	$	127,591	$	127,881

Composition Of Net Realized Securities Gains

	For the Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Gross gains realized	$	33	$	—
Gross losses realized		(9)		—
Net gains realized	$	24	$	—

Schedule Of Unrealized Loss On Investments

	March 31, 2019
	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	$	—	$	—	—	$	4,777	$	(40)	14	$	4,777	$	(40)	14
Municipal securities		238		—	1		12,377		(108)	21		12,615		(108)	22
Trust preferred securities		1,166		(33)	2		2,734		(147)	3		3,900		(180)	5
Agency mortgage-backed securities		895		(1)	4		28,746		(363)	71		29,641		(364)	75
Asset-backed securities		6,721		(51)	7		18		(1)	2		6,739		(52)	9
Total temporarily impaired   securities	$	9,020	$	(85)	14	$	48,652	$	(659)	111	$	57,672	$	(744)	125

	December 31, 2018
	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	$	2,071	$	(6)	2	$	5,175	$	(59)	14	$	7,246	$	(65)	16
Municipal securities		5,832		(12)	10		25,091		(472)	42		30,923		(484)	52
Trust preferred securities		2,008		(159)	3		1,750		(157)	2		3,758		(316)	5
Agency mortgage-backed securities		7,687		(46)	16		30,511		(602)	74		38,198		(648)	90
Asset-backed securities		5,826		(22)	6		19		(2)	2		5,845		(24)	8
Total temporarily impaired   securities	$	23,424	$	(245)	37	$	62,546	$	(1,292)	134	$	85,970	$	(1,537)	171

Other Than Temporary Impairment, Credit Losses Recognized In Earnings

	Three Months Ended
(Dollars in thousands)	March 31,
	2019		2018
Balance of cumulative credit-related OTTI at January 1	$	272	$	595
Additions for credit-related OTTI not previously recognized		—		—
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 March 31	$	272	$	595

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Loans (Tables)

3 Months Ended

Mar. 31, 2019

Loans [Abstract]

Schedule Of Loans Outstanding

	March 31,		December 31,
(Dollars in thousands)	2019		2018
Residential Real Estate 1-4 Family
Consumer first liens	$	89,212	$	89,673
Commercial first lien		58,210		59,227
Total first liens		147,422		148,900
Consumer junior liens and lines of credit		41,831		42,504
Commercial junior liens and lines of credit		4,859		4,716
Total junior liens and lines of credit		46,690		47,220
Total residential real estate 1-4 family		194,112		196,120
Residential real estate - construction
Consumer		2,750		1,667
Commercial		11,231		8,558
Total residential real estate construction		13,981		10,225
Commercial real estate		497,974		487,980
Commercial		269,243		274,054
Total commercial		767,217		762,034
Consumer		5,156		4,996
		980,466		973,375
Less: Allowance for loan losses		(12,681)		(12,415)
Net Loans	$	967,785	$	960,960
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	125	$	123
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	787,055	$	772,564
Federal Reserve Bank		33,645		34,160
	$	820,700	$	806,724

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Loan Quality and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2019

Loan Quality And Allowance for Loan Losses [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 shown:

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415
Charge-offs		(33)		(1)		(3)		(63)		(61)		(26)		—		(187)
Recoveries		1		—		—		1		42		10		—		54
Provision		28		—		47		270		70		18		(34)		399
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681
ALL at December 31, 2017	$	1,060	$	330	$	224	$	6,526	$	2,110	$	105	$	1,437	$	11,792
Charge-offs		-		—		—		—		—		(26)		—		(26)
Recoveries		1		—		—		—		8		14		—		23
Provision		(18)		(10)		36		172		(45)		11		54		200
ALL at March 31, 2018	$	1,043	$	320	$	260	$	6,698	$	2,073	$	104	$	1,491	$	11,989

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 March 31, 2019and December 31, 2018:

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
March 31, 2019
Loans evaluated for ALL:
Individually	$	401	$	—	$	652	$	13,247	$	—	$	—	$	—	$	14,300
Collectively		147,021		46,690		13,329		484,727		269,243		5,156		—		966,166
Total	$	147,422	$	46,690	$	13,981	$	497,974	$	269,243	$	5,156	$	—	$	980,466
ALL established for   loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		487		132		152		5,906		4,562		72		1,370		12,681
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681
December 31, 2018
Loans evaluated for ALL:
Individually	$	405	$	—	$	455	$	10,099	$	181	$	—	$	—	$	11,140
Collectively		148,495		47,220		9,770		477,881		273,873		4,996		—		962,235
Total	$	148,900	$	47,220	$	10,225	$	487,980	$	274,054	$	4,996	$	—	$	973,375
ALL established for   loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		491		133		108		5,698		4,511		70		1,404		12,415
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415

Impaired Financing Receivables

The following table shows additional information about those loans considered to be impaired at March 31, 2019and December 31, 2018:

	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal		Related
March 31, 2019	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	889	$	889	$	—	$	—	$	—
Junior liens and lines of credit		44		44		—		—		—
Total		933		933		—		—		—
Residential real estate - construction		652		729		—		—		—
Commercial real estate		13,446		14,022		—		—		—
Commercial		129		146		—		—		—
Total	$	15,160	$	15,830	$	—	$	—	$	—

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	871	$	958	$	—	$	—	$	—
Junior liens and lines of credit		49		49		—		—		—
Total		920		1,007		—		—		—
Residential real estate - construction		455		531		—		—		—
Commercial real estate		10,236		10,808		—		—		—
Commercial		315		9,763		—		—		—
Total	$	11,926	$	22,109	$	—	$	—	$	—

The following table shows the average of impaired loans and related interest income for the three months ended March 31, 2019and 2018:

	Three Months Ended				Three Months Ended
	March 31, 2019				March 31, 2018
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	893	$	11	$	805	$	11
Junior liens and lines of credit		44		—		—		—
Total		937		11		805		11
Residential real estate - construction		653		—		466		—
Commercial real estate		13,494		102		10,994		105
Commercial		129		—		185		—
Total	$	15,213	$	113	$	12,450	$	116

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
March 31, 2019
Residential Real Estate 1-4 Family
First liens	$	146,866	$	309	$	30	$	137	$	476	$	80	$	147,422
Junior liens and lines of credit		46,588		29		29		18		76		26		46,690
Total		193,454		338		59		155		552		106		194,112
Residential real estate - construction		13,329		—		—		—		—		652		13,981
Commercial real estate		491,462		438		1,331		—		1,769		4,743		497,974
Commercial		268,527		273		262		52		587		129		269,243
Consumer		5,135		21		—		—		21		—		5,156
Total	$	971,907	$	1,070	$	1,652	$	207	$	2,929	$	5,630	$	980,466

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	148,183	$	322	$	202	$	113	$	637	$	80	$	148,900
Junior liens and lines of credit		47,040		131		—		26		157		23		47,220
Total		195,223		453		202		139		794		103		196,120
Residential real estate - construction		9,572		—		198		—		198		455		10,225
Commercial real estate		481,774		1,343		3,323		113		4,779		1,427		487,980
Commercial		273,534		65		40		100		205		315		274,054
Consumer		4,933		46		12		5		63		—		4,996
Total	$	965,036	$	1,907	$	3,775	$	357	$	6,039	$	2,300	$	973,375

Internal Credit Rating For The Loan Portfolio

	Pass		Special Mention		Substandard		Doubtful
(Dollars in thousands)	(1-5)		(6)		(7)		(8)		Total
March 31, 2019
Residential Real Estate 1-4 Family
First liens	$	146,986	$	—	$	436	$	—	$	147,422
Junior liens and lines of credit		46,646		—		44		—		46,690
Total		193,632		—		480		—		194,112
Residential real estate - construction		13,329		—		652		—		13,981
Commercial real estate		490,057		655		7,262		—		497,974
Commercial		268,345		—		898		—		269,243
Consumer		5,156		—		—		—		5,156
Total	$	970,519	$	655	$	9,292	$	—	$	980,466

December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	148,453	$	—	$	447	$	—	$	148,900
Junior liens and lines of credit		47,171		—		49		—		47,220
Total		195,624		—		496		—		196,120
Residential real estate - construction		9,572		—		653		—		10,225
Commercial real estate		479,969		660		7,351		—		487,980
Commercial		272,959		—		1,095		—		274,054
Consumer		4,991		—		5		—		4,996
Total	$	963,115	$	660	$	9,600	$	—	$	973,375

Troubled Debt Restructuring Loans

								Troubled Debt Restructurings
								Within the Last 12 Months
								That Have Defaulted
(Dollars in thousands)	Troubled Debt Restructurings							On Modified Terms
	Number of	Recorded						Number of	Recorded
	Contracts	Investment		Performing*		Nonperforming*		Contracts	Investment
March 31, 2019
Residential real estate - construction	1	$	454	$	—	$	454	—	$	—
Residential real estate	4		673		673		—	—		—
Commercial real estate	11		9,982		8,703		1,279	—		—
Total	16	$	11,109	$	9,376	$	1,733	—	$	—
December 31, 2018
Residential real estate - construction	1	$	455	$	—	$	455	—	$	—
Residential real estate	4		678		678		—	—		—
Commercial real estate	11		10,099		8,809		1,290	—		—
Total	16	$	11,232	$	9,487	$	1,745	—	$	—

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

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Leases (Tables)

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Schedule Of Lease Costs

	Three Months Ended
(Dollars in thousands)	March 31, 2019
Operating lease cost	$	188
Short-term lease cost		6
Variable lease cost		11
Total lease cost	$	205

Schedule Of Measurement Of Lease Liabilities

	Three Months Ended
(Dollars in thousands)	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	123
Weighted-average remaining lease term		13.7 years
Weighted-average discount rate		3.54%

Schedule Of Future Minimum Payments Operating Leases

(Dollars in thousands)
2019	$	706
2020		664
2021		651
2022		543
2023		539
2024 and beyond		4,790
Total undiscounted cash flows		7,893
Discounted cash flows		(1,780)
Total lease liability	$	6,113

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Other Real Estate Owned (Tables)

3 Months Ended

Mar. 31, 2019

Other Real Estate Owned [Abstract]

Summary Of Changes In Other Real Estate Owned

	Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Balance at beginning of the period	$	2,684	$	2,598
Additions		—		—
Proceeds from dispositions		—		—
Loss on sales, net		—		—
Valuation adjustment		—		(6)
Balance at the end of the period	$	2,684	$	2,592

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Pension (Tables)

3 Months Ended

Mar. 31, 2019

Pension [Abstract]

Schedule Of Net Periodic Pension Costs

	Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Components of net periodic cost:
Service cost	$	80	$	90
Interest cost		158		138
Expected return on plan assets		(270)		(279)
Recognized net actuarial loss		152		176
Net period cost	$	120	$	125

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

3 Months Ended

Mar. 31, 2019

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

Fair Value, By Balance Sheet Grouping

	March 31, 2019
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	47,033	$	47,033	$	47,033	$	—	$	—
Restricted stock		452		452		—		452		—
Loans held for sale		195		195				195
Net loans		967,785		952,024		—		—		952,024
Accrued interest receivable		3,963		3,963		—		3,963		—
Financial assets, available for sale
Debt securities		127,881		127,881		—		127,881		—
Financial assets, fair value
Equity securities		377		377		377		—		—
Financial liabilities:
Deposits	$	1,076,491	$	1,076,572	$	—	$	1,076,572	$	—
Accrued interest payable		291		291		—		291		—
	December 31, 2018
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	52,957	$	52,957	$	52,957	$	—	$	—
Restricted stock		452		452		—		452		—
Loans held for sale		118		118		—		118		—
Net loans		960,960		941,930		—		—		941,930
Accrued interest receivable		4,103		4,103		—		4,103		—
Financial assets, available for sale
Debt securities		131,472		131,472		—		131,472		—
Financial assets, fair value
Equity securities		374		374		374		—		—
Financial liabilities:
Deposits	$	1,082,629	$	1,082,425	$	—	$	1,082,425	$	—
Accrued interest payable		193		193		—		193		—

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

(Dollars in Thousands	Fair Value at March 31, 2019
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	377	$	—	$	—	$	377
Available for sale:
U.S. Government and Agency securities		—		9,618		—		9,618
Municipal securities		—		64,557		—		64,557
Trust Preferred Securities		—		3,900		—		3,900
Agency mortgage-backed securities		—		42,589		—		42,589
Private-label mortgage-backed securities		—		478		—		478
Asset-backed securities		—		6,739		—		6,739
Total assets	$	377	$	127,881	$	—	$	128,258

(Dollars in Thousands)	Fair Value at December 31, 2018
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	374	$	—	$	—	$	374
Available for sale:
U.S. Government and Agency securities		—		9,076		—		9,076
Municipal securities		—		67,647		—		67,647
Trust Preferred Securities		—		3,758		—		3,758
Agency mortgage-backed securities		—		44,658		—		44,658
Private-label mortgage-backed securities		—		488		—		488
Asset-backed securities		—		5,845		—		5,845
Total assets	$	374	$	131,472	$	—	$	131,846

Schedule Of Fair Value On A Nonrecurring Basis

(Dollars in Thousands)	Fair Value at December 31, 2018
Asset  Description	Level 1		Level 2		Level 3		Total
Other real estate owned (1)	$	—	$	—	$	71	$	71
Total assets	$	—	$	—	$	71	$	71

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

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Capital Ratios (Tables)

3 Months Ended

Mar. 31, 2019

Capital Ratios [Abstract]

Schedule Of The Total Risk-based, Tier 1 Risk-based And Tier 1 Leverage Requirements

			Regulatory Ratios
			Adequately	Well
	March 31,	December 31,	Capitalized	Capitalized
(Dollars in thousands)	2019	2018	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	13.78%	13.96%	4.500%	N/A
Farmers & Merchants Trust Company	13.69%	13.80%	4.500%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	13.78%	13.96%	6.000%	N/A
Farmers & Merchants Trust Company	13.69%	13.80%	6.000%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	15.04%	15.21%	8.000%	N/A
Farmers & Merchants Trust Company	14.95%	15.06%	8.000%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	9.88%	9.78%	4.000%	N/A
Farmers & Merchants Trust Company	9.82%	9.68%	4.000%	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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Commitments And Contingencies (Tables)

3 Months Ended

Mar. 31, 2019

Commitments And Contingencies [Abstract]

Outstanding Commitments

	March 31,		December 31,
(Dollars in thousands)	2019		2018
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit	$	231,555	$	216,913
Consumer commitments to extend credit (secured)		50,950		49,221
Consumer commitments to extend credit (unsecured)		5,506		5,605
	$	288,011	$	271,739
Standby letters of credit	$	25,306	$	25,429

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Basis Of Presentation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Basis Of Presentation [Abstract]
Weighted average shares outstanding (basic)	4,412	4,359
Impact of common stock equivalents	21	28
Weighted average shares outstanding (diluted)	4,433	4,387
Net income	$ 3,237	$ 3,502
Basic earnings per share	$ 0.73	$ 0.80
Diluted earnings per share	$ 0.73	$ 0.80

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Recent Accounting Pronouncements (Recent Accounting Pronouncements) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right-of-use asset		$ 6,099
Accounting Standards Update 2016-02 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right-of-use asset			$ 6,200
Retained Earnings [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative adjustment for fair value of equity securities	$ 201
Accumulated Other Comprehensive Loss [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative adjustment for fair value of equity securities	$ (201)

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Accumulated Other Comprehensive Loss [Abstract]
Net unrealized (losses) gains on debt securities	$ 290	$ (1,100)
Tax effect	(61)	230
Net of tax amount	229	(870)
Accumulated pension adjustment	(6,975)	(6,975)
Tax effect	1,465	1,465
Net of tax amount	(5,510)	(5,510)
Total accumulated other comprehensive loss	$ (5,281)	$ (6,380)

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Investments (Narrative) (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) security $ / shares	Dec. 31, 2018 USD ($) security
Investments [Abstract]
Number of temporarily impaired securities | security	125	171
Unrealized Losses	$ 744	$ 1,537
Number of investments | security	125
Equity securities held | security	1
Securities pledged as collateral	$ 76,700	84,600
Unrealized Gain (Loss) on Securities	(744)
Gross Unrealized Gain (Loss)	793
Other-than-temporary-impairment charges	57,700
Repurchased FHLB stock	$ 30
Price Per Share, FHLB Stock | $ / shares	$ 100
Restricted stock	$ 452	452
Equity securities	$ 377	$ 374

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Investments (Unrealized Gain (loss) On Investments) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 127,591
Gross unrealized gains	1,034
Gross unrealized losses	(744)
Available for sale	127,881
Before Adoption Of ASU 2016-01 [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost		$ 132,572
Gross unrealized gains		437
Gross unrealized losses		(1,537)
Available for sale		131,472
U.S. Government And Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	9,634	9,120
Gross unrealized gains	24	21
Gross unrealized losses	(40)	(65)
Available for sale	9,618	9,076
Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	63,820	67,811
Gross unrealized gains	845	320
Gross unrealized losses	(108)	(484)
Available for sale	64,557	67,647
Trust Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	4,080	4,074
Gross unrealized losses	(180)	(316)
Available for sale	3,900	3,758
Agency Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	42,818	45,241
Gross unrealized gains	135	65
Gross unrealized losses	(364)	(648)
Available for sale	42,589	44,658
Private-Label Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	448	457
Gross unrealized gains	30	31
Available for sale	478	488
Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	6,791	5,869
Gross unrealized losses	(52)	(24)
Available for sale	$ 6,739	$ 5,845

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Investments (Amortized Cost And Fair Value Of Debt Securities, By Contractual Maturity) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Investments [Abstract]
Due in one year or less, Amortized cost	$ 21,030
Due after one year through five years, Amortized cost	25,764
Due after five years through ten years, Amortized cost	35,173
Due after ten years, Amortized cost	2,358
Amortized Cost Contractual Maturities Subtotal	84,325
Mortgage-backed securities, Amortized cost	43,266
Available-for-sale Securities, Debt Maturities, Amortized cost	127,591
Due in one year or less, Fair value	21,084
Due after one year through five years, Fair value	25,839
Due after five years through ten years, Fair value	35,467
Due after ten years, Fair value	2,424
Fair Value Contractual Maturities Subtotal	84,814
Mortgage-backed securities, Fair value	43,067
Available-for-sale Securities, Debt Securities, Fair Value	$ 127,881	$ 131,472

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Investments (Composition Of Net Realized Securities Gains) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Investments [Abstract]
Gross gains realized	$ 33
Gross losses realized	(9)
Net gains realized	$ 24

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Investments (Schedule Of Unrealized Loss On Investments) (Details) $ in Thousands	Mar. 31, 2019 USD ($) security	Dec. 31, 2018 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 9,020	$ 23,424
Less than 12 months: Unrealized Losses	$ (85)	$ (245)
Less than 12 months: Count | security	14	37
12 months or more: Fair Value	$ 48,652	$ 62,546
12 months or more: Unrealized Losses	$ (659)	$ (1,292)
12 months or more: Count | security	111	134
Fair Value	$ 57,672	$ 85,970
Unrealized Losses	$ (744)	$ (1,537)
Count | security	125	171
U.S. Government And Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value		$ 2,071
Less than 12 months: Unrealized Losses		$ (6)
Less than 12 months: Count | security		2
12 months or more: Fair Value	$ 4,777	$ 5,175
12 months or more: Unrealized Losses	$ (40)	$ (59)
12 months or more: Count | security	14	14
Fair Value	$ 4,777	$ 7,246
Unrealized Losses	$ (40)	$ (65)
Count | security	14	16
Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 238	$ 5,832
Less than 12 months: Unrealized Losses		$ (12)
Less than 12 months: Count | security	1	10
12 months or more: Fair Value	$ 12,377	$ 25,091
12 months or more: Unrealized Losses	$ (108)	$ (472)
12 months or more: Count | security	21	42
Fair Value	$ 12,615	$ 30,923
Unrealized Losses	$ (108)	$ (484)
Count | security	22	52
Trust Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 1,166	$ 2,008
Less than 12 months: Unrealized Losses	$ (33)	$ (159)
Less than 12 months: Count | security	2	3
12 months or more: Fair Value	$ 2,734	$ 1,750
12 months or more: Unrealized Losses	$ (147)	$ (157)
12 months or more: Count | security	3	2
Fair Value	$ 3,900	$ 3,758
Unrealized Losses	$ (180)	$ (316)
Count | security	5	5
Agency Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 895	$ 7,687
Less than 12 months: Unrealized Losses	$ (1)	$ (46)
Less than 12 months: Count | security	4	16
12 months or more: Fair Value	$ 28,746	$ 30,511
12 months or more: Unrealized Losses	$ (363)	$ (602)
12 months or more: Count | security	71	74
Fair Value	$ 29,641	$ 38,198
Unrealized Losses	$ (364)	$ (648)
Count | security	75	90
Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 6,721	$ 5,826
Less than 12 months: Unrealized Losses	$ (51)	$ (22)
Less than 12 months: Count | security	7	6
12 months or more: Fair Value	$ 18	$ 19
12 months or more: Unrealized Losses	$ (1)	$ (2)
12 months or more: Count | security	2	2
Fair Value	$ 6,739	$ 5,845
Unrealized Losses	$ (52)	$ (24)
Count | security	9	8

XML

Investments (Other Than Temporary Impairment, Credit Losses Recognized In Earnings) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Investments [Abstract]
Balance of cumulative credit-related OTTI at January 1	$ 272	$ 595
Additions for credit-related OTTI not previously recognized
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 September 30	$ 272	$ 595

XML

Loans (Schedule Of Loans Outstanding) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 980,466	$ 973,375
Less: Allowance for loan losses	(12,681)	(12,415)
Net Loans	967,785	960,960
Net unamortized deferred loan costs	125	123
Loans pledged as collateral for borrowings and commitments from: FHLB	787,055	772,564
Loans pledged as collateral for borrowings and commitments from :Federal Reserve Bank	33,645	34,160
Total	820,700	806,724
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	194,112	196,120
Residential Real Estate - Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	13,981	10,225
Less: Allowance for loan losses	(152)	(108)
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	497,974	487,980
Less: Allowance for loan losses	(5,906)	(5,698)
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	269,243	274,054
Less: Allowance for loan losses	(4,562)	(4,511)
Total Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	767,217	762,034
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	5,156	4,996
Less: Allowance for loan losses	(72)	(70)
Consumer First Liens [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	89,212	89,673
Consumer Junior Liens And Lines Of Credit [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	41,831	42,504
Consumer [Member] | Residential Real Estate - Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	2,750	1,667
Commercial Junior Liens And Lines Of Credit [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	4,859	4,716
Commercial [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	58,210	59,227
Commercial [Member] | Residential Real Estate - Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	11,231	8,558
First Liens [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	147,422	148,900
Less: Allowance for loan losses	(487)	(491)
Junior Lines And Lines Of Credit [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 46,690	$ 47,220

XML

Loan Quality and Allowance for Loan Losses (Allowance For Loan Losses, By Loan Segment) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	$ 12,415	$ 11,792
Charge-offs	(187)	(26)
Recoveries	54	23
Provision	399	200
Allowance, Ending Balance	12,681	11,989
Loans evaluated for allowance individually	14,300		$ 11,140
Loans evaluated for allowance collectively	966,166		962,235
Total Loans	980,466		973,375
Allowance established for loan evaluated collectively	12,681		12,415
Total Allowance	12,681		12,415
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Loans	194,112		196,120
Residential Real Estate - Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	108	224
Charge-offs	(3)
Provision	47	36
Allowance, Ending Balance	152	260
Loans evaluated for allowance individually	652		455
Loans evaluated for allowance collectively	13,329		9,770
Total Loans	13,981		10,225
Allowance established for loan evaluated collectively	152		108
Total Allowance	152		108
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	5,698	6,526
Charge-offs	(63)
Recoveries	1
Provision	270	172
Allowance, Ending Balance	5,906	6,698
Loans evaluated for allowance individually	13,247		10,099
Loans evaluated for allowance collectively	484,727		477,881
Total Loans	497,974		487,980
Allowance established for loan evaluated collectively	5,906		5,698
Total Allowance	5,906		5,698
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	4,511	2,110
Charge-offs	(61)
Recoveries	42	8
Provision	70	(45)
Allowance, Ending Balance	4,562	2,073
Loans evaluated for allowance individually			181
Loans evaluated for allowance collectively	269,243		273,873
Total Loans	269,243		274,054
Allowance established for loan evaluated collectively	4,562		4,511
Total Allowance	4,562		4,511
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	70	105
Charge-offs	(26)	(26)
Recoveries	10	14
Provision	18	11
Allowance, Ending Balance	72	104
Loans evaluated for allowance collectively	5,156		4,996
Total Loans	5,156		4,996
Allowance established for loan evaluated collectively	72		70
Total Allowance	72		70
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	1,404	1,437
Provision	(34)	54
Allowance, Ending Balance	1,370	1,491
Allowance established for loan evaluated collectively	1,370		1,404
Total Allowance	1,370		1,404
First Liens [Member] | Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	491	1,060
Charge-offs	(33)
Recoveries	1	1
Provision	28	(18)
Allowance, Ending Balance	487	1,043
Loans evaluated for allowance individually	401		405
Loans evaluated for allowance collectively	147,021		148,495
Total Loans	147,422		148,900
Allowance established for loan evaluated collectively	487		491
Total Allowance	487		491
Junior Liens & Lines Of Credit [Member] | Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	133	330
Charge-offs	(1)
Provision		(10)
Allowance, Ending Balance	132	$ 320
Loans evaluated for allowance collectively	46,690		47,220
Total Loans	46,690		47,220
Allowance established for loan evaluated collectively	132		133
Total Allowance	$ 132		$ 133

XML

Loan Quality and Allowance for Loan Losses (Impaired Financing Receivables) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	$ 15,160		$ 11,926
Unpaid Principal Balance With No Allowance	15,830		22,109
Average Recorded Investment	15,213	$ 12,450
Interest Income Recognized	113	116
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	933		920
Unpaid Principal Balance With No Allowance	933		1,007
Average Recorded Investment	937	805
Interest Income Recognized	11	11
Residential Real Estate [Member] | First Liens [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	889		871
Unpaid Principal Balance With No Allowance	889		958
Average Recorded Investment	893	805
Interest Income Recognized	11	11
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	44		49
Unpaid Principal Balance With No Allowance	44		49
Average Recorded Investment	44
Residential Real Estate - Construction [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	652		455
Unpaid Principal Balance With No Allowance	729		531
Average Recorded Investment	653	466
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	13,446		10,236
Unpaid Principal Balance With No Allowance	14,022		10,808
Average Recorded Investment	13,494	10,994
Interest Income Recognized	102	105
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	129		315
Unpaid Principal Balance With No Allowance	146		$ 9,763
Average Recorded Investment	$ 129	$ 185

XML

Loan Quality and Allowance for Loan Losses (Aging Of Payments Of The Loan Portfolio) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 971,907	$ 965,036
Loans Past Due and Still Accruing	2,929	6,039
Non-accrual loans	5,630	2,300
Total Loans	980,466	973,375
30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	1,070	1,907
60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	1,652	3,775
90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	207	357
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	193,454	195,223
Loans Past Due and Still Accruing	552	794
Non-accrual loans	106	103
Total Loans	194,112	196,120
Residential Real Estate [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	338	453
Residential Real Estate [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	59	202
Residential Real Estate [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	155	139
Residential Real Estate [Member] | First Liens [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	146,866	148,183
Loans Past Due and Still Accruing	476	637
Non-accrual loans	80	80
Total Loans	147,422	148,900
Residential Real Estate [Member] | First Liens [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	309	322
Residential Real Estate [Member] | First Liens [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	30	202
Residential Real Estate [Member] | First Liens [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	137	113
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	46,588	47,040
Loans Past Due and Still Accruing	76	157
Non-accrual loans	26	23
Total Loans	46,690	47,220
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	29	131
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	29
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	18	26
Residential Real Estate - Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	13,329	9,572
Loans Past Due and Still Accruing		198
Non-accrual loans	652	455
Total Loans	13,981	10,225
Residential Real Estate - Construction [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing		198
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	491,462	481,774
Loans Past Due and Still Accruing	1,769	4,779
Non-accrual loans	4,743	1,427
Total Loans	497,974	487,980
Commercial Real Estate [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	438	1,343
Commercial Real Estate [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	1,331	3,323
Commercial Real Estate [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing		113
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	268,527	273,534
Loans Past Due and Still Accruing	587	205
Non-accrual loans	129	315
Total Loans	269,243	274,054
Commercial [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	273	65
Commercial [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	262	40
Commercial [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	52	100
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	5,135	4,933
Loans Past Due and Still Accruing	21	63
Total Loans	5,156	4,996
Consumer [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	$ 21	46
Consumer [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing		12
Consumer [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing		$ 5

XML

Loan Quality and Allowance for Loan Losses (Internal Credit Rating For The Loan Portfolio) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 980,466	$ 973,375
Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	970,519	963,115
Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	655	660
Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	9,292	9,600
Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	194,112	196,120
Residential Real Estate [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	193,632	195,624
Residential Real Estate [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	480	496
Residential Real Estate [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Residential Real Estate [Member] | First Liens [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	147,422	148,900
Residential Real Estate [Member] | First Liens [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	146,986	148,453
Residential Real Estate [Member] | First Liens [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	436	447
Residential Real Estate [Member] | First Liens [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	46,690	47,220
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	46,646	47,171
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	44	49
Residential Real Estate [Member] | 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 - Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	13,981	10,225
Residential Real Estate - Construction [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	13,329	9,572
Residential Real Estate - Construction [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	652	653
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	497,974	487,980
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	490,057	479,969
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	655	660
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	7,262	7,351
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	269,243	274,054
Commercial [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	268,345	272,959
Commercial [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	898	1,095
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	5,156	4,996
Consumer [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	5,156	4,991
Consumer [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount		5
Consumer [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount

XML

Loan Quality and Allowance for Loan Losses (Troubled Debt Restructuring Loans) (Details) $ in Thousands		3 Months Ended
		Mar. 31, 2019 USD ($) item contract	Mar. 31, 2018 item	Dec. 31, 2018 USD ($) contract
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Number of Contracts | contract		16		16
Troubled Debt Restructurings: Recorded Investment		$ 11,109		$ 11,232
Troubled Debt Restructurings That Have Defaulted on Modified Terms in the Last Twelve Months: Number of Contracts | contract
Troubled Debt Restructurings That Have Defaulted on Modified Terms in the Last Twelve Months: Recorded Investment
New During Period, Number of Contracts | item		0	0
Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 9,376		9,487
Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 1,733		$ 1,745
Residential Real Estate - Construction [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Number of Contracts | contract		1		1
Troubled Debt Restructurings: Recorded Investment		$ 454		$ 455
Troubled Debt Restructurings That Have Defaulted on Modified Terms in the Last Twelve Months: Number of Contracts | contract
Troubled Debt Restructurings That Have Defaulted on Modified Terms in the Last Twelve Months: Recorded Investment
Residential Real Estate - Construction [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 454		$ 455
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Number of Contracts | contract		4		4
Troubled Debt Restructurings: Recorded Investment		$ 673		$ 678
Troubled Debt Restructurings That Have Defaulted on Modified Terms in the Last Twelve Months: Number of Contracts | contract
Troubled Debt Restructurings That Have Defaulted on Modified Terms in the Last Twelve Months: Recorded Investment
Residential Real Estate [Member] | Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 673		$ 678
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Number of Contracts | contract		11		11
Troubled Debt Restructurings: Recorded Investment		$ 9,982		$ 10,099
Troubled Debt Restructurings That Have Defaulted on Modified Terms in the Last Twelve Months: Number of Contracts | contract
Troubled Debt Restructurings That Have Defaulted on Modified Terms in the Last Twelve Months: Recorded Investment
Commercial Real Estate [Member] | Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	8,703		8,809
Commercial Real Estate [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 1,279		$ 1,290

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

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Leases (Narrative) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019
Right-of-use asset	$ 6,099
Lease liability	$ 6,113
Related Party [Member]
Lease liability		$ 1,800
Accounting Standards Update 2016-02 [Member]
Right-of-use asset		$ 6,200

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Leases (Schedule Of Lease Costs) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Leases [Abstract]
Operating lease cost	$ 188
Short-term lease cost	6
Variable lease cost	11
Total lease cost	$ 205

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Leases (Schedule Of Measurement Of Lease Liabilities) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Leases [Abstract]
Operating cash flows from operating leases	$ 123
Weighted-average remaining lease term	13 years 8 months 12 days
Weighted-average discount rate	3.54%

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Leases (Schedule Of Future Minimum Payments Operating Leases) (Details) $ in Thousands	Mar. 31, 2019 USD ($)
Leases [Abstract]
2019	$ 706
2020	664
2021	651
2022	543
2023	539
2024 and beyond	4,790
Total undiscounted cash flows	7,893
Discounted cash flows	(1,780)
Total lease liability	$ 6,113

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Other Real Estate Owned (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Other Real Estate Owned [Abstract]
Balance at beginning of the period	$ 2,684	$ 2,598
Additions
Proceeds from dispositions
Loss on sales, net
Valuation adjustment		(6)
Balance at the end of the period	$ 2,684	$ 2,592

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Pension (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Pension [Abstract]
Expected pension expense	$ 420
Pension Contributions		$ 1,000
Pension expense	$ 120	$ 125	$ 500

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Pension (Schedule Of Net Periodic Pension Costs) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Pension [Abstract]
Service cost	$ 80	$ 90
Interest cost	158	138
Expected return on plan assets	(270)	(279)
Recognized net actuarial loss	152	176
Net period cost	$ 120	$ 125	$ 500

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Fair Value Measurements And Fair Values Of Financial Instruments (Narrative) (Details)	Mar. 31, 2019 USD ($)
Fair Value Measurements And Fair Values Of Financial Instruments [Abstract]
Total liabilities	$ 0
Assets, Level 1 to Level 2 Transfers	0
Liabilities, Level 1 to Level 2 Transfers	$ 0

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Fair Value Measurements And Fair Values Of Financial Instruments (Fair Value, By Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale, at fair value	$ 127,881
Equity securities, at fair value	377	$ 374
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	47,033	52,957
Restricted stock	452	452
Loans held for sale	195	118
Net loans	967,785	960,960
Accrued interest receivable	3,963	4,103
Debt securities available for sale, at fair value	127,881	131,472
Equity securities, at fair value	377	374
Deposits	1,076,491	1,082,629
Accrued interest payable	291	193
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	47,033	52,957
Restricted stock	452	452
Loans held for sale	195	118
Net loans	952,024	941,930
Accrued interest receivable	3,963	4,103
Debt securities available for sale, at fair value	127,881	131,472
Equity securities, at fair value	377	374
Deposits	1,076,572	1,082,425
Accrued interest payable	291	193
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	47,033	52,957
Equity securities, at fair value	377	374
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Restricted stock	452	452
Loans held for sale	195	118
Accrued interest receivable	3,963	4,103
Debt securities available for sale, at fair value	127,881	131,472
Deposits	1,076,572	1,082,425
Accrued interest payable	291	193
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Net loans	$ 952,024	941,930
Before Adoption Of ASU 2016-01 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale, at fair value		$ 131,472

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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	Mar. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, at fair value	$ 377	$ 374
Available for sale	127,881
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, at fair value	377
Total assets	128,258	131,846
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, at fair value	377	374
Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, at fair value	377
Total assets	377	374
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	127,881	131,472
Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	127,881	131,472
Equity Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale		374
Equity Securities [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale		374
U.S. Government And Agency Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	9,618	9,076
U.S. Government And Agency Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	9,618	9,076
U.S. Government And Agency Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	9,618	9,076
Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	64,557	67,647
Municipal Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	64,557	67,647
Municipal Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	64,557	67,647
Trust Preferred Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	3,900	3,758
Trust Preferred Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	3,900	3,758
Trust Preferred Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	3,900	3,758
Agency Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	42,589	44,658
Agency Mortgage-Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	42,589	44,658
Agency Mortgage-Backed Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	42,589	44,658
Private-Label Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	478	488
Private-Label Mortgage-Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	478	488
Private-Label Mortgage-Backed Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	478	488
Asset-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	6,739	5,845
Asset-Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	6,739	5,845
Asset-Backed Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	$ 6,739	$ 5,845

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Fair Value Measurements And Fair Values Of Financial Instruments (Schedule Of Fair Value On A Nonrecurring Basis) (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 71
Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	71
Other Real Estate Owned [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	71	[1]
Other Real Estate Owned [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	71	[1]
Other Real Estate Owned [Member] | Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 71	[1]

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

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Fair Value Measurements And Fair Values Of Financial Instruments (Fair Value Inputs, Assets, Quantitative Information) (Details) - Other Real Estate Owned [Member] - Level 3 [Member] $ in Thousands	Dec. 31, 2018 USD ($)	[1]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 71
Weighted Average [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Quantitative Information Percentage	8.00%

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

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Capital Ratios (Narrative) (Details)		3 Months Ended
		Mar. 31, 2019		Dec. 31, 2018	Dec. 31, 2017
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Risk-based Capital Ratio: Ratio		14.95%
Capital Ratios, Basel III, Capital Conservation Buffer				1.25%	0.625%
Capital Ratios, Basel III, Capital Conservation Buffer, Year Two		1.875%
Capital Ratios, Basel III, Capital Conservation Buffer, Year Three		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: Ratio	[1]	13.69%		13.80%
Tier One Leverage Capital to Average Assets	[2]	9.82%		9.68%
Common Equity Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	[1]	6.50%
Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum: Ratio		8.00%	[3]	6.00%
Tier 1 Leverage Ratio: Well Capitalized Minimum: Ratio	[2]	5.00%
Total Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	[4]	10.00%
Capital ratios, capital conservation buffer		6.95%
Total Risk-based Capital Ratio: Ratio	[4]	14.95%		15.06%

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

[2] Tier 1 capital / average quarterly assets

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

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

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Capital Ratios (Schedule Of The Total Risk-based, Tier 1 Risk-based And Tier 1 Leverage Requirements) (Details)		Mar. 31, 2019		Dec. 31, 2018
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Risk-based Capital Ratio: Ratio		14.95%
Franklin Financial Services Corporation 2 [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital Ratio: Ratio	[1]	13.78%		13.96%
Common Equity Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	[1]	4.50%
Tier 1 Risk-based Capital Ratio: Ratio	[2]	13.78%		13.96%
Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	[2]	6.00%
Total Risk-based Capital Ratio: Ratio	[3]	15.04%		15.21%
Total Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	[3]	8.00%
Tier 1 Leverage Ratio: Ratio	[4]	9.88%		9.78%
Tier 1 Leverage Ratio: Adequately Capitalized Minimum: Ratio	[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]	13.69%		13.80%
Common Equity Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	[1]	4.50%
Common Equity Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	[1]	6.50%
Tier 1 Risk-based Capital Ratio: Ratio	[2]	13.69%		13.80%
Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	[2]	6.00%
Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum: Ratio		8.00%	[2]	6.00%
Total Risk-based Capital Ratio: Ratio	[3]	14.95%		15.06%
Total Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	[3]	8.00%
Total Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	[3]	10.00%
Tier 1 Leverage Ratio: Ratio	[4]	9.82%		9.68%
Tier 1 Leverage Ratio: Adequately Capitalized Minimum: Ratio	[4]	4.00%
Tier 1 Leverage Ratio: Well Capitalized Minimum: Ratio	[4]	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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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Disaggregation of Revenue [Line Items]
Investment and trust services fees	$ 1,452	$ 1,397
Estate management services Fees recognition period	18 months
Asset Management Fees [Member]
Disaggregation of Revenue [Line Items]
Investment and trust services fees	$ 1,300	1,300
Estate Management Services Fees [Member]
Disaggregation of Revenue [Line Items]
Investment and trust services fees	70	61
Commisions [Member]
Disaggregation of Revenue [Line Items]
Investment and trust services fees	$ 68	$ 68

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Commitments And Contingencies (Narrative) (Details) $ in Millions	Jun. 30, 2018 USD ($)
Commitments And Contingencies [Abstract]
Allowance against letters of credit	$ 2.4

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Commitments And Contingencies (Outstanding Commitments ) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Commercial Commitments To Extend Credit [Member]
Loss Contingencies [Line Items]
Commitments outstanding	$ 231,555	$ 216,913
Consumer Commitments To Extend Credit (Secured) [Member]
Loss Contingencies [Line Items]
Commitments outstanding	50,950	49,221
Consumer Commitments To Extend Credit (Unsecured) [Member]
Loss Contingencies [Line Items]
Commitments outstanding	5,506	5,605
Commitments To Extend Credit [Member]
Loss Contingencies [Line Items]
Commitments outstanding	288,011	271,739
Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Commitments outstanding	$ 25,306	$ 25,429