10-Q

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For quarterly period ended    March 31, 2015

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

For the transition period from to _______

Commission file number    001-35021                                  

                    EVANS BANCORP, INC.            .

(Exact name of registrant as specified in its charter)

        New York         16-1332767

(State or other jurisdiction of         (I.R.S. Employer

incorporation or organization)       Identification No.)

One Grimsby Drive, Hamburg, NY 14075

(Address of principal executive offices)  (Zip Code)

                      (716) 926-2000                  .

(Registrant's telephone number, including area code)

                                            Not Applicable                                           .  

 (Former name, former address and former fiscal year, if changed

 since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒ No ☐

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

Large accelerated filer ☐Accelerated filer ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes  ☐  No  ☒

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

Common Stock, $.50 par value 4,231,416 shares as of April 30, 2015

INDEX

EVANS BANCORP, INC. AND SUBSIDIARIES

PART 1.   FINANCIAL INFORMATION		PAGE
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets – March 31, 2015 and December 31, 2014	1
	Unaudited Consolidated Statements of Income – Three months ended March 31, 2015 and 2014	2
	Unaudited Statements of Consolidated Comprehensive Income – Three months ended March 31, 2015 and 2014	3
	Unaudited Consolidated Statements of Changes in Stockholder’s Equity – Three months ended March 31, 2015 and 2014	4
	Unaudited Consolidated Statements of Cash Flows - Three months ended March 31, 2015 and 2014	5
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	45
	Signatures	46

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2015 AND DECEMBER 31, 2014
(in thousands, except share and per share amounts)
	March 31,		December 31,
	2015		2014
ASSETS
Cash and due from banks	$	14,661	$	8,784
Interest-bearing deposits at banks		46,033		2,114
Securities:
Available for sale, at fair value (amortized cost: $96,367 at March 31, 2015;		98,393		95,533
$94,048 at December 31, 2014)
Held to maturity, at amortized cost (fair value: $1,576 at March 31, 2015;		1,588		1,599
$1,574 at December 31, 2014)
Federal Home Loan Bank common stock, at amortized cost		822		1,439
Federal Reserve Bank common stock, at amortized cost		1,486		1,486
Loans, net of allowance for loan losses of $12,777 at March 31, 2015
and $12,533 at December 31, 2014		688,961		683,131
Properties and equipment, net of accumulated depreciation of $15,390 at March 31, 2015
and $15,129 at December 31, 2014		10,074		10,224
Goodwill		8,101		8,101
Bank-owned life insurance		20,552		20,415
Other assets		13,681		13,983
TOTAL ASSETS	$	904,352	$	846,809
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand	$	169,965	$	158,631
NOW		82,956		72,670
Regular savings		416,317		363,542
Time		111,120		112,792
Total deposits		780,358		707,635
Securities sold under agreement to repurchase		10,673		13,778
Other short term borrowings		-		13,700
Other liabilities		15,290		14,578
Junior subordinated debentures		11,330		11,330
Total liabilities		817,651		761,021
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value, 10,000,000 shares authorized;
4,244,591 and 4,241,797 shares issued at March 31, 2015 and December 31, 2014,
respectively, and 4,230,895 and 4,203,684 outstanding at March 31, 2015
and December 31, 2014, respectively		2,123		2,123
Capital surplus		42,682		43,102
Treasury stock, at cost, 13,696 shares and 38,113 at March 31, 2015 and
December 31, 2014, respectively		(166)		(751)
Retained earnings		43,210		42,822
Accumulated other comprehensive loss, net of tax		(1,148)		(1,508)
Total stockholders' equity		86,701		85,788
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	904,352	$	846,809
See Notes to Unaudited Consolidated Financial Statements

1

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(in thousands, except share and per share amounts)
	Three Months Ended March 31,
	2015		2014
INTEREST INCOME
Loans	$	7,813	$	7,510
Interest bearing deposits at banks		1		15
Securities:
Taxable		405		449
Non-taxable		237		245
Total interest income		8,456		8,219
INTEREST EXPENSE
Deposits		781		756
Other borrowings		15		86
Junior subordinated debentures		79		79
Total interest expense		875		921
NET INTEREST INCOME		7,581		7,298
PROVISION (CREDIT) FOR LOAN LOSSES		201		153
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		7,380		7,145
NON-INTEREST INCOME
Bank charges		409		461
Insurance service and fees		1,829		2,132
Data center income		24		107
Gain on loans sold		22		-
Bank-owned life insurance		137		145
Other		645		550
Total non-interest income		3,066		3,395
NON-INTEREST EXPENSE
Salaries and employee benefits		4,794		4,695
Occupancy		695		743
Repairs and maintenance		173		176
Advertising and public relations		211		222
Professional services		511		518
Technology and communications		259		300
Amortization of intangibles		-		41
FDIC insurance		147		162
Other		722		761
Total non-interest expense		7,512		7,618
INCOME BEFORE INCOME TAXES		2,934		2,922
INCOME TAX PROVISION		1,029		909
NET INCOME	$	1,905	$	2,013
Net income per common share-basic	$	0.45	$	0.48
Net income per common share-diluted	$	0.44	$	0.47
Cash dividends per common share	$	0.36	$	0.31
Weighted average number of common shares outstanding		4,213,509		4,200,519
Weighted average number of diluted shares outstanding		4,291,676		4,284,016
See Notes to Unaudited Consolidated Financial Statements

2

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(in thousands, except share and per share amounts)
	Three Months Ended March 31,
	2015			2014
NET INCOME		$	1,905		$	2,013
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gain on available-for-sale securities:
Unrealized gain on available-for-sale securities	331			361
Less: Reclassification of gain on sale of securities	-			-
			331			361
Defined benefit pension plans:
Amortization of prior service cost	5			5
Amortization of actuarial assumptions	24			16
Total			29			21
OTHER COMPREHENSIVE INCOME, NET OF TAX			360			382
COMPREHENSIVE INCOME		$	2,265		$	2,395
See Notes to Unaudited Consolidated Financial Statements

3

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(in thousands, except share and per share amounts)
							Accumulated
							Other
	Common		Capital		Retained		Comprehensive		Treasury
	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance, December 31, 2013	$	2,106	$	42,619	$	37,370	$	(1,263)	$	(120)	$	80,712
Net Income						2,013						2,013
Other comprehensive income								382				382
Cash dividends ($0.31 per common share)						(1,305)						(1,305)
Stock options and restricted stock expense				99								99
Excess tax expense from stock-based compensation				21								21
Issued 3,017 restricted shares		2		(2)								-
Repurchased 59,800 shares										(1,436)		(1,436)
Reissued 3,087 shares in stock option exercise				(27)						58		31
Balance, March 31, 2014	$	2,108	$	42,710	$	38,078	$	(881)	$	(1,498)	$	80,517
Balance, December 31, 2014	$	2,123	$	43,102	$	42,822	$	(1,508)	$	(751)	$	85,788
Net Income						1,905						1,905
Other comprehensive income								360				360
Cash dividends ($0.36 per common share)						(1,517)						(1,517)
Stock options and restricted stock expense				117								117
Excess tax benefit from stock-based
compensation				14								14
Repurchased 1,397 shares in Treasury stock										(34)		(34)
Reissued 20,942 restricted shares				(503)						503		-
Reissued 4,872 shares through stock option exercise				(48)						116		68
Balance, March 31, 2015	$	2,123	$	42,682	$	43,210	$	(1,148)	$	(166)	$	86,701
See Notes to Unaudited Consolidated Financial Statements

4

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(in thousands)
	Three Months Ended March 31,
		2015		2014
OPERATING ACTIVITIES:
Interest received	$	8,256	$	8,105
Fees received		2,779		3,388
Interest paid		(896)		(937)
Cash paid to employees and vendors		(7,804)		(8,368)
Income taxes paid		(1)		(960)
Proceeds from sale of loans held for resale		2,658		-
Originations of loans held for resale		(4,995)		(123)
Net cash (used in) provided by operating activities		(3)		1,105
INVESTING ACTIVITIES:
Available for sales securities:
Purchases		(4,244)		-
Proceeds from maturities, calls, and payments		2,451		5,543
Held to maturity securities:
Proceeds from maturities, calls, and payments		11		11
Additions to properties and equipment		(111)		(226)
Purchase of tax credit investment		(667)		-
Net increase in loans		(3,595)		(13,493)
Net cash used in investing activities		(6,155)		(8,165)
FINANCING ACTIVITIES:
Proceeds from (repayments of) borrowings, net		(16,803)		(1,977)
Net increase in deposits		72,723		15,333
Repurchase of treasury stock		(34)		(1,436)
Reissuance of treasury stock		68		31
Net cash provided by financing activities		55,954		11,951
Net increase in cash and equivalents		49,796		4,891
CASH AND CASH EQUIVALENTS:
Beginning of period		10,898		41,954
End of period	$	60,694	$	46,845

(continued)

5

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(in thousands)
	Three Months Ended March 31,
		2015		2014
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income	$	1,905	$	2,013
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		356		422
Deferred tax (benefit) expense		42		(13)
Provision for loan losses		201		153
Gain on loans sold		(22)		-
Stock options and restricted stock expense		117		99
Proceeds from sale of loans held for resale		2,658		-
Originations of loans held for resale		(4,995)		(123)
Changes in assets and liabilities affecting cash flow:
Other assets		327		(377)
Other liabilities		(592)		(1,069)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(3)	$	1,105
See Notes to Unaudited Consolidated Financial Statements

6

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

THREEMONTHS ENDED MARCH 31, 2015 AND 2014

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies followed by Evans Bancorp, Inc. (the “Company”), a financial holding company, and its two direct, wholly-owned subsidiaries: (i) Evans Bank, National Association (the “Bank”), and the Bank’s subsidiaries, Evans National Leasing, Inc. (“ENL”), Evans National Holding Corp. (“ENHC”) and Suchak Data Systems, LLC (“SDS”); and (ii) Evans National Financial Services, LLC (“ENFS”), and ENFS’s subsidiary, The Evans Agency, LLC (“TEA”), and TEA’s subsidiaries, Frontier Claims Services, Inc. (“FCS”) and ENB Associates Inc. (“ENBA”), in the preparation of the accompanying interim unaudited consolidated financial statements conform with U.S. generally accepted accounting principles (“GAAP”) and with general practice within the industries in which it operates.  Except as the context otherwise requires, the Company and its direct and indirect subsidiaries are collectively referred to in this report as the “Company.”

The accompanying consolidated financial statements are unaudited.  In the opinion of management, all adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods have been made.  During the three month period ended March 31, 2015, the Company revised the unaudited Consolidated Statement of Cash Flows for the three month period ended March 31, 2014 to correct errors of a $40 thousand increase within “Depreciation and amortization”, $236 thousand increase within “Change in other assets affecting cash flow”, and $276 thousand decrease within “Change in other liabilities affecting cash flow” line items.  The Company has assessed the materiality of this correction and concluded, based on qualitative and quantitative considerations, in accordance with Staff Accounting Bulletin No. 99, that the adjustments were not material to our previously reported financial statements.

The results of operations for the three month periods ended March 31, 2015 are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.   

7

2. SECURITIES

The amortized cost of securities and their approximate fair value at March 31, 2015 and December 31, 2014 were as follows:

	March 31, 2015
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	26,593	$	388	$	(122)	$	26,859
States and political subdivisions		30,988		969		(28)		31,929
Total debt securities	$	57,581	$	1,357	$	(150)	$	58,788
Mortgage-backed securities:
FNMA	$	14,101	$	578	$	-	$	14,679
FHLMC		5,620		131		(46)		5,705
GNMA		8,276		133		(9)		8,400
CMO		10,789		88		(56)		10,821
Total mortgage-backed securities	$	38,786	$	930	$	(111)	$	39,605
Total securities designated as available for sale	$	96,367	$	2,287	$	(261)	$	98,393
Held to Maturity:
Debt securities
States and political subdivisions	$	1,588	$	13	$	(25)	$	1,576
Total securities designated as held to maturity	$	1,588	$	13	$	(25)	$	1,576

	December 31, 2014
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	26,687	$	305	$	(275)	$	26,717
States and political subdivisions		30,182		927		(49)		31,060
Total debt securities	$	56,869	$	1,232	$	(324)	$	57,777
Mortgage-backed securities:
FNMA	$	14,653	$	516	$	(15)	$	15,154
FHLMC		5,901		121		(64)		5,958
GNMA		6,014		143		(27)		6,130
CMO		10,611		42		(139)		10,514
Total mortgage-backed securities	$	37,179	$	822	$	(245)	$	37,756
Total securities designated as available for sale	$	94,048	$	2,054	$	(569)	$	95,533
Held to Maturity:
Debt securities
States and political subdivisions	$	1,599	$	7	$	(32)	$	1,574
Total securities designated as held to maturity	$	1,599	$	7	$	(32)	$	1,574

8

Available for sale securities with a total fair value of $85.6 million and $68.8 million at March 31, 2015 and December 31, 2014, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

The Company uses the Federal Home Loan Bank of New York (“FHLBNY”) as its primary source of overnight funds and also has several long-term advances with FHLBNY.  The Company had no borrowed funds as of March 31, 2015, and had a total of $13.7 million in borrowed funds with FHLBNY at December 31, 2014.  The Company has placed sufficient collateral in the form of residential and commercial real estate loans at FHLBNY that meet FHLB collateral requirements.  As a member of the Federal Home Loan Bank (“FHLB”) System, the Bank is required to hold stock in FHLBNY.  The Bank held $0.8 million and $1.4 million in FHLBNY stock as of March 31, 2015 and December 31, 2014 at amortized cost.  The Company regularly evaluates investments in FHLBNY for impairment, considering liquidity, operating performance, capital position, stock repurchase and dividend history.  At this time, the Company does not believe any impairment in FHLBNY stock is warranted.

The scheduled maturities of debt and mortgage-backed securities at March 31, 2015 and December 31, 2014 are summarized below.  All maturity amounts are contractual maturities.  Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call premiums.

	March 31, 2015				December 31, 2014
	Amortized		Estimated		Amortized		Estimated
	cost		fair value		cost		fair value
		(in thousands)				(in thousands)
Debt securities available for sale:
Due in one year or less	$	8,033	$	8,084	$	8,172	$	8,256
Due after one year through five years		23,284		23,893		22,118		22,597
Due after five years through ten years		19,310		19,590		20,517		20,589
Due after ten years		6,954		7,221		6,062		6,335
		57,581		58,788		56,869		57,777
Mortgage-backed securities
available for sale		38,786		39,605		37,179		37,756
Total available for sale securities	$	96,367	$	98,393	$	94,048	$	95,533
Debt securities held to maturity:
Due in one year or less	$	478	$	478	$	478	$	477
Due after one year through five years		66		67		77		78
Due after five years through ten years		932		924		932		914
Due after ten years		112		107		112		105
		1,588		1,576		1,599		1,574
Total held to maturity securities	$	1,588	$	1,576	$	1,599	$	1,574

Information regarding unrealized losses within the Company’s available for sale securities at March 31, 2015 and December 31, 2014 is summarized below.  The securities are primarily U.S. government-guaranteed agency securities or municipal securities.  All unrealized losses are considered temporary and related to market interest rate fluctuations.

9

	March 31, 2015
		Less than 12 months				12 months or longer					Total
		Fair		Unrealized		Fair			Unrealized		Fair		Unrealized
		Value		Losses		Value			Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	1,991	$	(9)	$	5,887		$	(113)	$	7,878	$	(122)
States and political subdivisions		1,989		(10)		1,130			(18)		3,119		(28)
Total debt securities	$	3,980	$	(19)	$	7,017		$	(131)	$	10,997	$	(150)
Mortgage-backed securities:
FNMA	$	-	$	-	$	-	-	$	-	$	-	$	-
FHLMC		-		-		1,454			(46)		1,454		(46)
GNMA		1,207		(1)		795			(8)		2,002		(9)
CMO'S		1,670		(4)		4,232			(52)		5,902		(56)
Total mortgage-backed securities	$	2,877	$	(5)	$	6,481		$	(106)	$	9,358	$	(111)
Held To Maturity:
Debt securities:
States and political subdivisions	$	371	$	(1)	$	473		$	(24)	$	844	$	(25)
Total temporarily impaired
securities	$	7,228	$	(25)	$	13,971		$	(261)	$	21,199	$	(286)

	December 31, 2014
		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	3,906	$	(26)	$	7,751	$	(249)	$	11,657	$	(275)
States and political subdivisions		4,752		(9)		1,902		(40)		6,654		(49)
Total debt securities	$	8,658	$	(35)	$	9,653	$	(289)	$	18,311	$	(324)
Mortgage-backed securities:
FNMA	$	1,498	$	(10)	$	1,731	$	(5)	$	3,229	$	(15)
FHLMC		-		-		1,482		(64)		1,482		(64)
GNMA		-		-		2,079		(27)		2,079		(27)
CMO'S		1,722		(11)		4,290		(128)		6,012		(139)
Total mortgage-backed securities	$	3,220	$	(21)	$	9,582	$	(224)	$	12,802	$	(245)
Held To Maturity:
Debt securities:
States and political subdivisions	$	371	$	(1)	$	556	$	(31)	$	927	$	(32)
Total temporarily impaired
securities	$	12,249	$	(57)	$	19,791	$	(544)	$	32,040	$	(601)

10

Management has assessed the securities available for sale in an unrealized loss position at March 31, 2015 and December 31, 2014 and determined the decline in fair value below amortized cost to be temporary.  In making this determination, management considered the period of time the securities were in a loss position, the percentage decline in comparison to the securities’ amortized cost, and the financial condition of the issuer (primarily government or government-sponsored enterprises).  In addition, management does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost.  Management believes the decline in fair value is primarily related to market interest rate fluctuations and not to the credit deterioration of the individual issuers.

The Company had not recorded any other-than-temporary impairment (“OTTI”) charges as of March 31, 2015 and did not record any OTTI charges during 2014.  Nevertheless, it remains possible that there could be deterioration in the asset quality of the securities portfolio in the future.  The credit worthiness of the Company’s portfolio is largely reliant on the ability of U.S. government sponsored agencies such as FHLB, Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), and Federal Home Loan Mortgage Corporation (“FHLMC”), and municipalities throughout New York State to meet their obligations.  In addition, dysfunctional markets could materially alter the liquidity, interest rate, and pricing risk of the portfolio.  The relatively stable past performance is not a guarantee for similar performance of the Company’s securities portfolio going forward.

3.  FAIR VALUE MEASUREMENTS

The Company follows the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures.”  Those provisions relate to financial assets and liabilities carried at fair value and fair value disclosures related to financial assets and liabilities. ASC Topic 820 defines fair value and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 

There are three levels of inputs to fair value measurements:

· Level 1, meaning the use of quoted prices for identical instruments in active markets;

· Level 2, meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable; and

· Level 3, meaning the use of unobservable inputs.

Observable market data should be used when available.

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A RECURRING BASIS

The following table presents for each of the fair-value hierarchy levels as defined in this footnote, those financial instruments which are measured at fair value on a recurring basis at March 31, 2015 and December 31, 2014:

(in thousands)		Level 1		Level 2		Level 3		Fair Value
March 31, 2015
Securities available-for-sale:
U.S. government agencies	$	-	$	26,859	$	-	$	26,859
States and political subdivisions		-		31,929		-		31,929
Mortgage-backed securities		-		39,605		-		39,605
Mortgage servicing rights		-		-		497		497
December 31, 2014
Securities available-for-sale:
U.S. government agencies	$	-	$	26,717	$	-	$	26,717
States and political subdivisions		-		31,060		-		31,060
Mortgage-backed securities		-		37,756		-		37,756
Mortgage servicing rights		-		-		518		518

11

Securities available for sale

Fair values for securities are determined using independent pricing services and market-participating brokers.  The Company’s independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information for structured securities, cash flow and, when available, loan performance data.  Because many fixed income securities do not trade on a daily basis, the evaluated pricing applications apply information as applicable through processes, such as benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations.  In addition, model processes, such as the Option Adjusted Spread model, are used to assess interest rate impact and develop prepayment scenarios.  The models and the process take into account market convention.  For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models.  The company’s service provider may occasionally determine that it does have not sufficient verifiable information to value a particular security.  In these cases the Company will utilize valuations from another pricing service.

Management believes that it has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of securities to enable management to maintain an appropriate system of internal control.  On a quarterly basis, the Company reviews changes in the market value of its security portfolio.  Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities.  Additionally, on an annual basis, the Company has its entire security portfolio priced by a second pricing service to determine consistency with another market evaluator.  If, on the Company’s review or in comparing with another servicer, a material difference between pricing evaluations were to exist, the Company would submit an inquiry to the service provider regarding the data used to value a particular security.   If the Company determines it has market information that would support a different valuation than the initial evaluation it can submit a challenge for a change to that security’s valuation. There were no material differences in valuations noted in the first quarter of 2015 or during fiscal year 2014.

Securities available for sale are classified as Level 2 in the fair value hierarchy as the valuation provided by the third-party provider uses observable market data.

Mortgage servicing rights

Mortgage servicing rights (“MSRs”) do not trade in an active, open market with readily observable prices. Accordingly, the Company obtains the fair value of the MSRs using a third-party pricing provider. The provider determines the fair value by discounting projected net servicing cash flows of the remaining servicing portfolio.  The valuation model used by the provider considers market loan prepayment predictions and other economic factors which management considers to be significant unobservable inputs.  The fair value of MSRs is mostly affected by changes in mortgage interest rates since rate changes cause the loan prepayment acceleration factors to increase or decrease.  Management has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of MSRs to enable management to maintain an appropriate system of internal control.  Mortgage servicing rights are classified within Level 3 of the fair value hierarchy as the valuation is model driven and primarily based on unobservable inputs.

The following table summarizes the changes in fair value for mortgage servicing rights during the three month periods ended March 31, 2015 and 2014, respectively:

	Three months ended March 31,
(in thousands)	2015		2014
Mortgage servicing rights - January 1	$	518	$	509
Gains (losses) included in earnings		(45)		(38)
Additions from loan sales		24		-
Mortgage servicing rights - March 31	$	497	$	471

12

Quantitative information about the significant unobservable inputs used in the fair value measurement of MSRs at the respective dates is as follows:

	3/31/2015		12/31/2014
Servicing fees	0.25	%	0.25	%
Discount rate	9.52	%	9.52	%
Prepayment rate (CPR)	9.80	%	9.28	%

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A NONRECURRING BASIS

The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or provide valuation allowances related to certain assets using fair value measurements.  The following table presents for each of the fair-value hierarchy levels as defined in this footnote, those financial instruments which are measured at fair value on a nonrecurring basis at March 31, 2015 and December 31, 2014:

(in thousands)		Level 1	Level 2	Level 3		Fair Value
March 31, 2015
Impaired loans	$	-	-	14,569	$	14,569
December 31, 2014
Impaired loans	$	-	-	13,716	$	13,716

Impaired loans

The Company evaluatesand values impaired loans at the time the loan is identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy.  Each loan’s collateral has a unique appraisal and management’s discount of the value is based on factors unique to each impaired loan.  The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which ranges from 10%-50%.  Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on appraisals by qualified licensed appraisers hired by the Company.  Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.

The Company has an appraisal policy in which appraisals are obtained upon a commercial loan being downgraded on the Company internal loan rating scale to a 5 (special mention) or a 6 (substandard) depending on the amount of the loan, the type of loan and the type of collateral.  All impaired commercial loans are either graded a 6 or 7 on the internal loan rating scale.  For consumer loans, the Company obtains appraisals when a loan becomes 90 days past due or is determined to be impaired, whichever occurs first.  Subsequent to the downgrade or reaching 90 days past due, if the loan remains outstanding and impaired for at least one year more, management may require another follow-up appraisal.  Between receipts of updated appraisals, if necessary, management may perform an internal valuation based on any known changing conditions in the marketplace such as sales of similar properties, a change in the condition of the collateral, or feedback from local appraisers.  Impaired loans had a gross value of $15.7 million, with a valuation allowance of $1.2 million, at March 31, 2015, compared to a gross value for impaired loans of $15.0 million, with a valuation allowance of $1.3million, at December 31, 2014.

13

FAIR VALUE OF FINANCIAL INSTRUMENTS

At March 31, 2015 and December 31, 2014, the estimated fair values of the Company’s financial instruments, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis, were as follows:

	March 31, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
		(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	60,694	$	60,694	$	10,898	$	10,898
Level 2:
Available for sale securities		98,393		98,393		95,533		95,533
FHLB and FRB stock		2,308		2,308		2,925		2,925
Level 3:
Held to maturity securities		1,588		1,576		1,599		1,574
Loans and leases, net		688,961		700,338		683,131		685,148
Mortgage servicing rights		497		497		518		518
Financial liabilities:
Level 1:
Demand deposits	$	169,965	$	169,965	$	158,631	$	158,631
NOW deposits		82,956		82,956		72,670		72,670
Regular savings deposits		416,317		416,317		363,542		363,542
Commitments to extend credit		93		93		245		245
Securities sold under agreement to
repurchase		10,673		10,673		13,778		13,778
Level 2:
Other borrowed funds		-		-		13,700		13,700
Junior subordinated debentures		11,330		11,330		11,330		11,330
Level 3:
Time deposits		111,120		110,678		112,792		113,854

14

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate that value.

Cash and Cash Equivalents.  For these short-term instruments, the carrying amount is a reasonable estimate of fair value.  “Cash and Cash Equivalents” includes interest-bearing deposits at other banks.

FHLB and FRB stock.  The carrying value of FHLB and FRB stock approximate fair value.

Securities held to maturity.  The Company holds certain municipal bonds as held-to-maturity.  These bonds are generally small in dollar amount and are issued only by certain local municipalities within the Company’s market area.  The original terms are negotiated directly and on an individual basis consistent with our loan and credit guidelines.  These bonds are not traded on the open market and management intends to hold the bonds to maturity.  The fair value of held-to-maturity securities is estimated by discounting the future cash flows using the current rates at which similar agreements would be made with municipalities with similar credit ratings and for the same remaining maturities.

Loans and Leases, net.  The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, net of the appropriate portion of the allowance for loan losses.  For variable rate loans, the carrying amount is a reasonable estimate of fair value.  This fair value calculation is not necessarily indicative of the exit price, as defined in ASC 820.

Deposits.  The fair value of demand deposits, NOW accounts, muni-vest accounts and regular savings accounts is the amount payable on demand at the reporting date.  The fair value of time deposits is estimated using the rates currently offered for deposits of similar remaining maturities.

Junior Subordinated Debentures.  There is no active market for the Company’s debentures.  The fair value of the junior subordinated debentures is determined using an expected prevent value technique.  The fair value of the adjustable-rate debentures approximates their face amount.

Commitments to extend credit and standby letters of credit.  As described in Note 8 - “Contingent Liabilities and Commitments” to these Unaudited Consolidated Financial Statements, the Company was a party to financial instruments with off-balance sheet risk at March 31, 2015 and December 31, 2014.  Such financial instruments consist of commitments to extend permanent financing and letters of credit.  If the options are exercised by the prospective borrowers, these financial instruments will become interest-earning assets of the Company.  If the options expire, the Company retains any fees paid by the counterparty in order to obtain the commitment or guarantee.  The fees collected for these commitments are recorded as “unearned commitment fees” in Other Liabilities.  The carrying value approximates the fair value.

Securities Sold Under Agreement to Repurchase.  The fair value of the securities sold under agreement to repurchase approximates its carrying value.

Other Borrowed Funds.  The fair value of the short-term portion of other borrowed funds approximates its carrying value.  The fair value of the long-term portion of other borrowed funds is estimated using a discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

15

4. LOANSAND THE ALLOWANCE FOR LOAN LOSSES

Loan Portfolio Composition

The following table presents selected information on the composition of the Company’s loan portfolio as of the dates indicated:

	March 31, 2015		December 31, 2014
Mortgage loans on real estate:		(in thousands)
Residential Mortgages	$	100,548	$	98,374
Commercial and multi-family		366,657		363,252
Construction-Residential		238		721
Construction-Commercial		39,723		40,986
Home equities		59,689		59,948
Total real estate loans		566,855		563,281
Commercial and industrial loans		132,416		129,456
Consumer loans		1,704		1,764
Other		122		404
Net deferred loan origination costs		641		759
Total gross loans		701,738		695,664
Allowance for loan losses		(12,777)		(12,533)
Loans, net	$	688,961	$	683,131

The Bank sells certain fixed rate residential mortgages to FNMA, while maintaining the servicing rights for those mortgages.  In the three month period ended March 31, 2015, the Bank sold mortgages to FNMA totaling $2.6 million, as compared with no mortgages sold to FNMA in the three month period ended March 31, 2014.  At March 31, 2015, the Bank had a loan servicing portfolio principal balance of $72.2 million upon which it earns servicing fees, as compared with $71.6 million at December 31, 2014.  The value of the mortgage servicing rights for that portfolio was $0.5 million at March 31, 2015 and December 31, 2014, respectively.  At March 31, 2015, there were $2.8 million in residential mortgage loans held-for-sale, compared with$0.4 million in residential mortgages held for sale at December 31, 2014.  The Company had no commercial loans held-for-sale at March 31, 2015 or December 31, 2014.  The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

As noted in Note 1, these financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.  Disclosures related to the basis for accounting for loans, the method for recognizing interest income on loans, the policy for placing loans on nonaccrual status and the subsequent recording of payments and resuming accrual of interest, the policy for determining past due status, a description of the Company’s accounting policies and methodology used to estimate the allowance for loan losses, the policy for charging off loans, the accounting policies for impaired loans, and more descriptive information on the Company’s credit risk ratings are all contained in the Notes to the Audited Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.  Unless otherwise noted in this Form 10-Q, the policies and methodology described in the Annual Report for the year ended December 31, 2014 are consistent with those utilized by the Company in the three months ended March 31, 2015.

16

Credit Quality Indicators

The Bank monitors the credit risk in its loan portfolio by reviewing certain credit quality indicators (“CQI”).  The primary CQI for its commercial mortgage and commercial and industrial (“C&I”) portfolios is the individual loan’s credit risk rating.  The following list provides a description of the credit risk ratings that are used internally by the Bank when assessing the adequacy of its allowance for loan and lease losses:

· 1-3-Pass

· 4-Watch

· 5-O.A.E.M. (Other Assets Especially Mentioned) or Special Mention

· 6-Substandard

· 7-Doubtful

· 8-Loss

The Company’s consumer loans, including residential mortgages and home equities, are not individually risk rated or reviewed in the Company’s loan review process.  Consumers are not required to provide the Company with updated financial information as is a commercial customer.  Consumer loans also carry smaller balances.  Given the lack of updated information after the initial underwriting of the loan and small size of individual loans, the Company uses delinquency status as the credit quality indicator for consumer loans.

The following tables provide data, at the class level, of credit quality indicators of certain loans and leases for the dates specified:

March 31, 2015
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
3	$	33,644	$	308,059	$	341,703	$	86,254
4		1,235		42,901		44,136		29,712
5		4,844		9,974		14,818		8,652
6		-		5,723		5,723		7,687
7		-		-		-		111
Total	$	39,723	$	366,657	$	406,380	$	132,416

December 31, 2014
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
3	$	29,421	$	299,798	$	329,219	$	83,789
4		10,492		50,691		61,183		30,223
5		1,073		7,853		8,926		8,662
6		-		4,757		4,757		6,613
7		-		153		153		169
Total	$	40,986	$	363,252	$	404,238	$	129,456

17

Past Due Loans

The following tables provide an analysis of the age of the recorded investment in loans that are past due as of the dates indicated:

March 31, 2015
(in thousands)
							Total Past		Current		Total		90+ Days		Non-accruing
	30-59 days		60-89 days		90+ days		Due		Balance		Balance		Accruing		Loans
Commercial and
industrial	$	663	$	117	$	25	$	805	$	131,611	$	132,416	$	-	$	6,380
Residential real estate:
Residential		345		189		473		1,007		99,541		100,548		-		1,275
Construction		-		-		-		-		238		238		-		-
Commercial real estate:
Commercial		1,923		247		302		2,472		364,185		366,657		192		2,938
Construction		5,848		-		513		6,361		33,362		39,723		513		-
Home equities		911		13		279		1,203		58,486		59,689		-		489
Consumer		15		19		-		34		1,670		1,704		-		17
Other		-		-		-		-		122		122		-		-
Total Loans	$	9,705	$	585	$	1,592	$	11,882	$	689,215	$	701,097	$	705	$	11,099

NOTE: Loan and lease balances do not include $641 thousand in net deferred loan origination costs as of March 31, 2015.

18

December 31, 2014
(in thousands)
							Total Past		Current		Total		90+ Days		Non-accruing
	30-59 days		60-89 days		90+ days		Due		Balance		Balance		Accruing		Loans
Commercial and
industrial	$	153	$	60	$	274	$	487	$	128,969	$	129,456	$	-	$	5,500
Residential real estate:
Residential		848		158		682		1,688		96,686		98,374		-		1,296
Construction		-		-		-		-		721		721		-		-
Commercial real estate:
Commercial		4,201		3,115		513		7,829		355,423		363,252		-		3,162
Construction		8		-		201		209		40,777		40,986		201		-
Home equities		594		120		192		906		59,042		59,948		-		415
Consumer		13		1		-		14		1,750		1,764		-		17
Other		-		-		-		-		404		404		-		-
Total Loans	$	5,817	$	3,454	$	1,862	$	11,133	$	683,772	$	694,905	$	201	$	10,390

NOTE: Loan and lease balances do not include $759 thousand in net deferred loan origination costs as of December 31, 2014.

19

Allowance for loan losses

The following tables present the activity in the allowance for loan losses according to portfolio segment, for the three month periods ended March 31, 2015 and 2014:

March 31, 2015
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer **		Residential Mortgages*		HELOC		Direct Financing Leases		Unallocated		Total
Allowance for loan
losses:
Beginning balance	$	4,896	$	5,650	$	78	$	941	$	819	$	-	$	149	$	12,533
Charge-offs		-		-		(6)		-		-		-		-		(6)
Recoveries		38		10		1		-		-		-		-		49
Provision		55		170		(3)		(17)		(4)		-		-		201
Ending balance	$	4,989	$	5,830	$	70	$	924	$	815	$	-	$	149	$	12,777
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	978	$	124	$	47	$	3	$	-	$	-	$	-	$	1,152
Collectively evaluated
for impairment		4,011		5,706		23		921		815		-		149		11,625
Total	$	4,989	$	5,830	$	70	$	924	$	815	$	-	$	149	$	12,777
Loans:
Ending balance:
Individually evaluated
for impairment	$	6,577	$	5,604	$	47	$	2,512	$	981	$	-	$	-	$	15,721
Collectively evaluated
for impairment		125,839		400,776		1,779		98,274		58,708		-		-		685,376
Total	$	132,416	$	406,380	$	1,826	$	100,786	$	59,689	$	-	$	-	$	701,097

* Includes construction loans

** Includes all other consumer loans

NOTE: Loan balances do not include $641 thousand in net deferred loan origination costs as of March 31, 2015.

20

March 31, 2014
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer **		Residential Mortgages*		HELOC		Direct Financing Leases		Unallocated		Total
Allowance for loan
losses:
Beginning balance	$	4,489	$	4,912	$	37	$	1,038	$	878	$	-	$	149	$	11,503
Charge-offs		(57)		-		(6)		-		(1)		-		-		(64)
Recoveries		28		29		2		-		-		83		-		142
Provision		63		167		3		(1)		4		(83)		-		153
Ending balance	$	4,523	$	5,108	$	36	$	1,037	$	881	$	-	$	149	$	11,734
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	1,182	$	210	$	19	$	-	$	-	$	-	$	-	$	1,411
Collectively evaluated
for impairment		3,341		4,898		17		1,037		881		-		149		10,323
Total	$	4,523	$	5,108	$	36	$	1,037	$	881	$	-	$	149	$	11,734
Loans:
Ending balance:
Individually evaluated
for impairment	$	4,291	$	11,579	$	19	$	2,100	$	284	$	-	$	-	$	18,273
Collectively evaluated
for impairment		106,653		380,194		1,576		96,268		57,080		-		-		641,771
Total	$	110,944	$	391,773	$	1,595	$	98,368	$	57,364	$	-	$	-	$	660,044

* Includes construction loans

** Includes all other consumer loans

NOTE: Loan balances do not include $651 thousand in net deferred loan origination costs as of March 31, 2014.

21

Impaired Loans

The following tables provide data, at the class level, of impaired loans as of the dates indicated:

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,330	$	1,461	$	-	$	1,416	$	148	$	7
Residential real estate:
Residential		2,241		2,419		-		2,253		12		11
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		1,922		2,016		-		1,956		6		18
Construction		1,103		1,103		-		1,128		-		12
Home equities		981		1,025		-		991		6		4
Consumer		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total impaired loans	$	7,577	$	8,024	$	-	$	7,744	$	172	$	52

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	5,247	$	5,324	$	978	$	5,283	$	75	$	12
Residential real estate:
Residential		271		285		3		271		5		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,579		2,758		124		2,670		35		-
Construction		-		-		-		-		-		-
Home equities		-		-		-		-		-		-
Consumer		47		60		47		48		1		1
Other		-		-		-		-		-		-
Total impaired loans	$	8,144	$	8,427	$	1,152	$	8,272	$	116	$	13

22

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	6,577	$	6,785	$	978	$	6,699	$	223	$	19
Residential real estate:
Residential		2,512		2,704		3		2,524		17		11
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		4,501		4,774		124		4,626		41		18
Construction		1,103		1,103		-		1,128		-		12
Home equities		981		1,025		-		991		6		4
Consumer		47		60		47		48		1		1
Other		-		-		-		-		-		-
Total impaired loans	$	15,721	$	16,451	$	1,152	$	16,016	$	288	$	65

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,017	$	1,022	$	-	$	1,096	$	9	$	66
Residential real estate:
Residential		2,264		2,435		-		2,271		37		68
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,103		2,208		-		2,139		33		91
Construction		1,074		1,074		-		1,169		-		44
Home equities		911		950		-		917		17		22
Consumer		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total impaired loans	$	7,369	$	7,689	$	-	$	7,592	$	96	$	291

23

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	4,701	$	4,734	$	988	$	4,701	$	64	$	234
Residential real estate:
Residential		271		285		3		271		20		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,640		2,785		274		2,708		96		50
Construction		-		-		-		-		-		-
Home equities		-		-		-		-		-		-
Consumer		48		60		48		49		5		6
Other		-		-		-		-		-		-
Total impaired loans	$	7,660	$	7,864	$	1,313	$	7,729	$	185	$	290

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	5,718	$	5,756	$	988	$	5,797	$	73	$	300
Residential real estate:
Residential		2,535		2,720		3		2,542		57		68
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		4,743		4,993		274		4,847		129		141
Construction		1,074		1,074		-		1,169		-		44
Home equities		911		950		-		917		17		22
Consumer		48		60		48		49		5		6
Other		-		-		-		-		-		-
Total impaired loans	$	15,029	$	15,553	$	1,313	$	15,321	$	281	$	581

24

Non-performing loans

The following table sets forth information regarding non-performing loans as of the dates specified:

	March 31, 2015			December 31, 2014
		(in thousands)
Non-accruing loans:
Commercial and industrial loans	$	6,380		$	5,500
Residential real estate:
Residential		1,275			1,296
Construction		-			-
Commercial real estate:
Commercial and multi-family		2,938			3,162
Construction		-			-
Home equities		489			415
Consumer loans		17			17
Other		-			-
Total non-accruing loans	$	11,099		$	10,390
Accruing loans 90+ days past due		705			201
Total non-performing loans	$	11,804		$	10,591
Total non-performing loans
to total assets		1.31	%		1.25	%
Total non-performing loans
to total loans		1.68	%		1.52	%

25

Troubled debt restructurings

The Company had $6.8 million in loans that were restructured in a troubled debt restructuring (“TDR”) at March 31, 2015, compared with $6.6 million at December 31, 2014.  $2.2 million and $1.9 million of those balances were in non-accrual status at March 31, 2015 and December 31, 2014, respectively.  Any TDR that is placed on non-accrual is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable.  All of the Company’s restructurings were allowed in an effort to maximize its ability to collect on loans where borrowers were experiencing financial difficulty.  The Company did not engage in any re-modifications during the three month periods ended March 31, 2015 and 2014.

The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent.  This reserve methodology is used because all TDR loans are considered impaired.  As of March 31, 2015, there were no commitments to lend additional funds to debtors owing on loans whose terms have been modified in TDRs. 

The following tables summarize the loans that were classified as troubled debt restructurings as of the dates indicated:

		March 31, 2015
		($ in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	874	$	677	$	197	$	200
Residential real estate:
Residential		1,824		586		1,238		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi family		2,238		675		1,563		33
Construction		1,103		-		1,103		-
Home equities		719		228		491		-
Consumer loans		30		-		30		30
Other		-		-		-		-
Total troubled restructured loans	$	6,788	$	2,166	$	4,622	$	263

26

		December 31, 2014
		($ in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	492	$	274	$	218	$	173
Residential real estate:
Residential		1,833		594		1,239		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi family		2,428		847		1,581		33
Construction		1,074		-		1,074		-
Home equities		728		233		495		-
Consumer loans		31		-		31		31
Other		-		-		-		-
Total troubled restructured loans	$	6,586	$	1,948	$	4,638	$	237

The Company’s TDRs have various agreements that involve deferral of principal payments, or interest-only payments, for a period (usually 12 months or less) to allow the customer time to improve cash flow or sell the property.  Other common types of concessions leading to the designation of a TDR are lines of credit that are termed out and extensions of maturities at rates that are less than market given the risk profile of the borrower.

The following table shows the data for TDR activity by type of concession granted to the borrower for the three month periods ended March 31, 2015 and 2014:

27

	Three months ended March 31, 2015					Three months ended March 31, 2014
	($ in thousands)					($ in thousands)
Troubled Debt Restructurings by Type of Concession	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial:
Deferral of principal	3	$	541	$	541	-	$	-	$	-
Residential Real Estate & Construction:
Deferral of principal	-		-		-	-		-		-
Commercial Real Estate & Construction
Deferral of principal	-		-		-	-		-		-
Home Equities:
Deferral of principal	-		-		-	-		-		-
Consumer loans	-		-		-	-		-		-
Other	-		-		-	-		-		-

The general practice of the Bank is to work with borrowers so that they are able to pay back their loan in full.  If a borrower continues to be delinquent or cannot meet the terms of a TDR and the loan is determined to be uncollectible, the loan will be charged off.  The following table presents loans which were classified as TDRs during the previous 12 months which defaulted during the three month periods ended March 31, 2015 and 2014:

	Three months ended March 31, 2015			Three months ended March 31, 2014
	($ in thousands)			($ in thousands)
Troubled Debt Restructurings	Number of	Recorded		Number of	Recorded
That Subsequently Defaulted	Contracts	Investment		Contracts	Investment
Commercial and Industrial	-	$	-	-	$	-
Residential Real Estate:
Residential	-		-	-		-
Construction	-		-	-		-
Commercial Real Estate:
Commercial and Multi-Family	-		-	-		-
Construction	-		-	-		-
Home Equities	1		19	-		-
Consumer loans	-		-	-		-
Other	-		-	-		-

28

5. PER SHARE DATA

The common stock per share information is based upon the weighted average number of shares outstanding during each period.  For the three month periods ended March 31, 2015 and 2014, the Company had an average of 78,167 and 83,497 dilutive shares outstanding, respectively. 

Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive and not included in calculating diluted earnings per share.  For the three month periods ended March 31, 2015 and 2014, there was an average of 38,630 and 9,000 anti-dilutive shares outstanding, respectively, that were not included in calculating diluted earnings per share because their effect was anti-dilutive. 

6. OTHER COMPREHENSIVE INCOME

The following tables summarize the changes in the components of accumulated other comprehensive income (loss) during the three month periods ended March 31, 2015 and 2014:

	Balance at December 31, 2014		Net Change		Balance at March 31, 2015
	(in thousands)
Net unrealized gain (loss) on investment securities	$	911	$	331	$	1,242
Net defined benefit pension plans adjustments		(2,419)		29		(2,390)
Total	$	(1,508)	$	360	$	(1,148)
	Balance at December 31, 2013		Net Change		Balance at March 31, 2014
	(in thousands)
Net unrealized gain (loss) on investment securities	$	191	$	361	$	552
Net defined benefit pension plans adjustments		(1,454)		21		(1,433)
Total	$	(1,263)	$	382	$	(881)

29

	Three months ended March 31, 2015 (in thousands)						Three months ended March 31, 2014 (in thousands)
	Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount		Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount
Unrealized loss on investment securities:
Unrealized gain (loss) on investment securities	$	541	$	(210)	$	331	$	588	$	(227)	$	361
Reclassification from accumulated other
comprehensive income for gains (losses)		-		-		-		-		-		-
Net change		541		(210)		331		588		(227)		361
Defined benefit pension plans adjustments:
Net actuarial (loss) gain	$	-	$	-	$	-	$	-	$	-	$	-
Reclassifications from accumulated other
comprehensive income for gains (losses)
Amortization of prior service cost (a)		7		(2)		5		8		(3)		5
Amortization of actuarial loss (a)		48		(24)		24		26		(10)		16
Net change		55		(26)		29		34		(13)		21
Other Comprehensive Income (Loss)	$	596	$	(236)	$	360	$	622	$	(240)	$	382

(a)   Included in net periodic pension cost, as described in Note 9 – “Net Periodic Benefit Costs”

7. SEGMENT INFORMATION

The Company is comprised of two primary business segments, banking and insurance agency activities. The following tables set forth information regarding these segments for the three month periods ended March 31, 2015 and 2014.

	Three months ended March 31, 2015
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	7,609	$	(28)	$	7,581
Provision for loan and lease losses		201		-		201
Net interest income (expense) after
provision for loan and lease losses		7,408		(28)		7,380
Non-interest income		1,237		-		1,237
Insurance service and fees		162		1,667		1,829
Net gain on sales and calls of securities		-		-		-
Amortization expense		-		-		-
Non-interest expense		6,481		1,031		7,512
Income before income taxes		2,326		608		2,934
Income tax provision		794		235		1,029
Net income	$	1,532	$	373	$	1,905

30

	Three months ended March 31, 2014
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	7,326	$	(28)	$	7,298
Provision for loan and lease losses		153		-		153
Net interest income (expense) after
provision for loan and lease losses		7,173		(28)		7,145
Non-interest income		1,263		-		1,263
Insurance service and fees		152		1,980		2,132
Net gain on sales and calls of securities		-		-		-
Amortization expense		-		41		41
Non-interest expense		6,477		1,100		7,577
Income before income taxes		2,111		811		2,922
Income tax provision		596		313		909
Net income	$	1,515	$	498	$	2,013

8. CONTINGENT LIABILITIES AND COMMITMENTS

The unaudited consolidated financial statements do not reflect various commitments and contingent liabilities, which arise in the normal course of business, and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities consist of commitments to extend credit and standby letters of credit. A summary of the Bank’s commitments and contingent liabilities is as follows:

	March 31,		December 31,
	2015		2014
	(in thousands)
Commitments to extend credit	$	234,311	$	212,193
Standby letters of credit		2,767		2,430
Total	$	237,078	$	214,623

31

Commitments to extend credit and standby letters of credit include some exposure to credit loss in the event of nonperformance by the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded on the Company’s unaudited consolidated balance sheets. Because these instruments have fixed maturity dates, and because they may expire without being drawn upon, they do not necessarily represent cash requirements of the Bank. The Bank has not incurred any losses on its commitments and did not record a reserve for its commitments during the first three months of 2015 or during 2014.

Certain lending commitments for construction residential mortgage loans are considered derivative instruments under the guidelines of GAAP.  The changes in the fair value of these commitments, due to interest rate risk, are not recorded on the consolidated balance sheets as the fair value of these derivatives is not considered material.

The Company is subject to possible litigation proceedings in the normal course of business.  As noted in Item 1 of Part II of the Company’s Quarterly Report on Form 10-Q,in which these unaudited financial statements are included, on September 2, 2014 the Office of the Attorney General for the State of New York (“NYAG”) filed a formal complaint against the Company and the Bank regarding residential lending practices.  The Company accrued an estimated liability relating to the NYAG investigation totaling $1.0 million during 2014.  At March, 31, 2015, a range of loss could not be determined, and management believes the $1.0 million accrual is the best estimate of probable loss.  

9. NET PERIODIC BENEFIT COSTS

On January 31, 2008, the Bank froze its defined benefit pension plan.  The plan covered substantially all Company employees.  The plan provides benefits that are based on the employees’ compensation and years of service.  Under the freeze, eligible employees will receive, at retirement, the benefits already earned through January 31, 2008, but have not accrued any additional benefits since then.  As a result, service cost is no longer incurred. 

The Bank uses an actuarial method of amortizing prior service cost and unrecognized net gains or losses which result from actual expense and assumptions being different than those that are projected. The amortization method the Bank used recognized the prior service cost and net gains or losses over the average remaining service period of active employees.

The Bank also maintains a nonqualified supplemental executive retirement plan covering certain members of the Company’s senior management. The Bank uses an actuarial method of amortizing unrecognized net gains or losses which result from actual expense and assumptions being different than those that are projected. The amortization method the Bank uses recognizes the net gains or losses over the average remaining service period of active employees.

The Bank did not contribute to the defined benefit pension plan in the first three months of 2015, and expects to contribute $110 thousand additional funds to the pension plan in the remainder of 2015.

The following table presents the net periodic cost for the Bank’s defined benefit pension plan and supplemental executive retirement plan for the three month periods ended March 31, 2015 and 2014:

32

		Three months ended March 31,
		(in thousands)
					Supplemental Executive
	Pension Benefits				Retirement Plan
	2015		2014		2015		2014
Service cost	$	-	$	-	$	48	$	42
Interest cost		51		51		37		40
Expected return on plan assets		(77)		(76)		-		-
Amortization of prior service cost		-		-		7		8
Amortization of the net loss		17		5		31		21
Net periodic cost (benefit)	$	(9)	$	(20)	$	123	$	111

10.  RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update (“ASU”) 2014-04, Reclassification of Collateralized Mortgage Loans upon a Troubled Debt Restructuring.  The objective of this proposed ASU is to clarify when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, such that all or a portion of the loan should be derecognized and the real estate property recognized.  The main provisions would also require additional disclosures regarding the amount of foreclosed residential real estate property held by the creditor and the recorded investments of consumer mortgage loans that are in the process of foreclosure at each interim and annual reporting period.  This ASU became effective for the Company in fiscal years and interim periods within those years, beginning after December 15, 2014.  The Company has adopted this guidance for the reporting periods after December 15, 2014 and did nothave a material impact on its financial statements.

ASU 2014-09, Revenue from Contracts with Customers.  The objective of this proposed ASU is to require entities to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.  This ASU will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective.  The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  Early application is not permitted.  The standard allows an entity to apply the amendments in the ASU using either the retrospective or cumulative effect transition method.  The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

33

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties.  When used in this report, or in the documents incorporated by reference herein, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” and similar expressions identify such forward-looking statements.  These forward-looking statements include statements regarding the Company’s business plans, prospects, growth and operating strategies, statements regarding the asset quality of the Company’s loan and investment portfolios, and estimates of the Company’s risks and future costs and benefits.

These forward-looking statements are based largely on the expectations of the Company’s management and are subject to a number of risks and uncertainties, including but not limited to: general economic conditions, either nationally or in the Company’s market areas, that are worse than expected; increased competition among depository or other financial institutions; inflation and changes in the interest rate environment that reduce the Company’s margins or reduce the fair value of financial instruments; changes in laws or government regulations affecting financial institutions, including changes in regulatory fees, monetary policy, and capital requirements; the Company’s ability to enter new markets successfully and capitalize on growth opportunities; the Company’s ability to successfully integrate acquired entities; changes in accounting pronouncements and practices, as adopted by financial institution regulatory agencies, the Financial Accounting Standards Board and the Public Company Accounting Oversight Board; changes in consumer spending, borrowing and saving habits; changes in the Company’s organization, compensation and benefit plans; and other factors discussed elsewhere in this Quarterly Report on Form 10-Q, as well as in the Company’s periodic reports filed with the SEC, in particular the “Risk Factors” discussed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  Many of these factors are beyond the Company’s control and are difficult to predict. 

Because of these and other uncertainties, the Company’s actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein.  Forward-looking statements speak only as of the date they are made.  The Company undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

The Company’s Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are prepared in accordance with U.S. GAAP and follow general practices within the industries in which it operates.  Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the Company’s Unaudited Consolidated Financial Statements and Notes.  These estimates, assumptions and judgments are based on information available as of the date of the Unaudited Consolidated Financial Statements.  Accordingly, as this information changes, the Unaudited Consolidated Financial Statements could reflect different estimates, assumptions and judgments.  Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments, and as such, have a greater possibility of producing results that could be materially different than originally reported.  Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event.  Carrying assets and liabilities at fair value inherently results in more financial statement volatility.  The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available.  When third-party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal cash flow modeling techniques.  Refer to Note 3 – “Fair Value Measurements” to the Company’s Unaudited Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for further detail on fair value measurement.

Significant accounting policies followed by the Company are presented in Note 1 – “Organization and Summary of Significant Accounting Policies” to the Audited Consolidated Financial Statements included in Item 8 in its Annual Report on Form 10-K for the year ended December 31, 2014.  These policies, along with the disclosures presented in the other Notes to the Company's Audited Consolidated Financial Statements contained in its Annual Report on Form 10-K and in this financial review, provide information on how significant assets and liabilities are presented in the Company’s Unaudited Consolidated Financial Statements and how those values are determined. 

Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions and estimates underlying those amounts, management has identified the determination of the allowance for loan losses and valuation of goodwill to be the accounting areas that require the most subjective or complex judgments, and as such, could be most subject to revision as new information becomes available.

34

Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of probable losses in the Company’s loan portfolio.  Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment on the part of management and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience and consideration of current economic trends and conditions, all of which may be susceptible to significant change.  The loan portfolio also represents the largest asset type on the Company’s Unaudited Consolidated Balance Sheets.  Note 1 to the Audited Consolidated Financial Statements included in Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, describes the methodology used to determine the allowance for loan losses.

Goodwill

The amount of goodwill reflected in the Company’s Unaudited Consolidated Financial Statements is required to be tested by management for impairment on at least an annual basis.  The test for impairment of goodwill on the identified reporting unit is considered a critical accounting estimate because it requires judgment on the part of management and the use of estimates related to the growth assumptions and market multiples used in the valuation model.  The goodwill impairment testing is performed annually as of December 31st.  No impairment charges were incurred in the most recent test and the fair value of the tested reporting unit substantially exceeded its fair value.  There were no triggering events in the three month period ended March 31, 2015 that resulted in an interim impairment test.

ANALYSIS OF FINANCIAL CONDITION

Loan Activity

Total loans grew to $701.7 million at March 31, 2015, a $6.1 million, or 0.9%, increase from total loans of $695.7 million at December 31, 2014.  Total loans grew $41.0 million, or 6.2%, from $660.7 million at March 31, 2014. 

Loans secured by real estate were $566.9 million at March 31, 2015, reflecting a $3.6 million, 0.6%, increase from $563.3 million at December 31, 2014.  The Company’s commercial real estate portfolio has historically been the fastest growing part of the real estate portfolio, which experienced $3.4 million, or 0.9%, growth from December 31, 2014, however, the Company’s residential real estate loan portfolio increased $2.2 million, or 2.2%, since December 31, 2014.  The Company’s largest loan growth was realized in the commercial and industrial loan portfolio of $132.4 million, which grew $3.0 million, or 2.3%, from $129.5 million at December 31, 2014.  Commercial construction and residential construction loans decreased $1.3 million, or 3.1%, and $0.5 million, or 67.0%, respectively, from $41.0 million and $0.7 million at December 31, 2014, respectively. 

The Company sold $2.6 million in residential mortgages originated during the first quarter of 2015, compared with retaining all of its originated residential mortgages during the first quarter of 2014 as deposits increased and the Company was in an overall liquid position.  Residential mortgages sold in the first quarter of 2015 equated to approximately 40.5% of the residential mortgages originated by the Company during this quarter. 

The Bank sells certain fixed rate residential mortgages to FNMA, while maintaining the servicing rights for those mortgages.  In the three month period ended March 31, 2015, the Bank sold mortgages to FNMA totaling $2.6 million, as compared with no mortgages sold to FNMA in the three month period ended March 31, 2014.  At March 31, 2015, the Bank had a loan servicing portfolio principal balance of $72.2 million upon which it earns servicing fees, as compared with $71.6 million at December 31, 2014.  The value of the mortgage servicing rights for that portfolio was $0.5 million at March 31, 2015 and December 31, 2014, respectively.  At March 31, 2015, there were $2.8 million in residential mortgage loans held-for-sale, compared with $0.4 million in residential mortgages held for sale at December 31, 2014.  The Company had no commercial loans held-for-sale at March 31, 2015 or December 31, 2014.  The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

The Company continues to focus on diversified growth with commercial and industrial (“C&I”) lending as a way to achieve such diversification in its loan portfolio, which has historically experienced strong growth rates in real estate loans.  In the first quarter of 2015, C&I balances increased $3.0 million, or 2.3%, from $129.5 million at December 31, 2014, and increased $21.5 million, or 19.4%, from $111.0 million at March 31, 2014.

35

Credit Quality of Loan Portfolio

Total non-performing loans, defined as accruing loans greater than 90 days past due and non-accrual loans, totaled $11.8 million, or 1.68% of total loans outstanding, as of March 31, 2015, compared with $10.6 million, or 1.52% of total loans outstanding, as of December 31, 2014, and $5.2 million, or 0.79% of total loans and leases outstanding at March 31, 2014.  The $1.2 million increase in non-performing loans from December 31, 2014 was due to commercial loan relationships identified during the quarter as non-accrual loans.  

In the first quarter of 2015, commercial credits graded as “special mention” and “substandard” of $36.9 million increased $7.9 million, or 27.4%, from $29.0 million at December 31, 2014.  As noted in Note 4 to the Company’s Unaudited Financial Statements included in Part I of this Quarterly Report on Form 10-Q, internal risk ratings are the credit quality indicators used by the Company’s management to determine the appropriate allowance for loan losses for commercial credits.  “Special mention” and “substandard” loans are weaker credits with a higher risk of loss categorized as “criticized” credits rather than “pass” or “watch” credits.  A $5.9 million, or 33.4%, increase in “special mention” and a $2.0 million, or 17.9%, increase in “substandard” commercial credits since December 31, 2014 resulted from a commercial real estate relationship and a commercial loan relationship down-graded from a “pass” rating into a “criticized” rating during the year. 

The allowance for loan losses totaled $12.8 million, or 1.82% of total loans outstanding as of March 31, 2015, compared with $12.5 million, or 1.80% of total loans outstanding as of December 31, 2014, and $11.7 million, or 1.78% of total loans outstanding at March 31, 2014.  The $0.2 million increase in the allowance during the first quarter of 2015 was driven primarily by the increase to “criticized” commercial loans during the quarter described above.  The net charge-off (recovery) ratio in the first quarter of 2015was (0.03)% of average net loans, compared with a ratio of 0.00% in the fourth quarter of 2014 and (0.05)% in the first quarter of 2014. 

The coverage ratio of the allowance for loan losses to non-performing loans was 108.3% at March 31, 2015 compared with 118.3% at December 31, 2014, and 224.7% at March, 31 2014.  The first quarter coverage ratio decreased from December 31, 2014 due to the $1.2 million, or 11.4%, increase in total non-performing loans. 

Investing Activities

Total securities were $100.0 million at March 31, 2015, compared with $97.1 million at December 31, 2014 and $97.0 million at March 31, 2014.  Interest-bearing deposits at other banks, which consist of overnight funds kept at correspondent banks and the Federal Reserve, increased to $46.0 million at March 31, 2015 from $2.1 million at December 31, 2014 and $30.1 million at March 31, 2014.  Interest-bearing cash increased in the first quarter of 2015 due to a $72.7 million, or 10.3%, increase in the Company’s total deposits, driven primarily by increases in regular savings, demand deposits, and NOW accounts.Securities and interest-bearing deposits at correspondent banks made up 13.6% of the Bank’s total average interest earning assets in the first quarter, compared with 13.3% in the fourth quarter of 2014 and 16.8% in the first quarter of 2014.

The Company’s highest concentration in its securities portfolio was in available for sale U.S. government sponsored mortgage-backed securities at 39.6% of total investment securities at March 31, 2015, compared with 38.9% at December 31, 2014 and 35.7% at March 31, 2014.  The concentration in tax-advantaged debt securities issued by state and political subdivisions and U.S. government-sponsored agency bonds was 31.9% and 26.9%, respectively, of the total securities portfolio at March 31, 2015, compared with 27.5% and 32.0% at December 31, 2014, and 32.9% and 28.9% at March 31, 2014. 

Management believes that the credit quality of the securities portfolio as a whole is strong, as the portfolio has no individual securities in a significant unrealized loss position.  Interest rates have remained low, however, rates decreased slightly in the first quarter since December 31, 2014, resulting in an increase in the net unrealized gain position of the available-for-sale investment portfolio to $2.0 million at March 31, 2015, compared with $1.5 million at December 31, 2014 and $0.9 million at March 31, 2014.

The Company monitors extension and prepayment risk in the securities portfolio to limit potential exposures.  Available-for-sale securities with a total fair value of $85.6 million at March 31, 2015, compared with $68.8 million at December 31, 2014 and $93.6 million at March 31, 2014, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.  The Company has no direct exposure to subprime mortgages, nor does the Company hold private mortgage-backed securities, credit default swaps, or FNMA or FHLMC preferred stock investments in its investment portfolio.

36

Funding Activities

Total deposits at March 31, 2015 were $780.4 million, a $72.7 million, or 10.3%, increase when compared with $707.6 million at December 31, 2014, and a $58.4 million, 8.1%, increase from $721.9 million at March 31, 2014.  The increases in deposit balances were driven by growth in regular savings, NOW accounts and demand deposit products.The growth in the Company’s total deposits from December 31, 2014was due mainly to increases of $52.8 million, or 14.5%, in savings deposits, $10.3 million, or 14.2%, in NOW accounts, and $11.3 million,  7.1%, in demand deposits.In the first quarter the Bank introduced a new money market account that has been successful in acquiring new customer deposit relationships and providing cross sell opportunities.

In the first quarter of 2015, time deposits decreased $1.7 million, or 1.5%, from $112.8 million December 31, 2014 to $111.1 million at March 31, 2015. 

As of March 31, 2015, the Company had no other borrowings, which include the Bank’s overnight line of credit and other advances with the FHLBNY, compared with $13.7 million at December 31, 2014 and $9.0 million at March 31, 2014.  The Company had moved into an overall liquid position in the first quarter of 2015 as a result of the increase in total deposits described above.

37

ANALYSIS OF RESULTS OF OPERATIONS

Average Balance Sheet

The following tables present the significant categories of the assets and liabilities of the Company, interest income and interest expense, and the corresponding yields earned and rates paid for the periods indicated.  The assets and liabilities are presented as daily averages.  The average loan balances include both performing and non-performing loans. Investments are included at amortized cost. Yields are presented on a non-tax-equivalent basis.

	Three months ended March 31, 2015						Three months ended March 31, 2014
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate
	(dollars in thousands)						(dollars in thousands)
ASSETS
Interest-earning assets:
Loans, net	$	682,653	$	7,813	4.58	%	$	641,265	$	7,510	4.68	%
Taxable securities		68,373		405	2.37	%		69,992		449	2.57	%
Tax-exempt securities		32,513		237	2.92	%		33,499		245	2.93	%
Interest bearing deposits at banks		6,624		1	0.06	%		26,238		15	0.23	%
Total interest-earning assets		790,163	$	8,456	4.28	%		770,994	$	8,219	4.26	%
Non interest-earning assets:
Cash and due from banks		11,480						14,920
Premises and equipment, net		10,164						11,210
Other assets		42,728						39,789
Total Assets	$	854,535					$	836,913
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW	$	77,072	$	79	0.41	%	$	71,190	$	76	0.43	%
Regular savings		370,017		269	0.29	%		388,890		265	0.27	%
Time deposits		112,224		435	1.55	%		109,549		415	1.52	%
Other borrowed funds		9,156		8	0.35	%		9,000		79	3.51	%
Junior subordinated debentures		11,330		78	2.75	%		11,330		79	2.79	%
Securities sold U/A to repurchase		13,366		6	0.18	%		14,883		7	0.19	%
Total interest-bearing liabilities		593,165	$	875	0.59	%		604,842	$	921	0.61	%
Noninterest-bearing liabilities:
Demand deposits		159,388						139,503
Other		14,785						12,090
Total liabilities	$	767,338					$	756,435
Stockholders' equity		87,197						80,478
Total Liabilities and Equity	$	854,535					$	836,913
Net interest earnings			$	7,581					$	7,298
Net interest margin					3.84	%					3.79	%
Interest rate spread					3.69	%					3.65	%

38

Net Income

Net income was $1.9 million, or $0.44 per diluted share, in the first quarter of 2015 compared with $2.0 million, or $0.47 per diluted share, in the first quarter of 2014.  The slight decline was due to lower insurance agency revenue, which offset net interest income growth and lower operating expenses.  As a result, return on average equity was 8.74% for the first quarter of 2015 compared with 10.01% in the first quarter of 2014. 

Other Results of Operations – Quarterly Comparison

Net interest income was $7.6 million in the first quarter, an increase of $0.3 million, or 3.9%, from the prior-year period, which reflects strong loan growth.  First quarter net interest income was down $0.9 million, or 10.2%, from the trailing fourth quarter of 2014 which benefited from approximately $0.6 million of accelerated fee income due to two commercial loan payoffs. 

Net interest margin of 3.84% improved 5 basis points over the 2014 first quarter rate of 3.79%, and was primarily impacted by a 2 basis point decrease in pricing on Evans’ interest bearing liabilities, combined with a 2 basis point increase in the yield on interest-earning assets as lower interest-earning fed funds were invested into higher yielding loans.  When compared with the trailing fourth quarter rate of 4.32%, first quarter net interest margin wasdown 48 basis points.  Excluding the accelerated loan fees of $0.6 million mentioned previously, the adjusted fourth quarter net interest margin was 4.03%.  The 19 basis point decrease from the adjusted fourth quarter margin was primarily due to a decrease in the yield on interest-earning assets.

The provision for loan losses was $201 thousand in the 2015 first quarter, up slightly from $153 thousand in the prior-year period. When compared with the trailing fourth quarter of 2014, the provision decreased by $373 thousand as a result of significant pay-downs on impaired loans.

Non-interest income was $3.1 million, or 28.8% of total revenue, in the quarter, down $0.3 million, or 9.7%, from the prior-year period.  Insurance agency revenue of $1.8 million was down $0.3 million, or 14.2%, from the 2014 first quarter, due mostly to decreases in personal property and casualty and profit sharing revenue.  The profit sharing decrease was driven by damage losses sustained by customers during a major snow storm in November 2014. Compared with the trailing fourth quarter of 2014, total non-interest income increased by $2.8 million due mainly to the loss on a tax credit investment that occurred in the trailing quarter.

Total non-interest expense was $7.5 million in the first quarter, a decrease of 1.4% from the prior-year period.  Personnel expenses, the largest expense item for the Company, were up $0.1 million, or 2.1%, from the last year’s first quarter, and reflect annual merit increases and personnel hires to support the Company’s growth strategy. Disciplined expense management resulted in an aggregated decrease in all other expense categories of $205 thousand compared with the 2014 first quarter.  Compared with the trailing fourth quarter of 2014, total non-interest expense was down $0.3 million, or 3.9%.

Income tax expense for the quarter was $1.0 million, representing an effective tax rate of 35.1% compared with an effective tax rate of 31.1% in the first quarter of 2014.  The increase was mostly due to one-time adjustments to deferred tax assets as a result of statutory changes made by the New York State which became effective on January 1, 2015.

CAPITAL

The Company consistently maintains regulatory capital ratios significantly above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 10.81% and10.84% at March 31,2015 and December 31, 2014, respectively.  New minimum capital ratios became effective for the Company and the Bank on January 1, 2015 and will be fully-phased-in on January 1, 2019.  As of March 31, 2015, the Company and the Bank met all applicable capital adequacy requirements under the Basel III Capital Rules. 

Book value per share of the Company’s common stock was $20.49 at March 31, 2015, compared with $20.41 at December 31, 2014.  Tangible book value per share (a non-GAAP measure) at March 31, 2015 was $18.58, compared with $18.48 at December 31, 2014.

39

Tangible book value per share is a non-GAAP financial measure.  The Company calculates tangible book value per share by dividing tangible book value by the number of common shares outstanding, as compared to GAAP book value per share, which the Company calculates by dividing GAAP book value by the number of common shares outstanding.  Management believes that this information is consistent with treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios.  Accordingly, management believes that this non-GAAP financial measure provides information that is important to investors and that is useful in understanding the Company’s capital position and ratios.  Further, management believes that presentation of this measure, together with the accompanying reconciliation, provides a complete understanding of factors and trends affecting the Company’s business and allows investors to view the Company’s performance in a manner similar to management, the financial services industry, bank stock analysts and regulatory agencies.  However, this non-GAAP financial measure is supplemental and is not a substitute for an analysis based on GAAP financial measures.  Note that other companies may use different calculations for this measure, and therefore the Company’s presentation of tangible book value per share may not be comparable to similarly titled measures reported by other companies.  Investors should review the Company’s consolidated financial statements in their entirety and should not rely on any single financial measure.

A reconciliation of this non-GAAP financial measure, tangible book value per share, to the most directly comparable GAAP financial measure, book value, is set forth in the following table: 

($ in thousands, except per share data)	March 31, 2015		December 31, 2014
Stockholders' equity ("book value")	$	86,701	$	85,788
Goodwill (related to insurance agency reporting unit)		(8,101)		(8,101)
Intangible assets  (related to insurance agency reporting unit)		-		-
Tangible book value (non-GAAP)	$	78,600	$	77,687
Number of common shares outstanding		4,230,895		4,203,684
Tangible book value per share	$	18.58	$	18.48

On February 17, 2015, the Company declared a cash dividend of $0.36 per share on the Company’s outstanding common stock. The dividend was paid on April 7, 2015 to shareholders of record as of March 17, 2015.

LIQUIDITY

The Bank utilizes cash flows from the investment portfolio and federal funds sold balances to manage the liquidity requirements related to loan demand and deposit fluctuations.  The Bank also has many borrowing options. As a member of the FHLB the Bank is able to borrow funds at competitive rates.  Advances of up to $184.6 million can be drawn on the FHLB via an Overnight Line of Credit Agreement between the Bank and the FHLB.  An amount equal to 25% of the Bank’s total assets could be borrowed through the advance programs under certain qualifying circumstances.  The Bank also has the ability to purchase up to $14.0 million in federal funds from its correspondent banks.  By placing sufficient collateral in safekeeping at the Federal Reserve Bank, the Bank could borrow at the discount window.  The Bank’s liquidity needs also can be met by more aggressively pursuing time deposits, or accessing the brokered time deposit market, including the Certificate of Deposit Account Registry Service (“CDARS”) network.  The Company’s primary source of liquidity is dividends from the Bank.  Additionally, the Company has access to capital markets as a funding source.

Cash flows from the Bank’s investment portfolio are laddered, so that securities mature at regular intervals, to provide funds from principal and interest payments at various times as liquidity needs may arise. Contractual maturities are also laddered, with consideration as to the volatility of market prices.  At March 31, 2015, approximately 8.6% of the Bank’s securities had contractual maturity dates of one year or less and approximately 35.5% had maturity dates of five years or less.

40

Management, on an ongoing basis, closely monitors the Company’s liquidity position for compliance with internal policies, and believes that available sources of liquidity are adequate to meet funding needs in the normal course of business.  As part of that monitoring process, management calculates the 90-day liquidity each month by analyzing the cash needs of the Bank.  Included in the calculation are liquid assets and potential liabilities.  Management stresses the potential liabilities calculation to ensure a strong liquidity position.  Included in the calculation are assumptions of some significant deposit run-off as well as funds needed for loan closings and investment purchases. At March 31, 2015, in the Company’s internal stress test, the Company had net short-term liquidity of $193.7 million as compared with $214.6 million at December 31, 2014, due to the usage of cash for loan growth.  Available assets of $167.0 million, divided by public and purchased funds of $124.2 million, resulted in a long-term liquidity ratio of 134% at March 31, 2015, compared with 88% at December 31, 2014.

Management does not anticipate engaging in any activities, either currently or in the long term, for which adequate funding would not be available and which would therefore result in significant pressure on liquidity. 

The Company believes that the Bank maintains a sufficient level of U.S. government and government agency securities and New York State municipal bonds that can be pledged as collateral for municipal deposits. 

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Additional information responsive to this Item is contained in the Liquidity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, which information is incorporated herein by reference.

Market risk is the risk of loss from adverse changes in market prices and/or interest rates of the Bank’s financial instruments. The primary market risk the Company is exposed to is interest rate risk. The core banking activities of lending and deposit-taking expose the Bank to interest rate risk, which occurs when assets and liabilities reprice at different times and by different amounts as interest rates change. As a result, net interest income earned by the Bank is subject to the effects of changing interest rates. The Bank measures interest rate risk by calculating the variability of net interest income in future periods under various interest rate scenarios using projected balances for interest-earning assets and interest-bearing liabilities. Management’s philosophy toward interest rate risk management is to limit the variability of net interest income to changes in net interest rates. The balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans, and expected maturities of investment securities, loans and deposits. Management supplements the modeling technique described above with analysis of market values of the Bank’s financial instruments and changes to such market values given changes in the interest rates.

The Bank’s Asset-Liability Committee, which includes members of senior management, monitors the Bank’s interest rate sensitivity with the aid of a model that considers the impact of ongoing lending and deposit taking activities, as well as interrelationships in the magnitude and timing of the repricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. When deemed prudent, management has taken actions, and intends to do so in the future, to mitigate exposure to interest rate risk through the use of on- or off-balance sheet financial instruments. Possible actions include, but are not limited to, changing the pricing of loan and deposit products, and modifying the composition of interest-earning assets and interest-bearing liabilities, and reliance on other financial instruments used for interest rate risk management purposes.

41

The following table demonstrates the possible impact of changes in interest rates on the Bank’s net interest income over a 12-month period of time:

SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES

	Calculated increase
	in projected annual net interest income
	(in thousands)
		March 31, 2015		December 31, 2014
Changes in interest rates
+200 basis points	$	982	$	531
+100 basis points		1,479		1,149
-100 basis points		NM		NM
-200 basis points		NM		NM

Many assumptions were utilized by management to calculate the impact that changes in interest rates may have on the Bank’s net interest income. The more significant assumptions related to the rate of prepayments of mortgage-related assets, loan and deposit volumes and pricing, and deposit maturities. The Bank assumed immediate changes in rates including 200 basis point rate changes. In the event that the 200 basis point rate changes cannot be achieved, the applicable rate changes are limited to lesser amounts such that interest rates cannot be less than zero. These assumptions are inherently uncertain and, as a result, the Bank cannot precisely predict the impact of changes in interest rates on net interest income. Actual results may differ significantly due to the timing, magnitude, and frequency of interest rate changes in market conditions and interest rate differentials (spreads) between maturity/repricing categories, as well as any actions such as those previously described, which management may take to counter such changes. In light of the uncertainties and assumptions associated with the process, the amounts presented in the table and changes in such amounts are not considered significant to the Bank’s projected net interest income.

ITEM 4 - CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2015 (the end of the period covered by this Report).  Based on that evaluation, the Company’s principal executive and principal financial officers concluded that as of March 31, 2015 the Company’s disclosure controls and procedures were effective.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No changes in the Company’s internal control over financial reporting were identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the fiscal quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

42

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

The nature of the Company’s business generates a certain amount of litigation involving matters arising in the ordinary course of business.

Additionally, as previously reported, on September 2, 2014, the Office of the Attorney General for the State of New York (the “NYAG”) filed a formal complaint in the U.S. District Court for the Western District of New York against the Company and the Bank regarding residential lending practices.  The complaint seeks unspecified monetary damages and injunctive relief. 

The Company and the Bank believe that they have meritorious defenses to the NYAG’s claims, deny any wrongdoing, and will defend against the NYAG’s allegations.  However, the outcome of this action may not be assured.  If this action is decided unfavorably to the Company and the Bank, we could be required to pay a civil penalty and make other expenditures.  Despite management’s views of the merits of this litigation, or the reasonableness of our estimates and reserves, our financial statements could nonetheless be materially affected by an adverse judgment.

Under applicable accounting guidance, we accrue for litigation and claims where the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated.  Accordingly, based on the advice of counsel and a management review of the existing facts and circumstances, we recorded a reserve relating to the NYAG investigation totaling $1 million in the second quarter of 2014.  Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict.  Because of such uncertainties, accruals are based only on the best information available at the time.  As additional information becomes available, we will reassess the potential liability related to this investigation and may revise this estimate.

In the opinion of management, there are no other proceedings pending to which the Company is a party or to which its property is subject, which, if determined adversely, would have a material effect on the Company’s results of operations or financial condition.

43

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In March 2013, the Company announced it had been authorized by its Board of Directors to purchase up to 100,000 shares of the Company’s outstanding common stock.  In the first quarter of 2015, the Company purchased shares of its common stock as follows:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
January 2015:
January 1, 2015 - January 31, 2015		-	$	-	-	27,168
February 2015:
February 1, 2015 - February 28, 2015		-	$	-	-	27,168
March 2015:
March 1, 2015 - March 31, 2015		5,374	$	24.12	1,397	25,771
Total:		5,374	$	24.12	1,397	25,771

(1)3,977 of the total shares purchased in the period consist of shares constructively tendered to the Company by attestation in satisfaction of the exercise price due upon exercise of options issued pursuant to the Company’s 2009 Long-Term Incentive Plan.  The “average price paid per share” reported in the table above, with respect to such shares, reflects the cost basis of the Company’s Treasury sharesand the fair market value of the Company’s common stock on the purchase date, which was the cost paid by the Company upon acquisition of treasury shares and the closing sales price of the Company’s common stock as reported on the NYSE MKT on that date, respectively. 

(2) On March 25, 2013, the Board of Directors authorized the Company to repurchase up to 100,000 shares of the Company’s common stock.  The repurchase program has no fixed expiration date but may be suspended or discontinued at any time.  The Company did not make any repurchases during the quarter ended March 31, 2015 except pursuant to this publically announced program.  

44

ITEM 6 – EXHIBITS

The information called for by this item is incorporated herein by reference to the Exhibit Index included immediately following the signature page to this Quarterly Report on Form 10-Q.

45

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.

Evans Bancorp, Inc.

DATE

May 1, 2015

/s/ David J. Nasca

David J. Nasca

President and CEO

(Principal Executive Officer)

DATE

May 1, 2015

/s/ Gary A. Kajtoch

Gary A. Kajtoch

Treasurer

(Principal Financial Officer)

46

EXHIBIT INDEX

Exhibit No.	Name
31.1	Certification of Principal Executive Officer pursuant to
	Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Principal Financial Officer pursuant to
	Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer pursuant to 18
	USC Section 1350 Chapter 63 of Title 18, United States Code,
	as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
	of 2002.
32.2	Certification of Principal Financial Officer pursuant to 18
	USC Section 1350 Chapter 63 of Title 18, United States Code,
	as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
	of 2002.
101	The following materials from Evans Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Consolidated Balance Sheets – March 31, 2015 and December 31, 2014; (ii) Unaudited Consolidated Statements of Income – Three months ended March 31, 2015 and 2014; (iii) Unaudited Statements of Consolidated Comprehensive Income – Three months ended March 31, 2015 and 2014; (iv) Unaudited Consolidated Statements of Stockholder’s Equity – Three months ended March 31, 2015 and 2014; (v) Unaudited Consolidated Statements of Cash Flows – Three months ended March 31, 2015 and 2014; and (vi) Notes to Unaudited Consolidated Financial Statements.

47

EX-31.1

Exhibit 31.1

Certification

I, David J. Nasca, certify that:

1. I have reviewed this report on Form 10-Q of Evans Bancorp, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: May 1, 2015

/s/ David J. Nasca

David J. Nasca

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification

I, Gary A. Kajtoch, certify that:

1. I have reviewed this report on Form 10-Q of Evans Bancorp, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: May 1, 2015

/s/ Gary A. Kajtoch

Gary A. Kajtoch

Treasurer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICERS

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, David J. Nasca, the President and Chief Executive Officer of Evans Bancorp, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) the Quarterly Report of Evans Bancorp, Inc. on Form 10-Q for the fiscal quarter ended March 31, 2015 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and (2) the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Evans Bancorp, Inc. 

Date: May 1, 2015

By:	/s/ David J. Nasca
Name:	David J. Nasca
Title:	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICERS

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary A. Kajtoch, the Treasurer of Evans Bancorp, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) the Quarterly Report of Evans Bancorp, Inc. on Form 10-Q for the fiscal quarter ended March 31, 2015 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and (2) the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Evans Bancorp, Inc. 

Date: May 1, 2015

By:	/s/ Gary A. Kajtoch
Name:	Gary A. Kajtoch
Title:	Treasurer
	(Principal Financial Officer)

XML

Loans And The Allowance For Loan Losses (Data, At The Class Level, Of Credit Quality Indicators Of Certain Loans And Leases) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	$ 701,097	$ 694,905
Commercial Real Estate: Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	39,723	40,986
Commercial Real Estate: Construction [Member] | Corporate Credit Exposure—By Credit Rating 3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	33,644	29,421
Commercial Real Estate: Construction [Member] | Corporate Credit Exposure—By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	1,235	10,492
Commercial Real Estate: Construction [Member] | Corporate Credit Exposure—By Credit Rating 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	4,844	1,073
Commercial Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	366,657	363,252
Commercial Real Estate Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	308,059	299,798
Commercial Real Estate Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	42,901	50,691
Commercial Real Estate Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	9,974	7,853
Commercial Real Estate Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	5,723	4,757
Commercial Real Estate Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans		153
Commercial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	406,380	404,238
Commercial Loans [Member] | Corporate Credit Exposure—By Credit Rating 3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	341,703	329,219
Commercial Loans [Member] | Corporate Credit Exposure—By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	44,136	61,183
Commercial Loans [Member] | Corporate Credit Exposure—By Credit Rating 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	14,818	8,926
Commercial Loans [Member] | Corporate Credit Exposure—By Credit Rating 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	5,723	4,757
Commercial Loans [Member] | Corporate Credit Exposure—By Credit Rating 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans		153
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	132,416	129,456
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	86,254	83,789
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	29,712	30,223
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	8,652	8,662
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	7,687	6,613
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	$ 111	$ 169

XML

Other Comprehensive Income (Schedule of Accumulated Other Comprehensive Income (Loss)) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	$ (1,508)	$ (1,263)
Net Change	360	382
Ending Balance	(1,148)	(881)
Net Unrealized Gain (Loss) On Investment Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	911	191
Net Change	331	361
Ending Balance	1,242	552
Net Defined Benefit Pension Plans Adjustments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(2,419)	(1,454)
Net Change	29	21
Ending Balance	$ (2,390)	$ (1,433)

XML

Loans And The Allowance For Loan Losses (Troubled Debt Restructurings That Subsequently Defaulted) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 contract	Mar. 31, 2014 contract
Commercial And Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded investment of restructured contracts that subsequently defaulted
Residential Real Estate: Residential [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded investment of restructured contracts that subsequently defaulted
Residential Real Estate: Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded investment of restructured contracts that subsequently defaulted
Commercial Real Estate: Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded investment of restructured contracts that subsequently defaulted
Commercial Real Estate: Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded investment of restructured contracts that subsequently defaulted
Home Equity Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1
Recorded investment of restructured contracts that subsequently defaulted	19
Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded investment of restructured contracts that subsequently defaulted
Other [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded investment of restructured contracts that subsequently defaulted

XML

Fair Value Measurements (Changes In Fair Value For Mortgage Servicing Rights) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Fair Value Measurements [Abstract]
Mortgage servicing rights - Beginning Balance	$ 518	$ 509
Gains (losses) included in earnings	(45)	(38)
Additions from loan sales	24
Mortgage servicing rights - Ending Balance	$ 497	$ 471

XML

Net Periodic Benefit Costs (Tables)

3 Months Ended

Mar. 31, 2015

Net Periodic Benefit Costs [Abstract]

Schedule Of Net Periodic Benefit Costs

		Three months ended March 31,
		(in thousands)
					Supplemental Executive
	Pension Benefits				Retirement Plan
	2015		2014		2015		2014
Service cost	$	-	$	-	$	48	$	42
Interest cost		51		51		37		40
Expected return on plan assets		(77)		(76)		-		-
Amortization of prior service cost		-		-		7		8
Amortization of the net loss		17		5		31		21
Net periodic cost (benefit)	$	(9)	$	(20)	$	123	$	111

XML

Segment Information (Business Segment Information) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Segment Reporting Information [Line Items]
Net interest income (expense)	$ 7,581	$ 7,298
Provision for loan losses	201	153
Net interest income (expense) after provision for loan and lease losses	7,380	7,145
Non-interest income	1,237	1,263
Insurance service and fees	1,829	2,132
Amortization expense		41
Non-interest expense	7,512	7,577
Income before income taxes	2,934	2,922
Income tax provision	1,029	909
Net income	1,905	2,013
Banking Activities [Member]
Segment Reporting Information [Line Items]
Net interest income (expense)	7,609	7,326
Provision for loan losses	201	153
Net interest income (expense) after provision for loan and lease losses	7,408	7,173
Non-interest income	1,237	1,263
Insurance service and fees	162	152
Non-interest expense	6,481	6,477
Income before income taxes	2,326	2,111
Income tax provision	794	596
Net income	1,532	1,515
Insurance Agency Activities [Member]
Segment Reporting Information [Line Items]
Net interest income (expense)	(28)	(28)
Net interest income (expense) after provision for loan and lease losses	(28)	(28)
Insurance service and fees	1,667	1,980
Amortization expense		41
Non-interest expense	1,031	1,100
Income before income taxes	608	811
Income tax provision	235	313
Net income	$ 373	$ 498

XML

Loans And The Allowance For Loan Losses (Impaired Loans And Leases) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Impaired Financing Receivable, Recorded Investment
Impaired loans, Recorded Investment, With no related allowance recorded	$ 7,577	$ 7,369
Impaired loans, Recorded Investment, With a related allowance recorded	8,144	7,660
Impaired loans, Recorded Investment, Total	15,721	15,029
Impaired Financing Receivable, Unpaid Principal Balance
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	8,024	7,689
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	8,427	7,864
Impaired loans, Unpaid Principal Balance, Total	16,451	15,553
Impaired Financing Receivable Related Allowance
Impaired loans, Related Allowance	1,152	1,313
Impaired Financing Receivable, Average Recorded Investment
Impaired loans, Average Recorded Investment, With no related allowance recorded	7,744	7,592
Impaired loans, Average Recorded Investment, With a related allowance recorded	8,272	7,729
Impaired loans, Average Recorded Investment, Total	16,016	15,321
Impaired Financing Receivable, Interest Income Foregone
Impaired Loans, Interest Income Foregone, With no related allowance recorded	172	96
Impaired Loans, Interest Income Foregone, With a related allowance recorded	116	185
Impaired Loans, Interest Income Foregone, Total	288	281
Impaired Financing Receivable, Interest Income Recognized
Impaired Loans, Interest Income Recognized, With no related allowance recorded	52	291
Impaired Loans, Interest Income Recognized, With a related allowance recorded	13	290
Impaired Loans, Interest Income Recognized, Total	65	581
Commercial And Industrial [Member]
Impaired Financing Receivable, Recorded Investment
Impaired loans, Recorded Investment, With no related allowance recorded	1,330	1,017
Impaired loans, Recorded Investment, With a related allowance recorded	5,247	4,701
Impaired loans, Recorded Investment, Total	6,577	5,718
Impaired Financing Receivable, Unpaid Principal Balance
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	1,461	1,022
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	5,324	4,734
Impaired loans, Unpaid Principal Balance, Total	6,785	5,756
Impaired Financing Receivable Related Allowance
Impaired loans, Related Allowance	978	988
Impaired Financing Receivable, Average Recorded Investment
Impaired loans, Average Recorded Investment, With no related allowance recorded	1,416	1,096
Impaired loans, Average Recorded Investment, With a related allowance recorded	5,283	4,701
Impaired loans, Average Recorded Investment, Total	6,699	5,797
Impaired Financing Receivable, Interest Income Foregone
Impaired Loans, Interest Income Foregone, With no related allowance recorded	148	9
Impaired Loans, Interest Income Foregone, With a related allowance recorded	75	64
Impaired Loans, Interest Income Foregone, Total	223	73
Impaired Financing Receivable, Interest Income Recognized
Impaired Loans, Interest Income Recognized, With no related allowance recorded	7	66
Impaired Loans, Interest Income Recognized, With a related allowance recorded	12	234
Impaired Loans, Interest Income Recognized, Total	19	300
Residential Real Estate: Residential [Member]
Impaired Financing Receivable, Recorded Investment
Impaired loans, Recorded Investment, With no related allowance recorded	2,241	2,264
Impaired loans, Recorded Investment, With a related allowance recorded	271	271
Impaired loans, Recorded Investment, Total	2,512	2,535
Impaired Financing Receivable, Unpaid Principal Balance
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	2,419	2,435
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	285	285
Impaired loans, Unpaid Principal Balance, Total	2,704	2,720
Impaired Financing Receivable Related Allowance
Impaired loans, Related Allowance	3	3
Impaired Financing Receivable, Average Recorded Investment
Impaired loans, Average Recorded Investment, With no related allowance recorded	2,253	2,271
Impaired loans, Average Recorded Investment, With a related allowance recorded	271	271
Impaired loans, Average Recorded Investment, Total	2,524	2,542
Impaired Financing Receivable, Interest Income Foregone
Impaired Loans, Interest Income Foregone, With no related allowance recorded	12	37
Impaired Loans, Interest Income Foregone, With a related allowance recorded	5	20
Impaired Loans, Interest Income Foregone, Total	17	57
Impaired Financing Receivable, Interest Income Recognized
Impaired Loans, Interest Income Recognized, With no related allowance recorded	11	68
Impaired Loans, Interest Income Recognized, Total	11	68
Commercial Real Estate: Commercial [Member]
Impaired Financing Receivable, Recorded Investment
Impaired loans, Recorded Investment, With no related allowance recorded	1,922	2,103
Impaired loans, Recorded Investment, With a related allowance recorded	2,579	2,640
Impaired loans, Recorded Investment, Total	4,501	4,743
Impaired Financing Receivable, Unpaid Principal Balance
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	2,016	2,208
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	2,758	2,785
Impaired loans, Unpaid Principal Balance, Total	4,774	4,993
Impaired Financing Receivable Related Allowance
Impaired loans, Related Allowance	124	274
Impaired Financing Receivable, Average Recorded Investment
Impaired loans, Average Recorded Investment, With no related allowance recorded	1,956	2,139
Impaired loans, Average Recorded Investment, With a related allowance recorded	2,670	2,708
Impaired loans, Average Recorded Investment, Total	4,626	4,847
Impaired Financing Receivable, Interest Income Foregone
Impaired Loans, Interest Income Foregone, With no related allowance recorded	6	33
Impaired Loans, Interest Income Foregone, With a related allowance recorded	35	96
Impaired Loans, Interest Income Foregone, Total	41	129
Impaired Financing Receivable, Interest Income Recognized
Impaired Loans, Interest Income Recognized, With no related allowance recorded	18	91
Impaired Loans, Interest Income Recognized, With a related allowance recorded		50
Impaired Loans, Interest Income Recognized, Total	18	141
Commercial Real Estate: Construction [Member]
Impaired Financing Receivable, Recorded Investment
Impaired loans, Recorded Investment, With no related allowance recorded	1,103	1,074
Impaired loans, Recorded Investment, Total	1,103	1,074
Impaired Financing Receivable, Unpaid Principal Balance
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	1,103	1,074
Impaired loans, Unpaid Principal Balance, Total	1,103	1,074
Impaired Financing Receivable, Average Recorded Investment
Impaired loans, Average Recorded Investment, With no related allowance recorded	1,128	1,169
Impaired loans, Average Recorded Investment, Total	1,128	1,169
Impaired Financing Receivable, Interest Income Recognized
Impaired Loans, Interest Income Recognized, With no related allowance recorded	12	44
Impaired Loans, Interest Income Recognized, Total	12	44
Home Equity Loans [Member]
Impaired Financing Receivable, Recorded Investment
Impaired loans, Recorded Investment, With no related allowance recorded	981	911
Impaired loans, Recorded Investment, Total	981	911
Impaired Financing Receivable, Unpaid Principal Balance
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	1,025	950
Impaired loans, Unpaid Principal Balance, Total	1,025	950
Impaired Financing Receivable, Average Recorded Investment
Impaired loans, Average Recorded Investment, With no related allowance recorded	991	917
Impaired loans, Average Recorded Investment, Total	991	917
Impaired Financing Receivable, Interest Income Foregone
Impaired Loans, Interest Income Foregone, With no related allowance recorded	6	17
Impaired Loans, Interest Income Foregone, Total	6	17
Impaired Financing Receivable, Interest Income Recognized
Impaired Loans, Interest Income Recognized, With no related allowance recorded	4	22
Impaired Loans, Interest Income Recognized, Total	4	22
Consumer Loans [Member]
Impaired Financing Receivable, Recorded Investment
Impaired loans, Recorded Investment, With a related allowance recorded	47	48
Impaired loans, Recorded Investment, Total	47	48
Impaired Financing Receivable, Unpaid Principal Balance
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	60	60
Impaired loans, Unpaid Principal Balance, Total	60	60
Impaired Financing Receivable Related Allowance
Impaired loans, Related Allowance	47	48
Impaired Financing Receivable, Average Recorded Investment
Impaired loans, Average Recorded Investment, With a related allowance recorded	48	49
Impaired loans, Average Recorded Investment, Total	48	49
Impaired Financing Receivable, Interest Income Foregone
Impaired Loans, Interest Income Foregone, With a related allowance recorded	1	5
Impaired Loans, Interest Income Foregone, Total	1	5
Impaired Financing Receivable, Interest Income Recognized
Impaired Loans, Interest Income Recognized, With a related allowance recorded	1	6
Impaired Loans, Interest Income Recognized, Total	$ 1	$ 6

XML

Loans And The Allowance For Loan Losses (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and leases, restructured and deemed to be a TDR	$ 6,788,000		$ 6,586,000
Troubled restructured loans and leases, Nonaccruing	2,166,000		1,948,000
Period of timely payments before reversion to accruing status, months	6 months
Residential Real Estate Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Unpaid principal balance	72,200,000		71,600,000
Mortgages sold to FNMA	2,600,000	0
Mortgage servicing rights	500,000		500,000
Mortgage loans held-for-sale	2,800,000		400,000
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans held-for-sale	$ 0		$ 0

XML

Net Periodic Benefit Costs (Schedule Of Net Periodic Benefit Costs) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 51	$ 51
Expected return on plan assets	(77)	(76)
Amortization of the net loss	17	5
Net periodic cost (benefit)	(9)	(20)
Supplemental Executive Retirement Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	48	42
Interest cost	37	40
Amortization of prior service cost	7	8
Amortization of the net loss	31	21
Net periodic cost (benefit)	$ 123	$ 111

XML

Per Share Data (Details)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Per Share Data [Abstract]
Potentially dilutive shares of common stock included in calculating diluted earnings per share	78,167	83,497
Potential anti-dilutive shares	38,630	9,000

XML

Organization And Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Organization And Summary Of Significant Accounting Policies [Abstract]

Organization And Summary Of Significant Accounting Policies

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies followed by Evans Bancorp, Inc. (the “Company”), a financial holding company, and its two direct, wholly-owned subsidiaries: (i) Evans Bank, National Association (the “Bank”), and the Bank’s subsidiaries, Evans National Leasing, Inc. (“ENL”), Evans National Holding Corp. (“ENHC”) and Suchak Data Systems, LLC (“SDS”); and (ii) Evans National Financial Services, LLC (“ENFS”), and ENFS’s subsidiary, The Evans Agency, LLC (“TEA”), and TEA’s subsidiaries, Frontier Claims Services, Inc. (“FCS”) and ENB Associates Inc. (“ENBA”), in the preparation of the accompanying interim unaudited consolidated financial statements conform with U.S. generally accepted accounting principles (“GAAP”) and with general practice within the industries in which it operates.  Except as the context otherwise requires, the Company and its direct and indirect subsidiaries are collectively referred to in this report as the “Company.”

The accompanying consolidated financial statements are unaudited.  In the opinion of management, all adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods have been made.  During the three month period ended March 31, 2015, the Company revised the unaudited Consolidated Statement of Cash Flows for the three month period ended March 31, 2014 to correct errors of a $40 thousand increase within “Depreciation and amortization”, $236 thousand increase within “Change in other assets affecting cash flow”, and $276 thousand decrease within “Change in other liabilities affecting cash flow” line items.  The Company has assessed the materiality of this correction and concluded, based on qualitative and quantitative considerations, in accordance with Staff Accounting Bulletin No. 99, that the adjustments were not material to our previously reported financial statements.

The results of operations for the three month periods ended March 31, 2015 are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.   

XML

Loans And The Allowance For Loan Losses (Non-Accrual Loans And Leases And Loans And Lease 90 Days Or More Past Due) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases	$ 11,099	$ 10,390
Accruing loans 90+ days past due	705	201
Total non-performing loans and leases	11,804	10,591
Total non-performing loans and leases to total assets	1.31%	1.25%
Total non-performing loans and leases to total loans and leases	1.68%	1.52%
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases	6,380	5,500
Residential Real Estate: Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases	1,275	1,296
Residential Real Estate: Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases
Commercial Real Estate: Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases	2,938	3,162
Accruing loans 90+ days past due	192
Commercial Real Estate: Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases
Accruing loans 90+ days past due	513	201
Home Equity Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases	489	415
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases	17	17
Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans and leases

XML

Securities (Scheduled Maturities Of Debt And Mortgage Backed Securities) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Securities [Abstract]
Debt securities available for sale, Due in one year or less, Amortized cost	$ 8,033	$ 8,172
Debt securities available for sale, Due after one year through five years, Amortized cost	23,284	22,118
Debt securities available for sale, Due after five years through ten years, Amortized cost	19,310	20,517
Debt securities available for sale, Due after ten years, Amortized cost	6,954	6,062
Debt securities available for sale, Amortized cost	57,581	56,869
Mortgage-backed securities available for sale, Amortized cost	38,786	37,179
Available-for-sale securities, Amortized cost	96,367	94,048
Debt securities available for sale, Due in one year or less, Fair value	8,084	8,256
Debt securities available for sale, Due after one year through five years, Fair value	23,893	22,597
Debt securities available for sale, Due after five years through ten years, Fair value	19,590	20,589
Debt securities available for sale, Due after ten years, Fair value	7,221	6,335
Debt securities available for sale, Fair value	58,788	57,777
Mortgage-backed securities available for sale, Fair value	39,605	37,756
Available-for-sale securities, Fair value	98,393	95,533
Debt securities held to maturity, Due in one year or less, Amortized cost	478	478
Debt securities held to maturity, Due after one year through five years, Amortized cost	66	77
Debt securities held to maturity, Due after five years through ten years, Amortized cost	932	932
Debt securities held to maturity, Due after ten years, Amortized cost	112	112
Held to maturity securities Amortized cost	1,588	1,599
Debt securities held to maturity, Due in one year or less, Fair value	478	477
Debt securites held to maturity, Due after one year through five years, Fair value	67	78
Debt securites held to maturity, Due after five years through ten years, Fair Value	924	914
Debt securities held to maturity, Due after ten years, Fair value	107	105
Held-to-maturity securities, Fair value	$ 1,576	$ 1,574

XML

Securities (Schedule Of Amortized Cost And Fair Value Of Securities) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	$ 96,367	$ 94,048
Available-for-sale Securities, Unrealized Gains	2,287	2,054
Available-for-sale Securities, Unrealized Losses	(261)	(569)
Available-for-sale securities, Fair value	98,393	95,533
Held-to-maturity Securities, Amortized Cost	1,588	1,599
Held-to-maturity Securities, Unrealized Gains	13	7
Held-to-maturity Securities, Unrealized Losses	(25)	(32)
Held-to-maturity securities, Fair value	1,576	1,574
US Government Agencies Debt Securities [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	26,593	26,687
Available-for-sale Securities, Unrealized Gains	388	305
Available-for-sale Securities, Unrealized Losses	(122)	(275)
Available-for-sale securities, Fair value	26,859	26,717
States and Political Subdivisions Debt Securities [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	30,988	30,182
Available-for-sale Securities, Unrealized Gains	969	927
Available-for-sale Securities, Unrealized Losses	(28)	(49)
Available-for-sale securities, Fair value	31,929	31,060
Held-to-maturity Securities, Amortized Cost	1,588	1,599
Held-to-maturity Securities, Unrealized Gains	13	7
Held-to-maturity Securities, Unrealized Losses	(25)	(32)
Held-to-maturity securities, Fair value	1,576	1,574
Debt Securities [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	57,581	56,869
Available-for-sale Securities, Unrealized Gains	1,357	1,232
Available-for-sale Securities, Unrealized Losses	(150)	(324)
Available-for-sale securities, Fair value	58,788	57,777
FNMA [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	14,101	14,653
Available-for-sale Securities, Unrealized Gains	578	516
Available-for-sale Securities, Unrealized Losses		(15)
Available-for-sale securities, Fair value	14,679	15,154
FHLMC [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	5,620	5,901
Available-for-sale Securities, Unrealized Gains	131	121
Available-for-sale Securities, Unrealized Losses	(46)	(64)
Available-for-sale securities, Fair value	5,705	5,958
GNMA [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	8,276	6,014
Available-for-sale Securities, Unrealized Gains	133	143
Available-for-sale Securities, Unrealized Losses	(9)	(27)
Available-for-sale securities, Fair value	8,400	6,130
CMO [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	10,789	10,611
Available-for-sale Securities, Unrealized Gains	88	42
Available-for-sale Securities, Unrealized Losses	(56)	(139)
Available-for-sale securities, Fair value	10,821	10,514
Mortgage-backed Securities [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available-for-sale Securities, Amortized Cost	38,786	37,179
Available-for-sale Securities, Unrealized Gains	930	822
Available-for-sale Securities, Unrealized Losses	(111)	(245)
Available-for-sale securities, Fair value	$ 39,605	$ 37,756

XML

Loans And The Allowance For Loan Losses (Troubled Debt Restructured Loans And Leases) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	$ 6,788	$ 6,586
Troubled restructured loans and leases, Nonaccruing	2,166	1,948
Troubled restructured loans and leases, Accruing	4,622	4,638
Troubled restructured loans and leases, Related Allowance	263	237
Commercial And Industrial [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	874	492
Troubled restructured loans and leases, Nonaccruing	677	274
Troubled restructured loans and leases, Accruing	197	218
Troubled restructured loans and leases, Related Allowance	200	173
Residential Real Estate: Residential [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	1,824	1,833
Troubled restructured loans and leases, Nonaccruing	586	594
Troubled restructured loans and leases, Accruing	1,238	1,239
Commercial Real Estate: Commercial [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total		2,428
Troubled restructured loans and leases, Nonaccruing		847
Troubled restructured loans and leases, Accruing		1,581
Troubled restructured loans and leases, Related Allowance		33
Commercial Real Estate: Construction [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	1,103	1,074
Troubled restructured loans and leases, Accruing	1,103	1,074
Home Equity Loans [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	719	728
Troubled restructured loans and leases, Nonaccruing	228	233
Troubled restructured loans and leases, Accruing	491	495
Consumer Loans [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	30	31
Troubled restructured loans and leases, Accruing	30	31
Troubled restructured loans and leases, Related Allowance	30	31
Other [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total
Troubled restructured loans and leases, Nonaccruing
Troubled restructured loans and leases, Accruing
Troubled restructured loans and leases, Related Allowance

XML

Securities (Unrealized Losses On Available For Sale Securities) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Investments In Debt And Marketable Equity Securities [Line Items]
Total temporarily impaired, Less than 12 months, Fair value	$ 7,228	$ 12,249
Total temporarily impaired, More than 12 months, Fair Value	13,971	19,791
Total temporarily impaired, Total, Fair value	21,199	32,040
Total temporarily impaired, Less than 12 months, Unrealized losses	(25)	(57)
Total temporarily impaired, More than 12 months, Unrealized losses	(261)	(544)
Total temporarily impaired, Total, Unrealized losses	(286)	(601)
US Government Agencies Debt Securities [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	1,991	3,906
Available for Sale, 12 months or longer, Fair Value	5,887	7,751
Available for Sale, Total, Fair Value	7,878	11,657
Available for sale, Less than 12 months, Unrealized losses	(9)	(26)
Available for sale, 12 months or more, Unrealized losses	(113)	(249)
Available for sale, Total, Unrealized losses	(122)	(275)
States and Political Subdivisions Debt Securities [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	1,989	4,752
Available for Sale, 12 months or longer, Fair Value	1,130	1,902
Available for Sale, Total, Fair Value	3,119	6,654
Available for sale, Less than 12 months, Unrealized losses	(10)	(9)
Available for sale, 12 months or more, Unrealized losses	(18)	(40)
Available for sale, Total, Unrealized losses	(28)	(49)
Held To Maturity, Less than 12 months, Fair Value	371	371
Held To Maturity, 12 months or longer, Fair Value	473	556
Held To Maturity, Total, Fair Value	844	927
Held to maturity, Less than 12 months, Unrealized losses	(1)	(1)
Held to maturity, 12 months or more, Unrealized losses	(24)	(31)
Held to maturity, Total, Unrealized losses	(25)	(32)
Debt Securities [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	3,980	8,658
Available for Sale, 12 months or longer, Fair Value	7,017	9,653
Available for Sale, Total, Fair Value	10,997	18,311
Available for sale, Less than 12 months, Unrealized losses	(19)	(35)
Available for sale, 12 months or more, Unrealized losses	(131)	(289)
Available for sale, Total, Unrealized losses	(150)	(324)
FNMA [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value		1,498
Available for Sale, 12 months or longer, Fair Value		1,731
Available for Sale, Total, Fair Value		3,229
Available for sale, Less than 12 months, Unrealized losses		(10)
Available for sale, 12 months or more, Unrealized losses		(5)
Available for sale, Total, Unrealized losses		(15)
FHLMC [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available for Sale, 12 months or longer, Fair Value	1,454	1,482
Available for Sale, Total, Fair Value	1,454	1,482
Available for sale, 12 months or more, Unrealized losses	(46)	(64)
Available for sale, Total, Unrealized losses	(46)	(64)
GNMA [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	1,207
Available for Sale, 12 months or longer, Fair Value	795	2,079
Available for Sale, Total, Fair Value	2,002	2,079
Available for sale, Less than 12 months, Unrealized losses	(1)
Available for sale, 12 months or more, Unrealized losses	(8)	(27)
Available for sale, Total, Unrealized losses	(9)	(27)
CMO [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	1,670	1,722
Available for Sale, 12 months or longer, Fair Value	4,232	4,290
Available for Sale, Total, Fair Value	5,902	6,012
Available for sale, Less than 12 months, Unrealized losses	(4)	(11)
Available for sale, 12 months or more, Unrealized losses	(52)	(128)
Available for sale, Total, Unrealized losses	(56)	(139)
Mortgage-backed Securities [Member]
Investments In Debt And Marketable Equity Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	2,877	3,220
Available for Sale, 12 months or longer, Fair Value	6,481	9,582
Available for Sale, Total, Fair Value	9,358	12,802
Available for sale, Less than 12 months, Unrealized losses	(5)	(21)
Available for sale, 12 months or more, Unrealized losses	(106)	(224)
Available for sale, Total, Unrealized losses	$ (111)	$ (245)

XML

Fair Value Measurements (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Fair Value Measurements [Line Items]
Impaired loans	15,721	$ 15,029
Impaired loans, related allowance	1,152	$ 1,313
Minimum [Member]
Fair Value Measurements [Line Items]
Discount on appraisals of the collateral securing the loan, range	10.00%
Maximum [Member]
Fair Value Measurements [Line Items]
Discount on appraisals of the collateral securing the loan, range	50.00%

XML

Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
OPERATING ACTIVITIES:
Interest received	$ 8,256	$ 8,105
Fees received	2,779	3,388
Interest paid	(896)	(937)
Cash paid to employees and vendors	(7,804)	(8,368)
Income taxes paid	(1)	(960)
Proceeds from sale of loans held for resale	2,658
Originations of loans held for resale	(4,995)	(123)
Net cash (used in) provided by operating activities	(3)	1,105
INVESTING ACTIVITIES:
Purchases of available for sale securities	(4,244)
Proceeds from maturities, calls, and payments of available for sale securities	2,451	5,543
Proceeds from maturities, calls, and payments of held to maturity securities	11	11
Additions to properties and equipment	(111)	(226)
Purchase of tax credit investment	(667)
Net increase in loans	(3,595)	(13,493)
Net cash (used in) provided by investing activities	(6,155)	(8,165)
FINANCING ACTIVITIES:
Proceeds from (repayments of) borrowings, net	(16,803)	(1,977)
Net increase in deposits	72,723	15,333
Repurchase of treasury stock	(34)	(1,436)
Reissuance of treasury stock	68	31
Net cash provided by financing activities	55,954	11,951
Net increase in cash and equivalents	49,796	4,891
CASH AND CASH EQUIVALENTS:
Beginning of period	10,898	41,954
End of period	60,694	46,845
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income	1,905	2,013
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	356	422
Deferred tax (benefit) expense	42	(13)
Provision for loan losses	201	153
Gain on loans sold	(22)
Stock options and restricted stock expense	117	99
Proceeds from sale of loans held for resale	2,658
Originations of loans held for resale	(4,995)	(123)
Changes in assets and liabilities affecting cash flow:
Other assets	327	(377)
Other liabilities	(592)	(1,069)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$ (3)	$ 1,105

XML

Fair Value Measurements (Financial Instruments Measured At Fair Value On Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities	$ 98,393	$ 95,533
Mortgage servicing rights	497	518
Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage servicing rights
Fair Value, Significant unobservable inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage servicing rights	497	518
US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities	26,859	26,717
US Government Agencies Debt Securities [Member] | Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities
US Government Agencies Debt Securities [Member] | Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities	26,859	26,717
States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities	31,929	31,060
States and Political Subdivisions Debt Securities [Member] | Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities
States and Political Subdivisions Debt Securities [Member] | Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities	31,929	31,060
Mortgage-backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities	39,605	37,756
Mortgage-backed Securities [Member] | Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities
Mortgage-backed Securities [Member] | Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities	$ 39,605	$ 37,756

XML

Loans And The Allowance For Loan Losses (Recorded Investment In Loans And Leases Past Due) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	$ 9,705	$ 5,817
60-89 days	585	3,454
90+ days	1,592	1,862
Total Past Due	11,882	11,133
Current Balance	689,215	683,772
Total gross loans	701,097	694,905
90+ Days Accruing	705	201
Non-accruing Loans and Leases	11,099	10,390
Net deferred loan origination costs	641	759	651
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	663	153
60-89 days	117	60
90+ days	25	274
Total Past Due	805	487
Current Balance	131,611	128,969
Total gross loans	132,416	129,456
Non-accruing Loans and Leases	6,380	5,500
Residential Real Estate: Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	345	848
60-89 days	189	158
90+ days	473	682
Total Past Due	1,007	1,688
Current Balance	99,541	96,686
Total gross loans	100,548	98,374
Non-accruing Loans and Leases	1,275	1,296
Residential Real Estate: Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current Balance	238	721
Total gross loans	238	721
Non-accruing Loans and Leases
Commercial Real Estate: Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	1,923	4,201
60-89 days	247	3,115
90+ days	302	513
Total Past Due	2,472	7,829
Current Balance	364,185	355,423
Total gross loans	366,657	363,252
90+ Days Accruing	192
Non-accruing Loans and Leases	2,938	3,162
Commercial Real Estate: Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	5,848	8
90+ days	513	201
Total Past Due	6,361	209
Current Balance	33,362	40,777
Total gross loans	39,723	40,986
90+ Days Accruing	513	201
Non-accruing Loans and Leases
Home Equity Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	911	594
60-89 days	13	120
90+ days	279	192
Total Past Due	1,203	906
Current Balance	58,486	59,042
Total gross loans	59,689	59,948
Non-accruing Loans and Leases	489	415
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	15	13
60-89 days	19	1
Total Past Due	34	14
Current Balance	1,670	1,750
Total gross loans	1,704	1,764
Non-accruing Loans and Leases	17	17
Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current Balance	122	404
Total gross loans	122	404
Non-accruing Loans and Leases

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
ASSETS
Cash and due from banks	$ 14,661	$ 8,784
Interest-bearing deposits at banks	46,033	2,114
Securities:
Available for sale, at fair value (amortized cost: $96,367 at March 31, 2015; $94,048 at December 31, 2014)	98,393	95,533
Held to maturity, at amortized cost (fair value: $1,576 at March 31, 2015; $1,574 at December 31, 2014)	1,588	1,599
Federal Home Loan Bank common stock, at amortized cost	822	1,439
Federal Reserve Bank common stock, at amortized cost	1,486	1,486
Loans, net of allowance for loan losses of $12,777 at March 31, 2015 and $12,533 at December 31, 2014	688,961	683,131
Properties and equipment, net of accumulated depreciation of $15,390 at March 31, 2015 and $15,129 at December 31, 2014	10,074	10,224
Goodwill	8,101	8,101
Bank-owned life insurance	20,552	20,415
Other assets	13,681	13,983
TOTAL ASSETS	904,352	846,809
LIABILITIES
Demand deposits	169,965	158,631
NOW deposits	82,956	72,670
Regular savings deposits	416,317	363,542
Time deposits	111,120	112,792
Total deposits	780,358	707,635
Securities sold under agreement to repurchase	10,673	13,778
Other short term borrowings		13,700
Other liabilities	15,290	14,578
Junior subordinated debentures	11,330	11,330
Total liabilities	817,651	761,021
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value, 10,000,000 shares authorized; 4,244,591 and 4,241,797 shares issued at March 31, 2015 and December 31, 2014, respectively, and 4,230,895 and 4,203,684 outstanding at March 31, 2015 and December 31, 2014, respectively	2,123	2,123
Capital surplus	42,682	43,102
Treasury stock, at cost, 13,696 shares and 38,113 at March 31, 2015 and December 31, 2014, respectively	(166)	(751)
Retained earnings	43,210	42,822
Accumulated other comprehensive loss, net of tax	(1,148)	(1,508)
Total stockholders' equity	86,701	85,788
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 904,352	$ 846,809

XML

Loans And The Allowance For Loan Losses (Troubled Debt Restructurings Activity) (Details) (Commercial And Industrial [Member], Deferral Of Principal [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 contract
Commercial And Industrial [Member] | Deferral Of Principal [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	3
Pre-Modification Outstanding Recorded Investment	$ 541
Post-Modification Outstanding Recorded Investment	$ 541

XML

Consolidated Statements Of Changes In Stockholders’ Equity (USD $) In Thousands	Common Stock [Member]	Capital Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2013	$ 2,106	$ 42,619	$ 37,370	$ (1,263)	$ (120)	$ 80,712
Net income			2,013			2,013
Other comprehensive income				382		382
Cash dividends			(1,305)			(1,305)
Stock options and restricted stock expense		99				99
Excess tax expense from stock-based compensation		21				21
Issued restricted shares	2	(2)
Repurchased shares in Treasury stock					(1,436)	(1,436)
Reissued shares in stock option exercise		(27)			58	31
Balance at Mar. 31, 2014	2,108	42,710	38,078	(881)	(1,498)	80,517
Balance at Dec. 31, 2014	2,123	43,102	42,822	(1,508)	(751)	85,788
Net income			1,905			1,905
Other comprehensive income				360		360
Cash dividends			(1,517)			(1,517)
Stock options and restricted stock expense		117				117
Excess tax benefit from stock-based compensation		(14)				(14)
Issued restricted shares		(503)			503
Repurchased shares in Treasury stock					(34)	(34)
Reissued shares in stock option exercise		(48)			116	68
Balance at Mar. 31, 2015	$ 2,123	$ 42,682	$ 43,210	$ (1,148)	$ (166)	$ 86,701

XML

Fair Value Measurements (Financial Instruments Measured At Fair Value On Nonrecurring Basis) (Details) (Fair Value, Measurements, Nonrecurring Basis [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 14,569	$ 13,716
Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans
Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans
Fair Value, Significant unobservable inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 14,569	$ 13,716

XML

Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2015

Other Comprehensive Income [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

	Balance at December 31, 2014		Net Change		Balance at March 31, 2015
	(in thousands)
Net unrealized gain (loss) on investment securities	$	911	$	331	$	1,242
Net defined benefit pension plans adjustments		(2,419)		29		(2,390)
Total	$	(1,508)	$	360	$	(1,148)
	Balance at December 31, 2013		Net Change		Balance at March 31, 2014
	(in thousands)
Net unrealized gain (loss) on investment securities	$	191	$	361	$	552
Net defined benefit pension plans adjustments		(1,454)		21		(1,433)
Total	$	(1,263)	$	382	$	(881)

Components Of Other Comprehensive Income (Loss)

	Three months ended March 31, 2015 (in thousands)						Three months ended March 31, 2014 (in thousands)
	Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount		Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount
Unrealized loss on investment securities:
Unrealized gain (loss) on investment securities	$	541	$	(210)	$	331	$	588	$	(227)	$	361
Reclassification from accumulated other
comprehensive income for gains (losses)		-		-		-		-		-		-
Net change		541		(210)		331		588		(227)		361
Defined benefit pension plans adjustments:
Net actuarial (loss) gain	$	-	$	-	$	-	$	-	$	-	$	-
Reclassifications from accumulated other
comprehensive income for gains (losses)
Amortization of prior service cost (a)		7		(2)		5		8		(3)		5
Amortization of actuarial loss (a)		48		(24)		24		26		(10)		16
Net change		55		(26)		29		34		(13)		21
Other Comprehensive Income (Loss)	$	596	$	(236)	$	360	$	622	$	(240)	$	382

(a)   Included in net periodic pension cost, as described in Note 9 – “Net Periodic Benefit Costs”

XML

Fair Value Measurements (Estimated Fair Value Of The Company's Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Level 2, Financial assets:
Available-for-sale Securities	$ 98,393	$ 95,533
Level 3, Financial assets:
Held-to-maturity Securities, Fair Value	1,576	1,574
Loans and leases, net	688,961	683,131
Mortgage servicing rights	497	518
Level 1, Financial Liabilities:
Demand deposits	169,965	158,631
NOW deposits	82,956	72,670
Regular savings deposits	416,317	363,542
Securities sold under agreement to repurchase	10,673	13,778
Level 3, Financial Liabilities:
Time deposits	111,120	112,792
Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Level 3, Financial assets:
Mortgage servicing rights
Fair Value, Significant unobservable inputs (Level 3) [Member]
Level 3, Financial assets:
Mortgage servicing rights	497	518
Carrying Amount [Member] | Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Level 1, Financial assets:
Cash and cash equivalents	60,694	10,898
Level 1, Financial Liabilities:
Demand deposits	169,965	158,631
NOW deposits	82,956	72,670
Regular savings deposits	416,317	363,542
Commitments to extend credit	93	245
Securities sold under agreement to repurchase	10,673	13,778
Carrying Amount [Member] | Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Level 2, Financial assets:
Available-for-sale Securities	98,393	95,533
FHLB and FRB stock	2,308	2,925
Level 2, Financial Liabilities:
Other borrowed funds		13,700
Junior subordinated debentures	11,330	11,330
Carrying Amount [Member] | Fair Value, Significant unobservable inputs (Level 3) [Member]
Level 3, Financial assets:
Held-to-maturity Securities, Fair Value	1,588	1,599
Loans and leases, net	688,961	683,131
Mortgage servicing rights	497	518
Level 3, Financial Liabilities:
Time deposits	111,120	112,792
Fair Value [Member] | Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Level 1, Financial assets:
Cash and cash equivalents	60,694	10,898
Level 1, Financial Liabilities:
Demand deposits	169,965	158,631
NOW deposits	82,956	72,670
Regular savings deposits	416,317	363,542
Commitments to extend credit	93	245
Securities sold under agreement to repurchase	10,673	13,778
Fair Value [Member] | Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Level 2, Financial assets:
Available-for-sale Securities	98,393	95,533
FHLB and FRB stock	2,308	2,925
Level 2, Financial Liabilities:
Other borrowed funds		13,700
Junior subordinated debentures	11,330	11,330
Fair Value [Member] | Fair Value, Significant unobservable inputs (Level 3) [Member]
Level 3, Financial assets:
Held-to-maturity Securities, Fair Value	1,576	1,574
Loans and leases, net	700,338	685,148
Mortgage servicing rights	497	518
Level 3, Financial Liabilities:
Time deposits	$ 110,678	$ 113,854

XML

Contingent Liabilities And Commitments (Tables)

3 Months Ended

Mar. 31, 2015

Contingent Liabilities And Commitments [Abstract]

Summary Of Commitments And Contingent Liabilities

	March 31,		December 31,
	2015		2014
	(in thousands)
Commitments to extend credit	$	234,311	$	212,193
Standby letters of credit		2,767		2,430
Total	$	237,078	$	214,623

XML

Consolidated Statements Of Changes In Stockholders’ Equity (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Consolidated Statements Of Changes In Stockholders’ Equity [Abstract]
Cash dividends per common share	$ 0.36	$ 0.31
Restricted shares issued		3,017
Shares repurchased	1,397	59,800
Reissued restricted shares	20,942
Shares reissued in stock options exercise	4,872	3,087

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Consolidated Balance Sheets [Abstract]
Available for sale, cost	$ 96,367	$ 94,048
Held to maturity, fair value	1,576	1,574
Allowance for loan and lease losses	12,777	12,533
Properties and equipment, accumulated depreciation	$ 15,390	$ 15,129
Common stock, par value	$ 0.50	$ 0.50
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	4,244,591	4,241,797
Common stock, shares outstanding	4,230,895	4,203,684
Treasury stock shares	13,696	38,113

XML

Net Periodic Benefit Costs

3 Months Ended

Mar. 31, 2015

Net Periodic Benefit Costs [Abstract]

Net Periodic Benefit Costs

9. NET PERIODIC BENEFIT COSTS

On January 31, 2008, the Bank froze its defined benefit pension plan.  The plan covered substantially all Company employees.  The plan provides benefits that are based on the employees’ compensation and years of service.  Under the freeze, eligible employees will receive, at retirement, the benefits already earned through January 31, 2008, but have not accrued any additional benefits since then.  As a result, service cost is no longer incurred. 

The Bank uses an actuarial method of amortizing prior service cost and unrecognized net gains or losses which result from actual expense and assumptions being different than those that are projected. The amortization method the Bank used recognized the prior service cost and net gains or losses over the average remaining service period of active employees.

The Bank also maintains a nonqualified supplemental executive retirement plan covering certain members of the Company’s senior management. The Bank uses an actuarial method of amortizing unrecognized net gains or losses which result from actual expense and assumptions being different than those that are projected. The amortization method the Bank uses recognizes the net gains or losses over the average remaining service period of active employees.

The Bank did not contribute to the defined benefit pension plan in the first three months of 2015, and expects to contribute $110 thousand additional funds to the pension plan in the remainder of 2015.

The following table presents the net periodic cost for the Bank’s defined benefit pension plan and supplemental executive retirement plan for the three month periods ended March 31, 2015 and 2014:

		Three months ended March 31,
		(in thousands)
					Supplemental Executive
	Pension Benefits				Retirement Plan
	2015		2014		2015		2014
Service cost	$	-	$	-	$	48	$	42
Interest cost		51		51		37		40
Expected return on plan assets		(77)		(76)		-		-
Amortization of prior service cost		-		-		7		8
Amortization of the net loss		17		5		31		21
Net periodic cost (benefit)	$	(9)	$	(20)	$	123	$	111

XML

Document And Entity Information	3 Months Ended
	Mar. 31, 2015	Apr. 30, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2015
Entity Registrant Name	EVANS BANCORP INC
Entity Central Index Key	0000842518
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,231,416

XML

Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2015

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

10.  RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update (“ASU”) 2014-04, Reclassification of Collateralized Mortgage Loans upon a Troubled Debt Restructuring.  The objective of this proposed ASU is to clarify when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, such that all or a portion of the loan should be derecognized and the real estate property recognized.  The main provisions would also require additional disclosures regarding the amount of foreclosed residential real estate property held by the creditor and the recorded investments of consumer mortgage loans that are in the process of foreclosure at each interim and annual reporting period.  This ASU became effective for the Company in fiscal years and interim periods within those years, beginning after December 15, 2014.  The Company has adopted this guidance for the reporting periods after December 15, 2014 and did nothave a material impact on its financial statements.

ASU 2014-09, Revenue from Contracts with Customers.  The objective of this proposed ASU is to require entities to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.  This ASU will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective.  The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  Early application is not permitted.  The standard allows an entity to apply the amendments in the ASU using either the retrospective or cumulative effect transition method.  The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

XML

Consolidated Statements Of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
INTEREST INCOME
Loans	$ 7,813	$ 7,510
Interest bearing deposits at banks	1	15
Securities:
Taxable	405	449
Non-taxable	237	245
Total interest income	8,456	8,219
INTEREST EXPENSE
Deposits	781	756
Other borrowings	15	86
Junior subordinated debentures	79	79
Total interest expense	875	921
NET INTEREST INCOME	7,581	7,298
PROVISION (CREDIT) FOR LOAN LOSSES	201	153
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	7,380	7,145
NON-INTEREST INCOME
Bank charges	409	461
Insurance service and fees	1,829	2,132
Data center income	24	107
Gain on loans sold	22
Bank-owned life insurance	137	145
Other	645	550
Total non-interest income	3,066	3,395
NON-INTEREST EXPENSE
Salaries and employee benefits	4,794	4,695
Occupancy	695	743
Repairs and maintenance	173	176
Advertising and public relations	211	222
Professional services	511	518
Technology and communications	259	300
Amortization of intangibles		41
FDIC insurance	147	162
Other	722	761
Total non-interest expense	7,512	7,618
INCOME BEFORE INCOME TAXES	2,934	2,922
INCOME TAX PROVISION	1,029	909
NET INCOME	$ 1,905	$ 2,013
Net income per common share-basic	$ 0.45	$ 0.48
Net income per common share-diluted	$ 0.44	$ 0.47
Cash dividends per common share	$ 0.36	$ 0.31
Weighted average number of common shares outstanding	4,213,509	4,200,519
Weighted average number of diluted shares outstanding	4,291,676	4,284,016

XML

Loans And The Allowance For Loan Losses

3 Months Ended

Mar. 31, 2015

Loans And The Allowance For Loan Losses [Abstract]

Loans, Leases, And The Allowance For Loan And Lease Losses

4. LOANSAND THE ALLOWANCE FOR LOAN LOSSES

Loan Portfolio Composition

The following table presents selected information on the composition of the Company’s loan portfolio as of the dates indicated:

	March 31, 2015		December 31, 2014
Mortgage loans on real estate:		(in thousands)
Residential Mortgages	$	100,548	$	98,374
Commercial and multi-family		366,657		363,252
Construction-Residential		238		721
Construction-Commercial		39,723		40,986
Home equities		59,689		59,948
Total real estate loans		566,855		563,281
Commercial and industrial loans		132,416		129,456
Consumer loans		1,704		1,764
Other		122		404
Net deferred loan origination costs		641		759
Total gross loans		701,738		695,664
Allowance for loan losses		(12,777)		(12,533)
Loans, net	$	688,961	$	683,131

The Bank sells certain fixed rate residential mortgages to FNMA, while maintaining the servicing rights for those mortgages.  In the three month period ended March 31, 2015, the Bank sold mortgages to FNMA totaling $2.6 million, as compared with no mortgages sold to FNMA in the three month period ended March 31, 2014.  At March 31, 2015, the Bank had a loan servicing portfolio principal balance of $72.2 million upon which it earns servicing fees, as compared with $71.6 million at December 31, 2014.  The value of the mortgage servicing rights for that portfolio was $0.5 million at March 31, 2015 and December 31, 2014, respectively.  At March 31, 2015, there were $2.8 million in residential mortgage loans held-for-sale, compared with$0.4 million in residential mortgages held for sale at December 31, 2014.  The Company had no commercial loans held-for-sale at March 31, 2015 or December 31, 2014.  The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

As noted in Note 1, these financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.  Disclosures related to the basis for accounting for loans, the method for recognizing interest income on loans, the policy for placing loans on nonaccrual status and the subsequent recording of payments and resuming accrual of interest, the policy for determining past due status, a description of the Company’s accounting policies and methodology used to estimate the allowance for loan losses, the policy for charging off loans, the accounting policies for impaired loans, and more descriptive information on the Company’s credit risk ratings are all contained in the Notes to the Audited Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.  Unless otherwise noted in this Form 10-Q, the policies and methodology described in the Annual Report for the year ended December 31, 2014 are consistent with those utilized by the Company in the three months ended March 31, 2015.

Credit Quality Indicators

The Bank monitors the credit risk in its loan portfolio by reviewing certain credit quality indicators (“CQI”).  The primary CQI for its commercial mortgage and commercial and industrial (“C&I”) portfolios is the individual loan’s credit risk rating.  The following list provides a description of the credit risk ratings that are used internally by the Bank when assessing the adequacy of its allowance for loan and lease losses:

· 1-3-Pass

· 4-Watch

· 5-O.A.E.M. (Other Assets Especially Mentioned) or Special Mention

· 6-Substandard

· 7-Doubtful

· 8-Loss

The Company’s consumer loans, including residential mortgages and home equities, are not individually risk rated or reviewed in the Company’s loan review process.  Consumers are not required to provide the Company with updated financial information as is a commercial customer.  Consumer loans also carry smaller balances.  Given the lack of updated information after the initial underwriting of the loan and small size of individual loans, the Company uses delinquency status as the credit quality indicator for consumer loans.

The following tables provide data, at the class level, of credit quality indicators of certain loans and leases for the dates specified:

March 31, 2015
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
3	$	33,644	$	308,059	$	341,703	$	86,254
4		1,235		42,901		44,136		29,712
5		4,844		9,974		14,818		8,652
6		-		5,723		5,723		7,687
7		-		-		-		111
Total	$	39,723	$	366,657	$	406,380	$	132,416

December 31, 2014
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
3	$	29,421	$	299,798	$	329,219	$	83,789
4		10,492		50,691		61,183		30,223
5		1,073		7,853		8,926		8,662
6		-		4,757		4,757		6,613
7		-		153		153		169
Total	$	40,986	$	363,252	$	404,238	$	129,456

Past Due Loans

The following tables provide an analysis of the age of the recorded investment in loans that are past due as of the dates indicated:

March 31, 2015
(in thousands)
							Total Past		Current		Total		90+ Days		Non-accruing
	30-59 days		60-89 days		90+ days		Due		Balance		Balance		Accruing		Loans
Commercial and
industrial	$	663	$	117	$	25	$	805	$	131,611	$	132,416	$	-	$	6,380
Residential real estate:
Residential		345		189		473		1,007		99,541		100,548		-		1,275
Construction		-		-		-		-		238		238		-		-
Commercial real estate:
Commercial		1,923		247		302		2,472		364,185		366,657		192		2,938
Construction		5,848		-		513		6,361		33,362		39,723		513		-
Home equities		911		13		279		1,203		58,486		59,689		-		489
Consumer		15		19		-		34		1,670		1,704		-		17
Other		-		-		-		-		122		122		-		-
Total Loans	$	9,705	$	585	$	1,592	$	11,882	$	689,215	$	701,097	$	705	$	11,099

NOTE: Loan and lease balances do not include $641 thousand in net deferred loan origination costs as of March 31, 2015.

December 31, 2014
(in thousands)
							Total Past		Current		Total		90+ Days		Non-accruing
	30-59 days		60-89 days		90+ days		Due		Balance		Balance		Accruing		Loans
Commercial and
industrial	$	153	$	60	$	274	$	487	$	128,969	$	129,456	$	-	$	5,500
Residential real estate:
Residential		848		158		682		1,688		96,686		98,374		-		1,296
Construction		-		-		-		-		721		721		-		-
Commercial real estate:
Commercial		4,201		3,115		513		7,829		355,423		363,252		-		3,162
Construction		8		-		201		209		40,777		40,986		201		-
Home equities		594		120		192		906		59,042		59,948		-		415
Consumer		13		1		-		14		1,750		1,764		-		17
Other		-		-		-		-		404		404		-		-
Total Loans	$	5,817	$	3,454	$	1,862	$	11,133	$	683,772	$	694,905	$	201	$	10,390

NOTE: Loan and lease balances do not include $759 thousand in net deferred loan origination costs as of December 31, 2014.

Allowance for loan losses

The following tables present the activity in the allowance for loan losses according to portfolio segment, for the three month periods ended March 31, 2015 and 2014:

March 31, 2015
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer **		Residential Mortgages*		HELOC		Direct Financing Leases		Unallocated		Total
Allowance for loan
losses:
Beginning balance	$	4,896	$	5,650	$	78	$	941	$	819	$	-	$	149	$	12,533
Charge-offs		-		-		(6)		-		-		-		-		(6)
Recoveries		38		10		1		-		-		-		-		49
Provision		55		170		(3)		(17)		(4)		-		-		201
Ending balance	$	4,989	$	5,830	$	70	$	924	$	815	$	-	$	149	$	12,777
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	978	$	124	$	47	$	3	$	-	$	-	$	-	$	1,152
Collectively evaluated
for impairment		4,011		5,706		23		921		815		-		149		11,625
Total	$	4,989	$	5,830	$	70	$	924	$	815	$	-	$	149	$	12,777
Loans:
Ending balance:
Individually evaluated
for impairment	$	6,577	$	5,604	$	47	$	2,512	$	981	$	-	$	-	$	15,721
Collectively evaluated
for impairment		125,839		400,776		1,779		98,274		58,708		-		-		685,376
Total	$	132,416	$	406,380	$	1,826	$	100,786	$	59,689	$	-	$	-	$	701,097

* Includes construction loans

** Includes all other consumer loans

NOTE: Loan balances do not include $641 thousand in net deferred loan origination costs as of March 31, 2015.

March 31, 2014
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer **		Residential Mortgages*		HELOC		Direct Financing Leases		Unallocated		Total
Allowance for loan
losses:
Beginning balance	$	4,489	$	4,912	$	37	$	1,038	$	878	$	-	$	149	$	11,503
Charge-offs		(57)		-		(6)		-		(1)		-		-		(64)
Recoveries		28		29		2		-		-		83		-		142
Provision		63		167		3		(1)		4		(83)		-		153
Ending balance	$	4,523	$	5,108	$	36	$	1,037	$	881	$	-	$	149	$	11,734
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	1,182	$	210	$	19	$	-	$	-	$	-	$	-	$	1,411
Collectively evaluated
for impairment		3,341		4,898		17		1,037		881		-		149		10,323
Total	$	4,523	$	5,108	$	36	$	1,037	$	881	$	-	$	149	$	11,734
Loans:
Ending balance:
Individually evaluated
for impairment	$	4,291	$	11,579	$	19	$	2,100	$	284	$	-	$	-	$	18,273
Collectively evaluated
for impairment		106,653		380,194		1,576		96,268		57,080		-		-		641,771
Total	$	110,944	$	391,773	$	1,595	$	98,368	$	57,364	$	-	$	-	$	660,044

* Includes construction loans

** Includes all other consumer loans

NOTE: Loan balances do not include $651 thousand in net deferred loan origination costs as of March 31, 2014.

Impaired Loans

The following tables provide data, at the class level, of impaired loans as of the dates indicated:

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,330	$	1,461	$	-	$	1,416	$	148	$	7
Residential real estate:
Residential		2,241		2,419		-		2,253		12		11
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		1,922		2,016		-		1,956		6		18
Construction		1,103		1,103		-		1,128		-		12
Home equities		981		1,025		-		991		6		4
Consumer		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total impaired loans	$	7,577	$	8,024	$	-	$	7,744	$	172	$	52

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	5,247	$	5,324	$	978	$	5,283	$	75	$	12
Residential real estate:
Residential		271		285		3		271		5		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,579		2,758		124		2,670		35		-
Construction		-		-		-		-		-		-
Home equities		-		-		-		-		-		-
Consumer		47		60		47		48		1		1
Other		-		-		-		-		-		-
Total impaired loans	$	8,144	$	8,427	$	1,152	$	8,272	$	116	$	13

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	6,577	$	6,785	$	978	$	6,699	$	223	$	19
Residential real estate:
Residential		2,512		2,704		3		2,524		17		11
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		4,501		4,774		124		4,626		41		18
Construction		1,103		1,103		-		1,128		-		12
Home equities		981		1,025		-		991		6		4
Consumer		47		60		47		48		1		1
Other		-		-		-		-		-		-
Total impaired loans	$	15,721	$	16,451	$	1,152	$	16,016	$	288	$	65

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,017	$	1,022	$	-	$	1,096	$	9	$	66
Residential real estate:
Residential		2,264		2,435		-		2,271		37		68
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,103		2,208		-		2,139		33		91
Construction		1,074		1,074		-		1,169		-		44
Home equities		911		950		-		917		17		22
Consumer		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total impaired loans	$	7,369	$	7,689	$	-	$	7,592	$	96	$	291

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	4,701	$	4,734	$	988	$	4,701	$	64	$	234
Residential real estate:
Residential		271		285		3		271		20		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,640		2,785		274		2,708		96		50
Construction		-		-		-		-		-		-
Home equities		-		-		-		-		-		-
Consumer		48		60		48		49		5		6
Other		-		-		-		-		-		-
Total impaired loans	$	7,660	$	7,864	$	1,313	$	7,729	$	185	$	290

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	5,718	$	5,756	$	988	$	5,797	$	73	$	300
Residential real estate:
Residential		2,535		2,720		3		2,542		57		68
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		4,743		4,993		274		4,847		129		141
Construction		1,074		1,074		-		1,169		-		44
Home equities		911		950		-		917		17		22
Consumer		48		60		48		49		5		6
Other		-		-		-		-		-		-
Total impaired loans	$	15,029	$	15,553	$	1,313	$	15,321	$	281	$	581

Non-performing loans

The following table sets forth information regarding non-performing loans as of the dates specified:

	March 31, 2015			December 31, 2014
		(in thousands)
Non-accruing loans:
Commercial and industrial loans	$	6,380		$	5,500
Residential real estate:
Residential		1,275			1,296
Construction		-			-
Commercial real estate:
Commercial and multi-family		2,938			3,162
Construction		-			-
Home equities		489			415
Consumer loans		17			17
Other		-			-
Total non-accruing loans	$	11,099		$	10,390
Accruing loans 90+ days past due		705			201
Total non-performing loans	$	11,804		$	10,591
Total non-performing loans
to total assets		1.31	%		1.25	%
Total non-performing loans
to total loans		1.68	%		1.52	%

Troubled debt restructurings

The Company had $6.8 million in loans that were restructured in a troubled debt restructuring (“TDR”) at March 31, 2015, compared with $6.6 million at December 31, 2014.  $2.2 million and $1.9 million of those balances were in non-accrual status at March 31, 2015 and December 31, 2014, respectively.  Any TDR that is placed on non-accrual is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable.  All of the Company’s restructurings were allowed in an effort to maximize its ability to collect on loans where borrowers were experiencing financial difficulty.  The Company did not engage in any re-modifications during the three month periods ended March 31, 2015 and 2014.

The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent.  This reserve methodology is used because all TDR loans are considered impaired.  As of March 31, 2015, there were no commitments to lend additional funds to debtors owing on loans whose terms have been modified in TDRs. 

The following tables summarize the loans that were classified as troubled debt restructurings as of the dates indicated:

		March 31, 2015
		($ in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	874	$	677	$	197	$	200
Residential real estate:
Residential		1,824		586		1,238		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi family		2,238		675		1,563		33
Construction		1,103		-		1,103		-
Home equities		719		228		491		-
Consumer loans		30		-		30		30
Other		-		-		-		-
Total troubled restructured loans	$	6,788	$	2,166	$	4,622	$	263

		December 31, 2014
		($ in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	492	$	274	$	218	$	173
Residential real estate:
Residential		1,833		594		1,239		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi family		2,428		847		1,581		33
Construction		1,074		-		1,074		-
Home equities		728		233		495		-
Consumer loans		31		-		31		31
Other		-		-		-		-
Total troubled restructured loans	$	6,586	$	1,948	$	4,638	$	237

The Company’s TDRs have various agreements that involve deferral of principal payments, or interest-only payments, for a period (usually 12 months or less) to allow the customer time to improve cash flow or sell the property.  Other common types of concessions leading to the designation of a TDR are lines of credit that are termed out and extensions of maturities at rates that are less than market given the risk profile of the borrower.

The following table shows the data for TDR activity by type of concession granted to the borrower for the three month periods ended March 31, 2015 and 2014:

	Three months ended March 31, 2015					Three months ended March 31, 2014
	($ in thousands)					($ in thousands)
Troubled Debt Restructurings by Type of Concession	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial:
Deferral of principal	3	$	541	$	541	-	$	-	$	-
Residential Real Estate & Construction:
Deferral of principal	-		-		-	-		-		-
Commercial Real Estate & Construction
Deferral of principal	-		-		-	-		-		-
Home Equities:
Deferral of principal	-		-		-	-		-		-
Consumer loans	-		-		-	-		-		-
Other	-		-		-	-		-		-

The general practice of the Bank is to work with borrowers so that they are able to pay back their loan in full.  If a borrower continues to be delinquent or cannot meet the terms of a TDR and the loan is determined to be uncollectible, the loan will be charged off.  The following table presents loans which were classified as TDRs during the previous 12 months which defaulted during the three month periods ended March 31, 2015 and 2014:

	Three months ended March 31, 2015			Three months ended March 31, 2014
	($ in thousands)			($ in thousands)
Troubled Debt Restructurings	Number of	Recorded		Number of	Recorded
That Subsequently Defaulted	Contracts	Investment		Contracts	Investment
Commercial and Industrial	-	$	-	-	$	-
Residential Real Estate:
Residential	-		-	-		-
Construction	-		-	-		-
Commercial Real Estate:
Commercial and Multi-Family	-		-	-		-
Construction	-		-	-		-
Home Equities	1		19	-		-
Consumer loans	-		-	-		-
Other	-		-	-		-

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Fair Value Measurements [Abstract]

Fair Value Measurements

3.  FAIR VALUE MEASUREMENTS

The Company follows the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures.”  Those provisions relate to financial assets and liabilities carried at fair value and fair value disclosures related to financial assets and liabilities. ASC Topic 820 defines fair value and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 

There are three levels of inputs to fair value measurements:

· Level 1, meaning the use of quoted prices for identical instruments in active markets;

· Level 2, meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable; and

· Level 3, meaning the use of unobservable inputs.

Observable market data should be used when available.

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A RECURRING BASIS

The following table presents for each of the fair-value hierarchy levels as defined in this footnote, those financial instruments which are measured at fair value on a recurring basis at March 31, 2015 and December 31, 2014:

(in thousands)		Level 1		Level 2		Level 3		Fair Value
March 31, 2015
Securities available-for-sale:
U.S. government agencies	$	-	$	26,859	$	-	$	26,859
States and political subdivisions		-		31,929		-		31,929
Mortgage-backed securities		-		39,605		-		39,605
Mortgage servicing rights		-		-		497		497
December 31, 2014
Securities available-for-sale:
U.S. government agencies	$	-	$	26,717	$	-	$	26,717
States and political subdivisions		-		31,060		-		31,060
Mortgage-backed securities		-		37,756		-		37,756
Mortgage servicing rights		-		-		518		518

Securities available for sale

Fair values for securities are determined using independent pricing services and market-participating brokers.  The Company’s independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information for structured securities, cash flow and, when available, loan performance data.  Because many fixed income securities do not trade on a daily basis, the evaluated pricing applications apply information as applicable through processes, such as benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations.  In addition, model processes, such as the Option Adjusted Spread model, are used to assess interest rate impact and develop prepayment scenarios.  The models and the process take into account market convention.  For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models.  The company’s service provider may occasionally determine that it does have not sufficient verifiable information to value a particular security.  In these cases the Company will utilize valuations from another pricing service.

Management believes that it has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of securities to enable management to maintain an appropriate system of internal control.  On a quarterly basis, the Company reviews changes in the market value of its security portfolio.  Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities.  Additionally, on an annual basis, the Company has its entire security portfolio priced by a second pricing service to determine consistency with another market evaluator.  If, on the Company’s review or in comparing with another servicer, a material difference between pricing evaluations were to exist, the Company would submit an inquiry to the service provider regarding the data used to value a particular security.   If the Company determines it has market information that would support a different valuation than the initial evaluation it can submit a challenge for a change to that security’s valuation. There were no material differences in valuations noted in the first quarter of 2015 or during fiscal year 2014.

Securities available for sale are classified as Level 2 in the fair value hierarchy as the valuation provided by the third-party provider uses observable market data.

Mortgage servicing rights

Mortgage servicing rights (“MSRs”) do not trade in an active, open market with readily observable prices. Accordingly, the Company obtains the fair value of the MSRs using a third-party pricing provider. The provider determines the fair value by discounting projected net servicing cash flows of the remaining servicing portfolio.  The valuation model used by the provider considers market loan prepayment predictions and other economic factors which management considers to be significant unobservable inputs.  The fair value of MSRs is mostly affected by changes in mortgage interest rates since rate changes cause the loan prepayment acceleration factors to increase or decrease.  Management has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of MSRs to enable management to maintain an appropriate system of internal control.  Mortgage servicing rights are classified within Level 3 of the fair value hierarchy as the valuation is model driven and primarily based on unobservable inputs.

The following table summarizes the changes in fair value for mortgage servicing rights during the three month periods ended March 31, 2015 and 2014, respectively:

	Three months ended March 31,
(in thousands)	2015		2014
Mortgage servicing rights - January 1	$	518	$	509
Gains (losses) included in earnings		(45)		(38)
Additions from loan sales		24		-
Mortgage servicing rights - March 31	$	497	$	471

Quantitative information about the significant unobservable inputs used in the fair value measurement of MSRs at the respective dates is as follows:

	3/31/2015		12/31/2014
Servicing fees	0.25	%	0.25	%
Discount rate	9.52	%	9.52	%
Prepayment rate (CPR)	9.80	%	9.28	%

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A NONRECURRING BASIS

The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or provide valuation allowances related to certain assets using fair value measurements.  The following table presents for each of the fair-value hierarchy levels as defined in this footnote, those financial instruments which are measured at fair value on a nonrecurring basis at March 31, 2015 and December 31, 2014:

(in thousands)		Level 1	Level 2	Level 3		Fair Value
March 31, 2015
Impaired loans	$	-	-	14,569	$	14,569
December 31, 2014
Impaired loans	$	-	-	13,716	$	13,716

Impaired loans

The Company evaluatesand values impaired loans at the time the loan is identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy.  Each loan’s collateral has a unique appraisal and management’s discount of the value is based on factors unique to each impaired loan.  The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which ranges from 10%-50%.  Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on appraisals by qualified licensed appraisers hired by the Company.  Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.

The Company has an appraisal policy in which appraisals are obtained upon a commercial loan being downgraded on the Company internal loan rating scale to a 5 (special mention) or a 6 (substandard) depending on the amount of the loan, the type of loan and the type of collateral.  All impaired commercial loans are either graded a 6 or 7 on the internal loan rating scale.  For consumer loans, the Company obtains appraisals when a loan becomes 90 days past due or is determined to be impaired, whichever occurs first.  Subsequent to the downgrade or reaching 90 days past due, if the loan remains outstanding and impaired for at least one year more, management may require another follow-up appraisal.  Between receipts of updated appraisals, if necessary, management may perform an internal valuation based on any known changing conditions in the marketplace such as sales of similar properties, a change in the condition of the collateral, or feedback from local appraisers.  Impaired loans had a gross value of $15.7 million, with a valuation allowance of $1.2 million, at March 31, 2015, compared to a gross value for impaired loans of $15.0 million, with a valuation allowance of $1.3million, at December 31, 2014.

FAIR VALUE OF FINANCIAL INSTRUMENTS

At March 31, 2015 and December 31, 2014, the estimated fair values of the Company’s financial instruments, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis, were as follows:

	March 31, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
		(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	60,694	$	60,694	$	10,898	$	10,898
Level 2:
Available for sale securities		98,393		98,393		95,533		95,533
FHLB and FRB stock		2,308		2,308		2,925		2,925
Level 3:
Held to maturity securities		1,588		1,576		1,599		1,574
Loans and leases, net		688,961		700,338		683,131		685,148
Mortgage servicing rights		497		497		518		518
Financial liabilities:
Level 1:
Demand deposits	$	169,965	$	169,965	$	158,631	$	158,631
NOW deposits		82,956		82,956		72,670		72,670
Regular savings deposits		416,317		416,317		363,542		363,542
Commitments to extend credit		93		93		245		245
Securities sold under agreement to
repurchase		10,673		10,673		13,778		13,778
Level 2:
Other borrowed funds		-		-		13,700		13,700
Junior subordinated debentures		11,330		11,330		11,330		11,330
Level 3:
Time deposits		111,120		110,678		112,792		113,854

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate that value.

Cash and Cash Equivalents.  For these short-term instruments, the carrying amount is a reasonable estimate of fair value.  “Cash and Cash Equivalents” includes interest-bearing deposits at other banks.

FHLB and FRB stock.  The carrying value of FHLB and FRB stock approximate fair value.

Securities held to maturity.  The Company holds certain municipal bonds as held-to-maturity.  These bonds are generally small in dollar amount and are issued only by certain local municipalities within the Company’s market area.  The original terms are negotiated directly and on an individual basis consistent with our loan and credit guidelines.  These bonds are not traded on the open market and management intends to hold the bonds to maturity.  The fair value of held-to-maturity securities is estimated by discounting the future cash flows using the current rates at which similar agreements would be made with municipalities with similar credit ratings and for the same remaining maturities.

Loans and Leases, net.  The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, net of the appropriate portion of the allowance for loan losses.  For variable rate loans, the carrying amount is a reasonable estimate of fair value.  This fair value calculation is not necessarily indicative of the exit price, as defined in ASC 820.

Deposits.  The fair value of demand deposits, NOW accounts, muni-vest accounts and regular savings accounts is the amount payable on demand at the reporting date.  The fair value of time deposits is estimated using the rates currently offered for deposits of similar remaining maturities.

Junior Subordinated Debentures.  There is no active market for the Company’s debentures.  The fair value of the junior subordinated debentures is determined using an expected prevent value technique.  The fair value of the adjustable-rate debentures approximates their face amount.

Commitments to extend credit and standby letters of credit.  As described in Note 8 - “Contingent Liabilities and Commitments” to these Unaudited Consolidated Financial Statements, the Company was a party to financial instruments with off-balance sheet risk at March 31, 2015 and December 31, 2014.  Such financial instruments consist of commitments to extend permanent financing and letters of credit.  If the options are exercised by the prospective borrowers, these financial instruments will become interest-earning assets of the Company.  If the options expire, the Company retains any fees paid by the counterparty in order to obtain the commitment or guarantee.  The fees collected for these commitments are recorded as “unearned commitment fees” in Other Liabilities.  The carrying value approximates the fair value.

Securities Sold Under Agreement to Repurchase.  The fair value of the securities sold under agreement to repurchase approximates its carrying value.

Other Borrowed Funds.  The fair value of the short-term portion of other borrowed funds approximates its carrying value.  The fair value of the long-term portion of other borrowed funds is estimated using a discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

XML

Segment Information (Tables)

3 Months Ended

Mar. 31, 2015

Segment Information [Abstract]

Business Segment Information

	Three months ended March 31, 2015
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	7,609	$	(28)	$	7,581
Provision for loan and lease losses		201		-		201
Net interest income (expense) after
provision for loan and lease losses		7,408		(28)		7,380
Non-interest income		1,237		-		1,237
Insurance service and fees		162		1,667		1,829
Net gain on sales and calls of securities		-		-		-
Amortization expense		-		-		-
Non-interest expense		6,481		1,031		7,512
Income before income taxes		2,326		608		2,934
Income tax provision		794		235		1,029
Net income	$	1,532	$	373	$	1,905

	Three months ended March 31, 2014
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	7,326	$	(28)	$	7,298
Provision for loan and lease losses		153		-		153
Net interest income (expense) after
provision for loan and lease losses		7,173		(28)		7,145
Non-interest income		1,263		-		1,263
Insurance service and fees		152		1,980		2,132
Net gain on sales and calls of securities		-		-		-
Amortization expense		-		41		41
Non-interest expense		6,477		1,100		7,577
Income before income taxes		2,111		811		2,922
Income tax provision		596		313		909
Net income	$	1,515	$	498	$	2,013

XML

Securities (Tables)

3 Months Ended

Mar. 31, 2015

Securities [Abstract]

Schedule Of Amortized Cost And Estimated Fair Value Of Investment Securities

The amortized cost of securities and their approximate fair value at March 31, 2015 and December 31, 2014 were as follows:

	March 31, 2015
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	26,593	$	388	$	(122)	$	26,859
States and political subdivisions		30,988		969		(28)		31,929
Total debt securities	$	57,581	$	1,357	$	(150)	$	58,788
Mortgage-backed securities:
FNMA	$	14,101	$	578	$	-	$	14,679
FHLMC		5,620		131		(46)		5,705
GNMA		8,276		133		(9)		8,400
CMO		10,789		88		(56)		10,821
Total mortgage-backed securities	$	38,786	$	930	$	(111)	$	39,605
Total securities designated as available for sale	$	96,367	$	2,287	$	(261)	$	98,393
Held to Maturity:
Debt securities
States and political subdivisions	$	1,588	$	13	$	(25)	$	1,576
Total securities designated as held to maturity	$	1,588	$	13	$	(25)	$	1,576

	December 31, 2014
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	26,687	$	305	$	(275)	$	26,717
States and political subdivisions		30,182		927		(49)		31,060
Total debt securities	$	56,869	$	1,232	$	(324)	$	57,777
Mortgage-backed securities:
FNMA	$	14,653	$	516	$	(15)	$	15,154
FHLMC		5,901		121		(64)		5,958
GNMA		6,014		143		(27)		6,130
CMO		10,611		42		(139)		10,514
Total mortgage-backed securities	$	37,179	$	822	$	(245)	$	37,756
Total securities designated as available for sale	$	94,048	$	2,054	$	(569)	$	95,533
Held to Maturity:
Debt securities
States and political subdivisions	$	1,599	$	7	$	(32)	$	1,574
Total securities designated as held to maturity	$	1,599	$	7	$	(32)	$	1,574

Scheduled Maturities Of Debt And Mortgage Backed Securities

	March 31, 2015				December 31, 2014
	Amortized		Estimated		Amortized		Estimated
	cost		fair value		cost		fair value
		(in thousands)				(in thousands)
Debt securities available for sale:
Due in one year or less	$	8,033	$	8,084	$	8,172	$	8,256
Due after one year through five years		23,284		23,893		22,118		22,597
Due after five years through ten years		19,310		19,590		20,517		20,589
Due after ten years		6,954		7,221		6,062		6,335
		57,581		58,788		56,869		57,777
Mortgage-backed securities
available for sale		38,786		39,605		37,179		37,756
Total available for sale securities	$	96,367	$	98,393	$	94,048	$	95,533
Debt securities held to maturity:
Due in one year or less	$	478	$	478	$	478	$	477
Due after one year through five years		66		67		77		78
Due after five years through ten years		932		924		932		914
Due after ten years		112		107		112		105
		1,588		1,576		1,599		1,574
Total held to maturity securities	$	1,588	$	1,576	$	1,599	$	1,574

Unrealized Losses On Available For Sale Securities

	March 31, 2015
		Less than 12 months				12 months or longer					Total
		Fair		Unrealized		Fair			Unrealized		Fair		Unrealized
		Value		Losses		Value			Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	1,991	$	(9)	$	5,887		$	(113)	$	7,878	$	(122)
States and political subdivisions		1,989		(10)		1,130			(18)		3,119		(28)
Total debt securities	$	3,980	$	(19)	$	7,017		$	(131)	$	10,997	$	(150)
Mortgage-backed securities:
FNMA	$	-	$	-	$	-	-	$	-	$	-	$	-
FHLMC		-		-		1,454			(46)		1,454		(46)
GNMA		1,207		(1)		795			(8)		2,002		(9)
CMO'S		1,670		(4)		4,232			(52)		5,902		(56)
Total mortgage-backed securities	$	2,877	$	(5)	$	6,481		$	(106)	$	9,358	$	(111)
Held To Maturity:
Debt securities:
States and political subdivisions	$	371	$	(1)	$	473		$	(24)	$	844	$	(25)
Total temporarily impaired
securities	$	7,228	$	(25)	$	13,971		$	(261)	$	21,199	$	(286)

	December 31, 2014
		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	3,906	$	(26)	$	7,751	$	(249)	$	11,657	$	(275)
States and political subdivisions		4,752		(9)		1,902		(40)		6,654		(49)
Total debt securities	$	8,658	$	(35)	$	9,653	$	(289)	$	18,311	$	(324)
Mortgage-backed securities:
FNMA	$	1,498	$	(10)	$	1,731	$	(5)	$	3,229	$	(15)
FHLMC		-		-		1,482		(64)		1,482		(64)
GNMA		-		-		2,079		(27)		2,079		(27)
CMO'S		1,722		(11)		4,290		(128)		6,012		(139)
Total mortgage-backed securities	$	3,220	$	(21)	$	9,582	$	(224)	$	12,802	$	(245)
Held To Maturity:
Debt securities:
States and political subdivisions	$	371	$	(1)	$	556	$	(31)	$	927	$	(32)
Total temporarily impaired
securities	$	12,249	$	(57)	$	19,791	$	(544)	$	32,040	$	(601)

XML

Segment Information

3 Months Ended

Mar. 31, 2015

Segment Information [Abstract]

Segment Information

7. SEGMENT INFORMATION

The Company is comprised of two primary business segments, banking and insurance agency activities. The following tables set forth information regarding these segments for the three month periods ended March 31, 2015 and 2014.

	Three months ended March 31, 2015
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	7,609	$	(28)	$	7,581
Provision for loan and lease losses		201		-		201
Net interest income (expense) after
provision for loan and lease losses		7,408		(28)		7,380
Non-interest income		1,237		-		1,237
Insurance service and fees		162		1,667		1,829
Net gain on sales and calls of securities		-		-		-
Amortization expense		-		-		-
Non-interest expense		6,481		1,031		7,512
Income before income taxes		2,326		608		2,934
Income tax provision		794		235		1,029
Net income	$	1,532	$	373	$	1,905

	Three months ended March 31, 2014
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	7,326	$	(28)	$	7,298
Provision for loan and lease losses		153		-		153
Net interest income (expense) after
provision for loan and lease losses		7,173		(28)		7,145
Non-interest income		1,263		-		1,263
Insurance service and fees		152		1,980		2,132
Net gain on sales and calls of securities		-		-		-
Amortization expense		-		41		41
Non-interest expense		6,477		1,100		7,577
Income before income taxes		2,111		811		2,922
Income tax provision		596		313		909
Net income	$	1,515	$	498	$	2,013

XML

Per Share Data

3 Months Ended

Mar. 31, 2015

Per Share Data [Abstract]

Per Share Data

5. PER SHARE DATA

The common stock per share information is based upon the weighted average number of shares outstanding during each period.  For the three month periods ended March 31, 2015 and 2014, the Company had an average of 78,167 and 83,497 dilutive shares outstanding, respectively. 

Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive and not included in calculating diluted earnings per share.  For the three month periods ended March 31, 2015 and 2014, there was an average of 38,630 and 9,000 anti-dilutive shares outstanding, respectively, that were not included in calculating diluted earnings per share because their effect was anti-dilutive. 

XML

Other Comprehensive Income

3 Months Ended

Mar. 31, 2015

Other Comprehensive Income [Abstract]

Other Comprehensive Income

6. OTHER COMPREHENSIVE INCOME

The following tables summarize the changes in the components of accumulated other comprehensive income (loss) during the three month periods ended March 31, 2015 and 2014:

	Balance at December 31, 2014		Net Change		Balance at March 31, 2015
	(in thousands)
Net unrealized gain (loss) on investment securities	$	911	$	331	$	1,242
Net defined benefit pension plans adjustments		(2,419)		29		(2,390)
Total	$	(1,508)	$	360	$	(1,148)
	Balance at December 31, 2013		Net Change		Balance at March 31, 2014
	(in thousands)
Net unrealized gain (loss) on investment securities	$	191	$	361	$	552
Net defined benefit pension plans adjustments		(1,454)		21		(1,433)
Total	$	(1,263)	$	382	$	(881)

	Three months ended March 31, 2015 (in thousands)						Three months ended March 31, 2014 (in thousands)
	Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount		Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount
Unrealized loss on investment securities:
Unrealized gain (loss) on investment securities	$	541	$	(210)	$	331	$	588	$	(227)	$	361
Reclassification from accumulated other
comprehensive income for gains (losses)		-		-		-		-		-		-
Net change		541		(210)		331		588		(227)		361
Defined benefit pension plans adjustments:
Net actuarial (loss) gain	$	-	$	-	$	-	$	-	$	-	$	-
Reclassifications from accumulated other
comprehensive income for gains (losses)
Amortization of prior service cost (a)		7		(2)		5		8		(3)		5
Amortization of actuarial loss (a)		48		(24)		24		26		(10)		16
Net change		55		(26)		29		34		(13)		21
Other Comprehensive Income (Loss)	$	596	$	(236)	$	360	$	622	$	(240)	$	382

(a)   Included in net periodic pension cost, as described in Note 9 – “Net Periodic Benefit Costs”

XML

Contingent Liabilities And Commitments

3 Months Ended

Mar. 31, 2015

Contingent Liabilities And Commitments [Abstract]

Contingent Liabilities And Commitments

8. CONTINGENT LIABILITIES AND COMMITMENTS

The unaudited consolidated financial statements do not reflect various commitments and contingent liabilities, which arise in the normal course of business, and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities consist of commitments to extend credit and standby letters of credit. A summary of the Bank’s commitments and contingent liabilities is as follows:

	March 31,		December 31,
	2015		2014
	(in thousands)
Commitments to extend credit	$	234,311	$	212,193
Standby letters of credit		2,767		2,430
Total	$	237,078	$	214,623

Commitments to extend credit and standby letters of credit include some exposure to credit loss in the event of nonperformance by the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded on the Company’s unaudited consolidated balance sheets. Because these instruments have fixed maturity dates, and because they may expire without being drawn upon, they do not necessarily represent cash requirements of the Bank. The Bank has not incurred any losses on its commitments and did not record a reserve for its commitments during the first three months of 2015 or during 2014.

Certain lending commitments for construction residential mortgage loans are considered derivative instruments under the guidelines of GAAP.  The changes in the fair value of these commitments, due to interest rate risk, are not recorded on the consolidated balance sheets as the fair value of these derivatives is not considered material.

The Company is subject to possible litigation proceedings in the normal course of business.  As noted in Item 1 of Part II of the Company’s Quarterly Report on Form 10-Q,in which these unaudited financial statements are included, on September 2, 2014 the Office of the Attorney General for the State of New York (“NYAG”) filed a formal complaint against the Company and the Bank regarding residential lending practices.  The Company accrued an estimated liability relating to the NYAG investigation totaling $1.0 million during 2014.  At March, 31, 2015, a range of loss could not be determined, and management believes the $1.0 million accrual is the best estimate of probable loss.  

XML

Fair Value Measurements (Quantitative Information About Significant Unobservable Inputs Used In The Fair Value Measurement Of MSRs) (Details)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Fair Value Measurements [Abstract]
Servicing fees	0.25%	0.25%
Discount rate	9.52%	9.52%
Prepayment rate (CPR)	9.80%	9.28%

XML

Contingent Liabilities And Commitments (Summary Of Commitments And Contingent Liabilities) (Details) (USD $)	Mar. 31, 2015	Mar. 31, 2014
Contingent Liabilities And Commitments [Abstract]
Commitments to extend credit	$ 234,311,000	$ 212,193,000
Standby letters of credit	2,767,000	2,430,000
Commitments and contingent liabilities	237,078,000	214,623,000
Estimated liability related to NYAG investigation	1,000,000
Estimated probable loss	$ 1,000,000

XML

Loans And The Allowance For Loan Losses (Tables)

3 Months Ended

Mar. 31, 2015

Loans And The Allowance For Loan Losses [Abstract]

Major Categories Of Loans And Leases

	March 31, 2015		December 31, 2014
Mortgage loans on real estate:		(in thousands)
Residential Mortgages	$	100,548	$	98,374
Commercial and multi-family		366,657		363,252
Construction-Residential		238		721
Construction-Commercial		39,723		40,986
Home equities		59,689		59,948
Total real estate loans		566,855		563,281
Commercial and industrial loans		132,416		129,456
Consumer loans		1,704		1,764
Other		122		404
Net deferred loan origination costs		641		759
Total gross loans		701,738		695,664
Allowance for loan losses		(12,777)		(12,533)
Loans, net	$	688,961	$	683,131

Data, At The Class Level, Of Credit Quality Indicators Of Certain Loans And Leases

March 31, 2015
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
3	$	33,644	$	308,059	$	341,703	$	86,254
4		1,235		42,901		44,136		29,712
5		4,844		9,974		14,818		8,652
6		-		5,723		5,723		7,687
7		-		-		-		111
Total	$	39,723	$	366,657	$	406,380	$	132,416

December 31, 2014
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
3	$	29,421	$	299,798	$	329,219	$	83,789
4		10,492		50,691		61,183		30,223
5		1,073		7,853		8,926		8,662
6		-		4,757		4,757		6,613
7		-		153		153		169
Total	$	40,986	$	363,252	$	404,238	$	129,456

Recorded Investment In Loans And Leases Past Due

March 31, 2015
(in thousands)
							Total Past		Current		Total		90+ Days		Non-accruing
	30-59 days		60-89 days		90+ days		Due		Balance		Balance		Accruing		Loans
Commercial and
industrial	$	663	$	117	$	25	$	805	$	131,611	$	132,416	$	-	$	6,380
Residential real estate:
Residential		345		189		473		1,007		99,541		100,548		-		1,275
Construction		-		-		-		-		238		238		-		-
Commercial real estate:
Commercial		1,923		247		302		2,472		364,185		366,657		192		2,938
Construction		5,848		-		513		6,361		33,362		39,723		513		-
Home equities		911		13		279		1,203		58,486		59,689		-		489
Consumer		15		19		-		34		1,670		1,704		-		17
Other		-		-		-		-		122		122		-		-
Total Loans	$	9,705	$	585	$	1,592	$	11,882	$	689,215	$	701,097	$	705	$	11,099

NOTE: Loan and lease balances do not include $641 thousand in net deferred loan origination costs as of March 31, 2015.

December 31, 2014
(in thousands)
							Total Past		Current		Total		90+ Days		Non-accruing
	30-59 days		60-89 days		90+ days		Due		Balance		Balance		Accruing		Loans
Commercial and
industrial	$	153	$	60	$	274	$	487	$	128,969	$	129,456	$	-	$	5,500
Residential real estate:
Residential		848		158		682		1,688		96,686		98,374		-		1,296
Construction		-		-		-		-		721		721		-		-
Commercial real estate:
Commercial		4,201		3,115		513		7,829		355,423		363,252		-		3,162
Construction		8		-		201		209		40,777		40,986		201		-
Home equities		594		120		192		906		59,042		59,948		-		415
Consumer		13		1		-		14		1,750		1,764		-		17
Other		-		-		-		-		404		404		-		-
Total Loans	$	5,817	$	3,454	$	1,862	$	11,133	$	683,772	$	694,905	$	201	$	10,390

NOTE: Loan and lease balances do not include $759 thousand in net deferred loan origination costs as of December 31, 2014.

Summary Of The Allowance For Loan And Lease Losses By Management Level Segments

March 31, 2015
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer **		Residential Mortgages*		HELOC		Direct Financing Leases		Unallocated		Total
Allowance for loan
losses:
Beginning balance	$	4,896	$	5,650	$	78	$	941	$	819	$	-	$	149	$	12,533
Charge-offs		-		-		(6)		-		-		-		-		(6)
Recoveries		38		10		1		-		-		-		-		49
Provision		55		170		(3)		(17)		(4)		-		-		201
Ending balance	$	4,989	$	5,830	$	70	$	924	$	815	$	-	$	149	$	12,777
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	978	$	124	$	47	$	3	$	-	$	-	$	-	$	1,152
Collectively evaluated
for impairment		4,011		5,706		23		921		815		-		149		11,625
Total	$	4,989	$	5,830	$	70	$	924	$	815	$	-	$	149	$	12,777
Loans:
Ending balance:
Individually evaluated
for impairment	$	6,577	$	5,604	$	47	$	2,512	$	981	$	-	$	-	$	15,721
Collectively evaluated
for impairment		125,839		400,776		1,779		98,274		58,708		-		-		685,376
Total	$	132,416	$	406,380	$	1,826	$	100,786	$	59,689	$	-	$	-	$	701,097

* Includes construction loans

** Includes all other consumer loans

NOTE: Loan balances do not include $641 thousand in net deferred loan origination costs as of March 31, 2015.

March 31, 2014
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer **		Residential Mortgages*		HELOC		Direct Financing Leases		Unallocated		Total
Allowance for loan
losses:
Beginning balance	$	4,489	$	4,912	$	37	$	1,038	$	878	$	-	$	149	$	11,503
Charge-offs		(57)		-		(6)		-		(1)		-		-		(64)
Recoveries		28		29		2		-		-		83		-		142
Provision		63		167		3		(1)		4		(83)		-		153
Ending balance	$	4,523	$	5,108	$	36	$	1,037	$	881	$	-	$	149	$	11,734
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	1,182	$	210	$	19	$	-	$	-	$	-	$	-	$	1,411
Collectively evaluated
for impairment		3,341		4,898		17		1,037		881		-		149		10,323
Total	$	4,523	$	5,108	$	36	$	1,037	$	881	$	-	$	149	$	11,734
Loans:
Ending balance:
Individually evaluated
for impairment	$	4,291	$	11,579	$	19	$	2,100	$	284	$	-	$	-	$	18,273
Collectively evaluated
for impairment		106,653		380,194		1,576		96,268		57,080		-		-		641,771
Total	$	110,944	$	391,773	$	1,595	$	98,368	$	57,364	$	-	$	-	$	660,044

* Includes construction loans

** Includes all other consumer loans

NOTE: Loan balances do not include $651 thousand in net deferred loan origination costs as of March 31, 2014.

Impaired Loans And Leases

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,330	$	1,461	$	-	$	1,416	$	148	$	7
Residential real estate:
Residential		2,241		2,419		-		2,253		12		11
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		1,922		2,016		-		1,956		6		18
Construction		1,103		1,103		-		1,128		-		12
Home equities		981		1,025		-		991		6		4
Consumer		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total impaired loans	$	7,577	$	8,024	$	-	$	7,744	$	172	$	52

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	5,247	$	5,324	$	978	$	5,283	$	75	$	12
Residential real estate:
Residential		271		285		3		271		5		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,579		2,758		124		2,670		35		-
Construction		-		-		-		-		-		-
Home equities		-		-		-		-		-		-
Consumer		47		60		47		48		1		1
Other		-		-		-		-		-		-
Total impaired loans	$	8,144	$	8,427	$	1,152	$	8,272	$	116	$	13

		At March 31, 2015
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	6,577	$	6,785	$	978	$	6,699	$	223	$	19
Residential real estate:
Residential		2,512		2,704		3		2,524		17		11
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		4,501		4,774		124		4,626		41		18
Construction		1,103		1,103		-		1,128		-		12
Home equities		981		1,025		-		991		6		4
Consumer		47		60		47		48		1		1
Other		-		-		-		-		-		-
Total impaired loans	$	15,721	$	16,451	$	1,152	$	16,016	$	288	$	65

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,017	$	1,022	$	-	$	1,096	$	9	$	66
Residential real estate:
Residential		2,264		2,435		-		2,271		37		68
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,103		2,208		-		2,139		33		91
Construction		1,074		1,074		-		1,169		-		44
Home equities		911		950		-		917		17		22
Consumer		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total impaired loans	$	7,369	$	7,689	$	-	$	7,592	$	96	$	291

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	4,701	$	4,734	$	988	$	4,701	$	64	$	234
Residential real estate:
Residential		271		285		3		271		20		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,640		2,785		274		2,708		96		50
Construction		-		-		-		-		-		-
Home equities		-		-		-		-		-		-
Consumer		48		60		48		49		5		6
Other		-		-		-		-		-		-
Total impaired loans	$	7,660	$	7,864	$	1,313	$	7,729	$	185	$	290

		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	5,718	$	5,756	$	988	$	5,797	$	73	$	300
Residential real estate:
Residential		2,535		2,720		3		2,542		57		68
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		4,743		4,993		274		4,847		129		141
Construction		1,074		1,074		-		1,169		-		44
Home equities		911		950		-		917		17		22
Consumer		48		60		48		49		5		6
Other		-		-		-		-		-		-
Total impaired loans	$	15,029	$	15,553	$	1,313	$	15,321	$	281	$	581

Non-Accrual Loans And Leases And Loans And Leases 90 Days Or More Past Due

	March 31, 2015			December 31, 2014
		(in thousands)
Non-accruing loans:
Commercial and industrial loans	$	6,380		$	5,500
Residential real estate:
Residential		1,275			1,296
Construction		-			-
Commercial real estate:
Commercial and multi-family		2,938			3,162
Construction		-			-
Home equities		489			415
Consumer loans		17			17
Other		-			-
Total non-accruing loans	$	11,099		$	10,390
Accruing loans 90+ days past due		705			201
Total non-performing loans	$	11,804		$	10,591
Total non-performing loans
to total assets		1.31	%		1.25	%
Total non-performing loans
to total loans		1.68	%		1.52	%

Troubled Debt Restructured Loans And Leases

		March 31, 2015
		($ in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	874	$	677	$	197	$	200
Residential real estate:
Residential		1,824		586		1,238		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi family		2,238		675		1,563		33
Construction		1,103		-		1,103		-
Home equities		719		228		491		-
Consumer loans		30		-		30		30
Other		-		-		-		-
Total troubled restructured loans	$	6,788	$	2,166	$	4,622	$	263

		December 31, 2014
		($ in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	492	$	274	$	218	$	173
Residential real estate:
Residential		1,833		594		1,239		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi family		2,428		847		1,581		33
Construction		1,074		-		1,074		-
Home equities		728		233		495		-
Consumer loans		31		-		31		31
Other		-		-		-		-
Total troubled restructured loans	$	6,586	$	1,948	$	4,638	$	237

Troubled Debt Restructurings Activity

	Three months ended March 31, 2015					Three months ended March 31, 2014
	($ in thousands)					($ in thousands)
Troubled Debt Restructurings by Type of Concession	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial:
Deferral of principal	3	$	541	$	541	-	$	-	$	-
Residential Real Estate & Construction:
Deferral of principal	-		-		-	-		-		-
Commercial Real Estate & Construction
Deferral of principal	-		-		-	-		-		-
Home Equities:
Deferral of principal	-		-		-	-		-		-
Consumer loans	-		-		-	-		-		-
Other	-		-		-	-		-		-

Troubled Debt Restructurings On Financing Receivables That Subsequently Defaulted

	Three months ended March 31, 2015			Three months ended March 31, 2014
	($ in thousands)			($ in thousands)
Troubled Debt Restructurings	Number of	Recorded		Number of	Recorded
That Subsequently Defaulted	Contracts	Investment		Contracts	Investment
Commercial and Industrial	-	$	-	-	$	-
Residential Real Estate:
Residential	-		-	-		-
Construction	-		-	-		-
Commercial Real Estate:
Commercial and Multi-Family	-		-	-		-
Construction	-		-	-		-
Home Equities	1		19	-		-
Consumer loans	-		-	-		-
Other	-		-	-		-

XML

Organization And Summary Of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Depreciation and amortization	$ 356	$ 422
Change in other assets	(327)	377
Change in other liabilities	(592)	(1,069)
Scenario, Adjustment [Member]
Depreciation and amortization	40
Change in other assets	236
Change in other liabilities	$ 276

XML

Other Comprehensive Income (Components Of Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Unrealized loss on investment securities, Before-Tax Amount:
Unrealized gain (loss) on investment securities, Before-Tax Amount	$ 541	$ 588
Net change, Before-Tax Amount	541	588
Defined benefit pension plans adjustments, Before-Tax Amount:
Amortization of prior service cost, Before-Tax Amount	7	8
Amortization of actuarial loss, Before-Tax Amount	48	26
Net change, Before-Tax Amount	55	34
Other Comprehensive Loss, Before-Tax Amount	596	622
Unrealized loss on investment securities, Income Tax (Provision) Benefit:
Unrealized gain (loss) on investment securities, Income Tax (Provision) Benefit	(210)	(227)
Reclassification from accumulated other comprehensive income for gains (losses), Income Tax (Provision) Benefit	210	227
Defined benefit pension plans adjustments, Income Tax (Provision) Benefit:
Amortization of prior service cost, Income Tax (Provision) Benefit	(2)	(3)
Amortization of actuarial loss, Income Tax (Provision) Benefit	(24)	(10)
Net change, Income Tax (Provision) Benefit	(26)	(13)
Other Comprehensive Loss, Income Tax (Provision) Benefit	(236)	(240)
Unrealized loss on investment securities, Net-of-Tax Amount:
Unrealized gain (loss) on investment securities, Net-of-Tax Amount	331	361
Reclassification from accumulated other comprehensive income for gains (losses), Net-of-Tax Amount
Net change, Net-of-Tax Amount	331	361
Defined benefit pension plans adjustments, Net-of-Tax Amount:
Amortization of prior service cost, Net-of-Tax Amount	5	5
Amortization of actuarial loss, Net-of-Tax Amount	24	16
Net change, Net-of-Tax Amount	29	21
OTHER COMPREHENSIVE INCOME, NET OF TAX	$ 360	$ 382

XML

Loans And The Allowance For Loan Losses (Summary Of The Allowance For Loan And Lease Losses By Management Level Segments) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014		Dec. 31, 2014
Allowance for loan and lease losses:
Beginning balance	$ 12,533		$ 11,503
Charge-offs	(6)		(64)
Recoveries	49		142
Provision for loan losses	201		153
Ending balance	12,777		11,734
Individually evaluated for impairment	1,152		1,411
Collectively evaluated for impairment	11,625		10,323
Allowance for loan and lease losses, Total	12,777		11,734
Loans and leases:
Individually evaluated for impairment	15,721		18,273
Collectively evaluated for impairment	685,376		641,771
Loans and leases, Total	701,097		660,044
Net deferred loan origination costs	641		651		759
Commercial And Industrial [Member]
Allowance for loan and lease losses:
Beginning balance	4,896		4,489
Charge-offs			(57)
Recoveries	38		28
Provision for loan losses	55		63
Ending balance	4,989		4,523
Individually evaluated for impairment	978		1,182
Collectively evaluated for impairment	4,011		3,341
Allowance for loan and lease losses, Total	4,989		4,523
Loans and leases:
Individually evaluated for impairment	6,577		4,291
Collectively evaluated for impairment	125,839		106,653
Loans and leases, Total	132,416		110,944
Commercial Real Estate Mortgages [Member]
Allowance for loan and lease losses:
Beginning balance	5,650	[1]	4,912	[1]
Recoveries	10	[1]	29	[1]
Provision for loan losses	170	[1]	167	[1]
Ending balance	5,830	[1]	5,108	[1]
Individually evaluated for impairment	124	[1]	210	[1]
Collectively evaluated for impairment	5,706	[1]	4,898	[1]
Allowance for loan and lease losses, Total	5,830	[1]	5,108	[1]
Loans and leases:
Individually evaluated for impairment	5,604	[1]	11,579	[1]
Collectively evaluated for impairment	400,776	[1]	380,194	[1]
Loans and leases, Total	406,380	[1]	391,773	[1]
Consumer Loans [Member]
Allowance for loan and lease losses:
Beginning balance	78	[2]	37	[2]
Charge-offs	(6)	[2]	(6)	[2]
Recoveries	1	[2]	2	[2]
Provision for loan losses	(3)	[2]	3	[2]
Ending balance	70	[2]	36	[2]
Individually evaluated for impairment	47	[2]	19	[2]
Collectively evaluated for impairment	23	[2]	17	[2]
Allowance for loan and lease losses, Total	70	[2]	36	[2]
Loans and leases:
Individually evaluated for impairment	47	[2]	19	[2]
Collectively evaluated for impairment	1,779	[2]	1,576	[2]
Loans and leases, Total	1,826	[2]	1,595	[2]
Residential Real Estate Mortgages [Member]
Allowance for loan and lease losses:
Beginning balance	941	[1]	1,038	[1]
Provision for loan losses	(17)	[1]	(1)	[1]
Ending balance	924	[1]	1,037	[1]
Individually evaluated for impairment	3	[1]
Collectively evaluated for impairment	921	[1]	1,037	[1]
Allowance for loan and lease losses, Total	924	[1]	1,037	[1]
Loans and leases:
Individually evaluated for impairment	2,512	[1]	2,100	[1]
Collectively evaluated for impairment	98,274	[1]	96,268	[1]
Loans and leases, Total	100,786	[1]	98,368	[1]
Home Equity Loans [Member]
Allowance for loan and lease losses:
Beginning balance	819		878
Charge-offs			(1)
Provision for loan losses	(4)		4
Ending balance	815		881
Collectively evaluated for impairment	815		881
Allowance for loan and lease losses, Total	815		881
Loans and leases:
Individually evaluated for impairment	981		284
Collectively evaluated for impairment	58,708		57,080
Loans and leases, Total	59,689		57,364
Direct Financing Leases [Member]
Allowance for loan and lease losses:
Recoveries			83
Provision for loan losses			(83)
Unallocated [Member]
Allowance for loan and lease losses:
Beginning balance	149		149
Charge-offs
Recoveries
Provision for loan losses
Ending balance	149		149
Individually evaluated for impairment
Collectively evaluated for impairment	149		149
Allowance for loan and lease losses, Total	149		149
Loans and leases:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans and leases, Total

[1] Includes construction loans

[2] Includes all other consumer loans

XML

Statements Of Consolidated Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Statements Of Consolidated Comprehensive Income [Abstract]
NET INCOME	$ 1,905	$ 2,013
Unrealized gain on available-for-sale securities:
Unrealized gain on available-for-sale securities	331	361
Less: Reclassification of gain on sale of securities
Net change, Net-of-Tax Amount	331	361
Defined benefit pension plans:
Amortization of prior service cost	5	5
Amortization of actuarial assumptions	24	16
Total	29	21
OTHER COMPREHENSIVE INCOME, NET OF TAX	360	382
COMPREHENSIVE INCOME	$ 2,265	$ 2,395

XML

Securities

3 Months Ended

Mar. 31, 2015

Securities [Abstract]

Securities

2. SECURITIES

The amortized cost of securities and their approximate fair value at March 31, 2015 and December 31, 2014 were as follows:

	March 31, 2015
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	26,593	$	388	$	(122)	$	26,859
States and political subdivisions		30,988		969		(28)		31,929
Total debt securities	$	57,581	$	1,357	$	(150)	$	58,788
Mortgage-backed securities:
FNMA	$	14,101	$	578	$	-	$	14,679
FHLMC		5,620		131		(46)		5,705
GNMA		8,276		133		(9)		8,400
CMO		10,789		88		(56)		10,821
Total mortgage-backed securities	$	38,786	$	930	$	(111)	$	39,605
Total securities designated as available for sale	$	96,367	$	2,287	$	(261)	$	98,393
Held to Maturity:
Debt securities
States and political subdivisions	$	1,588	$	13	$	(25)	$	1,576
Total securities designated as held to maturity	$	1,588	$	13	$	(25)	$	1,576

	December 31, 2014
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	26,687	$	305	$	(275)	$	26,717
States and political subdivisions		30,182		927		(49)		31,060
Total debt securities	$	56,869	$	1,232	$	(324)	$	57,777
Mortgage-backed securities:
FNMA	$	14,653	$	516	$	(15)	$	15,154
FHLMC		5,901		121		(64)		5,958
GNMA		6,014		143		(27)		6,130
CMO		10,611		42		(139)		10,514
Total mortgage-backed securities	$	37,179	$	822	$	(245)	$	37,756
Total securities designated as available for sale	$	94,048	$	2,054	$	(569)	$	95,533
Held to Maturity:
Debt securities
States and political subdivisions	$	1,599	$	7	$	(32)	$	1,574
Total securities designated as held to maturity	$	1,599	$	7	$	(32)	$	1,574

Available for sale securities with a total fair value of $85.6 million and $68.8 million at March 31, 2015 and December 31, 2014, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

The Company uses the Federal Home Loan Bank of New York (“FHLBNY”) as its primary source of overnight funds and also has several long-term advances with FHLBNY.  The Company had no borrowed funds as of March 31, 2015, and had a total of $13.7 million in borrowed funds with FHLBNY at December 31, 2014.  The Company has placed sufficient collateral in the form of residential and commercial real estate loans at FHLBNY that meet FHLB collateral requirements.  As a member of the Federal Home Loan Bank (“FHLB”) System, the Bank is required to hold stock in FHLBNY.  The Bank held $0.8 million and $1.4 million in FHLBNY stock as of March 31, 2015 and December 31, 2014 at amortized cost.  The Company regularly evaluates investments in FHLBNY for impairment, considering liquidity, operating performance, capital position, stock repurchase and dividend history.  At this time, the Company does not believe any impairment in FHLBNY stock is warranted.

The scheduled maturities of debt and mortgage-backed securities at March 31, 2015 and December 31, 2014 are summarized below.  All maturity amounts are contractual maturities.  Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call premiums.

	March 31, 2015				December 31, 2014
	Amortized		Estimated		Amortized		Estimated
	cost		fair value		cost		fair value
		(in thousands)				(in thousands)
Debt securities available for sale:
Due in one year or less	$	8,033	$	8,084	$	8,172	$	8,256
Due after one year through five years		23,284		23,893		22,118		22,597
Due after five years through ten years		19,310		19,590		20,517		20,589
Due after ten years		6,954		7,221		6,062		6,335
		57,581		58,788		56,869		57,777
Mortgage-backed securities
available for sale		38,786		39,605		37,179		37,756
Total available for sale securities	$	96,367	$	98,393	$	94,048	$	95,533
Debt securities held to maturity:
Due in one year or less	$	478	$	478	$	478	$	477
Due after one year through five years		66		67		77		78
Due after five years through ten years		932		924		932		914
Due after ten years		112		107		112		105
		1,588		1,576		1,599		1,574
Total held to maturity securities	$	1,588	$	1,576	$	1,599	$	1,574

Information regarding unrealized losses within the Company’s available for sale securities at March 31, 2015 and December 31, 2014 is summarized below.  The securities are primarily U.S. government-guaranteed agency securities or municipal securities.  All unrealized losses are considered temporary and related to market interest rate fluctuations.

	March 31, 2015
		Less than 12 months				12 months or longer					Total
		Fair		Unrealized		Fair			Unrealized		Fair		Unrealized
		Value		Losses		Value			Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	1,991	$	(9)	$	5,887		$	(113)	$	7,878	$	(122)
States and political subdivisions		1,989		(10)		1,130			(18)		3,119		(28)
Total debt securities	$	3,980	$	(19)	$	7,017		$	(131)	$	10,997	$	(150)
Mortgage-backed securities:
FNMA	$	-	$	-	$	-	-	$	-	$	-	$	-
FHLMC		-		-		1,454			(46)		1,454		(46)
GNMA		1,207		(1)		795			(8)		2,002		(9)
CMO'S		1,670		(4)		4,232			(52)		5,902		(56)
Total mortgage-backed securities	$	2,877	$	(5)	$	6,481		$	(106)	$	9,358	$	(111)
Held To Maturity:
Debt securities:
States and political subdivisions	$	371	$	(1)	$	473		$	(24)	$	844	$	(25)
Total temporarily impaired
securities	$	7,228	$	(25)	$	13,971		$	(261)	$	21,199	$	(286)

	December 31, 2014
		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	3,906	$	(26)	$	7,751	$	(249)	$	11,657	$	(275)
States and political subdivisions		4,752		(9)		1,902		(40)		6,654		(49)
Total debt securities	$	8,658	$	(35)	$	9,653	$	(289)	$	18,311	$	(324)
Mortgage-backed securities:
FNMA	$	1,498	$	(10)	$	1,731	$	(5)	$	3,229	$	(15)
FHLMC		-		-		1,482		(64)		1,482		(64)
GNMA		-		-		2,079		(27)		2,079		(27)
CMO'S		1,722		(11)		4,290		(128)		6,012		(139)
Total mortgage-backed securities	$	3,220	$	(21)	$	9,582	$	(224)	$	12,802	$	(245)
Held To Maturity:
Debt securities:
States and political subdivisions	$	371	$	(1)	$	556	$	(31)	$	927	$	(32)
Total temporarily impaired
securities	$	12,249	$	(57)	$	19,791	$	(544)	$	32,040	$	(601)

Management has assessed the securities available for sale in an unrealized loss position at March 31, 2015 and December 31, 2014 and determined the decline in fair value below amortized cost to be temporary.  In making this determination, management considered the period of time the securities were in a loss position, the percentage decline in comparison to the securities’ amortized cost, and the financial condition of the issuer (primarily government or government-sponsored enterprises).  In addition, management does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost.  Management believes the decline in fair value is primarily related to market interest rate fluctuations and not to the credit deterioration of the individual issuers.

The Company had not recorded any other-than-temporary impairment (“OTTI”) charges as of March 31, 2015 and did not record any OTTI charges during 2014.  Nevertheless, it remains possible that there could be deterioration in the asset quality of the securities portfolio in the future.  The credit worthiness of the Company’s portfolio is largely reliant on the ability of U.S. government sponsored agencies such as FHLB, Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), and Federal Home Loan Mortgage Corporation (“FHLMC”), and municipalities throughout New York State to meet their obligations.  In addition, dysfunctional markets could materially alter the liquidity, interest rate, and pricing risk of the portfolio.  The relatively stable past performance is not a guarantee for similar performance of the Company’s securities portfolio going forward.

XML

Securities (Narrative) (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Securities [Abstract]
Available for sale securities pledged as collateral	$ 85,600,000	$ 68,800,000
Borrowed funds with FHLBNY	0	13,700,000
FHLB stock	$ 822,000	$ 1,439,000

XML

Loans And The Allowance For Loan Losses (Major Categories Of Loans And Leases) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	$ 566,855	$ 563,281
Commercial and industrial loans	132,416	129,456
Consumer loans	1,704	1,764
Other	122	404
Net deferred loan origination costs	641	759	651
Total gross loans	701,738	695,664
Allowance for loan losses	(12,777)	(12,533)
Loans, net	688,961	683,131
Residential Real Estate Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	100,548	98,374
Commercial And Multi-Family [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	366,657	363,252
Construction-Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	238	721
Construction-Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	39,723	40,986
Home Equity Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total real estate loans	$ 59,689	$ 59,948

XML

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Measurements [Abstract]

Financial Instruments Measured At Fair Value On Recurring Basis

(in thousands)		Level 1		Level 2		Level 3		Fair Value
March 31, 2015
Securities available-for-sale:
U.S. government agencies	$	-	$	26,859	$	-	$	26,859
States and political subdivisions		-		31,929		-		31,929
Mortgage-backed securities		-		39,605		-		39,605
Mortgage servicing rights		-		-		497		497
December 31, 2014
Securities available-for-sale:
U.S. government agencies	$	-	$	26,717	$	-	$	26,717
States and political subdivisions		-		31,060		-		31,060
Mortgage-backed securities		-		37,756		-		37,756
Mortgage servicing rights		-		-		518		518

Changes In Fair Value For Mortgage Servicing Rights

	Three months ended March 31,
(in thousands)	2015		2014
Mortgage servicing rights - January 1	$	518	$	509
Gains (losses) included in earnings		(45)		(38)
Additions from loan sales		24		-
Mortgage servicing rights - March 31	$	497	$	471

Quantitative Information About Significant Unobservable Inputs Used In The Fair Value Measurement Of MSRs

	3/31/2015		12/31/2014
Servicing fees	0.25	%	0.25	%
Discount rate	9.52	%	9.52	%
Prepayment rate (CPR)	9.80	%	9.28	%

Financial Instruments Measured At Fair Value On Nonrecurring Basis

(in thousands)		Level 1	Level 2	Level 3		Fair Value
March 31, 2015
Impaired loans	$	-	-	14,569	$	14,569
December 31, 2014
Impaired loans	$	-	-	13,716	$	13,716

Estimated Fair Value Of The Company's Financial Instruments

	March 31, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
		(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	60,694	$	60,694	$	10,898	$	10,898
Level 2:
Available for sale securities		98,393		98,393		95,533		95,533
FHLB and FRB stock		2,308		2,308		2,925		2,925
Level 3:
Held to maturity securities		1,588		1,576		1,599		1,574
Loans and leases, net		688,961		700,338		683,131		685,148
Mortgage servicing rights		497		497		518		518
Financial liabilities:
Level 1:
Demand deposits	$	169,965	$	169,965	$	158,631	$	158,631
NOW deposits		82,956		82,956		72,670		72,670
Regular savings deposits		416,317		416,317		363,542		363,542
Commitments to extend credit		93		93		245		245
Securities sold under agreement to
repurchase		10,673		10,673		13,778		13,778
Level 2:
Other borrowed funds		-		-		13,700		13,700
Junior subordinated debentures		11,330		11,330		11,330		11,330
Level 3:
Time deposits		111,120		110,678		112,792		113,854