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, 2017

☐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 York16-1332767

(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,” “smaller reporting company,”  and “emerging growth 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 ☐
Emerging growth company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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,4,766,949 shares as of May 1, 2017

INDEX

EVANS BANCORP, INC. AND SUBSIDIARIES

PART 1.  FINANCIAL INFORMATION		PAGE
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets – March 31, 2017 and December 31, 2016	1
	Unaudited Consolidated Statements of Income – Three months ended March 31, 2017 and 2016	2
	Unaudited Statements of Consolidated Comprehensive Income – Three months ended March 31, 2017 and 2016	3
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity – Three months ended March 31, 2017 and 2016	4
	Unaudited Consolidated Statements of Cash Flows - Three months ended March 31, 2017 and 2016	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	43
Item 6.	Exhibits	43
	Signatures	44

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2017 AND DECEMBER 31, 2016
(in thousands, except share and per share amounts)
	March 31,		December 31,
	2017		2016
ASSETS
Cash and due from banks	$	10,795	$	12,503
Interest-bearing deposits at banks		19,440		581
Securities:
Available for sale, at fair value (amortized cost: $115,188 at March 31, 2017;		114,896		95,222
$95,810 at December 31, 2016)
Held to maturity, at amortized cost (fair value: $1,387 at March 31, 2017;		1,408		1,983
$1,959 at December 31, 2016)
Federal Home Loan Bank common stock, at cost		1,366		2,185
Federal Reserve Bank common stock, at cost		1,546		1,546
Loans, net of allowance for loan losses of $13,579 at March 31, 2017
and $13,916 at December 31, 2016		932,004		928,596
Properties and equipment, net of accumulated depreciation of $17,328 at March 31, 2017
and $17,012 at December 31, 2016		11,065		11,310
Goodwill and intangible assets		8,638		8,406
Bank-owned life insurance		21,664		21,534
Other assets		16,838		16,843
TOTAL ASSETS	$	1,139,660	$	1,100,709
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand	$	194,747	$	201,741
NOW		103,907		88,632
Savings		531,408		508,652
Time		147,915		140,949
Total deposits		977,977		939,974
Securities sold under agreement to repurchase		11,679		10,159
Other borrowings		10,000		28,200
Other liabilities		16,047		14,298
Junior subordinated debentures		11,330		11,330
Total liabilities		1,027,033		1,003,961
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value, 10,000,000 shares authorized; 4,763,696
and 4,302,504 shares issued at March 31, 2017 and December 31, 2016,
respectively, and 4,763,696 and 4,300,634 outstanding at March 31, 2017
and December 31, 2016, respectively		2,384		2,153
Capital surplus		58,543		44,389
Treasury stock, at cost, 0 and 1,870 shares at March 31, 2017 and
December 31, 2016, respectively		-		-
Retained earnings		53,874		52,630
Accumulated other comprehensive loss, net of tax		(2,174)		(2,424)
Total stockholders' equity		112,627		96,748
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,139,660	$	1,100,709
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, 2017 AND 2016
(in thousands, except share and per share amounts)
	Three Months Ended March 31,
	2017		2016
INTEREST INCOME
Loans	$	10,246	$	8,730
Interest-bearing deposits at banks		12		11
Securities:
Taxable		436		377
Non-taxable		224		238
Total interest income		10,918		9,356
INTEREST EXPENSE
Deposits		1,116		959
Other borrowings		58		50
Junior subordinated debentures		100		87
Total interest expense		1,274		1,096
NET INTEREST INCOME		9,644		8,260
(CREDIT) PROVISION FOR LOAN LOSSES		(435)		208
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		10,079		8,052
NON-INTEREST INCOME
Deposit service charges		390		443
Insurance service and fees		2,168		1,748
Gain on loans sold		18		15
Bank-owned life insurance		130		136
Interchange fee income		344		318
Other		472		334
Total non-interest income		3,522		2,994
NON-INTEREST EXPENSE
Salaries and employee benefits		5,716		5,514
Occupancy		775		699
Advertising and public relations		190		285
Professional services		602		580
Technology and communications		607		598
Amortization of intangibles		28		-
FDIC insurance		227		159
Other		910		693
Total non-interest expense		9,055		8,528
INCOME BEFORE INCOME TAXES		4,546		2,518
INCOME TAX PROVISION		1,400		804
NET INCOME	$	3,146	$	1,714
Net income per common share-basic	$	0.68	$	0.40
Net income per common share-diluted	$	0.66	$	0.40
Cash dividends per common share	$	0.40	$	0.38
Weighted average number of common shares outstanding		4,634,096		4,263,109
Weighted average number of diluted shares outstanding		4,757,062		4,328,034
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, 2017 AND 2016
(in thousands)
	Three Months Ended March 31,
	2017			2016
NET INCOME		$	3,146		$	1,714
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gain on available-for-sale securities			187			649
Defined benefit pension plans:
Amortization of prior service cost	10			5
Amortization of actuarial loss	53			35
Total			63			40
OTHER COMPREHENSIVE INCOME, NET OF TAX			250			689
COMPREHENSIVE INCOME		$	3,396		$	2,403
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, 2017 AND 2016
(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, 2015	$	2,132	$	43,318	$	47,616	$	(1,810)	$	-	$	91,256
Net Income						1,714						1,714
Other comprehensive income								689				689
Cash dividends ($0.38 per common share)						(1,626)						(1,626)
Stock compensation expense				118								118
Excess tax benefit from stock-based compensation				9								9
Issued 19,093 restricted shares		10		(10)								-
Reissued 2,938 restricted shares, net of forfeitures												-
Balance, March 31, 2016	$	2,142	$	43,435	$	47,704	$	(1,121)	$	-	$	92,160
Balance, December 31, 2016	$	2,153	$	44,389	$	52,630	$	(2,424)	$	-	$	96,748
Net Income						3,146						3,146
Other comprehensive income								250				250
Cash dividends ($0.40 per common share)						(1,902)						(1,902)
Stock compensation expense				136								136
Issued 440,000 shares in stock offering		220		13,922								14,142
Issued 15,763 restricted shares		8		(8)								-
Issued 5,429 shares in stock option exercises		3		104								107
Reissued 1,870 shares in stock option exercises												-
Balance, March 31, 2017	$	2,384	$	58,543	$	53,874	$	(2,174)	$	-	$	112,627
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, 2017 AND 2016
(in thousands)
	Three Months Ended March 31,
		2017		2016
OPERATING ACTIVITIES:
Interest received	$	10,801	$	9,090
Fees received		3,210		2,839
Interest paid		(1,263)		(1,068)
Cash paid to employees and vendors		(10,116)		(8,353)
Income taxes paid		(5)		(9)
Proceeds from sale of loans held for resale		2,788		880
Originations of loans held for resale		(3,354)		(335)
Net cash provided by operating activities		2,061		3,044
INVESTING ACTIVITIES:
Available for sales securities:
Purchases		(22,300)		(20,471)
Proceeds from maturities, calls, and payments		3,656		3,883
Held to maturity securities:
Purchases		(35)		-
Proceeds from maturities, calls, and payments		610		11
Additions to properties and equipment		(56)		(300)
Purchase of tax credit investment		-		(359)
Insurance agency acquisitions		(275)		-
Net increase in loans		(2,082)		(23,176)
Net cash used in investing activities		(20,482)		(40,412)
FINANCING ACTIVITIES:
Proceeds from (repayments of) short-term borrowings, net		(16,680)		2,072
Net increase in deposits		38,003		46,067
Issuance of common stock		14,249		-
Net cash provided by financing activities		35,572		48,139
Net increase in cash and cash equivalents		17,151		10,771
CASH AND CASH EQUIVALENTS:
Beginning of period		13,084		22,621
End of period	$	30,235	$	33,392

(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, 2017 AND 2016
(in thousands)
	Three Months Ended March 31,
		2017		2016
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income	$	3,146	$	1,714
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		432		359
Deferred tax expense		367		36
(Credit) Provision for loan losses		(435)		208
Gain on loans sold		(18)		(15)
Stock options and restricted stock expense		136		118
Proceeds from sale of loans held for resale		2,788		880
Originations of loans held for resale		(3,354)		(335)
Changes in assets and liabilities affecting cash flow:
Other assets		(901)		561
Other liabilities		(100)		(482)
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	2,061	$	3,044
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

THREEMONTH PERIODS ENDED MARCH 31, 2017 AND 2016

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 results of operations for the three month period ended March 31, 2017 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, 2016 (“10-K”).  The Company’s significant accounting policies are disclosed in Note 1 to the 10-K.

7

2. SECURITIES

The amortized cost of securities and their approximate fair value at March 31, 2017 and December 31, 2016 were as follows:

	March 31, 2017
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	16,795	$	73	$	(81)	$	16,787
States and political subdivisions		34,472		434		(62)		34,844
Total debt securities	$	51,267	$	507	$	(143)	$	51,631
Mortgage-backed securities:
FNMA	$	22,140	$	96	$	(229)	$	22,007
FHLMC		9,452		31		(78)		9,405
GNMA		2,463		29		(21)		2,471
SBA		7,975		19		(55)		7,939
CMO		21,891		52		(500)		21,443
Total mortgage-backed securities	$	63,921	$	227	$	(883)	$	63,265
Total securities designated as available for sale	$	115,188	$	734	$	(1,026)	$	114,896
Held to Maturity:
Debt securities
States and political subdivisions	$	1,408	$	4	$	(25)	$	1,387
Total securities designated as held to maturity	$	1,408	$	4	$	(25)	$	1,387

	December 31, 2016
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	12,958	$	67	$	(153)	$	12,872
States and political subdivisions		34,952		356		(166)		35,142
Total debt securities	$	47,910	$	423	$	(319)	$	48,014
Mortgage-backed securities:
FNMA	$	14,694	$	96	$	(230)	$	14,560
FHLMC		3,544		32		(51)		3,525
GNMA		2,535		19		(21)		2,533
CMO		27,127		67		(604)		26,590
Total mortgage-backed securities	$	47,900	$	214	$	(906)	$	47,208
Total securities designated as available for sale	$	95,810	$	637	$	(1,225)	$	95,222
Held to Maturity:
Debt securities
States and political subdivisions	$	1,983	$	5	$	(29)	$	1,959
Total securities designated as held to maturity	$	1,983	$	5	$	(29)	$	1,959

8

Available for sale securities with a total fair value of $108 million and $87 million at March 31, 2017 and December 31, 2016, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

The scheduled maturities of debt and mortgage-backed securities at March 31, 2017 and December 31, 2016 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, 2017				December 31, 2016
	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	$	2,875	$	2,885	$	2,869	$	2,876
Due after one year through five years		30,201		30,405		30,171		30,214
Due after five years through ten years		15,487		15,555		12,166		12,133
Due after ten years		2,704		2,786		2,704		2,791
		51,267		51,631		47,910		48,014
Mortgage-backed securities
available for sale		63,921		63,265		47,900		47,208
Total available for sale securities	$	115,188	$	114,896	$	95,810	$	95,222
Debt securities held to maturity:
Due in one year or less	$	174	$	173	$	780	$	778
Due after one year through five years		285		279		289		283
Due after five years through ten years		849		842		814		805
Due after ten years		100		93		100		93
		1,408		1,387		1,983		1,959
Total held to maturity securities	$	1,408	$	1,387	$	1,983	$	1,959

Contractual maturities of the Company’s mortgage-backed securities generally exceed ten years; however, the effective lives may be significantly shorter due to prepayments of the underlying loans and due to the nature of these securities.  The duration of the investment securities portfolio increased from 3.4 years at December 31, 2016 to 3.7 years at March 31, 2017.

Information regarding unrealized losses within the Company’s available for sale securities at March 31, 2017 and December 31, 2016 is summarized below.  The securities are primarily U.S. government-guaranteed agency securities or municipal securities.  All unrealized losses are considered temporary and are related to market interest rate fluctuations.

9

	March 31, 2017
		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	$	6,919	$	(81)	$	-	$	-	$	6,919	$	(81)
States and political subdivisions		9,370		(46)		733		(16)		10,103		(62)
Total debt securities	$	16,289	$	(127)	$	733	$	(16)	$	17,022	$	(143)
Mortgage-backed securities:
FNMA	$	15,301	$	(229)	$	-	$	-	$	15,301	$	(229)
FHLMC		7,730		(37)		925		(41)		8,655		(78)
GNMA		1,036		(19)		308		(2)		1,344		(21)
SBA		5,906		(55)		-		-		5,906		(55)
CMO		14,275		(353)		3,662		(147)		17,937		(500)
Total mortgage-backed securities	$	44,248	$	(693)	$	4,895	$	(190)	$	49,143	$	(883)
Held to Maturity:
Debt securities:
States and political subdivisions	$	611	$	(13)	$	362	$	(12)	$	973	$	(25)
Total temporarily impaired
securities	$	61,148	$	(833)	$	5,990	$	(218)	$	67,138	$	(1,051)

	December 31, 2016
		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	$	6,847	$	(153)	$	-	$	-	$	6,847	$	(153)
States and political subdivisions		16,895		(146)		731		(20)		17,626		(166)
Total debt securities	$	23,742	$	(299)	$	731	$	(20)	$	24,473	$	(319)
Mortgage-backed securities:
FNMA	$	9,577	$	(230)	$	-	$	-	$	9,577	$	(230)
FHLMC		1,728		(8)		988		(43)		2,716		(51)
GNMA		1,046		(17)		309		(4)		1,355		(21)
CMO		19,745		(569)		1,166		(35)		20,911		(604)
Total mortgage-backed securities	$	32,096	$	(824)	$	2,463	$	(82)	$	34,559	$	(906)
Held to Maturity:
Debt securities:
States and political subdivisions	$	863	$	(3)	$	706	$	(26)	$	1,569	$	(29)
Total temporarily impaired
securities	$	56,701	$	(1,126)	$	3,900	$	(128)	$	60,601	$	(1,254)

10

Management has assessed the securities available for sale in an unrealized loss position at March 31, 2017 and December 31, 2016 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 has not recorded any other-than-temporary impairment (“OTTI”) charges as of March 31, 2017 and did not record any OTTI charges during 2016.  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 stable past performance is not a guarantee for similar performance of the Company’s securities portfolio in future periods.

3.  FAIR VALUE MEASUREMENTS

Fair value is defined in ASC Topic 820 “Fair Value Measurements and Disclosures” 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 inputs are quoted prices for identical instruments in active markets;
	Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

 Level 3 inputs are 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 as of March 31, 2017 and December 31, 2016, respectively:

(in thousands)		Level 1		Level 2		Level 3		Fair Value
March 31, 2017
Securities available-for-sale:
U.S. government agencies	$	-	$	16,787	$	-	$	16,787
States and political subdivisions		-		34,844		-		34,844
Mortgage-backed securities		-		63,265		-		63,265
Mortgage servicing rights		-		-		564		564
December 31, 2016
Securities available-for-sale:
U.S. government agencies	$	-	$	12,872	$	-	$	12,872
States and political subdivisions		-		35,142		-		35,142
Mortgage-backed securities		-		47,208		-		47,208
Mortgage servicing rights		-		-		527		527

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 not have 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, during the Company’s review or when 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.

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, 2017 and 2016, respectively:

	Three months ended March 31,
(in thousands)	2017		2016
Mortgage servicing rights - January 1	$	527	$	557
Gains (losses) included in earnings		11		(69)
Additions from loan sales		26		8
Mortgage servicing rights - March 31	$	564	$	496

12

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

	March 31, 2017		December 31, 2016
Servicing fees	0.25	%	0.25	%
Discount rate	9.52	%	9.52	%
Prepayment rate (CPR)	8.15	%	8.12	%

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, 2017 and December 31, 2016:

(in thousands)		Level 1		Level 2		Level 3		Fair Value
March 31, 2017
Collateral dependent impaired loans	$	-	$	-	$	17,535	$	17,535
December 31, 2016
Collateral dependent impaired loans	$	-	$	-	$	13,114	$	13,114

Collateral dependent 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 $19.5 million, with an allowance for loan loss of $2.0 million, at March 31, 2017 compared with $15.1 million and $2.0 million, respectively, at December 31, 2016.

13

FAIR VALUE OF FINANCIAL INSTRUMENTS

At each of March 31, 2017 and December 31, 2016, 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, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
		(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	30,235	$	30,235	$	13,084	$	13,084
Level 2:
Available for sale securities		114,896		114,896		95,222		95,222
FHLB and FRB stock		2,912		2,912		3,731		3,731
Level 3:
Held to maturity securities		1,408		1,387		1,983		1,959
Loans, net		932,004		913,707		928,596		945,998
Mortgage servicing rights		564		564		527		527
Financial liabilities:
Level 1:
Demand deposits	$	194,747	$	194,747	$	201,741	$	201,741
NOW deposits		103,907		103,907		88,632		88,632
Savings deposits		531,408		531,408		508,652		508,652
Level 2:
Securities sold under agreement to
repurchase		11,679		11,679		10,159		10,159
Other borrowed funds		10,000		9,937		28,200		28,152
Junior subordinated debentures		11,330		11,330		11,330		11,330
Level 3:
Time deposits		147,915		148,921		140,949		141,758

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 Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, which are non-marketable equity investments, approximate fair value.

As a member of the FHLB System, the Bank is required to hold stock in FHLBNY.  The Company regularly evaluates investments in FHLBNY for impairment, considering liquidity, operating performance, capital position, stock repurchase and dividend history.  As of March 31, 2017, the Bank’s investment in FHLBNY stock was not impaired.

The Bank, as a member of the FRB system, is currently required to purchase and hold shares of capital stock in the FRB in an amount equal to 6% of its capital and surplus.  Based on the current capital adequacy and liquidity position of the FRB, management believes there is no impairment in the Company’s investment at March 31, 2017.

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.

14

Loans Receivable.  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, negotiable order of withdrawal (“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 and there have been no issuances of similar instruments in recent years.  The Company looked at a market bond index to estimate a discount margin to value the debentures.  The discount margin was very similar to the spread to LIBOR established at the issuance of the debentures.  As a result, the Company determined that the fair value of the adjustable-rate debentures approximates their face amount.

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

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. LOANS AND 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, 2017		December 31, 2016
Mortgage loans on real estate:	(in thousands)
Residential mortgages	$	122,818	$	118,542
Commercial and multi-family		464,288		462,385
Construction-Residential		2,155		2,540
Construction-Commercial		95,757		93,240
Home equities		66,229		66,234
Total real estate loans		751,247		742,941
Commercial and industrial loans		192,041		197,371
Consumer and other loans		1,344		1,417
Net deferred loan origination costs		951		783
Total gross loans		945,583		942,512
Allowance for loan losses		(13,579)		(13,916)
Loans, net	$	932,004	$	928,596

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, 2017, the Bank sold mortgages to FNMA totaling $2.8 million, compared with $0.9  million in the three month period ended March 31, 2016.  At each of March 31, 2017 and December 31, 2016, the Bank had a loan servicing portfolio principal balance of $76 million upon which it earned servicing fees.  The value of the mortgage servicing rights for that portfolio was $0.6 million at March 31, 2017 and $0.5 million at December 31, 2016.  At March 31, 2017 there were $0.9 million in residential mortgages held for sale compared with $0.3 million at December 31, 2016.  The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

The Company had $9 million in commercial and industrial loans held for sale as of March 31, 2017.  This represents a single loan relationship in which the Bank was a participant in a larger syndicated loan.  There was no significant credit deterioration in the loan as the Bank received a bid for the loan at par and as a result the loan’s fair value was equal to its amortized cost.  The Bank does not typically sell its commercial loans or hold them for resale.  However, management determined that from a risk management and capital management perspective, selling this particular loan was in the Bank’s best interest.  The loan is expected to be sold in the second quarter of 2017.There were no commercial loans held for sale as of December 31, 2016.   

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, 2016.  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, 2016.  Unless otherwise noted in this Form 10-Q, the policies and methodology described in the Annual Report for the year ended December 31, 2016 are consistent with those utilized by the Company in the three month period ended March 31, 2017.

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 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.  Unlike commercial customers, consumer loan customers are not required to provide the Company with updated financial information.  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 primary credit quality indicator for consumer loans.  However, once a consumer loan is identified as impaired, it is individually evaluated for impairment.

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

March 31, 2017
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
1-3	$	80,643	$	375,456	$	456,099	$	123,648
4		10,936		71,958		82,894		55,746
5		-		6,641		6,641		9,264
6		4,178		10,233		14,411		2,570
7		-		-		-		813
Total	$	95,757	$	464,288	$	560,045	$	192,041

December 31, 2016
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
1-3	$	82,520	$	372,235	$	454,755	$	121,414
4		6,541		73,655		80,196		59,117
5		-		12,506		12,506		12,623
6		4,179		3,989		8,168		3,404
7		-		-		-		813
Total	$	93,240	$	462,385	$	555,625	$	197,371

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, 2017
(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	$	2,751	$	138	$	931	$	3,820	$	188,221	$	192,041	$	72	$	2,771
Residential real estate:
Residential		1,225		70		659		1,954		120,864		122,818		-		846
Construction		-		-		-		-		2,155		2,155		-		-
Commercial real estate:
Commercial		15,249		213		2,097		17,559		446,729		464,288		-		3,174
Construction		4,127		-		4,179		8,306		87,451		95,757		-		4,179
Home equities		128		207		593		928		65,301		66,229		-		1,232
Consumer and other		50		7		-		57		1,287		1,344		-		11
Total Loans	$	23,530	$	635	$	8,459	$	32,624	$	912,008	$	944,632	$	72	$	12,213

Note: Loan balances do not include $951 thousand in net deferred loan origination costs as of March 31, 2017.

18

December 31, 2016
(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	$	6,772	$	2,966	$	1,150	$	10,888	$	186,483	$	197,371	$	-	$	3,106
Residential real estate:
Residential		868		123		567		1,558		116,984		118,542		-		862
Construction		-		-		-		-		2,540		2,540		-		-
Commercial real estate:
Commercial		6,319		1,522		2,357		10,198		452,187		462,385		483		1,874
Construction		257		-		4,417		4,674		88,566		93,240		239		4,178
Home equities		481		119		679		1,279		64,955		66,234		-		1,261
Consumer and other		15		10		5		30		1,387		1,417		-		17
Total Loans	$	14,712	$	4,740	$	9,175	$	28,627	$	913,102	$	941,729	$	722	$	11,298

Note: Loan balances do not include $783 thousand in net deferred loan origination costs as of December 31, 2016.

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, 2017 and 2016:

March 31, 2017
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Beginning balance	$	4,813	$	7,890	$	96	$	769	$	348	$	13,916
Charge-offs		(33)		-		(28)		-		-		(61)
Recoveries		147		-		12		-		-		159
Provision (Credit)		(964)		308		55		150		16		(435)
Ending balance	$	3,963	$	8,198	$	135	$	919	$	364	$	13,579
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	253	$	1,716	$	36	$	1	$	9	$	2,015
Collectively evaluated
for impairment		3,710		6,482		99		918		355		11,564
Total	$	3,963	$	8,198	$	135	$	919	$	364	$	13,579
Loans:
Ending balance:
Individually evaluated
for impairment	$	2,786	$	12,473	$	36	$	2,561	$	1,694	$	19,550
Collectively evaluated
for impairment		189,255		547,572		1,308		122,412		64,535		925,082
Total	$	192,041	$	560,045	$	1,344	$	124,973	$	66,229	$	944,632

* Includes construction loans

Note: Loan balances do not include $951 thousand in net deferred loan origination costs as of March 31, 2017.

20

March 31, 2016
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Beginning balance	$	4,383	$	7,135	$	85	$	909	$	371	$	12,883
Charge-offs		(13)		-		(7)		-		-		(20)
Recoveries		7		38		3		-		-		48
Provision (Credit)		203		269		12		(213)		(63)		208
Ending balance	$	4,580	$	7,442	$	93	$	696	$	308	$	13,119
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	516	$	1,134	$	41	$	2	$	-	$	1,693
Collectively evaluated
for impairment		4,064		6,308		52		694		308		11,426
Total	$	4,580	$	7,442	$	93	$	696	$	308	$	13,119
Loans:
Ending balance:
Individually evaluated
for impairment	$	5,382	$	10,092	$	41	$	2,482	$	1,545	$	19,542
Collectively evaluated
for impairment		145,431		464,806		2,131		104,212		60,048		776,628
Total	$	150,813	$	474,898	$	2,172	$	106,694	$	61,593	$	796,170

* Includes construction loans

Note: Loan balances do not include $603 thousand in net deferred loan origination costs as of March 31, 2016.

21

Impaired Loans

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

		At March 31, 2017
		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	$	1,176	$	1,279	$	-	$	1,183	$	23	$	5
Residential real estate:
Residential		2,491		2,697		-		2,493		9		17
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,452		2,506		-		2,534		34		19
Construction		-		-		-		-		-		-
Home equities		1,611		1,697		-		1,627		15		4
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	7,730	$	8,179	$	-	$	7,837	$	81	$	45

		At March 31, 2017
		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	$	1,610	$	1,853	$	253	$	1,654	$	24	$	2
Residential real estate:
Residential		70		72		1		70		1		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		5,843		5,871		541		5,843		13		53
Construction		4,178		4,201		1,175		4,179		50		-
Home equities		83		85		9		83		1		-
Consumer and other		36		62		36		37		1		1
Total impaired loans	$	11,820	$	12,144	$	2,015	$	11,866	$	90	$	56

22

		At March 31, 2017
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	2,786	$	3,132	$	253	$	2,837	$	47	$	7
Residential real estate:
Residential		2,561		2,769		1		2,563		10		17
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		8,295		8,377		541		8,377		47		72
Construction		4,178		4,201		1,175		4,179		50		-
Home equities		1,694		1,782		9		1,710		16		4
Consumer and other		36		62		36		37		1		1
Total impaired loans	$	19,550	$	20,323	$	2,015	$	19,703	$	171	$	101

		At December 31, 2016
		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	$	1,304	$	1,604	$	-	$	1,455	$	125	$	51
Residential real estate:
Residential		2,513		2,720		-		2,542		39		78
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,123		2,168		-		2,181		33		89
Construction		257		257		-		404		2		28
Home equities		1,559		1,621		-		1,606		51		30
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	7,756	$	8,370	$	-	$	8,188	$	250	$	276

23

		At December 31, 2016
		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	$	1,844	$	1,913	$	492	$	1,898	$	62	$	53
Residential real estate:
Residential		71		72		1		72		2		1
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		1,054		1,083		296		1,062		50		-
Construction		4,179		4,201		1,175		4,180		194		-
Home equities		194		206		20		195		9		1
Consumer and other		43		68		43		45		3		3
Total impaired loans	$	7,385	$	7,543	$	2,027	$	7,452	$	320	$	58

		At December 31, 2016
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	3,148	$	3,517	$	492	$	3,353	$	187	$	104
Residential real estate:
Residential		2,584		2,792		1		2,614		41		79
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		3,177		3,251		296		3,243		83		89
Construction		4,436		4,458		1,175		4,584		196		28
Home equities		1,753		1,827		20		1,801		60		31
Consumer and other		43		68		43		45		3		3
Total impaired loans	$	15,141	$	15,913	$	2,027	$	15,640	$	570	$	334

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Non-performing loans

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

	March 31, 2017			December 31, 2016
		(in thousands)
Non-accruing loans:
Commercial and industrial loans	$	2,771		$	3,106
Residential real estate:
Residential		846			862
Construction		-			-
Commercial real estate:
Commercial and multi-family		3,174			1,874
Construction		4,179			4,178
Home equities		1,232			1,261
Consumer loans		11			17
Total non-accruing loans	$	12,213		$	11,298
Accruing loans 90+ days past due		72			722
Total non-performing loans	$	12,285		$	12,020
Total non-performing loans
to total assets		1.08	%		1.09	%
Total non-performing loans
to total loans		1.30	%		1.28	%

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Troubled debt restructurings

The Company had $9.1 million and $5.1 million in loans that were restructured in a troubled debt restructuring (“TDR”) at March 31, 2017 and December 31, 2016, respectively.  Of those balances, $1.7 million and $1.2 million were in non-accrual status at March 31, 2017 and December 31, 2016, 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 reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective interest 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, 2017, 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, 2017
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	729	$	714	$	15	$	168
Residential real estate:
Residential		1,949		235		1,714		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		5,713		592		5,121		245
Construction		-		-		-		-
Home equities		638		177		461		-
Consumer and other loans		26		-		26		26
Total troubled restructured loans	$	9,055	$	1,718	$	7,337	$	439

		December 31, 2016
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	574	$	532	$	42	$	147
Residential real estate:
Residential		1,949		227		1,722		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		1,617		313		1,304		-
Construction		257		-		257		-
Home equities		667		175		492		1
Consumer and other loans		26		-		26		26
Total troubled restructured loans	$	5,090	$	1,247	$	3,843	$	174

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 concessions leading to the designation of a TDR are lines of credit that are termed-out and/or extensions of maturities at rates that are less than the prevailing market rates given the risk profile of the borrower.

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The following tables show the data for TDR activity by the type of concession granted to the borrower for the three month periods ended March 31, 2017 and 2016:

	Three months ended March 31, 2017					Three months ended March 31, 2016
	(Recorded Investment in thousands)					(Recorded Investment 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:
Extension of maturity	-	$	-	$	-	1	$	24	$	24
Interest rate reduction	-		-		-	-		-		-
Term-out line of credit	1		180		180	1		20		20
Combination of concessions	-		-		-	-		-		-
Residential Real Estate & Construction:
Extension of maturity	-		-		-	1		95		95
Commercial Real Estate & Construction	-		-		-	-		-		-
Extension of maturity	3		5,073		5,073	-		-		-
Home Equities	-		-		-	-		-		-
Consumer and other loans	-		-		-	-		-		-

The general practice of the Bank is to work with borrowers so that they are able to repay 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.  There were no loans which were classified as TDRs during the previous 12 months which defaulted during each of the three month periods ended March 31, 2017 and 2016.

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5. COMMON EQUITY AND EARNINGS 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, 2017 and 2016, the Company had an average of 122,966 and 64,925 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, 2017 and 2016, there was an average of 24,990 and 49,550 potentially anti-dilutive shares outstanding, respectively, that were not included in calculating diluted earnings per share because their effect was anti-dilutive.

The Company issued 440,000 shares of common stock at $35.00 per share (including shares issued upon partial exercise of the underwriters’ allotment option in connection with the offering) in a registered common stock offering in January 2017.  The offering netted $14 million in additional capital after expenses.

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, 2017 and 2016:

	Balance at December 31, 2016		Net Change		Balance at March 31, 2017
	(in thousands)
Net unrealized (loss) gain on investment securities	$	(365)	$	187	$	(178)
Net defined benefit pension plan adjustments		(2,059)		63		(1,996)
Total	$	(2,424)	$	250	$	(2,174)
	Balance at December 31, 2015		Net Change		Balance at March 31, 2016
	(in thousands)
Net unrealized gain on investment securities	$	475	$	649	$	1,124
Net defined benefit pension plan adjustments		(2,285)		40		(2,245)
Total	$	(1,810)	$	689	$	(1,121)

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	Three months ended March 31, 2017						Three months ended March 31, 2016
	(in thousands)						(in thousands)
	Before-Tax Amount		Income Tax (Provision) Benefit (b)		Net-of-Tax Amount		Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount
Unrealized gain on investment
securities:
Unrealized gain on investment
securities	$	296	$	(109)	$	187	$	1,047	$	(398)	$	649
Defined benefit pension plan
adjustments:
Reclassifications from accumulated other
comprehensive income for gains (losses)
Amortization of prior service cost (a)	$	8	$	2	$	10	$	8	$	(3)	$	5
Amortization of actuarial loss (a)		43		10		53		56		(21)		35
Net change		51		12		63		64		(24)		40
Other Comprehensive Income (Loss)	$	347	$	(97)	$	250	$	1,111	$	(422)	$	689

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

(b) Tax benefit includes impact of re-valuation of deferred tax asset due to increase in marginal federal income tax rate

from 34% to 35%.

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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, 2017 and 2016.

	March 31, 2017
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	9,670	$	(26)	$	9,644
(Credit) provision for loan losses		(435)		-		(435)
Net interest income (expense) after
provision for loan losses		10,105		(26)		10,079
Non-interest income		1,354		-		1,354
Insurance service and fees		109		2,059		2,168
Amortization expense		-		28		28
Non-interest expense		7,647		1,380		9,027
Income before income taxes		3,921		625		4,546
Income tax provision		1,159		241		1,400
Net income	$	2,762	$	384	$	3,146

	March 31, 2016
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	8,291	$	(31)	$	8,260
Provision for loan losses		208		-		208
Net interest income (expense) after
provision for loan losses		8,083		(31)		8,052
Non-interest income		1,246		-		1,246
Insurance service and fees		116		1,632		1,748
Non-interest expense		7,327		1,201		8,528
Income before income taxes		2,118		400		2,518
Income tax provision		650		154		804
Net income	$	1,468	$	246	$	1,714

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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,
	2017		2016
	(in thousands)
Commitments to extend credit	$	203,354	$	217,581
Standby letters of credit		4,504		3,736
Total	$	207,858	$	221,317

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 did not incur any losses on its commitments and did not record a reserve for its commitments during the first three months of 2017 or during 2016.

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 to be material.

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9. NET PERIODIC BENEFIT COSTS

On January 31, 2008, the Bank froze its defined benefit pension plan.  The plan covered substantially all Bank 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 make a contribution to the defined benefit pension plan during the first three months of 2017.

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, 2017 and 2016:

		Three months ended March 31,
		(in thousands)
					Supplemental Executive
	Pension Benefits				Retirement Plan
	2017		2016		2017		2016
Service cost	$	-	$	-	$	42	$	47
Interest cost		54		55		34		36
Expected return on plan assets		(69)		(65)		-		-
Amortization of prior service cost		-		-		8		8
Amortization of the net loss		23		22		20		34
Net periodic cost (benefit)	$	8	$	12	$	104	$	125

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10.  RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers.  The objective of this 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, 2017, including interim periods within the reporting period.  The Company does not expect the standard to have a material impact on the Company’s financial reporting.

ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  The main objective of this ASU is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years.  The ASU will not impact results of operations or the financial position of the Company, but will impact its fair value disclosures in the notes to the financial statements.

ASU 2016-02, Leases.  The objective of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements to meet that objective.  The main difference between previous GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP.  Under this new guidance, a lessee should recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term.  The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP.  Information about the Company’s operating lease obligations is disclosed in Note 16 to the Company’s Consolidated Financial Statements included in Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2016.  The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is currently evaluating the impact of the standard on its financial reporting.

ASU 2016-09, Improvements to Employee Share-Based Payment Accounting.  This ASU is part of the FASB’s Simplification Initiative.  The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Some of the areas of simplification apply only to nonpublic entities.  The standard was adopted effective January 1, 2017.  One part of this ASU that impacted the Company was the elimination of the concept of a tax windfall pool.  Previously, an entity determined for each award whether the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes resulted in either an excess benefit or a tax deficiency.  Excess tax benefits were recognized in additional paid-in-capital; tax deficiencies were recognized either as an offset to accumulated excess tax benefits, if any, or in the income statement.  Excess tax benefits were not recognized until the deduction reduced taxes payable.  Under the new standard, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement in the period in which they are incurred.  The impact in the first quarter of 2017 was a tax benefit of $0.1 million.

In addition, the Company made the accounting policy election effective January 1, 2017 to account for forfeitures of stock awards when they occur rather than estimating the number of awards that are expected to vest.  When stock awards are granted, the Company assumes that the service condition will be achieved when determining the initial amount of compensation cost recognized.  The Company does not expect this election to have a material impact on its financial statements.

ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.  Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. Both financial institutions and users of their financial statements expressed concern that current GAAP restricts the ability to record credit losses that are expected, but do not yet meet the “probable” threshold.  The main objective of this ASU (commonly known as the Current Expected Credit Loss Impairment Model, or CECL, in the industry) is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.  To achieve this objective, the amendments in CECL replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  The amendments in CECL are effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  The FASB expects that an entity will be able to leverage its current systems and methods for recording the allowance for credit losses.  However, many financial institutions, particularly community banks similar in size to the Company and industry groups like the American Bankers Association, have expressed concern about the impact of CECL.  The life of loan loss concept presents complexities that can decrease capital, and add both volatility to ALLL estimates and additional costs.  CECL may increase the ALLL, though many factors will determine the impact for each bank.  Changes in expectations of future economic conditions play a large role in CECL and can significantly affect the credit loss estimate.  While OCC estimates made in 2012 projected a 30% to 50% increase in the ALLL, more

33

recent bank analyst projections were far lower.  A challenge for the Company could be the operational impact.  Costly new systems and process to track loan performance may need to be purchased or developed.  Significant procedural challenges may be faced both in implementation and on an ongoing basis.  The total impact of CECL to the Company’s financial statements is unknown but may be material.  Implementation of CECL will be a significant project for the Company through the projected implementation date of January 1, 2020.

ASU 2017-04, Simplifying the Test for Goodwill Impairment.  The objective of this ASU is to simplify how an entity is required to test goodwill impairment by eliminating Step 2 from the goodwill impairment test.  Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.  Under the amendments in this ASU, an entity will perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.  An entity would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.  The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years.  The Company does not expect the standard to have a material impact on the Company’s financial reporting.

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; loan losses in excess of the Company’s allowance for loan losses; 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; the impact of such changes in accounting pronouncements and practices being greater than anticipated; the ability to realize the benefit of deferred tax assets; changes in tax policies, rates and regulations of federal, state and local tax authorities; 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, 2016.  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, except to the extent required by law.

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

34

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, 2016.  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.

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, 2016 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 thethree month period ended March  31, 2017 that resulted in an interim impairment test.

ANALYSIS OF FINANCIAL CONDITION

Loan Activity

Total loans grew to $946 million at March 31, 2017, a $3 million increase from total loans of $943 million at December 31, 2016 and a  $149 million or 19% increase from $797 million at March 31, 2016.

Loans secured by real estate were $751 million at March 31, 2017, reflecting an  $8 million or 1% increase from $743 million at December 31, 2016 and a $108 million or 17% increase from $643 million at March 31, 2016.  Commercial and multi-family real estate loan growth slowed to a 2% annualized growth rate during the first quarter of 2017, but grew 14% over the past twelve months.  Commercial construction loans grew at a 11% annualized rate in the first quarter, but grew 39% since March 31, 2016.  Commercial real estate is the largest part of the Company’s loan portfolio and has historically been the highest growth segment of the portfolio.  The market for commercial real estate in the Company’s footprint in Western New York has been strong, particularly in 2016.  However, demand for loans declined in December 2016 and January 2017 before improving in February and March.  Given the time it takes to underwrite and close a commercial real estate loan, it is expected that loan balance growth will not reflect the uptick in the pipeline until the second quarter of 2017.

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In the first quarter of 2017, residential mortgage originations were  $11 million compared with the previous quarter’s originations of $16 million, buthigher than the $5 million originated in last year’s first quarter.  Residential mortgages sold in the first quarter of 2017 equated to approximately 25% of the residential mortgages originated by the Company during this quarter, as compared with 28% of residential mortgages originated during the fourth quarter of 2016 and 19% in the first quarter of 2016.  While the Company has historically experienced most of its loan growth in commercial loans, residential mortgage loan growth been higher the past two quarters.  Management decides to keep or sell residential mortgage loans at the time of origination based on interest rate risk management and the risk-adjusted return of alternative investment sources such as mortgage-backed securities.

The Company has also focused on growth opportunities in commercial and industrial (“C&I”) lending as a way to diversify its overall loan portfolio.  The C&I portfolio declined to $192 million at March 31, 2017from $197 million at December 31, 2016, butgrew  $41 million or 27%  from $151 million at March 31, 2016.  Weak commercial loan demand in late fourth quarter of 2016 and early first quarter of 2017 and paydowns of outstanding balances on lines of credit contributed to the first quarter decrease in C&I loan balances.

Credit Quality of Loan Portfolio

Total non-performing loans, defined as accruing loans greater than 90 days past due and nonaccrual loans, totaled $12 million, or 1.30% of total loans outstanding at March 31, 2017, compared with $12 million, or 1.28% of total loans outstanding, as of December 31, 2016 and $18 million, or 2.25% of total loans outstanding, as of March 31, 2016.  In the current quarter, an increase in non-accruing commercial real estate loans was offset by a decrease in non-accruing C&I loans and loans 90 days past due and accruing.  The improvement in the percentage of non-performing loans as a percentage of total loans from the end of last year’s first quarter represents a $3 million decrease in non-accruing C&I loans and a $3 million decrease in commercial real estate loans 90 days past due and accruing.

Troubled debt restructurings (“TDRs”) increased from $5 million at December 31, 2016 to $9 million at March 31, 2017.  The increase is attributable to a single commercial real estate loan of $5 million that matured in the first quarter and was subsequently extended.  While the borrower was considered to be financially troubled due to a high loan to collateral value ratio, the Company expects the borrower to pay the principal and interest of the restructured terms as contracted and therefore the loan remained in accruing status.

Commercial credits graded as “special mention” and “substandard,” or the criticized loan portfolio, were $34 million at March 31, 2017, a $4 million decrease from $38 million at December 31, 2016 and $7 million lower than the $41 million in criticized loans at March 31, 2016.  The decrease in criticized loans in the recent quarter was in the C&I portfolio as one large loan relationship was upgraded to watch from special mention as the borrower demonstrated improved operating performance over a sustained period of time.  The level of criticized loans can fluctuate as new information is constantly received on the Company’s borrowers and their financial circumstances change over time.  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.

The Company maintains an allowance for loan losses that in management’s judgment appropriately reflects losses inherent in the loan portfolio.The allowance for loan losses totaled $13.6 million or 1.44% of total loans outstanding at March 31, 2017, compared with $13.9 million or 1.48% of total loans outstanding as of December 31, 2016 and $13.1 million or 1.65% of total loans outstanding at March 31, 2016.  The Company released $0.4 million in allowance for loan losses during the 2017 first quarter, reflecting favorable credit quality trends including a sustained historically low charge-off ratio and a decrease in criticized loans.  The net charge-off (recovery) ratio for the first quarter of 2017 was (0.04)% of average net loans, compared with a ratio of 0.07% and (0.02)% in the fourth quarter of 2016 and first quarter of 2016, respectively.

Investing Activities

Total securities were $116 million at March 31, 2017, compared with $97 million at December 31, 2016 and $116 million at March 31, 2016.  Interest-bearing deposits at other banks, which consist of overnight funds kept at correspondent banks and the Federal Reserve, increased to $19 million at March 31, 2017 from $1 million at December 31, 2016, but decreased from $22 million at March 31, 2016.  The Company experienced strong loan growth in 2016, resulting in the decrease in investment securities and short-term interest-bearing deposits at banks from the end of the first quarter of 2016 to December 31, 2016.  A common equity issuance and seasonal municipal deposit inflows in the first quarter of 2017 increased liquidity, resulting in the increased investment securities and interest-bearing deposits at other banks.  Securities and interest-bearing deposits at correspondent banks made up 11% of the Bank’s total average interest earning assets in the first quarter of 2017,  compared with 10% in the fourth quarter of 2016 and14% in last year’s first quarter.

The Company’s highest concentration in its securities portfolio was in available for sale U.S. government sponsored mortgage-backed securities at 55% of total investment securities at March 31, 2017, compared with49% at December 31, 2016 and 44% at March 31,

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2016.  The concentration in tax-advantaged debt securities issued by state and political subdivisions and U.S. government-sponsored agency bonds was 31% and 14%, respectively, of the total securities portfolio at March 31, 2017, compared with 38% and 13% at December 31, 2016 and 34% and 22% at March 31, 2016.

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.  The total net unrealized loss position of the available-for-sale investment portfolio was  $0.3 million at March 31, 2017, compared with $0.6 million at December 31, 2016. 

The Company monitors extension and prepayment risk in the securities portfolio to limit potential exposures.  The Company has no 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.

Funding Activities

Total deposits at March 31, 2017 were $978 million, a $38 million or 4% increase from $940 million at December 31, 2016 and a $129 million or 15% increase from $849 million at March 31, 2016.  The growth in the first quarter reflected growth in savings deposits of $23 million, NOW deposits of $15 million, and time deposits of $7 million.  Demand deposits declined $7 million during the first quarter.  Most of the NOW and savings deposit growth is attributable to seasonal municipal deposit growth as municipalities collect annual property tax receipts in the first quarter. The $129 million deposit growth since the end of last year’s first quarter reflects growth across all product categories including savings deposits of $68 million, time deposits of $33 million, demand deposits of $20 million, and NOW deposits of $8 million.  With market disruption in the Western New York market due to a significant merger between two of the Company’s competitors, the Company has maintained highly competitive savings and time deposit rates in an effort to attract new customers.  Due to the transactional nature of demand deposits, average balances are a useful metric to meaningfully measure sustained growth rates.  Average demand deposits were $196 million in the current quarter, a 1% decrease from $199 million in the fourth quarter of 2016, but 12% higher than the $176 million average balance in the first quarter of 2016.  Most of the Company’s demand deposit growth over the past twelve months has been with commercial customers. 

The Company had $10 million in other borrowings at March 31, 2017, which consisted of a long-term advance with the FHLBNY scheduled to mature in 2020.  Other borrowings were $28 millionat December 31, 2016 and $10 million at March 31, 2016.  The Company relied less on its overnight line of credit with FHLBNY in the first quarter due to the inflow of seasonal municipal deposits and the proceeds from the common equity offering.

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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 book value.  Yields are presented on a non-tax-equivalent basis.

	Three months ended March 31, 2017						Three months ended March 31, 2016
	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	$	924,612	$	10,246	4.49	%	$	772,672	$	8,730	4.54	%
Taxable securities		70,584		436	2.51	%		64,796		377	2.34	%
Tax-exempt securities		36,440		224	2.49	%		38,298		238	2.50	%
Interest bearing deposits at banks		5,943		12	0.82	%		18,862		11	0.23	%
Total interest-earning assets		1,037,579	$	10,918	4.27	%		894,628	$	9,356	4.21	%
Non interest-earning assets:
Cash and due from banks		12,750						12,733
Premises and equipment, net		11,233						11,092
Other assets		46,741						42,550
Total Assets	$	1,108,303					$	961,003
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW	$	94,088	$	51	0.22	%	$	88,220	$	85	0.39	%
Savings		510,632		610	0.48	%		447,318		531	0.48	%
Time deposits		144,888		455	1.27	%		108,954		343	1.27	%
Other borrowed funds		15,522		53	1.38	%		10,427		44	1.70	%
Junior subordinated debentures		11,330		100	3.58	%		11,330		87	3.09	%
Securities sold U/A to repurchase		11,896		5	0.17	%		12,493		6	0.19	%
Total interest-bearing liabilities		788,356	$	1,274	0.66	%		678,742	$	1,096	0.65	%
Noninterest-bearing liabilities:
Demand deposits		196,331						176,074
Other		15,053						13,879
Total liabilities	$	999,740					$	868,695
Stockholders' equity		108,563						92,308
Total Liabilities and Equity	$	1,108,303					$	961,003
Net interest earnings			$	9,644					$	8,260
Net interest margin					3.77	%					3.71	%
Interest rate spread					3.61	%					3.56	%

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Net Income

Net income was $3.1 million, or $0.66 per diluted share, in the first quarter of 2017, compared with $2.3 million, or $0.53 per diluted share, in the trailing fourth quarter of 2016 and $1.7 million, or $0.40 per diluted share, in last year’s first quarter.  The increase from each comparative period reflects higher non-interest income and net interest income, along with lower provision for loan losses.  Return on average equity was 11.59% for the first quarter of 2017 compared with 9.70% in the trailing fourth quarter of 2016 and 7.43% in the first quarter of 2016.

Other Results of Operations – Quarterly Comparison

Net interest income of $9.6 million increased $0.2 million, or 3%, from the fourth quarter of 2016 and $1.4 million, or 17%, from the prior-year first quarter.  Average commercial loans, including both commercial real estate and commercial and industrial loans, were $747 million in the first quarter compared with $745 million in the trailing fourth quarter, but were 21% higher than $616 million in the 2016 first quarter.  The high volume of loan closings in the fourth quarter of 2016 somewhat muted commercial loan growth in the first quarter of 2017.  However, the Company expects stronger growth trends through the rest of 2017, given the strength of the commercial loan pipeline at the end of the first quarter.  The strong growth of average commercial loans from last year’s first quarter was the primary driver of the improvement in net interest income in the first quarter of 2017 when compared with the first three months of 2016.  The 3% increase in net interest income when compared with the fourth quarter of 2016 largely reflected a higher net interest margin.

First quarter net interest margin of 3.77% improved 11 basis points from the 2016 fourth quarter and 6 basis points from the first quarter of 2016.  The margin improvement stems from increased yields on interest-earning assets.  The higher yields when compared with the fourth quarter reflect an increase of 10 basis points in loan yields and 38 basis points in investment security yields.  Loan yields have benefited from variable loan re-pricing, due to an increase in the prime rate after the Federal Reserve increased its target rate by 25 basis points late in 2016 and again in March of 2017.  Fourth quarter 2016 investment yields had a higher than typical impact from accelerated premium amortization, resulting in somewhat depressed yields in that quarter.  The improved asset yields when compared with last year’s first quarter reflect an asset mix increasingly weighted toward loans.  Average loans were 89% of average interest-earning assets in the first three months of 2017 compared with 86% in the prior-year period.

The $0.4 million release of allowance for loan losses in the first quarter of 2017 reflects a decrease in commercial and industrial loan balances and favorable credit quality trends including a sustained historically low charge-off ratio and a decrease in criticized loans.  Strong loan growth in eachof the fourth and the first quarters of 2016, along with a higher level of non-performing loans in the first quarter of 2016,were the primary factors driving the provision for loan losses of $0.4 million and $0.2 million in each of those respective periods.

Non-interest income was $3.5 million in the first quarter of 2017, an increase from $2.6 million in the fourth quarter of 2016 and $3.0 million in the prior year first quarter.  The fourth quarter of 2016 included the impact of a net reduction of noninterest income of $0.3 million related to an investment in an historic rehabilitation tax credit.  There were no comparable transactions in each of the first quarters of 2017 and 2016.

Insurance revenue increased from $1.3 million in the trailing fourth quarter and $1.7 million in last year’s first quarter to $2.2 million in the first three months of 2017 due to higher profit sharing revenue, including a seasonal impact when comparing to the fourth quarter.  There was also continued growth in commercial lines insurance commissions and personal lines revenue was bolstered by revenue from two recent insurance agency acquisitions.  Two business lines that struggled in 2016, insurance claims services and financial services, both demonstrated improved performance in the first quarter of 2017.

Non-interest expenses increased 6% to $9.1 million in the first quarter of 2017 when compared to the comparable prior year period, but decreased 1% from the trailing fourth quarter, primarily due to lower salaries and benefits costs.Salaries and benefits costs decreased $0.1 million to $5.7 million in the recent first quarter when compared with the fourth quarter of 2016, reflecting seasonal incentive compensation in the fourth quarter.  The 4% increase from last year’s first quarter reflects strategic personnel hires to support the Company’s continued growth.

Other expenses of $0.9 million in the first quarter of 2017 were higher when compared with the first three months of 2016 mostly due tothe receipt of an insurance claim of $0.1 million in the first quarter of 2016 from litigation costs recorded in previous periods.  Occupancy costs of $0.8 million were higher in the first quarter of 2017 when compared to the prior year due to additional depreciation costs of the new core banking system.  Higher FDIC insurance costs of $0.2 million reflect the Company’s balance sheet growth over the past year.

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The efficiency ratio for the current quarter was 68.6%, compared with 74.2% in the fourth quarter of 2016 and 75.8% in last year’s first quarter.  The calculation of the efficiency ratio for the fourth quarter of 2016 excludes the net impact of the tax credit investment.  The decrease in the efficiency ratio this quarter reflects the Company’s strong revenue growth.

Income tax expense of $1.4 million was recorded for the first quarter of 2017, compared with $0.2 million in the fourth quarter of 2016 and $0.8 million recognized in last year’s first quarter.  The effective tax rate for the quarter was 30.8% compared with 7.8% in the fourth quarter of 2016 and 31.9% in the first quarter of 2016.  The lower effective tax rate in the fourth quarter of 2016 reflects the impact of the tax credit investment transaction.  The decrease in the effective tax rate in the first three months of 2017 when compared with the comparable prior year period is due to an increase in the value of the deferred tax asset recorded in the this year’s first quarter, reflecting an increase in the Company’s projected marginal federal tax rate due to the growth in the Company’s taxable income.  The first quarter of 2017 income tax expense was also impacted by the recognition of a tax benefit related to the vesting of employee and director stock awards, as described in Note 10 to the Unaudited Consolidated Financial Statements on this Form 10-Q.

CAPITAL

The Company consistently maintains regulatory capital ratios significantly above the federal “well capitalized” standard, including a  Tier 1 leverage ratio of 10.76% at March 31, 2017, compared with 9.49% and 10.18%at December 31, 2016  and March 31, 2016, respectively.  The increase reflects the impact of the Company’s registered common stock offering in January 2017 which netted $14 million in additional capital after expenses.  The Company issued 440,000 shares of common stock at $35.00 per share (including shares issued upon partial exercise of the underwriters’ allotment option in connection with the offering).  The offering was accretive to book value per share.  Book value per share increased to $23.64 at March 31, 2017, compared with $22.50 at December 31, 2016 and $21.54 at March 31, 2016. 

On February 21, 2017, the Company declared a cash dividend of $0.40 per share on the Company’s outstanding common stock. The dividend was paid on April 4, 2017 to shareholders of record as of March 14, 2017.This semi-annual dividend represents a $0.02, or 5%, increase from the previous semi-annual dividend paid on October 4, 2016.

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.  The Company uses the Federal Home Loan Bank of New York (“FHLBNY”) as its primary source of overnight funds and also has one long-term advance with FHLBNY.  The Company had $10 million and $28 million in borrowed funds at FHLBNY at March 31, 2017 and December 31, 2016, respectively.  The Company has pledged sufficient collateral in the form of residential and commercial real estate loans at FHLBNY that meets FHLB collateral requirements.As a member of the FHLB, the Bank is able to borrow funds at competitive rates.  Advances of up to $201 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 $18 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.

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, 2017, approximately 3% of the Bank’s securities had contractual maturity dates of one year or less and approximately 29% had maturity dates of five years or less.  Additionally, mortgage-backed securities, which comprise 55% of the investment portfolio at March 31, 2017, provide consistent cash flows for the Bank.

The Company’s primary source of liquidity is dividends from the Bank.  Additionally, the Company has access to capital markets as a funding source.

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.  In the Company’s internal stress test at  March 31, 2017 the Company had net short-term liquidity

40

of $215 million as compared with $248 million at December 31, 2016.  Available assets of $139 million, divided by public and purchased funds of $183 million, resulted in a long-term liquidity ratio of 76% at March 31, 2017, compared with 58% at December 31, 2016.

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 that 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.

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, 2017		December 31, 2016
Changes in interest rates
+200 basis points	$	1,800	$	1,838
+100 basis points		2,613		2,590
-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.

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In each of the 100 and 200 basis point rate reduction scenarios, the applicable rate changes are limited to lesser amounts such that interest rates are not 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, 2017 (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, 2017 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, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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.

In the opinion of management, there are no 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.

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

In the first quarter of 2017, 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 2017:
January 1, 2017 - January 31, 2017		-	$	-	-	15,212
February 2017:
February 1, 2017 - February 28, 2017		683	$	38.92	-	15,212
March 2017:
March 1, 2017 - March 31, 2017		-	$	-	-	15,212
Total:		683	$	38.92	-	15,212

(1) 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 fair market value of the Company’s common stock on the exercise date, which was the closing sales price of the Company’s common stock as reported on the NYSE MKT on that date.

(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 maximum number of shares that may be purchased under this program as of March 31, 2017 was 15,212.

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.

43

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 2, 2017

/s/ David J. Nasca

David J. Nasca

President and CEO

(Principal Executive Officer)

DATE

May 2, 2017

/s/ John B. Connerton

John B.  Connerton

Treasurer

(Principal Financial Officer)

44

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, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Consolidated Balance Sheets – March 31, 2017 and December 31, 2016; (ii) Unaudited Consolidated Statements of Income – Three months ended March 31, 2017 and 2016; (iii) Unaudited Statements of Consolidated Comprehensive Income – Three months ended March 31, 2017 and 2016; (iv) Unaudited Consolidated Statements of Stockholders' Equity – Three months ended March 31, 2017 and 2016; (v) Unaudited Consolidated Statements of Cash Flows – Three months ended March 31, 2017 and 2016; and (vi) Notes to Unaudited Consolidated Financial Statements.

45

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  2, 2017

/s/ David J. Nasca

David J. Nasca

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification

I, John B. Connerton, 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  2, 2017

/s/ John B. Connerton

John B. Connerton

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, 2017 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  2, 2017

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, John B. Connerton, 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, 2017 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  2, 2017

By:	/s/ John B. Connerton
Name:	John B. Connerton
Title:	Treasurer
	(Principal Financial Officer)

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 02, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	EVANS BANCORP INC
Entity Filer Category	Accelerated Filer
Entity Central Index Key	0000842518
Amendment Flag	false
Document Type	10-Q
Document Fiscal Period Focus	Q1
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		4,766,949

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks	$ 10,795	$ 12,503
Interest-bearing deposits at banks	19,440	581
Securities:
Available for sale, at fair value (amortized cost: $115,188 at March 31, 2017; $95,810 at December 31, 2016)	114,896	95,222
Held to maturity, at amortized cost (fair value: $1,387 at March 31, 2017; $1,959 at December 31, 2016)	1,408	1,983
Federal Home Loan Bank common stock, at cost	1,366	2,185
Federal Reserve Bank common stock, at cost	1,546	1,546
Loans, net of allowance for loan losses of $13,579 at March 31, 2017 and $13,916 at December 31, 2016	932,004	928,596
Properties and equipment, net of accumulated depreciation of $17,328 at March 31, 2017 and $17,012 at December 31, 2016	11,065	11,310
Goodwill and intangible assets	8,638	8,406
Bank-owned life insurance	21,664	21,534
Other assets	16,838	16,843
TOTAL ASSETS	1,139,660	1,100,709
Deposits:
Demand	194,747	201,741
NOW	103,907	88,632
Savings	531,408	508,652
Time	147,915	140,949
Total deposits	977,977	939,974
Securities sold under agreement to repurchase	11,679	10,159
Other borrowings	10,000	28,200
Other liabilities	16,047	14,298
Junior subordinated debentures	11,330	11,330
Total liabilities	1,027,033	1,003,961
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value, 10,000,000 shares authorized; 4,763,696 and 4,302,504 shares issued at March 31, 2017 and December 31, 2016, respectively, and 4,763,696 and 4,300,634 outstanding at March 31, 2017 and December 31, 2016, respectively	2,384	2,153
Capital surplus	58,543	44,389
Treasury stock, at cost, 0 and 1,870 shares at March 31, 2017 and December 31, 2016, respectively
Retained earnings	53,874	52,630
Accumulated other comprehensive loss, net of tax	(2,174)	(2,424)
Total stockholders' equity	112,627	96,748
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 1,139,660	$ 1,100,709

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Securities:
Available for sale, amortized cost	$ 115,188	$ 95,810
Held to maturity, fair value	1,387	1,959
Loans, allowance for loan losses	13,579	13,916
Properties and equipment, accumulated depreciation	$ 17,328	$ 17,012
STOCKHOLDERS' EQUITY:
Common stock, par value	$ 0.50	$ 0.50
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	4,763,696	4,302,504
Common stock, shares outstanding	4,763,696	4,300,634
Treasury stock, shares	0	1,870

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Consolidated Statements Of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
INTEREST INCOME
Loans	$ 10,246	$ 8,730
Interest bearing deposits at banks	12	11
Securities:
Taxable	436	377
Non-taxable	224	238
Total interest income	10,918	9,356
INTEREST EXPENSE
Deposits	1,116	959
Other borrowings	58	50
Junior subordinated debentures	100	87
Total interest expense	1,274	1,096
NET INTEREST INCOME	9,644	8,260
(CREDIT) PROVISION FOR LOAN LOSSES	(435)	208
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	10,079	8,052
NON-INTEREST INCOME
Deposit service charges	390	443
Insurance service and fees	2,168	1,748
Gain on loans sold	18	15
Bank-owned life insurance	130	136
Interchange fee income	344	318
Other	472	334
Total non-interest income	3,522	2,994
NON-INTEREST EXPENSE
Salaries and employee benefits	5,716	5,514
Occupancy	775	699
Advertising and public relations	190	285
Professional services	602	580
Technology and communications	607	598
Amortization of intangibles	28
FDIC insurance	227	159
Other	910	693
Total non-interest expense	9,055	8,528
INCOME BEFORE INCOME TAXES	4,546	2,518
INCOME TAX PROVISION	1,400	804
NET INCOME	$ 3,146	$ 1,714
Net income per common share-basic	$ 0.68	$ 0.40
Net income per common share-diluted	0.66	0.40
Cash dividends per common share	$ 0.40	$ 0.38
Weighted average number of common shares outstanding	4,634,096	4,263,109
Weighted average number of diluted shares outstanding	4,757,062	4,328,034

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Statements Of Consolidated Comprehensive Income - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Statements Of Consolidated Comprehensive Income [Abstract]
NET INCOME		$ 3,146	$ 1,714
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gain on available-for-sale securities		187	649
Defined benefit pension plans:
Amortization of prior service cost	[1]	10	5
Amortization of actuarial loss	[1]	53	35
Net change, Net-of-Tax Amount		63	40
OTHER COMPREHENSIVE INCOME, NET OF TAX		250	689
COMPREHENSIVE INCOME		$ 3,396	$ 2,403

[1] Included in net periodic pension cost, as described in Note 9 - "Net Periodic Benefit Costs"

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, 2015	$ 2,132	$ 43,318	$ 47,616	$ (1,810)		$ 91,256
Net Income			1,714			1,714
Other comprehensive income				689		689
Cash dividends			(1,626)			(1,626)
Stock compensation expense		118				118
Excess tax benefit from stock-based compensation		9				9
Issued restricted shares	10	(10)
Reissued restricted shares, net of forfeitures
Balance at Mar. 31, 2016	2,142	43,435	47,704	(1,121)		92,160
Balance at Dec. 31, 2016	2,153	44,389	52,630	(2,424)		96,748
Net Income			3,146			3,146
Other comprehensive income				250		250
Cash dividends			(1,902)			(1,902)
Stock compensation expense		136				136
Issued shares in stock offering	220	13,922				14,142
Issued restricted shares	8	(8)
Issued shares in stock option exercises	3	104				107
Reissued shares in stock option exercises
Balance at Mar. 31, 2017	$ 2,384	$ 58,543	$ 53,874	$ (2,174)		$ 112,627

XML

Consolidated Statements Of Changes In Stockholders’ Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements Of Changes In Stockholders’ Equity [Abstract]
Cash dividends per common share	$ 0.40	$ 0.38
Issued shares in stock offering	440,000
Issued restricted shares	15,763	19,093
Issued shares in stock option exercises	5,429
Reissued shares in stock option exercises	1,870
Reissued restricted shares, net of forfeitures		2,938

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
OPERATING ACTIVITIES:
Interest received	$ 10,801	$ 9,090
Fees received	3,210	2,839
Interest paid	(1,263)	(1,068)
Cash paid to employees and vendors	(10,116)	(8,353)
Income taxes paid	(5)	(9)
Proceeds from sale of loans held for resale	2,788	880
Originations of loans held for resale	(3,354)	(335)
Net cash provided by operating activities	2,061	3,044
INVESTING ACTIVITIES:
Purchases of available for sale securities	(22,300)	(20,471)
Proceeds from maturities, calls, and payments of available for sale securities	3,656	3,883
Purchases of held to maturity securities	(35)
Proceeds from maturities, calls, and payments of held to maturity securities	610	11
Additions to properties and equipment	(56)	(300)
Purchase of tax credit investment		(359)
Insurance agency acquisitions	(275)
Net increase in loans	(2,082)	(23,176)
Net cash used in investing activities	(20,482)	(40,412)
FINANCING ACTIVITIES:
Proceeds from (repayments of) short-term borrowings, net	(16,680)	2,072
Net increase in deposits	38,003	46,067
Issuance of common stock	14,249
Net cash provided by financing activities	35,572	48,139
Net increase in cash and cash equivalents	17,151	10,771
CASH AND CASH EQUIVALENTS:
Beginning of period	13,084	22,621
End of period	30,235	33,392
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income	3,146	1,714
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	432	359
Deferred tax expense	367	36
(Credit) Provision for loan losses	(435)	208
Gain on loans sold	(18)	(15)
Stock options and restricted stock expense	136	118
Proceeds from sale of loans held for resale	2,788	880
Originations of loans held for resale	(3,354)	(335)
Changes in assets and liabilities affecting cash flow:
Other assets	(901)	561
Other liabilities	(100)	(482)
NET CASH PROVIDED BY OPERATING ACTIVITIES	$ 2,061	$ 3,044

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Organization And Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2017

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 results of operations for the three month period ended March 31, 2017 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, 2016 (“10-K”).  The Company’s significant accounting policies are disclosed in Note 1 to the 10-K.

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Securities

3 Months Ended

Mar. 31, 2017

Securities [Abstract]

Securities

2. SECURITIES

The amortized cost of securities and their approximate fair value at March 31, 2017 and December 31, 2016 were as follows:

	March 31, 2017
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	16,795	$	73	$	(81)	$	16,787
States and political subdivisions		34,472		434		(62)		34,844
Total debt securities	$	51,267	$	507	$	(143)	$	51,631
Mortgage-backed securities:
FNMA	$	22,140	$	96	$	(229)	$	22,007
FHLMC		9,452		31		(78)		9,405
GNMA		2,463		29		(21)		2,471
SBA		7,975		19		(55)		7,939
CMO		21,891		52		(500)		21,443
Total mortgage-backed securities	$	63,921	$	227	$	(883)	$	63,265
Total securities designated as available for sale	$	115,188	$	734	$	(1,026)	$	114,896
Held to Maturity:
Debt securities
States and political subdivisions	$	1,408	$	4	$	(25)	$	1,387
Total securities designated as held to maturity	$	1,408	$	4	$	(25)	$	1,387

	December 31, 2016
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	12,958	$	67	$	(153)	$	12,872
States and political subdivisions		34,952		356		(166)		35,142
Total debt securities	$	47,910	$	423	$	(319)	$	48,014
Mortgage-backed securities:
FNMA	$	14,694	$	96	$	(230)	$	14,560
FHLMC		3,544		32		(51)		3,525
GNMA		2,535		19		(21)		2,533
CMO		27,127		67		(604)		26,590
Total mortgage-backed securities	$	47,900	$	214	$	(906)	$	47,208
Total securities designated as available for sale	$	95,810	$	637	$	(1,225)	$	95,222
Held to Maturity:
Debt securities
States and political subdivisions	$	1,983	$	5	$	(29)	$	1,959
Total securities designated as held to maturity	$	1,983	$	5	$	(29)	$	1,959

Available for sale securities with a total fair value of $108 million and $87 million at March 31, 2017 and December 31, 2016, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

The scheduled maturities of debt and mortgage-backed securities at March 31, 2017 and December 31, 2016 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, 2017				December 31, 2016
	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	$	2,875	$	2,885	$	2,869	$	2,876
Due after one year through five years		30,201		30,405		30,171		30,214
Due after five years through ten years		15,487		15,555		12,166		12,133
Due after ten years		2,704		2,786		2,704		2,791
		51,267		51,631		47,910		48,014
Mortgage-backed securities
available for sale		63,921		63,265		47,900		47,208
Total available for sale securities	$	115,188	$	114,896	$	95,810	$	95,222
Debt securities held to maturity:
Due in one year or less	$	174	$	173	$	780	$	778
Due after one year through five years		285		279		289		283
Due after five years through ten years		849		842		814		805
Due after ten years		100		93		100		93
		1,408		1,387		1,983		1,959
Total held to maturity securities	$	1,408	$	1,387	$	1,983	$	1,959

Contractual maturities of the Company’s mortgage-backed securities generally exceed ten years; however, the effective lives may be significantly shorter due to prepayments of the underlying loans and due to the nature of these securities.  The duration of the investment securities portfolio increased from 3.4 years at December 31, 2016 to 3.7 years at March 31, 2017.

Information regarding unrealized losses within the Company’s available for sale securities at March 31, 2017 and December 31, 2016 is summarized below.  The securities are primarily U.S. government-guaranteed agency securities or municipal securities.  All unrealized losses are considered temporary and are related to market interest rate fluctuations.

	March 31, 2017
		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	$	6,919	$	(81)	$	-	$	-	$	6,919	$	(81)
States and political subdivisions		9,370		(46)		733		(16)		10,103		(62)
Total debt securities	$	16,289	$	(127)	$	733	$	(16)	$	17,022	$	(143)
Mortgage-backed securities:
FNMA	$	15,301	$	(229)	$	-	$	-	$	15,301	$	(229)
FHLMC		7,730		(37)		925		(41)		8,655		(78)
GNMA		1,036		(19)		308		(2)		1,344		(21)
SBA		5,906		(55)		-		-		5,906		(55)
CMO		14,275		(353)		3,662		(147)		17,937		(500)
Total mortgage-backed securities	$	44,248	$	(693)	$	4,895	$	(190)	$	49,143	$	(883)
Held to Maturity:
Debt securities:
States and political subdivisions	$	611	$	(13)	$	362	$	(12)	$	973	$	(25)
Total temporarily impaired
securities	$	61,148	$	(833)	$	5,990	$	(218)	$	67,138	$	(1,051)

	December 31, 2016
		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	$	6,847	$	(153)	$	-	$	-	$	6,847	$	(153)
States and political subdivisions		16,895		(146)		731		(20)		17,626		(166)
Total debt securities	$	23,742	$	(299)	$	731	$	(20)	$	24,473	$	(319)
Mortgage-backed securities:
FNMA	$	9,577	$	(230)	$	-	$	-	$	9,577	$	(230)
FHLMC		1,728		(8)		988		(43)		2,716		(51)
GNMA		1,046		(17)		309		(4)		1,355		(21)
CMO		19,745		(569)		1,166		(35)		20,911		(604)
Total mortgage-backed securities	$	32,096	$	(824)	$	2,463	$	(82)	$	34,559	$	(906)
Held to Maturity:
Debt securities:
States and political subdivisions	$	863	$	(3)	$	706	$	(26)	$	1,569	$	(29)
Total temporarily impaired
securities	$	56,701	$	(1,126)	$	3,900	$	(128)	$	60,601	$	(1,254)

Management has assessed the securities available for sale in an unrealized loss position at March 31, 2017 and December 31, 2016 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 has not recorded any other-than-temporary impairment (“OTTI”) charges as of March 31, 2017 and did not record any OTTI charges during 2016.  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 stable past performance is not a guarantee for similar performance of the Company’s securities portfolio in future periods.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2017

Fair Value Measurements [Abstract]

Fair Value Measurements

3.  FAIR VALUE MEASUREMENTS

Fair value is defined in ASC Topic 820 “Fair Value Measurements and Disclosures” 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 inputs are quoted prices for identical instruments in active markets;
	Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

 Level 3 inputs are 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 as of March 31, 2017 and December 31, 2016, respectively:

(in thousands)		Level 1		Level 2		Level 3		Fair Value
March 31, 2017
Securities available-for-sale:
U.S. government agencies	$	-	$	16,787	$	-	$	16,787
States and political subdivisions		-		34,844		-		34,844
Mortgage-backed securities		-		63,265		-		63,265
Mortgage servicing rights		-		-		564		564
December 31, 2016
Securities available-for-sale:
U.S. government agencies	$	-	$	12,872	$	-	$	12,872
States and political subdivisions		-		35,142		-		35,142
Mortgage-backed securities		-		47,208		-		47,208
Mortgage servicing rights		-		-		527		527

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 not have 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, during the Company’s review or when 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.

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, 2017 and 2016, respectively:

	Three months ended March 31,
(in thousands)	2017		2016
Mortgage servicing rights - January 1	$	527	$	557
Gains (losses) included in earnings		11		(69)
Additions from loan sales		26		8
Mortgage servicing rights - March 31	$	564	$	496

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

	March 31, 2017		December 31, 2016
Servicing fees	0.25	%	0.25	%
Discount rate	9.52	%	9.52	%
Prepayment rate (CPR)	8.15	%	8.12	%

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, 2017 and December 31, 2016:

(in thousands)		Level 1		Level 2		Level 3		Fair Value
March 31, 2017
Collateral dependent impaired loans	$	-	$	-	$	17,535	$	17,535
December 31, 2016
Collateral dependent impaired loans	$	-	$	-	$	13,114	$	13,114

Collateral dependent 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 $19.5 million, with an allowance for loan loss of $2.0 million, at March 31, 2017 compared with $15.1 million and $2.0 million, respectively, at December 31, 2016.

FAIR VALUE OF FINANCIAL INSTRUMENTS

At each of March 31, 2017 and December 31, 2016, 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, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
		(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	30,235	$	30,235	$	13,084	$	13,084
Level 2:
Available for sale securities		114,896		114,896		95,222		95,222
FHLB and FRB stock		2,912		2,912		3,731		3,731
Level 3:
Held to maturity securities		1,408		1,387		1,983		1,959
Loans, net		932,004		913,707		928,596		945,998
Mortgage servicing rights		564		564		527		527
Financial liabilities:
Level 1:
Demand deposits	$	194,747	$	194,747	$	201,741	$	201,741
NOW deposits		103,907		103,907		88,632		88,632
Savings deposits		531,408		531,408		508,652		508,652
Level 2:
Securities sold under agreement to
repurchase		11,679		11,679		10,159		10,159
Other borrowed funds		10,000		9,937		28,200		28,152
Junior subordinated debentures		11,330		11,330		11,330		11,330
Level 3:
Time deposits		147,915		148,921		140,949		141,758

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 Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, which are non-marketable equity investments, approximate fair value.

As a member of the FHLB System, the Bank is required to hold stock in FHLBNY.  The Company regularly evaluates investments in FHLBNY for impairment, considering liquidity, operating performance, capital position, stock repurchase and dividend history.  As of March 31, 2017, the Bank’s investment in FHLBNY stock was not impaired.

The Bank, as a member of the FRB system, is currently required to purchase and hold shares of capital stock in the FRB in an amount equal to 6% of its capital and surplus.  Based on the current capital adequacy and liquidity position of the FRB, management believes there is no impairment in the Company’s investment at March 31, 2017.

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 Receivable.  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, negotiable order of withdrawal (“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 and there have been no issuances of similar instruments in recent years.  The Company looked at a market bond index to estimate a discount margin to value the debentures.  The discount margin was very similar to the spread to LIBOR established at the issuance of the debentures.  As a result, the Company determined that the fair value of the adjustable-rate debentures approximates their face amount.

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

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.

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Loans And The Allowance For Loan Losses

3 Months Ended

Mar. 31, 2017

Loans And The Allowance For Loan Losses [Abstract]

Loans And The Allowance For Loan Losses

4. LOANS AND 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, 2017		December 31, 2016
Mortgage loans on real estate:	(in thousands)
Residential mortgages	$	122,818	$	118,542
Commercial and multi-family		464,288		462,385
Construction-Residential		2,155		2,540
Construction-Commercial		95,757		93,240
Home equities		66,229		66,234
Total real estate loans		751,247		742,941
Commercial and industrial loans		192,041		197,371
Consumer and other loans		1,344		1,417
Net deferred loan origination costs		951		783
Total gross loans		945,583		942,512
Allowance for loan losses		(13,579)		(13,916)
Loans, net	$	932,004	$	928,596

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, 2017, the Bank sold mortgages to FNMA totaling $2.8 million, compared with $0.9  million in the three month period ended March 31, 2016.  At each of March 31, 2017 and December 31, 2016, the Bank had a loan servicing portfolio principal balance of $76 million upon which it earned servicing fees.  The value of the mortgage servicing rights for that portfolio was $0.6 million at March 31, 2017 and $0.5 million at December 31, 2016.  At March 31, 2017 there were $0.9 million in residential mortgages held for sale compared with $0.3 million at December 31, 2016.  The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

The Company had $9 million in commercial and industrial loans held for sale as of March 31, 2017.  This represents a single loan relationship in which the Bank was a participant in a larger syndicated loan.  There was no significant credit deterioration in the loan as the Bank received a bid for the loan at par and as a result the loan’s fair value was equal to its amortized cost.  The Bank does not typically sell its commercial loans or hold them for resale.  However, management determined that from a risk management and capital management perspective, selling this particular loan was in the Bank’s best interest.  The loan is expected to be sold in the second quarter of 2017.There were no commercial loans held for sale as of December 31, 2016.   

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, 2016.  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, 2016.  Unless otherwise noted in this Form 10-Q, the policies and methodology described in the Annual Report for the year ended December 31, 2016 are consistent with those utilized by the Company in the three month period ended March 31, 2017.

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 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.  Unlike commercial customers, consumer loan customers are not required to provide the Company with updated financial information.  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 primary credit quality indicator for consumer loans.  However, once a consumer loan is identified as impaired, it is individually evaluated for impairment.

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

March 31, 2017
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
1-3	$	80,643	$	375,456	$	456,099	$	123,648
4		10,936		71,958		82,894		55,746
5		-		6,641		6,641		9,264
6		4,178		10,233		14,411		2,570
7		-		-		-		813
Total	$	95,757	$	464,288	$	560,045	$	192,041

December 31, 2016
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
1-3	$	82,520	$	372,235	$	454,755	$	121,414
4		6,541		73,655		80,196		59,117
5		-		12,506		12,506		12,623
6		4,179		3,989		8,168		3,404
7		-		-		-		813
Total	$	93,240	$	462,385	$	555,625	$	197,371

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, 2017
(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	$	2,751	$	138	$	931	$	3,820	$	188,221	$	192,041	$	72	$	2,771
Residential real estate:
Residential		1,225		70		659		1,954		120,864		122,818		-		846
Construction		-		-		-		-		2,155		2,155		-		-
Commercial real estate:
Commercial		15,249		213		2,097		17,559		446,729		464,288		-		3,174
Construction		4,127		-		4,179		8,306		87,451		95,757		-		4,179
Home equities		128		207		593		928		65,301		66,229		-		1,232
Consumer and other		50		7		-		57		1,287		1,344		-		11
Total Loans	$	23,530	$	635	$	8,459	$	32,624	$	912,008	$	944,632	$	72	$	12,213

Note: Loan balances do not include $951 thousand in net deferred loan origination costs as of March 31, 2017.

December 31, 2016
(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	$	6,772	$	2,966	$	1,150	$	10,888	$	186,483	$	197,371	$	-	$	3,106
Residential real estate:
Residential		868		123		567		1,558		116,984		118,542		-		862
Construction		-		-		-		-		2,540		2,540		-		-
Commercial real estate:
Commercial		6,319		1,522		2,357		10,198		452,187		462,385		483		1,874
Construction		257		-		4,417		4,674		88,566		93,240		239		4,178
Home equities		481		119		679		1,279		64,955		66,234		-		1,261
Consumer and other		15		10		5		30		1,387		1,417		-		17
Total Loans	$	14,712	$	4,740	$	9,175	$	28,627	$	913,102	$	941,729	$	722	$	11,298

Note: Loan balances do not include $783 thousand in net deferred loan origination costs as of December 31, 2016.

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, 2017 and 2016:

March 31, 2017
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Beginning balance	$	4,813	$	7,890	$	96	$	769	$	348	$	13,916
Charge-offs		(33)		-		(28)		-		-		(61)
Recoveries		147		-		12		-		-		159
Provision (Credit)		(964)		308		55		150		16		(435)
Ending balance	$	3,963	$	8,198	$	135	$	919	$	364	$	13,579
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	253	$	1,716	$	36	$	1	$	9	$	2,015
Collectively evaluated
for impairment		3,710		6,482		99		918		355		11,564
Total	$	3,963	$	8,198	$	135	$	919	$	364	$	13,579
Loans:
Ending balance:
Individually evaluated
for impairment	$	2,786	$	12,473	$	36	$	2,561	$	1,694	$	19,550
Collectively evaluated
for impairment		189,255		547,572		1,308		122,412		64,535		925,082
Total	$	192,041	$	560,045	$	1,344	$	124,973	$	66,229	$	944,632

* Includes construction loans

Note: Loan balances do not include $951 thousand in net deferred loan origination costs as of March 31, 2017.

March 31, 2016
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Beginning balance	$	4,383	$	7,135	$	85	$	909	$	371	$	12,883
Charge-offs		(13)		-		(7)		-		-		(20)
Recoveries		7		38		3		-		-		48
Provision (Credit)		203		269		12		(213)		(63)		208
Ending balance	$	4,580	$	7,442	$	93	$	696	$	308	$	13,119
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	516	$	1,134	$	41	$	2	$	-	$	1,693
Collectively evaluated
for impairment		4,064		6,308		52		694		308		11,426
Total	$	4,580	$	7,442	$	93	$	696	$	308	$	13,119
Loans:
Ending balance:
Individually evaluated
for impairment	$	5,382	$	10,092	$	41	$	2,482	$	1,545	$	19,542
Collectively evaluated
for impairment		145,431		464,806		2,131		104,212		60,048		776,628
Total	$	150,813	$	474,898	$	2,172	$	106,694	$	61,593	$	796,170

* Includes construction loans

Note: Loan balances do not include $603 thousand in net deferred loan origination costs as of March 31, 2016.

Impaired Loans

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

		At March 31, 2017
		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	$	1,176	$	1,279	$	-	$	1,183	$	23	$	5
Residential real estate:
Residential		2,491		2,697		-		2,493		9		17
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,452		2,506		-		2,534		34		19
Construction		-		-		-		-		-		-
Home equities		1,611		1,697		-		1,627		15		4
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	7,730	$	8,179	$	-	$	7,837	$	81	$	45

		At March 31, 2017
		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	$	1,610	$	1,853	$	253	$	1,654	$	24	$	2
Residential real estate:
Residential		70		72		1		70		1		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		5,843		5,871		541		5,843		13		53
Construction		4,178		4,201		1,175		4,179		50		-
Home equities		83		85		9		83		1		-
Consumer and other		36		62		36		37		1		1
Total impaired loans	$	11,820	$	12,144	$	2,015	$	11,866	$	90	$	56

		At March 31, 2017
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	2,786	$	3,132	$	253	$	2,837	$	47	$	7
Residential real estate:
Residential		2,561		2,769		1		2,563		10		17
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		8,295		8,377		541		8,377		47		72
Construction		4,178		4,201		1,175		4,179		50		-
Home equities		1,694		1,782		9		1,710		16		4
Consumer and other		36		62		36		37		1		1
Total impaired loans	$	19,550	$	20,323	$	2,015	$	19,703	$	171	$	101

		At December 31, 2016
		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	$	1,304	$	1,604	$	-	$	1,455	$	125	$	51
Residential real estate:
Residential		2,513		2,720		-		2,542		39		78
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,123		2,168		-		2,181		33		89
Construction		257		257		-		404		2		28
Home equities		1,559		1,621		-		1,606		51		30
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	7,756	$	8,370	$	-	$	8,188	$	250	$	276

		At December 31, 2016
		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	$	1,844	$	1,913	$	492	$	1,898	$	62	$	53
Residential real estate:
Residential		71		72		1		72		2		1
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		1,054		1,083		296		1,062		50		-
Construction		4,179		4,201		1,175		4,180		194		-
Home equities		194		206		20		195		9		1
Consumer and other		43		68		43		45		3		3
Total impaired loans	$	7,385	$	7,543	$	2,027	$	7,452	$	320	$	58

		At December 31, 2016
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	3,148	$	3,517	$	492	$	3,353	$	187	$	104
Residential real estate:
Residential		2,584		2,792		1		2,614		41		79
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		3,177		3,251		296		3,243		83		89
Construction		4,436		4,458		1,175		4,584		196		28
Home equities		1,753		1,827		20		1,801		60		31
Consumer and other		43		68		43		45		3		3
Total impaired loans	$	15,141	$	15,913	$	2,027	$	15,640	$	570	$	334

Non-performing loans

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

	March 31, 2017			December 31, 2016
		(in thousands)
Non-accruing loans:
Commercial and industrial loans	$	2,771		$	3,106
Residential real estate:
Residential		846			862
Construction		-			-
Commercial real estate:
Commercial and multi-family		3,174			1,874
Construction		4,179			4,178
Home equities		1,232			1,261
Consumer loans		11			17
Total non-accruing loans	$	12,213		$	11,298
Accruing loans 90+ days past due		72			722
Total non-performing loans	$	12,285		$	12,020
Total non-performing loans
to total assets		1.08	%		1.09	%
Total non-performing loans
to total loans		1.30	%		1.28	%

Troubled debt restructurings

The Company had $9.1 million and $5.1 million in loans that were restructured in a troubled debt restructuring (“TDR”) at March 31, 2017 and December 31, 2016, respectively.  Of those balances, $1.7 million and $1.2 million were in non-accrual status at March 31, 2017 and December 31, 2016, 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 reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective interest 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, 2017, 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, 2017
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	729	$	714	$	15	$	168
Residential real estate:
Residential		1,949		235		1,714		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		5,713		592		5,121		245
Construction		-		-		-		-
Home equities		638		177		461		-
Consumer and other loans		26		-		26		26
Total troubled restructured loans	$	9,055	$	1,718	$	7,337	$	439

		December 31, 2016
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	574	$	532	$	42	$	147
Residential real estate:
Residential		1,949		227		1,722		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		1,617		313		1,304		-
Construction		257		-		257		-
Home equities		667		175		492		1
Consumer and other loans		26		-		26		26
Total troubled restructured loans	$	5,090	$	1,247	$	3,843	$	174

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 concessions leading to the designation of a TDR are lines of credit that are termed-out and/or extensions of maturities at rates that are less than the prevailing market rates given the risk profile of the borrower.

The following tables show the data for TDR activity by the type of concession granted to the borrower for the three month periods ended March 31, 2017 and 2016:

	Three months ended March 31, 2017					Three months ended March 31, 2016
	(Recorded Investment in thousands)					(Recorded Investment 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:
Extension of maturity	-	$	-	$	-	1	$	24	$	24
Interest rate reduction	-		-		-	-		-		-
Term-out line of credit	1		180		180	1		20		20
Combination of concessions	-		-		-	-		-		-
Residential Real Estate & Construction:
Extension of maturity	-		-		-	1		95		95
Commercial Real Estate & Construction	-		-		-	-		-		-
Extension of maturity	3		5,073		5,073	-		-		-
Home Equities	-		-		-	-		-		-
Consumer and other loans	-		-		-	-		-		-

The general practice of the Bank is to work with borrowers so that they are able to repay 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.  There were no loans which were classified as TDRs during the previous 12 months which defaulted during each of the three month periods ended March 31, 2017 and 2016.

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Common Equity And Earnings Per Share Data

3 Months Ended

Mar. 31, 2017

Common Equity And Earnings Per Share Data [Abstract]

Common Equity And Earnings Per Share Data

5. COMMON EQUITY AND EARNINGS 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, 2017 and 2016, the Company had an average of 122,966 and 64,925 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, 2017 and 2016, there was an average of 24,990 and 49,550 potentially anti-dilutive shares outstanding, respectively, that were not included in calculating diluted earnings per share because their effect was anti-dilutive.

The Company issued 440,000 shares of common stock at $35.00 per share (including shares issued upon partial exercise of the underwriters’ allotment option in connection with the offering) in a registered common stock offering in January 2017.  The offering netted $14 million in additional capital after expenses.

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Other Comprehensive Income

3 Months Ended

Mar. 31, 2017

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, 2017 and 2016:

	Balance at December 31, 2016		Net Change		Balance at March 31, 2017
	(in thousands)
Net unrealized (loss) gain on investment securities	$	(365)	$	187	$	(178)
Net defined benefit pension plan adjustments		(2,059)		63		(1,996)
Total	$	(2,424)	$	250	$	(2,174)
	Balance at December 31, 2015		Net Change		Balance at March 31, 2016
	(in thousands)
Net unrealized gain on investment securities	$	475	$	649	$	1,124
Net defined benefit pension plan adjustments		(2,285)		40		(2,245)
Total	$	(1,810)	$	689	$	(1,121)

	Three months ended March 31, 2017						Three months ended March 31, 2016
	(in thousands)						(in thousands)
	Before-Tax Amount		Income Tax (Provision) Benefit (b)		Net-of-Tax Amount		Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount
Unrealized gain on investment
securities:
Unrealized gain on investment
securities	$	296	$	(109)	$	187	$	1,047	$	(398)	$	649
Defined benefit pension plan
adjustments:
Reclassifications from accumulated other
comprehensive income for gains (losses)
Amortization of prior service cost (a)	$	8	$	2	$	10	$	8	$	(3)	$	5
Amortization of actuarial loss (a)		43		10		53		56		(21)		35
Net change		51		12		63		64		(24)		40
Other Comprehensive Income (Loss)	$	347	$	(97)	$	250	$	1,111	$	(422)	$	689

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

(b) Tax benefit includes impact of re-valuation of deferred tax asset due to increase in marginal federal income tax rate

from 34% to 35%.

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Segment Information

3 Months Ended

Mar. 31, 2017

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, 2017 and 2016.

	March 31, 2017
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	9,670	$	(26)	$	9,644
(Credit) provision for loan losses		(435)		-		(435)
Net interest income (expense) after
provision for loan losses		10,105		(26)		10,079
Non-interest income		1,354		-		1,354
Insurance service and fees		109		2,059		2,168
Amortization expense		-		28		28
Non-interest expense		7,647		1,380		9,027
Income before income taxes		3,921		625		4,546
Income tax provision		1,159		241		1,400
Net income	$	2,762	$	384	$	3,146

	March 31, 2016
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	8,291	$	(31)	$	8,260
Provision for loan losses		208		-		208
Net interest income (expense) after
provision for loan losses		8,083		(31)		8,052
Non-interest income		1,246		-		1,246
Insurance service and fees		116		1,632		1,748
Non-interest expense		7,327		1,201		8,528
Income before income taxes		2,118		400		2,518
Income tax provision		650		154		804
Net income	$	1,468	$	246	$	1,714

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Contingent Liabilities And Commitments

3 Months Ended

Mar. 31, 2017

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,
	2017		2016
	(in thousands)
Commitments to extend credit	$	203,354	$	217,581
Standby letters of credit		4,504		3,736
Total	$	207,858	$	221,317

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 did not incur any losses on its commitments and did not record a reserve for its commitments during the first three months of 2017 or during 2016.

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 to be material.

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Net Periodic Benefit Costs

3 Months Ended

Mar. 31, 2017

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 Bank 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 make a contribution to the defined benefit pension plan during the first three months of 2017.

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, 2017 and 2016:

		Three months ended March 31,
		(in thousands)
					Supplemental Executive
	Pension Benefits				Retirement Plan
	2017		2016		2017		2016
Service cost	$	-	$	-	$	42	$	47
Interest cost		54		55		34		36
Expected return on plan assets		(69)		(65)		-		-
Amortization of prior service cost		-		-		8		8
Amortization of the net loss		23		22		20		34
Net periodic cost (benefit)	$	8	$	12	$	104	$	125

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2017

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

10.  RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers.  The objective of this 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, 2017, including interim periods within the reporting period.  The Company does not expect the standard to have a material impact on the Company’s financial reporting.

ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  The main objective of this ASU is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years.  The ASU will not impact results of operations or the financial position of the Company, but will impact its fair value disclosures in the notes to the financial statements.

ASU 2016-02, Leases.  The objective of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements to meet that objective.  The main difference between previous GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP.  Under this new guidance, a lessee should recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term.  The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP.  Information about the Company’s operating lease obligations is disclosed in Note 16 to the Company’s Consolidated Financial Statements included in Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2016.  The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is currently evaluating the impact of the standard on its financial reporting.

ASU 2016-09, Improvements to Employee Share-Based Payment Accounting.  This ASU is part of the FASB’s Simplification Initiative.  The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Some of the areas of simplification apply only to nonpublic entities.  The standard was adopted effective January 1, 2017.  One part of this ASU that impacted the Company was the elimination of the concept of a tax windfall pool.  Previously, an entity determined for each award whether the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes resulted in either an excess benefit or a tax deficiency.  Excess tax benefits were recognized in additional paid-in-capital; tax deficiencies were recognized either as an offset to accumulated excess tax benefits, if any, or in the income statement.  Excess tax benefits were not recognized until the deduction reduced taxes payable.  Under the new standard, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement in the period in which they are incurred.  The impact in the first quarter of 2017 was a tax benefit of $0.1 million. 

In addition, the Company made the accounting policy election effective January 1, 2017 to account for forfeitures of stock awards when they occur rather than estimating the number of awards that are expected to vest.  When stock awards are granted, the Company assumes that the service condition will be achieved when determining the initial amount of compensation cost recognized.  The Company does not expect this election to have a material impact on its financial statements.

ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.  Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. Both financial institutions and users of their financial statements expressed concern that current GAAP restricts the ability to record credit losses that are expected, but do not yet meet the “probable” threshold.  The main objective of this ASU (commonly known as the Current Expected Credit Loss Impairment Model, or CECL, in the industry) is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.  To achieve this objective, the amendments in CECL replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  The amendments in CECL are effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  The FASB expects that an entity will be able to leverage its current systems and methods for recording the allowance for credit losses.  However, many financial institutions, particularly community banks similar in size to the Company and industry groups like the American Bankers Association, have expressed concern about the impact of CECL.  The life of loan loss concept presents complexities that can decrease capital, and add both volatility to ALLL estimates and additional costs.  CECL may increase the ALLL, though many factors will determine the impact for each bank.  Changes in expectations of future economic conditions play a large role in CECL and can significantly affect the credit loss estimate.  While OCC estimates made in 2012 projected a 30% to 50% increase in the ALLL, more

recent bank analyst projections were far lower.  A challenge for the Company could be the operational impact.  Costly new systems and process to track loan performance may need to be purchased or developed.  Significant procedural challenges may be faced both in implementation and on an ongoing basis.  The total impact of CECL to the Company’s financial statements is unknown but may be material.  Implementation of CECL will be a significant project for the Company through the projected implementation date of January 1, 2020.

ASU 2017-04, Simplifying the Test for Goodwill Impairment.  The objective of this ASU is to simplify how an entity is required to test goodwill impairment by eliminating Step 2 from the goodwill impairment test.  Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.  Under the amendments in this ASU, an entity will perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.  An entity would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.  The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years.  The Company does not expect the standard to have a material impact on the Company’s financial reporting.

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Organization And Summary Of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2017

Organization And Summary Of Significant Accounting Policies [Abstract]

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 results of operations for the three month period ended March 31, 2017 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, 2016 (“10-K”).  The Company’s significant accounting policies are disclosed in Note 1 to the 10-K.

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Securities (Tables)

3 Months Ended

Mar. 31, 2017

Securities [Abstract]

Schedule Of Amortized Cost And Approximate Fair Value Of Securities

	March 31, 2017
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	16,795	$	73	$	(81)	$	16,787
States and political subdivisions		34,472		434		(62)		34,844
Total debt securities	$	51,267	$	507	$	(143)	$	51,631
Mortgage-backed securities:
FNMA	$	22,140	$	96	$	(229)	$	22,007
FHLMC		9,452		31		(78)		9,405
GNMA		2,463		29		(21)		2,471
SBA		7,975		19		(55)		7,939
CMO		21,891		52		(500)		21,443
Total mortgage-backed securities	$	63,921	$	227	$	(883)	$	63,265
Total securities designated as available for sale	$	115,188	$	734	$	(1,026)	$	114,896
Held to Maturity:
Debt securities
States and political subdivisions	$	1,408	$	4	$	(25)	$	1,387
Total securities designated as held to maturity	$	1,408	$	4	$	(25)	$	1,387

	December 31, 2016
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. government agencies	$	12,958	$	67	$	(153)	$	12,872
States and political subdivisions		34,952		356		(166)		35,142
Total debt securities	$	47,910	$	423	$	(319)	$	48,014
Mortgage-backed securities:
FNMA	$	14,694	$	96	$	(230)	$	14,560
FHLMC		3,544		32		(51)		3,525
GNMA		2,535		19		(21)		2,533
CMO		27,127		67		(604)		26,590
Total mortgage-backed securities	$	47,900	$	214	$	(906)	$	47,208
Total securities designated as available for sale	$	95,810	$	637	$	(1,225)	$	95,222
Held to Maturity:
Debt securities
States and political subdivisions	$	1,983	$	5	$	(29)	$	1,959
Total securities designated as held to maturity	$	1,983	$	5	$	(29)	$	1,959

Scheduled Maturities Of Debt And Mortgage-Backed Securities

	March 31, 2017				December 31, 2016
	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	$	2,875	$	2,885	$	2,869	$	2,876
Due after one year through five years		30,201		30,405		30,171		30,214
Due after five years through ten years		15,487		15,555		12,166		12,133
Due after ten years		2,704		2,786		2,704		2,791
		51,267		51,631		47,910		48,014
Mortgage-backed securities
available for sale		63,921		63,265		47,900		47,208
Total available for sale securities	$	115,188	$	114,896	$	95,810	$	95,222
Debt securities held to maturity:
Due in one year or less	$	174	$	173	$	780	$	778
Due after one year through five years		285		279		289		283
Due after five years through ten years		849		842		814		805
Due after ten years		100		93		100		93
		1,408		1,387		1,983		1,959
Total held to maturity securities	$	1,408	$	1,387	$	1,983	$	1,959

Unrealized Losses On Securities

	March 31, 2017
		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	$	6,919	$	(81)	$	-	$	-	$	6,919	$	(81)
States and political subdivisions		9,370		(46)		733		(16)		10,103		(62)
Total debt securities	$	16,289	$	(127)	$	733	$	(16)	$	17,022	$	(143)
Mortgage-backed securities:
FNMA	$	15,301	$	(229)	$	-	$	-	$	15,301	$	(229)
FHLMC		7,730		(37)		925		(41)		8,655		(78)
GNMA		1,036		(19)		308		(2)		1,344		(21)
SBA		5,906		(55)		-		-		5,906		(55)
CMO		14,275		(353)		3,662		(147)		17,937		(500)
Total mortgage-backed securities	$	44,248	$	(693)	$	4,895	$	(190)	$	49,143	$	(883)
Held to Maturity:
Debt securities:
States and political subdivisions	$	611	$	(13)	$	362	$	(12)	$	973	$	(25)
Total temporarily impaired
securities	$	61,148	$	(833)	$	5,990	$	(218)	$	67,138	$	(1,051)

	December 31, 2016
		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	$	6,847	$	(153)	$	-	$	-	$	6,847	$	(153)
States and political subdivisions		16,895		(146)		731		(20)		17,626		(166)
Total debt securities	$	23,742	$	(299)	$	731	$	(20)	$	24,473	$	(319)
Mortgage-backed securities:
FNMA	$	9,577	$	(230)	$	-	$	-	$	9,577	$	(230)
FHLMC		1,728		(8)		988		(43)		2,716		(51)
GNMA		1,046		(17)		309		(4)		1,355		(21)
CMO		19,745		(569)		1,166		(35)		20,911		(604)
Total mortgage-backed securities	$	32,096	$	(824)	$	2,463	$	(82)	$	34,559	$	(906)
Held to Maturity:
Debt securities:
States and political subdivisions	$	863	$	(3)	$	706	$	(26)	$	1,569	$	(29)
Total temporarily impaired
securities	$	56,701	$	(1,126)	$	3,900	$	(128)	$	60,601	$	(1,254)

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2017

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, 2017
Securities available-for-sale:
U.S. government agencies	$	-	$	16,787	$	-	$	16,787
States and political subdivisions		-		34,844		-		34,844
Mortgage-backed securities		-		63,265		-		63,265
Mortgage servicing rights		-		-		564		564
December 31, 2016
Securities available-for-sale:
U.S. government agencies	$	-	$	12,872	$	-	$	12,872
States and political subdivisions		-		35,142		-		35,142
Mortgage-backed securities		-		47,208		-		47,208
Mortgage servicing rights		-		-		527		527

Changes In Fair Value For Mortgage Servicing Rights

	Three months ended March 31,
(in thousands)	2017		2016
Mortgage servicing rights - January 1	$	527	$	557
Gains (losses) included in earnings		11		(69)
Additions from loan sales		26		8
Mortgage servicing rights - March 31	$	564	$	496

Quantitative Information About Significant Unobservable Inputs For MSRs

	March 31, 2017		December 31, 2016
Servicing fees	0.25	%	0.25	%
Discount rate	9.52	%	9.52	%
Prepayment rate (CPR)	8.15	%	8.12	%

Financial Instruments Measured At Fair Value On Nonrecurring Basis

(in thousands)		Level 1		Level 2		Level 3		Fair Value
March 31, 2017
Collateral dependent impaired loans	$	-	$	-	$	17,535	$	17,535
December 31, 2016
Collateral dependent impaired loans	$	-	$	-	$	13,114	$	13,114

Estimated Fair Values Of Financial Instruments

	March 31, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
		(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	30,235	$	30,235	$	13,084	$	13,084
Level 2:
Available for sale securities		114,896		114,896		95,222		95,222
FHLB and FRB stock		2,912		2,912		3,731		3,731
Level 3:
Held to maturity securities		1,408		1,387		1,983		1,959
Loans, net		932,004		913,707		928,596		945,998
Mortgage servicing rights		564		564		527		527
Financial liabilities:
Level 1:
Demand deposits	$	194,747	$	194,747	$	201,741	$	201,741
NOW deposits		103,907		103,907		88,632		88,632
Savings deposits		531,408		531,408		508,652		508,652
Level 2:
Securities sold under agreement to
repurchase		11,679		11,679		10,159		10,159
Other borrowed funds		10,000		9,937		28,200		28,152
Junior subordinated debentures		11,330		11,330		11,330		11,330
Level 3:
Time deposits		147,915		148,921		140,949		141,758

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Loans And The Allowance For Loan Losses (Tables)

3 Months Ended

Mar. 31, 2017

Loans And The Allowance For Loan Losses [Abstract]

Schedule Of Loan Portfolio Composition

	March 31, 2017		December 31, 2016
Mortgage loans on real estate:	(in thousands)
Residential mortgages	$	122,818	$	118,542
Commercial and multi-family		464,288		462,385
Construction-Residential		2,155		2,540
Construction-Commercial		95,757		93,240
Home equities		66,229		66,234
Total real estate loans		751,247		742,941
Commercial and industrial loans		192,041		197,371
Consumer and other loans		1,344		1,417
Net deferred loan origination costs		951		783
Total gross loans		945,583		942,512
Allowance for loan losses		(13,579)		(13,916)
Loans, net	$	932,004	$	928,596

Data, At Class Level, Of Credit Quality Indicators Of Certain Loans

March 31, 2017
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
1-3	$	80,643	$	375,456	$	456,099	$	123,648
4		10,936		71,958		82,894		55,746
5		-		6,641		6,641		9,264
6		4,178		10,233		14,411		2,570
7		-		-		-		813
Total	$	95,757	$	464,288	$	560,045	$	192,041

December 31, 2016
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
1-3	$	82,520	$	372,235	$	454,755	$	121,414
4		6,541		73,655		80,196		59,117
5		-		12,506		12,506		12,623
6		4,179		3,989		8,168		3,404
7		-		-		-		813
Total	$	93,240	$	462,385	$	555,625	$	197,371

Recorded Investment In Loans Past Due

March 31, 2017
(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	$	2,751	$	138	$	931	$	3,820	$	188,221	$	192,041	$	72	$	2,771
Residential real estate:
Residential		1,225		70		659		1,954		120,864		122,818		-		846
Construction		-		-		-		-		2,155		2,155		-		-
Commercial real estate:
Commercial		15,249		213		2,097		17,559		446,729		464,288		-		3,174
Construction		4,127		-		4,179		8,306		87,451		95,757		-		4,179
Home equities		128		207		593		928		65,301		66,229		-		1,232
Consumer and other		50		7		-		57		1,287		1,344		-		11
Total Loans	$	23,530	$	635	$	8,459	$	32,624	$	912,008	$	944,632	$	72	$	12,213

Note: Loan balances do not include $951 thousand in net deferred loan origination costs as of March 31, 2017.

December 31, 2016
(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	$	6,772	$	2,966	$	1,150	$	10,888	$	186,483	$	197,371	$	-	$	3,106
Residential real estate:
Residential		868		123		567		1,558		116,984		118,542		-		862
Construction		-		-		-		-		2,540		2,540		-		-
Commercial real estate:
Commercial		6,319		1,522		2,357		10,198		452,187		462,385		483		1,874
Construction		257		-		4,417		4,674		88,566		93,240		239		4,178
Home equities		481		119		679		1,279		64,955		66,234		-		1,261
Consumer and other		15		10		5		30		1,387		1,417		-		17
Total Loans	$	14,712	$	4,740	$	9,175	$	28,627	$	913,102	$	941,729	$	722	$	11,298

Note: Loan balances do not include $783 thousand in net deferred loan origination costs as of December 31, 2016.

Schedule Of Allowance For Loan Losses According To Portfolio Segment

March 31, 2017
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Beginning balance	$	4,813	$	7,890	$	96	$	769	$	348	$	13,916
Charge-offs		(33)		-		(28)		-		-		(61)
Recoveries		147		-		12		-		-		159
Provision (Credit)		(964)		308		55		150		16		(435)
Ending balance	$	3,963	$	8,198	$	135	$	919	$	364	$	13,579
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	253	$	1,716	$	36	$	1	$	9	$	2,015
Collectively evaluated
for impairment		3,710		6,482		99		918		355		11,564
Total	$	3,963	$	8,198	$	135	$	919	$	364	$	13,579
Loans:
Ending balance:
Individually evaluated
for impairment	$	2,786	$	12,473	$	36	$	2,561	$	1,694	$	19,550
Collectively evaluated
for impairment		189,255		547,572		1,308		122,412		64,535		925,082
Total	$	192,041	$	560,045	$	1,344	$	124,973	$	66,229	$	944,632

* Includes construction loans

Note: Loan balances do not include $951 thousand in net deferred loan origination costs as of March 31, 2017.

March 31, 2016
(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Beginning balance	$	4,383	$	7,135	$	85	$	909	$	371	$	12,883
Charge-offs		(13)		-		(7)		-		-		(20)
Recoveries		7		38		3		-		-		48
Provision (Credit)		203		269		12		(213)		(63)		208
Ending balance	$	4,580	$	7,442	$	93	$	696	$	308	$	13,119
Allowance for loan
losses:
Ending balance:
Individually evaluated
for impairment	$	516	$	1,134	$	41	$	2	$	-	$	1,693
Collectively evaluated
for impairment		4,064		6,308		52		694		308		11,426
Total	$	4,580	$	7,442	$	93	$	696	$	308	$	13,119
Loans:
Ending balance:
Individually evaluated
for impairment	$	5,382	$	10,092	$	41	$	2,482	$	1,545	$	19,542
Collectively evaluated
for impairment		145,431		464,806		2,131		104,212		60,048		776,628
Total	$	150,813	$	474,898	$	2,172	$	106,694	$	61,593	$	796,170

* Includes construction loans

Note: Loan balances do not include $603 thousand in net deferred loan origination costs as of March 31, 2016.

Data, At Class Level, Of Impaired Loans

		At March 31, 2017
		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	$	1,176	$	1,279	$	-	$	1,183	$	23	$	5
Residential real estate:
Residential		2,491		2,697		-		2,493		9		17
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,452		2,506		-		2,534		34		19
Construction		-		-		-		-		-		-
Home equities		1,611		1,697		-		1,627		15		4
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	7,730	$	8,179	$	-	$	7,837	$	81	$	45

		At March 31, 2017
		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	$	1,610	$	1,853	$	253	$	1,654	$	24	$	2
Residential real estate:
Residential		70		72		1		70		1		-
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		5,843		5,871		541		5,843		13		53
Construction		4,178		4,201		1,175		4,179		50		-
Home equities		83		85		9		83		1		-
Consumer and other		36		62		36		37		1		1
Total impaired loans	$	11,820	$	12,144	$	2,015	$	11,866	$	90	$	56

		At March 31, 2017
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	2,786	$	3,132	$	253	$	2,837	$	47	$	7
Residential real estate:
Residential		2,561		2,769		1		2,563		10		17
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		8,295		8,377		541		8,377		47		72
Construction		4,178		4,201		1,175		4,179		50		-
Home equities		1,694		1,782		9		1,710		16		4
Consumer and other		36		62		36		37		1		1
Total impaired loans	$	19,550	$	20,323	$	2,015	$	19,703	$	171	$	101

		At December 31, 2016
		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	$	1,304	$	1,604	$	-	$	1,455	$	125	$	51
Residential real estate:
Residential		2,513		2,720		-		2,542		39		78
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		2,123		2,168		-		2,181		33		89
Construction		257		257		-		404		2		28
Home equities		1,559		1,621		-		1,606		51		30
Consumer and other		-		-		-		-		-		-
Total impaired loans	$	7,756	$	8,370	$	-	$	8,188	$	250	$	276

		At December 31, 2016
		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	$	1,844	$	1,913	$	492	$	1,898	$	62	$	53
Residential real estate:
Residential		71		72		1		72		2		1
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		1,054		1,083		296		1,062		50		-
Construction		4,179		4,201		1,175		4,180		194		-
Home equities		194		206		20		195		9		1
Consumer and other		43		68		43		45		3		3
Total impaired loans	$	7,385	$	7,543	$	2,027	$	7,452	$	320	$	58

		At December 31, 2016
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	3,148	$	3,517	$	492	$	3,353	$	187	$	104
Residential real estate:
Residential		2,584		2,792		1		2,614		41		79
Construction		-		-		-		-		-		-
Commercial real estate:
Commercial		3,177		3,251		296		3,243		83		89
Construction		4,436		4,458		1,175		4,584		196		28
Home equities		1,753		1,827		20		1,801		60		31
Consumer and other		43		68		43		45		3		3
Total impaired loans	$	15,141	$	15,913	$	2,027	$	15,640	$	570	$	334

Schedule Of Non-Performing Loans

	March 31, 2017			December 31, 2016
		(in thousands)
Non-accruing loans:
Commercial and industrial loans	$	2,771		$	3,106
Residential real estate:
Residential		846			862
Construction		-			-
Commercial real estate:
Commercial and multi-family		3,174			1,874
Construction		4,179			4,178
Home equities		1,232			1,261
Consumer loans		11			17
Total non-accruing loans	$	12,213		$	11,298
Accruing loans 90+ days past due		72			722
Total non-performing loans	$	12,285		$	12,020
Total non-performing loans
to total assets		1.08	%		1.09	%
Total non-performing loans
to total loans		1.30	%		1.28	%

Loans Classified As Troubled Debt Restructurings

		March 31, 2017
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	729	$	714	$	15	$	168
Residential real estate:
Residential		1,949		235		1,714		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		5,713		592		5,121		245
Construction		-		-		-		-
Home equities		638		177		461		-
Consumer and other loans		26		-		26		26
Total troubled restructured loans	$	9,055	$	1,718	$	7,337	$	439

		December 31, 2016
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	574	$	532	$	42	$	147
Residential real estate:
Residential		1,949		227		1,722		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		1,617		313		1,304		-
Construction		257		-		257		-
Home equities		667		175		492		1
Consumer and other loans		26		-		26		26
Total troubled restructured loans	$	5,090	$	1,247	$	3,843	$	174

TDR Activity By Type Of Concession Granted To Borrower

	Three months ended March 31, 2017					Three months ended March 31, 2016
	(Recorded Investment in thousands)					(Recorded Investment 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:
Extension of maturity	-	$	-	$	-	1	$	24	$	24
Interest rate reduction	-		-		-	-		-		-
Term-out line of credit	1		180		180	1		20		20
Combination of concessions	-		-		-	-		-		-
Residential Real Estate & Construction:
Extension of maturity	-		-		-	1		95		95
Commercial Real Estate & Construction	-		-		-	-		-		-
Extension of maturity	3		5,073		5,073	-		-		-
Home Equities	-		-		-	-		-		-
Consumer and other loans	-		-		-	-		-		-

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Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2017

Other Comprehensive Income [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

	Balance at December 31, 2016		Net Change		Balance at March 31, 2017
	(in thousands)
Net unrealized (loss) gain on investment securities	$	(365)	$	187	$	(178)
Net defined benefit pension plan adjustments		(2,059)		63		(1,996)
Total	$	(2,424)	$	250	$	(2,174)
	Balance at December 31, 2015		Net Change		Balance at March 31, 2016
	(in thousands)
Net unrealized gain on investment securities	$	475	$	649	$	1,124
Net defined benefit pension plan adjustments		(2,285)		40		(2,245)
Total	$	(1,810)	$	689	$	(1,121)

Components Of Other Comprehensive Income (Loss)

	Three months ended March 31, 2017						Three months ended March 31, 2016
	(in thousands)						(in thousands)
	Before-Tax Amount		Income Tax (Provision) Benefit (b)		Net-of-Tax Amount		Before-Tax Amount		Income Tax (Provision) Benefit		Net-of-Tax Amount
Unrealized gain on investment
securities:
Unrealized gain on investment
securities	$	296	$	(109)	$	187	$	1,047	$	(398)	$	649
Defined benefit pension plan
adjustments:
Reclassifications from accumulated other
comprehensive income for gains (losses)
Amortization of prior service cost (a)	$	8	$	2	$	10	$	8	$	(3)	$	5
Amortization of actuarial loss (a)		43		10		53		56		(21)		35
Net change		51		12		63		64		(24)		40
Other Comprehensive Income (Loss)	$	347	$	(97)	$	250	$	1,111	$	(422)	$	689

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

(b) Tax benefit includes impact of re-valuation of deferred tax asset due to increase in marginal federal income tax rate

from 34% to 35%.

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2017

Segment Information [Abstract]

Schedule Of Business Segments

	March 31, 2017
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	9,670	$	(26)	$	9,644
(Credit) provision for loan losses		(435)		-		(435)
Net interest income (expense) after
provision for loan losses		10,105		(26)		10,079
Non-interest income		1,354		-		1,354
Insurance service and fees		109		2,059		2,168
Amortization expense		-		28		28
Non-interest expense		7,647		1,380		9,027
Income before income taxes		3,921		625		4,546
Income tax provision		1,159		241		1,400
Net income	$	2,762	$	384	$	3,146

	March 31, 2016
		Banking		Insurance Agency
		Activities		Activities		Total
		(in thousands)
Net interest income (expense)	$	8,291	$	(31)	$	8,260
Provision for loan losses		208		-		208
Net interest income (expense) after
provision for loan losses		8,083		(31)		8,052
Non-interest income		1,246		-		1,246
Insurance service and fees		116		1,632		1,748
Non-interest expense		7,327		1,201		8,528
Income before income taxes		2,118		400		2,518
Income tax provision		650		154		804
Net income	$	1,468	$	246	$	1,714

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Contingent Liabilities And Commitments (Tables)

3 Months Ended

Mar. 31, 2017

Contingent Liabilities And Commitments [Abstract]

Summary Of Commitments And Contingent Liabilities

	March 31,		December 31,
	2017		2016
	(in thousands)
Commitments to extend credit	$	203,354	$	217,581
Standby letters of credit		4,504		3,736
Total	$	207,858	$	221,317

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Net Periodic Benefit Costs (Tables)

3 Months Ended

Mar. 31, 2017

Net Periodic Benefit Costs [Abstract]

Schedule Of Net Periodic Cost

		Three months ended March 31,
		(in thousands)
					Supplemental Executive
	Pension Benefits				Retirement Plan
	2017		2016		2017		2016
Service cost	$	-	$	-	$	42	$	47
Interest cost		54		55		34		36
Expected return on plan assets		(69)		(65)		-		-
Amortization of prior service cost		-		-		8		8
Amortization of the net loss		23		22		20		34
Net periodic cost (benefit)	$	8	$	12	$	104	$	125

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Organization And Summary Of Significant Accounting Policies (Narrative) (Details)	3 Months Ended
	Mar. 31, 2017 entity
Organization And Summary Of Significant Accounting Policies [Abstract]
Number of subsidiaries	2

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Securities (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities pledged as collateral	$ 108,000	$ 87,000
Impairment charges	$ 0	$ 0
Investment Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Contractual maturities duration	3 years 8 months 12 days	3 years 4 months 24 days
Minimum [Member] | Total Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Contractual maturities duration	10 years

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Securities (Schedule Of Amortized Cost And Approximate Fair Value Of Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	$ 115,188	$ 95,810
Available for Sale, Unrealized Gains	734	637
Available for Sale, Unrealized Losses	(1,026)	(1,225)
Available for Sale, Fair Value	114,896	95,222
Held to Maturity, Amortized Cost	1,408	1,983
Held to Maturity, Unrealized Gains	4	5
Held to Maturity, Unrealized Losses	(25)	(29)
Held to Maturity, Fair Value	1,387	1,959
States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Held to Maturity, Amortized Cost	1,408	1,983
Held to Maturity, Unrealized Gains	4	5
Held to Maturity, Unrealized Losses	(25)	(29)
Held to Maturity, Fair Value	1,387	1,959
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	16,795	12,958
Available for Sale, Unrealized Gains	73	67
Available for Sale, Unrealized Losses	(81)	(153)
Available for Sale, Fair Value	16,787	12,872
States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	34,472	34,952
Available for Sale, Unrealized Gains	434	356
Available for Sale, Unrealized Losses	(62)	(166)
Available for Sale, Fair Value	34,844	35,142
Total Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	51,267	47,910
Available for Sale, Unrealized Gains	507	423
Available for Sale, Unrealized Losses	(143)	(319)
Available for Sale, Fair Value	51,631	48,014
FNMA [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	22,140	14,694
Available for Sale, Unrealized Gains	96	96
Available for Sale, Unrealized Losses	(229)	(230)
Available for Sale, Fair Value	22,007	14,560
FHLMC [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	9,452	3,544
Available for Sale, Unrealized Gains	31	32
Available for Sale, Unrealized Losses	(78)	(51)
Available for Sale, Fair Value	9,405	3,525
GNMA [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	2,463	2,535
Available for Sale, Unrealized Gains	29	19
Available for Sale, Unrealized Losses	(21)	(21)
Available for Sale, Fair Value	2,471	2,533
SBA [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	7,975
Available for Sale, Unrealized Gains	19
Available for Sale, Unrealized Losses	(55)
Available for Sale, Fair Value	7,939
CMO [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	21,891	27,127
Available for Sale, Unrealized Gains	52	67
Available for Sale, Unrealized Losses	(500)	(604)
Available for Sale, Fair Value	21,443	26,590
Total Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Amortized Cost	63,921	47,900
Available for Sale, Unrealized Gains	227	214
Available for Sale, Unrealized Losses	(883)	(906)
Available for Sale, Fair Value	$ 63,265	$ 47,208

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Securities (Scheduled Maturities Of Debt And Mortgage-Backed Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Securities [Abstract]
Debt securities available for sale, Due in one year or less, Amortized cost	$ 2,875	$ 2,869
Debt securities available for sale, Due after one year through five years, Amortized cost	30,201	30,171
Debt securities available for sale, Due after five years through ten years, Amortized cost	15,487	12,166
Debt securities available for sale, Due after ten years, Amortized cost	2,704	2,704
Debt securities available for sale, Amortized cost	51,267	47,910
Mortgage-backed securities available for sale, Amortized cost	63,921	47,900
Available for Sale, Amortized Cost	115,188	95,810
Debt securities available for sale, Due in one year or less, Estimated fair value	2,885	2,876
Debt securities available for sale, Due after one year through five years, Estimated fair value	30,405	30,214
Debt securities available for sale, Due after five years through ten years, Estimated fair value	15,555	12,133
Debt securities available for sale, Due after ten years, Estimated fair value	2,786	2,791
Debt securities available for sale, Estimated fair value	51,631	48,014
Mortgage-backed securities available for sale, Estimated fair value	63,265	47,208
Available for Sale, Estimated Fair Value	114,896	95,222
Debt securities held to maturity, Due in one year or less, Amortized cost	174	780
Debt securities held to maturity, Due after one year through five years, Amortized cost	285	289
Debt securities held to maturity, Due after five years through ten years, Amortized cost	849	814
Debt securities held to maturity, Due after ten years, Amortized cost	100	100
Held to Maturity, Amortized Cost	1,408	1,983
Debt securities held to maturity, Due in one year or less, Estimated fair value	173	778
Debt securites held to maturity, Due after one year through five years, Estimated fair value	279	283
Debt securites held to maturity, Due after five years through ten years, Estimated fair value	842	805
Debt securities held to maturity, Due after ten years, Estimated fair value	93	93
Held to Maturity, Estimated Fair Value	$ 1,387	$ 1,959

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Securities (Unrealized Losses On Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Total temporarily impaired securities, Less than 12 months, Fair Value	$ 61,148	$ 56,701
Total temporarily impaired securities, 12 months or longer, Fair Value	5,990	3,900
Total temporarily impaired securities, Total, Fair Value	67,138	60,601
Total temporarily impaired securities, Less than 12 months, Unrealized Losses	(833)	(1,126)
Total temporarily impaired securities, 12 months or longer, Unrealized Losses	(218)	(128)
Total temporarily impaired securities, Total, Unrealized Losses	(1,051)	(1,254)
States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Held To Maturity, Less than 12 months, Fair Value	611	863
Held To Maturity, 12 months or longer, Fair Value	362	706
Held To Maturity, Total, Fair Value	973	1,569
Held To Maturity, Less than 12 months, Unrealized Losses	(13)	(3)
Held To Maturity, 12 months or longer, Unrealized Losses	(12)	(26)
Held To Maturity, Total, Unrealized Losses	(25)	(29)
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	6,919	6,847
Available for Sale, 12 months or longer, Fair Value
Available for Sale, Total, Fair Value	6,919	6,847
Available for Sale, Less than 12 months, Unrealized Losses	(81)	(153)
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Unrealized Losses	(81)	(153)
States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	9,370	16,895
Available for Sale, 12 months or longer, Fair Value	733	731
Available for Sale, Total, Fair Value	10,103	17,626
Available for Sale, Less than 12 months, Unrealized Losses	(46)	(146)
Available for Sale, 12 months or longer, Unrealized Losses	(16)	(20)
Available for Sale, Total, Unrealized Losses	(62)	(166)
Total Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	16,289	23,742
Available for Sale, 12 months or longer, Fair Value	733	731
Available for Sale, Total, Fair Value	17,022	24,473
Available for Sale, Less than 12 months, Unrealized Losses	(127)	(299)
Available for Sale, 12 months or longer, Unrealized Losses	(16)	(20)
Available for Sale, Total, Unrealized Losses	(143)	(319)
FNMA [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	15,301	9,577
Available for Sale, 12 months or longer, Fair Value
Available for Sale, Total, Fair Value	15,301	9,577
Available for Sale, Less than 12 months, Unrealized Losses	(229)	(230)
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Unrealized Losses	(229)	(230)
FHLMC [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	7,730	1,728
Available for Sale, 12 months or longer, Fair Value	925	988
Available for Sale, Total, Fair Value	8,655	2,716
Available for Sale, Less than 12 months, Unrealized Losses	(37)	(8)
Available for Sale, 12 months or longer, Unrealized Losses	(41)	(43)
Available for Sale, Total, Unrealized Losses	(78)	(51)
GNMA [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	1,036	1,046
Available for Sale, 12 months or longer, Fair Value	308	309
Available for Sale, Total, Fair Value	1,344	1,355
Available for Sale, Less than 12 months, Unrealized Losses	(19)	(17)
Available for Sale, 12 months or longer, Unrealized Losses	(2)	(4)
Available for Sale, Total, Unrealized Losses	(21)	(21)
SBA [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	5,906
Available for Sale, 12 months or longer, Fair Value
Available for Sale, Total, Fair Value	5,906
Available for Sale, Less than 12 months, Unrealized Losses	(55)
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Unrealized Losses	(55)
CMO [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	14,275	19,745
Available for Sale, 12 months or longer, Fair Value	3,662	1,166
Available for Sale, Total, Fair Value	17,937	20,911
Available for Sale, Less than 12 months, Unrealized Losses	(353)	(569)
Available for Sale, 12 months or longer, Unrealized Losses	(147)	(35)
Available for Sale, Total, Unrealized Losses	(500)	(604)
Total Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Less than 12 months, Fair Value	44,248	32,096
Available for Sale, 12 months or longer, Fair Value	4,895	2,463
Available for Sale, Total, Fair Value	49,143	34,559
Available for Sale, Less than 12 months, Unrealized Losses	(693)	(824)
Available for Sale, 12 months or longer, Unrealized Losses	(190)	(82)
Available for Sale, Total, Unrealized Losses	$ (883)	$ (906)

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Fair Value Measurements (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans	$ 19,550	$ 15,141
Impaired loans, allowance for loan loss	$ 2,015	2,027
Percentage required stock to capital and surplus	6.00%
Impairment charges	$ 0	0
Consumer And Other Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Period past due for loan appraisals	90 days
Impaired loans	$ 36	43
Impaired loans, allowance for loan loss	$ 36	$ 43
Minimum [Member] | Impaired Loans [Member] | Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	10.00%
Maximum [Member] | Impaired Loans [Member] | Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	50.00%
Investment In FRB Stock [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impairment charges	$ 0
FHLBNY [Member] | Investment In FHLBNY Stock [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impairment charges	$ 0

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Fair Value Measurements (Financial Instruments Measured At Fair Value On Recurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 114,896	$ 95,222
Mortgage servicing rights	564	527
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	16,787	12,872
States and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	34,844	35,142
Total Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	63,265	47,208
Recurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage servicing rights
Recurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage servicing rights	564	527
Recurring [Member] | U.S. Government Agencies [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale
Recurring [Member] | U.S. Government Agencies [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	16,787	12,872
Recurring [Member] | States and Political Subdivisions [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale
Recurring [Member] | States and Political Subdivisions [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	34,844	35,142
Recurring [Member] | Total Mortgage-Backed Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale
Recurring [Member] | Total Mortgage-Backed Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 63,265	$ 47,208

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Fair Value Measurements (Changes In Fair Value For Mortgage Servicing Rights) (Details) - Mortgage Servicing Rights [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Mortgage servicing rights - Beginning balance	$ 527	$ 557
Gains (losses) included in earnings	11	(69)
Additions from loan sales	26	8
Mortgage servicing rights - Ending balance	$ 564	$ 496

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Fair Value Measurements (Quantitative Information About Significant Unobservable Inputs For MSRs) (Details) - Mortgage Servicing Rights [Member] - Level 3 [Member]	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Servicing fees	0.25%	0.25%
Discount rate	9.52%	9.52%
Prepayment rate (CPR)	8.15%	8.12%

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Fair Value Measurements (Financial Instruments Measured At Fair Value On Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	$ 17,535	$ 13,114
Level 1 [Member] | Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans
Level 2 [Member] | Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans
Level 3 [Member] | Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	$ 17,535	$ 13,114

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Fair Value Measurements (Estimated Fair Values Of Financial Instruments) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	$ 114,896	$ 95,222
Held to maturity securities	1,387	1,959
Mortgage servicing rights	564	527
Demand deposits	194,747	201,741
NOW deposits	103,907	88,632
Savings deposits	531,408	508,652
Time deposits	147,915	140,949
Carrying Amount [Member] | Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	30,235	13,084
Demand deposits	194,747	201,741
NOW deposits	103,907	88,632
Savings deposits	531,408	508,652
Carrying Amount [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	114,896	95,222
FHLB and FRB stock	2,912	3,731
Securities sold under agreement to repurchase	11,679	10,159
Other borrowed funds	10,000	28,200
Junior subordinated debentures	11,330	11,330
Carrying Amount [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held to maturity securities	1,408	1,983
Loans, net	932,004	928,596
Mortgage servicing rights	564	527
Time deposits	147,915	140,949
Fair Value [Member] | Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	30,235	13,084
Demand deposits	194,747	201,741
NOW deposits	103,907	88,632
Savings deposits	531,408	508,652
Fair Value [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	114,896	95,222
FHLB and FRB stock	2,912	3,731
Securities sold under agreement to repurchase	11,679	10,159
Other borrowed funds	9,937	28,152
Junior subordinated debentures	11,330	11,330
Fair Value [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held to maturity securities	1,387	1,959
Loans, net	913,707	945,998
Mortgage servicing rights	564	527
Time deposits	$ 148,921	$ 141,758

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Loans And The Allowance For Loan Losses (Narrative) (Details)	3 Months Ended
	Mar. 31, 2017 USD ($) loan	Mar. 31, 2016 USD ($) loan	Dec. 31, 2016 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gain on loans sold to FNMA	$ 18,000	$ 15,000
Loan commitments to lend additional funds to debtors	0
Loans restructured in troubled debt restructurings	$ 9,055,000		$ 5,090,000
Period of timely payments before reversion to accruing status	6 months
Number of loans classified as TDRS | loan	0	0
Nonaccruing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans restructured in troubled debt restructurings	$ 1,718,000		1,247,000
Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial loans held-for-sale	9,000,000		0
Loans restructured in troubled debt restructurings	729,000		574,000
Commercial And Industrial [Member] | Nonaccruing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans restructured in troubled debt restructurings	714,000		532,000
Consumer And Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans restructured in troubled debt restructurings	26,000		26,000
Consumer And Other Loans [Member] | Nonaccruing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans restructured in troubled debt restructurings
Total Real Estate Loans [Member] | Residential Real Estate [Member] | Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Unpaid principal balance	76,000,000		76,000,000
Mortgage servicing rights	600,000		500,000
Mortgage loans held-for-sale	900,000		300,000
Loans restructured in troubled debt restructurings	1,949,000		1,949,000
Total Real Estate Loans [Member] | Residential Real Estate [Member] | Mortgages [Member] | Nonaccruing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans restructured in troubled debt restructurings	235,000		227,000
Total Real Estate Loans [Member] | Residential Real Estate [Member] | FNMA Loans [Member] | Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgages sold to FNMA	2,800,000	$ 900,000
Total Real Estate Loans [Member] | Commercial Real Estate [Member] | Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans restructured in troubled debt restructurings	5,713,000		1,617,000
Total Real Estate Loans [Member] | Commercial Real Estate [Member] | Mortgages [Member] | Nonaccruing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans restructured in troubled debt restructurings	$ 592,000		$ 313,000

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Loans And The Allowance For Loan Losses (Schedule Of Loan Portfolio Composition) (Details) - USD ($) $ in Thousands		Mar. 31, 2017		Dec. 31, 2016	Mar. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		$ 944,632		$ 941,729	$ 796,170
Net deferred loan origination costs		951		783	603
Total gross loans		945,583		942,512
Allowance for loan losses		(13,579)		(13,916)
Loans, net		932,004		928,596
Home Equities [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		66,229		66,234
Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		192,041		197,371	150,813
Consumer And Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		1,344		1,417	2,172
Total Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		751,247		742,941
Total Real Estate Loans [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs	[1]	124,973			106,694
Total Real Estate Loans [Member] | Residential Real Estate [Member] | Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		122,818		118,542
Total Real Estate Loans [Member] | Residential Real Estate [Member] | Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		2,155		2,540
Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		560,045	[1]	555,625	474,898	[1]
Total Real Estate Loans [Member] | Commercial Real Estate [Member] | Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		464,288		462,385
Total Real Estate Loans [Member] | Commercial Real Estate [Member] | Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		95,757		93,240
Total Real Estate Loans [Member] | Home Equities [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans before deferred loan origination costs		$ 66,229		$ 66,234	$ 61,593

[1] Includes construction loans

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Loans And The Allowance For Loan Losses (Data, At Class Level, Of Credit Quality Indicators Of Certain Loans) (Details) - USD ($) $ in Thousands	Mar. 31, 2017		Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	$ 944,632		$ 941,729	$ 796,170
Total Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	751,247		742,941
Commercial Real Estate [Member] | Total Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	560,045	[1]	555,625	474,898	[1]
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Corporate Credit Exposure—By Credit Rating 1-3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	456,099		454,755
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Corporate Credit Exposure—By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	82,894		80,196
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Corporate Credit Exposure—By Credit Rating 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	6,641		12,506
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Corporate Credit Exposure—By Credit Rating 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	14,411		8,168
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Corporate Credit Exposure—By Credit Rating 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	95,757		93,240
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Construction [Member] | Corporate Credit Exposure—By Credit Rating 1-3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	80,643		82,520
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Construction [Member] | Corporate Credit Exposure—By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	10,936		6,541
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Construction [Member] | Corporate Credit Exposure—By Credit Rating 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	4,178		4,179
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Construction [Member] | Corporate Credit Exposure—By Credit Rating 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	464,288		462,385
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 1-3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	375,456		372,235
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	71,958		73,655
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	6,641		12,506
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	10,233		3,989
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Mortgages [Member] | Corporate Credit Exposure—By Credit Rating 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	192,041		197,371	$ 150,813
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 1-3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	123,648		121,414
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	55,746		59,117
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	9,264		12,623
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	2,570		3,404
Commercial And Industrial [Member] | Corporate Credit Exposure—By Credit Rating 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Total gross loans	$ 813		$ 813

[1] Includes construction loans

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Loans And The Allowance For Loan Losses (Recorded Investment In Loans Past Due) (Details) - USD ($) $ in Thousands		Mar. 31, 2017		Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		$ 32,624		$ 28,627
Current Balance		912,008		913,102
Total		944,632		941,729	$ 796,170
90+ Days Accruing		72		722
Non-accruing Loans		12,213		11,298
Net deferred loan origination costs		951		783	603
30-59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		23,530		14,712
60-89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		635		4,740
90+ Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		8,459		9,175
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		3,820		10,888
Current Balance		188,221		186,483
Total		192,041		197,371	150,813
90+ Days Accruing		72
Non-accruing Loans		2,771		3,106
Commercial And Industrial [Member] | 30-59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		2,751		6,772
Commercial And Industrial [Member] | 60-89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		138		2,966
Commercial And Industrial [Member] | 90+ Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		931		1,150
Home Equities [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		928		1,279
Current Balance		65,301		64,955
Total		66,229		66,234
Non-accruing Loans		1,232		1,261
Home Equities [Member] | 30-59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		128		481
Home Equities [Member] | 60-89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		207		119
Home Equities [Member] | 90+ Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		593		679
Consumer And Other Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		57		30
Current Balance		1,287		1,387
Total		1,344		1,417	2,172
Non-accruing Loans		11		17
Consumer And Other Loans [Member] | 30-59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		50		15
Consumer And Other Loans [Member] | 60-89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		7		10
Consumer And Other Loans [Member] | 90+ Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due				5
Total Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		751,247		742,941
Total Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total	[1]	124,973			106,694
Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		560,045	[1]	555,625	474,898	[1]
Total Real Estate Loans [Member] | Home Equities [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		66,229		66,234	$ 61,593
Mortgages [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,954		1,558
Current Balance		120,864		116,984
Total		122,818		118,542
Non-accruing Loans		846		862
Mortgages [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member] | 30-59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,225		868
Mortgages [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member] | 60-89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		70		123
Mortgages [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member] | 90+ Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		659		567
Mortgages [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		17,559		10,198
Current Balance		446,729		452,187
Total		464,288		462,385
90+ Days Accruing				483
Non-accruing Loans		3,174		1,874
Mortgages [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member] | 30-59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		15,249		6,319
Mortgages [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member] | 60-89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		213		1,522
Mortgages [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member] | 90+ Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		2,097		2,357
Construction [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current Balance		2,155		2,540
Total		2,155		2,540
Construction [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		8,306		4,674
Current Balance		87,451		88,566
Total		95,757		93,240
90+ Days Accruing				239
Non-accruing Loans		4,179		4,178
Construction [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member] | 30-59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		4,127		257
Construction [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member] | 90+ Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		$ 4,179		$ 4,417

[1] Includes construction loans

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Loans And The Allowance For Loan Losses (Schedule Of Allowance For Loan Losses According To Portfolio Segment) (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017		Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses: Beginning balance		$ 13,916	$ 12,883
Allowance for loan losses: Charge-offs		(61)	(20)
Allowance for loan losses: Recoveries		159	48
Allowance for loan losses: Provision (Credit)		(435)	208
Allowance for loan losses: Ending balance		13,579	13,119
Allowance for loan losses: Individually evaluated for impairment				$ 2,015			$ 1,693
Allowance for loan losses: Collectively evaluated for impairment				11,564			11,426
Allowance for loan losses: Total		13,916	12,883	13,579		$ 13,916	13,119
Loans: Individually evaluated for impairment				19,550			19,542
Loans: Collectively evaluated for impairment				925,082			776,628
Total				944,632		941,729	796,170
Net deferred loan origination costs				951		783	603
Total Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total				751,247		742,941
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses: Beginning balance		4,813	4,383
Allowance for loan losses: Charge-offs		(33)	(13)
Allowance for loan losses: Recoveries		147	7
Allowance for loan losses: Provision (Credit)		(964)	203
Allowance for loan losses: Ending balance		3,963	4,580
Allowance for loan losses: Individually evaluated for impairment				253			516
Allowance for loan losses: Collectively evaluated for impairment				3,710			4,064
Allowance for loan losses: Total		4,813	4,383	3,963		4,813	4,580
Loans: Individually evaluated for impairment				2,786			5,382
Loans: Collectively evaluated for impairment				189,255			145,431
Total				192,041		197,371	150,813
Commercial Real Estate [Member] | Total Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses: Beginning balance	[1]	7,890	7,135
Allowance for loan losses: Charge-offs	[1]
Allowance for loan losses: Recoveries	[1]		38
Allowance for loan losses: Provision (Credit)	[1]	308	269
Allowance for loan losses: Ending balance	[1]	8,198	7,442
Allowance for loan losses: Individually evaluated for impairment	[1]			1,716			1,134
Allowance for loan losses: Collectively evaluated for impairment	[1]			6,482			6,308
Allowance for loan losses: Total	[1]	7,890	7,135	8,198		7,890	7,442
Loans: Individually evaluated for impairment	[1]			12,473			10,092
Loans: Collectively evaluated for impairment	[1]			547,572			464,806
Total				560,045	[1]	555,625	474,898	[1]
Consumer And Other Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses: Beginning balance		96	85
Allowance for loan losses: Charge-offs		(28)	(7)
Allowance for loan losses: Recoveries		12	3
Allowance for loan losses: Provision (Credit)		55	12
Allowance for loan losses: Ending balance		135	93
Allowance for loan losses: Individually evaluated for impairment				36			41
Allowance for loan losses: Collectively evaluated for impairment				99			52
Allowance for loan losses: Total		96	85	135		96	93
Loans: Individually evaluated for impairment				36			41
Loans: Collectively evaluated for impairment				1,308			2,131
Total				1,344		1,417	2,172
Residential Real Estate [Member] | Total Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses: Beginning balance	[1]	769	909
Allowance for loan losses: Charge-offs	[1]
Allowance for loan losses: Recoveries	[1]
Allowance for loan losses: Provision (Credit)	[1]	150	(213)
Allowance for loan losses: Ending balance	[1]	919	696
Allowance for loan losses: Individually evaluated for impairment	[1]			1			2
Allowance for loan losses: Collectively evaluated for impairment	[1]			918			694
Allowance for loan losses: Total	[1]	769	909	919		769	696
Loans: Individually evaluated for impairment	[1]			2,561			2,482
Loans: Collectively evaluated for impairment	[1]			122,412			104,212
Total	[1]			124,973			106,694
Home Equities [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total				66,229		66,234
Home Equities [Member] | Total Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses: Beginning balance		348	371
Allowance for loan losses: Charge-offs
Allowance for loan losses: Recoveries
Allowance for loan losses: Provision (Credit)		16	(63)
Allowance for loan losses: Ending balance		364	308
Allowance for loan losses: Individually evaluated for impairment				9
Allowance for loan losses: Collectively evaluated for impairment				355			308
Allowance for loan losses: Total		$ 348	$ 371	364		348	308
Loans: Individually evaluated for impairment				1,694			1,545
Loans: Collectively evaluated for impairment				64,535			60,048
Total				$ 66,229		$ 66,234	$ 61,593

[1] Includes construction loans

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Loans And The Allowance For Loan Losses (Data, At Class Level, Of Impaired Loans) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Impaired Loans, Recorded Investment, With no related allowance recorded	$ 7,730	$ 7,756
Impaired Loans, Recorded Investment, With a related allowance recorded	11,820	7,385
Impaired Loans, Recorded Investment, Total	19,550	15,141
Impaired Loans, Unpaid Principal Balance, With no related allowance recorded	8,179	8,370
Impaired Loans, Unpaid Principal Balance, With a related allowance recorded	12,144	7,543
Impaired Loans, Unpaid Principal Balance, Total	20,323	15,913
Impaired Loans, Related Allowance	2,015	2,027
Impaired Loans, Average Recorded Investment, With no related allowance recorded	7,837	8,188
Impaired Loans, Average Recorded Investment, With a related allowance recorded	11,866	7,452
Impaired Loans, Average Recorded Investment, Total	19,703	15,640
Impaired Loans, Interest Income Foregone, With no related allowance recorded	81	250
Impaired Loans, Interest Income Foregone, With a related allowance recorded	90	320
Impaired Loans, Interest Income Foregone, Total	171	570
Impaired Loans, Interest Income Recognized, With no related allowance recorded	45	276
Impaired Loans, Interest Income Recognized, With a related allowance recorded	56	58
Impaired Loans, Interest Income Recognized, Total	101	334
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans, Recorded Investment, With no related allowance recorded	1,176	1,304
Impaired Loans, Recorded Investment, With a related allowance recorded	1,610	1,844
Impaired Loans, Recorded Investment, Total	2,786	3,148
Impaired Loans, Unpaid Principal Balance, With no related allowance recorded	1,279	1,604
Impaired Loans, Unpaid Principal Balance, With a related allowance recorded	1,853	1,913
Impaired Loans, Unpaid Principal Balance, Total	3,132	3,517
Impaired Loans, Related Allowance	253	492
Impaired Loans, Average Recorded Investment, With no related allowance recorded	1,183	1,455
Impaired Loans, Average Recorded Investment, With a related allowance recorded	1,654	1,898
Impaired Loans, Average Recorded Investment, Total	2,837	3,353
Impaired Loans, Interest Income Foregone, With no related allowance recorded	23	125
Impaired Loans, Interest Income Foregone, With a related allowance recorded	24	62
Impaired Loans, Interest Income Foregone, Total	47	187
Impaired Loans, Interest Income Recognized, With no related allowance recorded	5	51
Impaired Loans, Interest Income Recognized, With a related allowance recorded	2	53
Impaired Loans, Interest Income Recognized, Total	7	104
Consumer And Other Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans, Recorded Investment, With no related allowance recorded
Impaired Loans, Recorded Investment, With a related allowance recorded	36	43
Impaired Loans, Recorded Investment, Total	36	43
Impaired Loans, Unpaid Principal Balance, With no related allowance recorded
Impaired Loans, Unpaid Principal Balance, With a related allowance recorded	62	68
Impaired Loans, Unpaid Principal Balance, Total	62	68
Impaired Loans, Related Allowance	36	43
Impaired Loans, Average Recorded Investment, With no related allowance recorded
Impaired Loans, Average Recorded Investment, With a related allowance recorded	37	45
Impaired Loans, Average Recorded Investment, Total	37	45
Impaired Loans, Interest Income Foregone, With no related allowance recorded
Impaired Loans, Interest Income Foregone, With a related allowance recorded	1	3
Impaired Loans, Interest Income Foregone, Total	1	3
Impaired Loans, Interest Income Recognized, With no related allowance recorded
Impaired Loans, Interest Income Recognized, With a related allowance recorded	1	3
Impaired Loans, Interest Income Recognized, Total	1	3
Total Real Estate Loans [Member] | Residential Real Estate [Member] | Mortgages [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans, Recorded Investment, With no related allowance recorded	2,491	2,513
Impaired Loans, Recorded Investment, With a related allowance recorded	70	71
Impaired Loans, Recorded Investment, Total	2,561	2,584
Impaired Loans, Unpaid Principal Balance, With no related allowance recorded	2,697	2,720
Impaired Loans, Unpaid Principal Balance, With a related allowance recorded	72	72
Impaired Loans, Unpaid Principal Balance, Total	2,769	2,792
Impaired Loans, Related Allowance	1	1
Impaired Loans, Average Recorded Investment, With no related allowance recorded	2,493	2,542
Impaired Loans, Average Recorded Investment, With a related allowance recorded	70	72
Impaired Loans, Average Recorded Investment, Total	2,563	2,614
Impaired Loans, Interest Income Foregone, With no related allowance recorded	9	39
Impaired Loans, Interest Income Foregone, With a related allowance recorded	1	2
Impaired Loans, Interest Income Foregone, Total	10	41
Impaired Loans, Interest Income Recognized, With no related allowance recorded	17	78
Impaired Loans, Interest Income Recognized, With a related allowance recorded		1
Impaired Loans, Interest Income Recognized, Total	17	79
Total Real Estate Loans [Member] | Residential Real Estate [Member] | Construction [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans, Recorded Investment, With no related allowance recorded
Impaired Loans, Recorded Investment, With a related allowance recorded
Impaired Loans, Recorded Investment, Total
Impaired Loans, Unpaid Principal Balance, With no related allowance recorded
Impaired Loans, Unpaid Principal Balance, With a related allowance recorded
Impaired Loans, Unpaid Principal Balance, Total
Impaired Loans, Related Allowance
Impaired Loans, Average Recorded Investment, With no related allowance recorded
Impaired Loans, Average Recorded Investment, With a related allowance recorded
Impaired Loans, Average Recorded Investment, Total
Impaired Loans, Interest Income Foregone, With no related allowance recorded
Impaired Loans, Interest Income Foregone, With a related allowance recorded
Impaired Loans, Interest Income Foregone, Total
Impaired Loans, Interest Income Recognized, With no related allowance recorded
Impaired Loans, Interest Income Recognized, With a related allowance recorded
Impaired Loans, Interest Income Recognized, Total
Total Real Estate Loans [Member] | Commercial Real Estate [Member] | Mortgages [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans, Recorded Investment, With no related allowance recorded	2,452	2,123
Impaired Loans, Recorded Investment, With a related allowance recorded	5,843	1,054
Impaired Loans, Recorded Investment, Total	8,295	3,177
Impaired Loans, Unpaid Principal Balance, With no related allowance recorded	2,506	2,168
Impaired Loans, Unpaid Principal Balance, With a related allowance recorded	5,871	1,083
Impaired Loans, Unpaid Principal Balance, Total	8,377	3,251
Impaired Loans, Related Allowance	541	296
Impaired Loans, Average Recorded Investment, With no related allowance recorded	2,534	2,181
Impaired Loans, Average Recorded Investment, With a related allowance recorded	5,843	1,062
Impaired Loans, Average Recorded Investment, Total	8,377	3,243
Impaired Loans, Interest Income Foregone, With no related allowance recorded	34	33
Impaired Loans, Interest Income Foregone, With a related allowance recorded	13	50
Impaired Loans, Interest Income Foregone, Total	47	83
Impaired Loans, Interest Income Recognized, With no related allowance recorded	19	89
Impaired Loans, Interest Income Recognized, With a related allowance recorded	53
Impaired Loans, Interest Income Recognized, Total	72	89
Total Real Estate Loans [Member] | Commercial Real Estate [Member] | Construction [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans, Recorded Investment, With no related allowance recorded		257
Impaired Loans, Recorded Investment, With a related allowance recorded	4,178	4,179
Impaired Loans, Recorded Investment, Total	4,178	4,436
Impaired Loans, Unpaid Principal Balance, With no related allowance recorded		257
Impaired Loans, Unpaid Principal Balance, With a related allowance recorded	4,201	4,201
Impaired Loans, Unpaid Principal Balance, Total	4,201	4,458
Impaired Loans, Related Allowance	1,175	1,175
Impaired Loans, Average Recorded Investment, With no related allowance recorded		404
Impaired Loans, Average Recorded Investment, With a related allowance recorded	4,179	4,180
Impaired Loans, Average Recorded Investment, Total	4,179	4,584
Impaired Loans, Interest Income Foregone, With no related allowance recorded		2
Impaired Loans, Interest Income Foregone, With a related allowance recorded	50	194
Impaired Loans, Interest Income Foregone, Total	50	196
Impaired Loans, Interest Income Recognized, With no related allowance recorded		28
Impaired Loans, Interest Income Recognized, With a related allowance recorded
Impaired Loans, Interest Income Recognized, Total		28
Total Real Estate Loans [Member] | Home Equities [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans, Recorded Investment, With no related allowance recorded	1,611	1,559
Impaired Loans, Recorded Investment, With a related allowance recorded	83	194
Impaired Loans, Recorded Investment, Total	1,694	1,753
Impaired Loans, Unpaid Principal Balance, With no related allowance recorded	1,697	1,621
Impaired Loans, Unpaid Principal Balance, With a related allowance recorded	85	206
Impaired Loans, Unpaid Principal Balance, Total	1,782	1,827
Impaired Loans, Related Allowance	9	20
Impaired Loans, Average Recorded Investment, With no related allowance recorded	1,627	1,606
Impaired Loans, Average Recorded Investment, With a related allowance recorded	83	195
Impaired Loans, Average Recorded Investment, Total	1,710	1,801
Impaired Loans, Interest Income Foregone, With no related allowance recorded	15	51
Impaired Loans, Interest Income Foregone, With a related allowance recorded	1	9
Impaired Loans, Interest Income Foregone, Total	16	60
Impaired Loans, Interest Income Recognized, With no related allowance recorded	4	30
Impaired Loans, Interest Income Recognized, With a related allowance recorded		1
Impaired Loans, Interest Income Recognized, Total	$ 4	$ 31

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Loans And The Allowance For Loan Losses (Schedule Of Non-Performing Loans) (Details) - USD ($) $ in Thousands		Mar. 31, 2017		Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		$ 944,632		$ 941,729	$ 796,170
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		192,041		197,371	150,813
Home Equities [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		66,229		66,234
Consumer And Other Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		1,344		1,417	2,172
Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans		12,213		11,298
Accruing loans 90+ days past due		72		722
Total		$ 12,285		$ 12,020
Total non-performing loans to total assets		1.08%		1.09%
Total non-performing loans to total loans		1.30%		1.28%
Non-Performing Loans [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans		$ 2,771		$ 3,106
Non-Performing Loans [Member] | Consumer And Other Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans		11		17
Total Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		751,247		742,941
Total Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total	[1]	124,973			106,694
Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		560,045	[1]	555,625	474,898	[1]
Total Real Estate Loans [Member] | Home Equities [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		66,229		66,234	$ 61,593
Total Real Estate Loans [Member] | Non-Performing Loans [Member] | Home Equities [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans		1,232		1,261
Mortgages [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		122,818		118,542
Mortgages [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		464,288		462,385
Mortgages [Member] | Total Real Estate Loans [Member] | Non-Performing Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans		846		862
Mortgages [Member] | Total Real Estate Loans [Member] | Non-Performing Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans		3,174		1,874
Construction [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		2,155		2,540
Construction [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total		95,757		93,240
Construction [Member] | Total Real Estate Loans [Member] | Non-Performing Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans
Construction [Member] | Total Real Estate Loans [Member] | Non-Performing Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accruing loans		$ 4,179		$ 4,178

[1] Includes construction loans

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Loans And The Allowance For Loan Losses (Loans Classified As Troubled Debt Restructurings) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable, Modifications [Line Items]
Total	$ 9,055	$ 5,090
Related Allowance	439	174
Commercial And Industrial [Member]
Financing Receivable, Modifications [Line Items]
Total	729	574
Related Allowance	168	147
Consumer And Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Total	26	26
Related Allowance	26	26
Nonaccruing [Member]
Financing Receivable, Modifications [Line Items]
Total	1,718	1,247
Nonaccruing [Member] | Commercial And Industrial [Member]
Financing Receivable, Modifications [Line Items]
Total	714	532
Nonaccruing [Member] | Consumer And Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Total
Accruing [Member]
Financing Receivable, Modifications [Line Items]
Total	7,337	3,843
Accruing [Member] | Commercial And Industrial [Member]
Financing Receivable, Modifications [Line Items]
Total	15	42
Accruing [Member] | Consumer And Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Total	26	26
Total Real Estate Loans [Member] | Home Equities [Member]
Financing Receivable, Modifications [Line Items]
Total	638	667
Related Allowance		1
Total Real Estate Loans [Member] | Nonaccruing [Member] | Home Equities [Member]
Financing Receivable, Modifications [Line Items]
Total	177	175
Total Real Estate Loans [Member] | Accruing [Member] | Home Equities [Member]
Financing Receivable, Modifications [Line Items]
Total	461	492
Mortgages [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	1,949	1,949
Related Allowance
Mortgages [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	5,713	1,617
Related Allowance	245
Mortgages [Member] | Total Real Estate Loans [Member] | Nonaccruing [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	235	227
Mortgages [Member] | Total Real Estate Loans [Member] | Nonaccruing [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	592	313
Mortgages [Member] | Total Real Estate Loans [Member] | Accruing [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	1,714	1,722
Mortgages [Member] | Total Real Estate Loans [Member] | Accruing [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	5,121	1,304
Construction [Member] | Total Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total
Related Allowance
Construction [Member] | Total Real Estate Loans [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total		257
Related Allowance
Construction [Member] | Total Real Estate Loans [Member] | Nonaccruing [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total
Construction [Member] | Total Real Estate Loans [Member] | Nonaccruing [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total
Construction [Member] | Total Real Estate Loans [Member] | Accruing [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total
Construction [Member] | Total Real Estate Loans [Member] | Accruing [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total		$ 257

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Loans And The Allowance For Loan Losses (TDR Activity By Type Of Concession Granted To Borrower) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) contract	Mar. 31, 2016 USD ($) contract
Total Real Estate Loans [Member] | Extension Of Maturity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract		1
Pre-Modification Outstanding Recorded Investment		$ 95
Post-Modification Outstanding Recorded Investment		$ 95
Commercial And Industrial [Member] | Extension Of Maturity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract		1
Pre-Modification Outstanding Recorded Investment		$ 24
Post-Modification Outstanding Recorded Investment		$ 24
Commercial And Industrial [Member] | Term-Out Line Of Credit [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	1	1
Pre-Modification Outstanding Recorded Investment	$ 180	$ 20
Post-Modification Outstanding Recorded Investment	$ 180	$ 20
Commercial Real Estate [Member] | Total Real Estate Loans [Member] | Extension Of Maturity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	3
Pre-Modification Outstanding Recorded Investment	$ 5,073
Post-Modification Outstanding Recorded Investment	$ 5,073

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Common Equity And Earnings Per Share Data (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended
	Jan. 31, 2017	Mar. 31, 2017	Mar. 31, 2016
Common Equity And Earnings Per Share Data [Abstract]
Potentially dilutive shares of common stock		122,966	64,925
Anti-dilutive shares		24,990	49,550
Common stock shares issued	440,000	440,000
Price per share	$ 35.00
Netted additional capital after expenses	$ 14,000	$ 14,142

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Other Comprehensive Income (Schedule Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	$ (2,424)	$ (1,810)
Net Change	250	689
Ending Balance	(2,174)	(1,121)
Net Unrealized (Loss) Gain On Investment Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(365)	475
Net Change	187	649
Ending Balance	(178)	1,124
Net Defined Benefit Pension Plan Adjustments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(2,059)	(2,285)
Net Change	63	40
Ending Balance	$ (1,996)	$ (2,245)

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Other Comprehensive Income (Components Of Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Unrealized gain on investment securities:
Unrealized gain on investment securities, Before-Tax Amount		$ 296	$ 1,047
Defined benefit pension plan adjustments:
Amortization of prior service cost, Before-Tax Amount	[1]	8	8
Amortization of actuarial loss, Before-Tax Amount	[1]	43	56
Net change, Before-Tax Amount		51	64
Other Comprehensive Income (Loss), Before-Tax Amount		347	1,111
Unrealized gain (loss) on investment securities, Income Tax (Provision) Benefit		(109)	(398)
Amortization of prior service cost, Income Tax (Provision) Benefit	[1]	2	(3)
Amortization of actuarial loss, Income Tax (Provision) Benefit	[1]	10	(21)
Net change, Income Tax (Provision) Benefit		12	(24)
Other Comprehensive Income (Loss), Income Tax (Provision) Benefit		(97)	(422)
Unrealized gain (loss) on investment securities, Net-of-Tax Amount		187	649
Amortization of prior service cost, Net-of-Tax Amount	[1]	10	5
Amortization of actuarial loss, Net-of-Tax Amount	[1]	53	35
Net change, Net-of-Tax Amount		63	40
OTHER COMPREHENSIVE INCOME, NET OF TAX		$ 250	$ 689
Federal income tax rate		35.00%	34.00%

[1] Included in net periodic pension cost, as described in Note 9 - "Net Periodic Benefit Costs"

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Segment Information (Schedule Of Business Segments) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($) segment	Mar. 31, 2016 USD ($)
Number of primary business segments | segment	2
Net interest income (expense)	$ 9,644	$ 8,260
(Credit) Provision for loan losses	(435)	208
Net interest income (expense) after provision for loan losses	10,079	8,052
Non-interest income	3,522	2,994
Insurance service and fees	2,168	1,748
Amortization expense	28
Non-interest expense	9,055	8,528
Income before income taxes	4,546	2,518
Income tax provision (benefit)	1,400	804
Net income	3,146	1,714
Operating Segments [Member]
Net interest income (expense)	9,644	8,260
(Credit) Provision for loan losses	(435)	208
Net interest income (expense) after provision for loan losses	10,079	8,052
Non-interest income	1,354	1,246
Insurance service and fees	2,168	1,748
Amortization expense	28
Non-interest expense	9,027	8,528
Income before income taxes	4,546	2,518
Income tax provision (benefit)	1,400	804
Net income	3,146	1,714
Banking Activities [Member] | Operating Segments [Member]
Net interest income (expense)	9,670	8,291
(Credit) Provision for loan losses	(435)	208
Net interest income (expense) after provision for loan losses	10,105	8,083
Non-interest income	1,354	1,246
Insurance service and fees	109	116
Non-interest expense	7,647	7,327
Income before income taxes	3,921	2,118
Income tax provision (benefit)	1,159	650
Net income	2,762	1,468
Insurance Agency Activities [Member] | Operating Segments [Member]
Net interest income (expense)	(26)	(31)
Net interest income (expense) after provision for loan losses	(26)	(31)
Insurance service and fees	2,059	1,632
Amortization expense	28
Non-interest expense	1,380	1,201
Income before income taxes	625	400
Income tax provision (benefit)	241	154
Net income	$ 384	$ 246

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Contingent Liabilities And Commitments (Narrative) (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Contingent Liabilities And Commitments [Abstract]
Losses on commitments	$ 0	$ 0

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Contingent Liabilities And Commitments (Summary Of Commitments And Contingent Liabilities) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Loss Contingencies [Line Items]
Commitments and contingent liabilities	$ 207,858	$ 221,317
Commitments To Extend Credit [Member]
Loss Contingencies [Line Items]
Commitments and contingent liabilities	203,354	217,581
Standby Letters Of Credit [Member]
Loss Contingencies [Line Items]
Commitments and contingent liabilities	$ 4,504	$ 3,736

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Net Periodic Benefit Costs (Schedule Of Net Periodic Cost) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Contributions to defined benefit pension plan	$ 0
Pension Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost	54	$ 55
Expected return on plan assets	(69)	(65)
Amortization of the net loss	23	22
Net periodic cost (benefit)	8	12
Supplemental Executive Retirement Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	42	47
Interest cost	34	36
Amortization of prior service cost	8	8
Amortization of the net loss	20	34
Net periodic cost (benefit)	$ 104	$ 125

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Recent Accounting Pronouncements (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Tax benefit	$ 1,400	$ 804
ASU 2016-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Tax benefit	$ 100