10-Q

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For quarterly period ended June 30, 2012

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

For the transition period from                  to                 

Commission file number 001-35021

EVANS BANCORP, INC.

(Exact name of registrant as specified in its charter)

New York	16-1332767
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
14 -16 North Main Street, Angola, New York	14006
(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  x     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  x     No  ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if smaller reporting company)	Smaller reporting company	x

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

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: 4,153,332 shares as of July 31, 2012

INDEX

EVANS BANCORP, INC. AND SUBSIDIARIES

	PAGE
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets—June 30, 2012 and December 31, 2011		1
Unaudited Consolidated Statements of Income—Three months ended June 30, 2012 and 2011		2
Unaudited Consolidated Statements of Income—Six months ended June 30, 2012 and 2011		3
Unaudited Statements of Consolidated Comprehensive Income—Three months ended June  30, 2012 and 2011		4
Unaudited Statements of Consolidated Comprehensive Income—Six months ended June  30, 2012 and 2011		5
Unaudited Consolidated Statements of Stockholders’ Equity—Six months ended June  30, 2012 and 2011		6
Unaudited Consolidated Statements of Cash Flows—Six months ended June 30, 2012 and 2011		7
Notes to Unaudited Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Item 3. Quantitative and Qualitative Disclosures About Market Risk		50
Item 4. Controls and Procedures		51
PART II. OTHER INFORMATION
Item 6.Exhibits		51
SIGNATURES		52

PART I—FINANCIAL INFORMATION

ITEM I—FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2012 AND DECEMBER 31, 2011

(in thousands, except share and per share amounts)

	June 30,		December 31,
	2012		2011
ASSETS
Cash and due from banks	$	12,540	$	11,486
Interest-bearing deposits at banks		31,445		3,192
Securities:
Available for sale, at fair value (cost: $89,125 at June 30, 2012; $95,848 at December 31, 2011)		93,094		99,981
Held to maturity, at amortized cost (fair value: $3,730 at June 30, 2012; $3,811 at December 31, 2011)		3,708		3,802
Federal Home Loan Bank common stock, at amortized cost		1,804		1,830
Federal Reserve Bank common stock, at amortized cost		1,434		1,425
Loans and leases, net of allowance for loan and lease losses of $10,658 at June 30, 2012 and $11,495 at December 31, 2011		587,265		571,910
Properties and equipment, net of depreciation of $13,687 at June 30, 2012 and $13,145 at December 31, 2011		10,497		10,477
Goodwill		8,101		8,101
Intangible assets		468		678
Bank-owned life insurance		15,095		14,843
Other assets		12,671		13,177
TOTAL ASSETS	$	778,122	$	740,902
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Demand	$	116,231	$	118,037
NOW		63,535		50,761
Regular savings		342,992		313,777
Muni-vest		22,883		20,161
Time		108,279		113,467
Total deposits		653,920		616,203
Securities sold under agreement to repurchase		9,855		9,010
Other borrowings		19,000		22,000
Other liabilities		11,736		13,371
Junior subordinated debentures		11,330		11,330
Total liabilities		705,841		671,914
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS’ EQUITY:
Common stock, $.50 par value, 10,000,000 shares authorized; 4,153,332 and 4,125,272 shares issued at June 30, 2012 and December 31, 2011, respectively, and 4,153,332 and 4,124,892 shares outstanding, at June 30, 2012 and December 31, 2011, respectively		2,077		2,063
Capital surplus		41,611		41,275
Retained earnings		28,269		25,304
Accumulated other comprehensive gain, net of tax		324		346
Total stockholders’ equity		72,281		68,988
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	778,122	$	740,902

See Notes to Unaudited Consolidated Financial Statements

1

PART I—FINANCIAL INFORMATION

ITEM I—FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED JUNE 30, 2012 AND 2011

(in thousands, except share and per share amounts)

	Three Months Ended June 30,
	2012		2011
INTEREST INCOME
Loans and leases	$	7,521	$	7,081
Interest bearing deposits at banks		15		7
Securities:
Taxable		457		538
Non-taxable		296		389
Total interest income		8,289		8,015
INTEREST EXPENSE
Deposits		1,146		1,461
Other borrowings		177		185
Junior subordinated debentures		85		82
Total interest expense		1,408		1,728
NET INTEREST INCOME		6,881		6,287
PROVISION FOR LOAN AND LEASE LOSSES		301		1,009
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND LEASE LOSSES		6,580		5,278
NON-INTEREST INCOME
Bank charges		437		416
Insurance service and fees		1,643		1,601
Data center income		119		192
Gain on loans sold		75		20
Bank-owned life insurance		134		110
Other		630		586
Total non-interest income		3,038		2,925
NON-INTEREST EXPENSE
Salaries and employee benefits		4,229		3,912
Occupancy		645		816
Repairs and maintenance		177		155
Advertising and public relations		336		247
Professional services		567		407
Technology and communications		269		220
Amortization of intangibles		106		126
FDIC insurance		139		135
Other		855		744
Total non-interest expense		7,323		6,762
INCOME BEFORE INCOME TAXES		2,295		1,441
INCOME TAX PROVISION		800		469
NET INCOME	$	1,495	$	972
Net income per common share-basic	$	0.36	$	0.24
Net income per common share-diluted	$	0.36	$	0.24
Cash dividends per common share	$	0.00	$	0.00
Weighted average number of common shares outstanding		4,139,805		4,100,201
Weighted average number of diluted shares outstanding		4,156,868		4,106,371

See Notes to Unaudited Consolidated Financial Statements

2

PART I—FINANCIAL INFORMATION

ITEM I—FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(in thousands, except share and per share amounts)

	Six Months Ended June 30,
	2012		2011
INTEREST INCOME
Loans and leases	$	15,029	$	14,233
Interest bearing deposits at banks		24		11
Securities:
Taxable		1,002		1,024
Non-taxable		603		760
Total interest income		16,658		16,028
INTEREST EXPENSE
Deposits		2,388		2,882
Other borrowings		364		400
Junior subordinated debentures		173		163
Total interest expense		2,925		3,445
NET INTEREST INCOME		13,733		12,583
PROVISION FOR LOAN AND LEASE LOSSES		52		1,497
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND LEASE LOSSES		13,681		11,086
NON-INTEREST INCOME
Bank charges		873		802
Insurance service and fees		3,589		3,690
Data center income		244		431
Gain on loans sold		128		72
Bank-owned life insurance		252		213
Other		1,241		1,178
Total non-interest income		6,327		6,386
NON-INTEREST EXPENSE
Salaries and employee benefits		8,443		7,816
Occupancy		1,330		1,593
Repairs and maintenance		346		314
Advertising and public relations		481		377
Professional services		1,106		809
Technology and communications		517		454
Amortization of intangibles		210		256
FDIC Insurance		274		364
Other		1,525		1,383
Total non-interest expense		14,232		13,366
INCOME BEFORE INCOME TAXES		5,776		4,106
INCOME TAX PROVISION		1,902		1,259
NET INCOME	$	3,874	$	2,847
Net income per common share-basic	$	0.94	$	0.70
Net income per common share-diluted	$	0.94	$	0.69
Cash dividends per common share	$	0.22	$	0.20
Weighted average number of common shares outstanding		4,133,230		4,092,896
Weighted average number of diluted shares outstanding		4,142,209		4,100,635

See Notes to Unaudited Consolidated Financial Statements

3

PART I—FINANCIAL INFORMATION

ITEM I—FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

THREE MONTHS ENDED JUNE 30, 2012 AND 2011

(in thousands, except share and per share amounts)

	Three Months Ended June 30,
	2012		2011
NET INCOME	$	1,495	$	972
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gain on available-for-sale securities		14		741
Defined benefit pension plans:
Amortization of prior service cost		13		13
Amortization of actuarial loss		26		6
Total		39		19
OTHER COMPREHENSIVE INCOME, NET OF TAX		53		760
COMPREHENSIVE INCOME		1,548		1,732

See Notes to Unaudited Consolidated Financial Statements

4

PART I—FINANCIAL INFORMATION

ITEM I—FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(in thousands, except share and per share amounts)

	Six Months Ended June 30,
	2012			2011
NET INCOME	$	3,874		$	2,847
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:
Unrealized (loss) gain on available-for-sale securities		(101	)		865
Defined benefit pension plans:
Amortization of prior service cost		27			27
Amortization of actuarial loss		52			12
Total		79			39
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX		(22	)		904
COMPREHENSIVE INCOME		3,852			3,751

See Notes to Unaudited Consolidated Financial Statements

5

PART 1—FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(in thousands, except share and per share amounts)

	Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total
Balance, December 31, 2010	$	2,041	$	40,660		$	20,836			($473	)	$	63,064
Net Income							2,847						2,847
Other comprehensive income										904			904
Cash dividends ($0.20 per common share)							(816	)					(816	)
Stock options expense				127									127
Excess tax benefit from stock-based compensation				9									9
Issued 12,260 restricted shares		6		(6	)								—
Issued 7,784 shares under ESPP		4		87									91
Issued 6,172 shares in DRIP		3		84									87
Balance, June 30, 2011	$	2,054	$	40,961		$	22,867		$	431		$	66,313
Balance, December 31, 2011	$	2,063	$	41,275		$	25,304		$	346		$	68,988
Net Income							3,874						3,874
Other comprehensive loss										(22	)		(22	)
Cash dividends ($0.22 per common share)							(909	)					(909	)
Stock options expense				151									151
Issued 11,493 restricted shares		6		(6	)								—
Issued 10,267 shares under ESPP		5		99									104
Issued 6,680 shares in DRIP		3		92									95
Balance, June 30, 2012	$	2,077	$	41,611		$	28,269		$	324		$	72,281

See Notes to Unaudited Consolidated Financial Statements

6

PART I—FINANCIAL INFORMATION

ITEM I—FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(in thousands)

	Six Months Ended June 30,
	2012			2011
OPERATING ACTIVITIES:
Interest received	$	16,526		$	15,833
Fees received		5,802			6,327
Interest paid		(2,968	)		(3,493	)
Cash paid to employees and vendors		(13,137	)		(12,007	)
Cash contributed to pension plan		(310	)		—
Income taxes paid		(2,274	)		(1,712	)
Proceeds from sale of loans held for resale		11,268			13,116
Originations of loans held for resale		(8,575	)		(15,590	)
Net cash provided by operating activities		6,332			2,474
INVESTING ACTIVITIES:
Available for sales securities:
Purchases		(23,936	)		(10,290	)
Proceeds from maturities, calls, and payments		30,741			7,470
Held to maturity securities:
Purchases		(638	)		(435	)
Proceeds from maturities, calls, and payments		732			91
Additions to properties and equipment		(563	)		(176	)
Net increase in loans		(18,214	)		(13,609	)
Net cash used in investing activities		(11,878	)		(16,949	)
FINANCING ACTIVITIES:
Repayments of borrowings		(2,155	)		(13,304	)
Net increase in deposits		37,718			42,310
Dividends paid		(909	)		(816	)
Issuance of common stock		199			178
Net cash provided by financing activities		34,853			28,368
Net increase in cash and equivalents		29,307			13,893
CASH AND CASH EQUIVALENTS:
Beginning of period		14,678			13,722
End of period	$	43,985		$	27,615
		(continued)

7

(in thousands)	Six Months Ended June 30,
	2012			2011
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income	$	3,874		$	2,847
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		636			662
Deferred tax expense		398			109
Provision for loan and lease losses		52			1,497
Premium on loans sold		(128	)		(72	)
Stock options expense		151			127
Proceeds from sale of loans held for resale		11,268			13,116
Originations of loans held for resale		(8,575	)		(15,590	)
Cash contributed to pension plan		(310	)		—
Changes in assets and liabilities affecting cash flow:
Other assets		213			536
Other liabilities		(1,247	)		(758	)
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	6,332		$	2,474

See Notes to Unaudited Consolidated Financial Statements

8

PART 1—FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods have been made. Certain reclassifications have been made to the 2011 unaudited consolidated financial statements to conform to the presentation used in 2012.

The results of operations for the three and six month periods ended June 30, 2012 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, 2011. The Company has evaluated subsequent events for potential recognition and/or disclosure through the date of filing.

2. SECURITIES

The amortized cost of securities and their approximate fair value at June 30, 2012 and December 31, 2011 were as follows:

9

	June 30, 2012
	(in thousands)
			Unrealized
	Amortized Cost		Gains		Losses			Fair Value
Available for Sale:
Debt securities:
U.S. government agencies	$	24,061	$	1,246	$	—		$	25,307
States and political subdivisions		30,407		1,495		(43	)		31,859
Total debt securities	$	54,468	$	2,741	($	43	)	$	57,166
Mortgage-backed securities:
FNMA	$	18,210	$	807	$	—		$	19,017
FHLMC		5,621		222		—			5,843
GNMA		8,885		223		(10	)		9,098
CMO		1,941		29		—			1,970
Total mortgage-backed securities	$	34,657	$	1,281	($	10	)	$	35,928
Total securities designated as available for sale	$	89,125	$	4,022	($	53	)	$	93,094
Held to Maturity:
Debt securities
States and political subdivisions		3,708		31		(9	)		3,730
Total securities designated as held to maturity	$	3,708	$	31	($	9	)	$	3,730
Total securities	$	92,833	$	4,053	($	62	)	$	96,824

	December 31, 2011
	(in thousands)
			Unrealized
	Amortized Cost		Gains		Losses			Fair Value
Available for Sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	29,002	$	1,250	$	—		$	30,252
States and political subdivisions		30,632		1,698		(4	)		32,326
Total debt securities	$	59,634	$	2,948	($	4	)	$	62,578
Mortgage-backed securities:
FNMA	$	20,071	$	647		—		$	20,718
FHLMC		8,052		269		—			8,321
GNMA		5,895		248		—			6,143
CMO		2,196		25		—			2,221
Total mortgage-backed securities	$	36,214	$	1,189		—		$	37,403
Total securities designated as available for sale	$	95,848	$	4,137	($	4	)	$	99,981
Held to Maturity:
Debt securities
States and political subdivisions		3,802		24		(15	)		3,811
Total securities designated as held to maturity	$	3,802	$	24	($	15	)	$	3,811
Total securities	$	99,650	$	4,161	($	19	)	$	103,792

Available for sale securities with a total fair value of $75.2 million and $76.7 million at June 30, 2012 and December 31, 2011, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

10

The Company uses the Federal Home Loan Bank of New York (“FHLBNY”) as its primary source of overnight funds and also has several long-term advances with FHLBNY. The Company had a total of $19.0 million and $22.0 million in borrowed funds with FHLBNY at June 30, 2012 and December 31, 2011, respectively. The Company has placed sufficient collateral in the form of residential and commercial real estate loans at FHLBNY that meet FHLB collateral requirements. As a member of the Federal Home Loan Bank (“FHLB”) System, the Bank is required to hold stock in FHLBNY. The Bank held $1.8 million in FHLBNY stock as of June 30, 2012 and December 31, 2011, respectively, at amortized cost.

The scheduled maturities of debt and mortgage-backed securities at June 30, 2012 and December 31, 2011 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.

	June 30, 2012				December 31, 2011
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)				(in thousands)
Debt securities available for sale:
Due in one year or less	$	2,121	$	2,148	$	2,426	$	2,453
Due after one year through five years		16,299		17,013		18,454		19,231
Due after five years through ten years		26,644		27,774		24,995		26,238
Due after ten years		9,404		10,231		13,759		14,656
		54,468		57,166		59,634		62,578
Mortgage-backed securities available for sale		34,657		35,928		36,214		37,403
Total available for sale securities	$	89,125	$	93,094	$	95,848	$	99,981
Debt securities held to maturity:
Due in one year or less	$	2,581	$	2,573	$	2,656	$	2,644
Due after one year through five years		534		547		518		529
Due after five years through ten years		35		37		40		42
Due after ten years		558		573		588		596
Total held to maturity securities	$	3,708	$	3,730	$	3,802	$	3,811

Information regarding unrealized losses within the Company’s available for sale securities at June 30, 2012 and December 31, 2011, is summarized below. The securities are primarily U.S. government-guaranteed agency securities or municipal securities. All unrealized losses are considered temporary and related to market interest rate fluctuations.

11

	June 30, 2012
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
States and political subdivisions		4,326		(39	)		303		(4	)		4,629		(43	)
Total debt securities		$4,326		($39	)		$303		($4	)	$	4,629		($43	)
Mortgage-backed securities:
FNMA	$	—	$	—		$	—	$	—		$	—	$	—
FHLMC		—		—			—		—			—		—
GNMA		2,160		(10	)		—		—			2,160		(10	)
CMO’S		—		—			—		—			—		—
Total mortgage-backed securities	$	2,160		($10	)	$	—	$	—		$	2,160		($10	)
Held To Maturity:
Debt securities:
States and political subdivisions	$	2,174		($9	)	$	0	$	0		$	2,174		($9	)
Total temporarily impaired securities	$	8,660		($58	)	$	303		($4	)	$	8,963		($62	)

	December 31, 2011
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
Available for Sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
States and political subdivisions		401		(1	)		304		(3	)		705		(4	)
Total debt securities	$	401		($1	)		$304		($3	)	$	705		($4	)
Mortgage-backed securities:
FNMA	$	—	$	—		$	—	$	—		$	—	$	—
FHLMC		—		—			—		—			—		—
GNMA		—		—			—		—			—		—
CMO’S		—		—			—		—			—		—
Total mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Held To Maturity:
Debt securities:
States and political subdivisions	$	2,239		($12	)	$	1,006		($3	)	$	3,245		($15	)
Total temporarily impaired securities	$	2,640		($13	)	$	1,310		($6	)	$	3,950		($19	)

In regard to municipal securities, the Company’s general investment policy is that in-state securities must be rated at least Moody’s Baa (or equivalent) at the time of purchase. The Company reviews the ratings report and municipality financial statements and prepares a pre-purchase analysis report before the purchase of any municipal securities. Out-of-state issues must be rated by Moody’s at least Aa (or equivalent) at the time of purchase. The Company did not own any out-of-state municipal bonds at June 30, 2012 or December 31, 2011. Bonds rated below A are reviewed periodically to ensure their continued credit worthiness. While purchase of non-rated municipal securities is permitted under the Company’s investment policy, such purchases are limited to bonds issued by

12

municipalities in the Company’s general market area. Those municipalities are typically customers of the Bank whose financial situation is familiar to management. The financial statements of the issuers of non-rated securities are reviewed by the Bank and a credit file of the issuers is kept on each non-rated municipal security with relevant financial information.

Although concerns have been raised in the marketplace recently about the health of municipal bonds, the Company has not experienced any significant credit troubles in this portfolio and does not believe any credit troubles are imminent. Aside from the non-rated municipal securities to local municipalities discussed above that are considered held-to-maturity, all of the Company’s available-for-sale municipal bonds are investment-grade government obligation (“G.O.”) bonds. G.O. bonds are generally considered safer than revenue bonds because they are backed by the full faith and credit of the government while revenue bonds rely on the revenue produced by a particular project. All of the Company’s municipal bonds are issued by municipalities in New York State. To the Company’s knowledge, there has never been a default of a NY G.O. in the history of the state. The Company believes that its risk of loss on default of a G.O. municipal bond for the Company is relatively low. However, historical performance does not guarantee future performance.

Management has assessed the securities available for sale in an unrealized loss position at June 30, 2012 and December 31, 2011 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 charges in 2012 or 2011, with the gross unrealized losses at an immaterial level, amounting to less than 0.1% of the total fair value of the securities portfolio at June 30, 2012 and December 31, 2011. Nevertheless, it remains possible that there could be deterioration in the asset quality of the securities portfolio in the future. The credit worthiness of the Company’s portfolio is largely reliant on the ability of U.S. government sponsored agencies such as FHLB, Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), and Federal Home Loan Mortgage Corporation (“FHLMC”), and municipalities throughout New York State to meet their obligations. In addition, dysfunctional markets could materially alter the liquidity, interest rate, and pricing risk of the portfolio. The relatively stable past performance is not a guarantee for similar performance of the Company’s securities portfolio going forward.

3. FAIR VALUE MEASUREMENTS

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

There are three levels of inputs to fair value measurements:

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

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

• Level 3, meaning the use of unobservable inputs.

Observable market data should be used when available.

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A RECURRING BASIS

The following table presents for each of the fair-value hierarchy levels as defined in this footnote, those financial

13

instruments which are measured at fair value on a recurring basis at June 30, 2012 and December 31, 2011:

	Level 1		Level 2		Level 3		Fair Value
June 30, 2012
Securities available-for-sale:
U.S. government agencies	$	—	$	25,307	$	—	$	25,307
States and political subdivisions		—		31,859		—		31,859
Mortgage-backed securities		—		35,928		—		35,928
Mortgage servicing rights		—		—		448		448
December 31, 2011
Securities available-for-sale:
U.S. Treasury and other U.S. government agencies	$	—	$	30,252	$	—	$	30,252
States and political subdivisions		—		32,326		—		32,326
Mortgage-backed securities		—		37,403		—		37,403
Mortgage servicing rights		—		—		407		407

Securities available for sale

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

Management believes that it has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of securities to enable management to maintain an appropriate system of internal control. On a quarterly basis the Company reviews changes in the market value of its security portfolio. Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities. Additionally, on an annual basis the Company has its entire security portfolio priced by a second pricing service to determine consistency with another market evaluator. If, on the Company’s review or in comparing with another servicer, a material difference between pricing evaluations were to exist, the Company may submit an inquiry to the servicing provider regarding the data used to value a particular security. If the Company determines it has market information that would support a different valuation than the initial evaluation it can submit a challenge for a change to that security’s valuation. There were no material differences in valuations noted in 2012 or 2011.

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. All assumptions are market driven. Management has a sufficient understanding of the third party

14

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 and six month periods ended June 30, 2012 and 2011, respectively:

	Three months ended June 30,
	2012			2011
Beginning balance, March 31	$	454		$	435
Losses included in earnings		(47	)		(41	)
Additions from loan sales		41			48
Ending balance, June 30	$	448		$	442

	Six months ended June 30,
	2012			2011
Beginning balance, December 31	$	407		$	388
Losses included in earnings		(54	)		(36	)
Additions from loan sales		95			90
Ending balance, June 30	$	448		$	442

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

	6/30/2012			6/30/2011
Servicing fees		0.25	%		0.25	%
Discount rate		10.08	%		10.12	%
Prepayment rate (CPR)		15.82	%		13.07	%

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 June 30, 2012 and December 31, 2011:

	Level 1		Level 2		Level 3		Fair Value
June 30, 2012
Impaired loans	$	—	$	—	$	10,076	$	10,076
December 31, 2011
Impaired loans	$	—	$	—	$	10,311	$	10,311

Impaired loans

The Company evaluates and 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

15

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 $11.4 million, with a valuation allowance of $1.3 million, at June 30, 2012, compared to a gross value for impaired loans of $11.9 million, with a valuation allowance of $1.6 million, at December 31, 2011.

FAIR VALUE OF FINANCIAL INSTRUMENTS

At June 30, 2012 and December 31, 2011, 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:

	June 30, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	43,985	$	43,985	$	14,678	$	14,678
Level 2:
Available for sale securities		93,094		93,094		99,981		99,981
FHLB and FRB stock		3,238		3,238		3,255		3,255
Level 3:
Held to maturity securities		3,708		3,730		3,802		3,811
Loans and leases, net		587,265		621,700		571,910		602,534
Mortgage servicing rights		448		448		407		407
Financial liabilities:
Level 1:
Demand deposits	$	116,231	$	116,231	$	118,037	$	118,037
NOW deposits		63,535		63,535		50,761		50,761
Regular savings deposits		342,992		342,992		313,777		313,777
Muni-vest deposits		22,883		22,883		20,161		20,161
Junior subordinated debentures		11,330		11,330		11,330		11,330
Commitments to extend credit		64		64		161		161
Securities sold under agreement to repurchase		9,855		9,855		9,010		9,010
Level 2:
Other borrowed funds		19,000		19,751		22,000		22,988
Level 3:
Time deposits		108,279		111,558		113,467		116,666

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

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

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

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

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

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

Junior Subordinated Debentures. The carrying amount of Junior Subordinated Debentures is a reasonable estimate of fair value due to the fact that they bear a floating interest rate that adjusts on a quarterly basis.

Commitments to extend credit and standby letters of credit. As described in Note 8—“Contingent Liabilities and Commitments” to these Unaudited Consolidated Financial Statements, the Company was a party to financial instruments with off-balance sheet risk at June 30, 2012 and December 31, 2011. Such financial instruments consist of commitments to extend permanent financing and letters of credit. If the options are exercised by the prospective borrowers, these financial instruments will become interest-earning assets of the Company. If the options expire, the Company retains any fees paid by the counterparty in order to obtain the commitment or guarantee. The fees collected for these commitments are recorded as “unearned commitment fees” in Other Liabilities. The carrying value approximates the fair value.

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

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

4. LOANS, LEASES, AND THE ALLOWANCE FOR LOAN AND LEASE LOSSES

Loan and Lease Portfolio Composition

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

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	June 30, 2012			December 31, 2011
Mortgage loans on real estate:	(in thousands)
Residential Mortgages	$	69,332		$	73,579
Commercial and multi-family		323,456			306,683
Construction-Residential		2,535			2,392
Construction-Commercial		31,807			27,887
Home equities		55,445			54,673
Total real estate loans		482,575			465,214
Direct financing leases		3,355			6,021
Commercial and industrial loans		107,807			109,513
Consumer loans		1,551			1,677
Other		2,303			586
Net deferred loan origination costs		332			394
Total gross loans		597,923			583,405
Allowance for loan losses		(10,658	)		(11,495	)
Loans, net	$	587,265		$	571,910

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The Bank sells certain fixed rate residential mortgages to FNMA, while maintaining the servicing rights for those mortgages. During the three and six month periods ended June 30, 2012, the Bank sold mortgages to FNMA totaling $4.9 million and $11.1 million, respectively as compared with $5.8 million and $13.1 million sold during the three and six month periods ended June 30, 2011, respectively. At June 30, 2012, the Bank had a loan servicing portfolio principal balance of $68.4 million upon which it earns servicing fees, as compared with $62.4 million at December 31, 2011. The value of the mortgage servicing rights for that portfolio was $0.4 million at June 30, 2012 and $0.4 million at December 31, 2011. Residential mortgage loans held-for-sale were $1.0 million at June 30, 2012, compared with $3.6 million at December 31, 2011. The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

As noted in Note 1, these financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011. Disclosures related to the basis for accounting for loans and leases, the method for recognizing interest income on loans and leases, the policy for placing loans and leases 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 and lease losses, the policy for charging off loans and leases, 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 Annual Report on Form 10-K for the year ended December 31, 2011. Unless otherwise noted in this Form 10-Q, the policies and methodology described in the Annual Report for the year ended December 31, 2011 are consistent with those utilized in the six months ended June 30, 2012.

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 C&I portfolios is the individual loan’s credit risk rating. The following list provides a description of the credit risk ratings that are used internally by the Bank when assessing the adequacy of its allowance for loan and lease losses:

• 1-3-Pass

• 4-Watch

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

• 6-Substandard

• 7-Doubtful

• 8-Loss

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

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

June 30, 2012
(in thousands)
Corporate Credit Exposure—By Credit Rating	Commercial Real Estate Construction		Commercial Real Estate Other		Total Commercial Real Estate		Commercial and Industrial
3	$	27,328	$	278,067	$	305,395	$	79,307
4		2,825		35,953		38,778		19,362
5		843		1,858		2,701		4,415
6		811		3,766		4,577		3,362
7		—		3,812		3,812		1,361
Total	$	31,807	$	323,456	$	355,263	$	107,807

December 31, 2011
(in thousands)
Corporate Credit Exposure—By Credit Rating	Commercial Real Estate Construction		Commercial Real Estate Other		Total Commercial Real Estate		Commercial and Industrial
3	$	21,607	$	250,575	$	272,182	$	77,017
4		4,421		45,505		49,926		21,448
5		362		1,758		2,120		5,939
6		1,497		8,845		10,342		4,761
7		—		—		—		348
Total	$	27,887	$	306,683	$	334,570	$	109,513

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Past Due Loans and Leases

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

June 30, 2012
(in thousands)
	30-59 days		60-89 days		90+ days		Total Past Due		Current Balance		Total Balance		90+ Days Accruing		Non-accruing Loans and Leases
Commercial and industrial	$	254	$	1,069	$	805	$	2,128	$	105,679	$	107,807	$	2	$	1,895
Residential real estate:
Residential		—		269		1,183		1,452		67,880		69,332		241		985
Construction		—		—		—		—		2,535		2,535		—		—
Commercial real estate:
Commercial		—		—		2,136		2,136		321,320		323,456		151		5,504
Construction		—		—		811		811		30,996		31,807		—		811
Home equities		154		104		773		1,031		54,414		55,445		16		907
Direct financing leases		33		14		250		297		3,058		3,355		—		430
Consumer		1		4		37		42		1,509		1,551		—		66
Other		—		—		—		—		2,635		2,635		—		—
Total Loans	$	442	$	1,460	$	5,995	$	7,897	$	590,026	$	597,923	$	410	$	10,598

December 31, 2011
(in thousands)
	30-59 days		60-89 days		90+ days		Total Past Due		Current Balance		Total Balance		90+ Days Accruing		Non-accruing Loans and Leases
Commercial and industrial	$	279	$	94	$	1,702	$	2,075	$	107,438	$	109,513	$	—	$	2,180
Residential real estate:
Residential		735		55		1,062		1,852		71,727		73,579		73		1,048
Construction		—		—		167		167		2,225		2,392		—		167
Commercial real estate:
Commercial		3,086		64		2,686		5,836		300,847		306,683		59		6,858
Construction		—		—		2,609		2,609		25,278		27,887		1,167		1,442
Home equities		481		110		683		1,274		53,399		54,673		—		946
Direct financing leases		327		26		754		1,107		4,914		6,021		—		1,160
Consumer		56		5		4		65		1,612		1,677		—		76
Other		—		—		—		—		980		980		—		—
Total Loans	$	4,964	$	354	$	9,667	$	14,985	$	568,420	$	583,405	$	1,299	$	13,877

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Allowance for loan and lease losses

The following tables present the activity in the allowance for loan and lease losses according to portfolio segment, for the six month period ended June 30, 2012 and June 30, 2011:

June 30, 2012
(in thousands)	Commercial and Industrial			Commercial Real Estate Mortgages*			Consumer ^			Residential Mortgages*			HELOC			Direct Financing Leases			Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	4,085		$	4,670		$	36		$	793		$	768		$	994		$	149	$	11,495
Charge-offs		(424	)		(546	)		(10	)		0			(13	)		0			0		(993	)
Recoveries		70			15			13			—			6			—			—		104
Provision	$	485		$	238			$9			($95	)	$	42			($627	)		$0		52
Ending balance	$	4,216		$	4,377		$	48		$	698		$	803		$	367		$	149	$	10,658
Allowance for loan and lease losses:
Individually evaluated for impairment	$	851		$	252		$	16			$0		$	102		$	95			$0	$	1,316
Collectively evaluated for impairment		3,365			4,125			32			698			701			272			149		9,342
Loans acquired with deteriorated credit quality		—			—			—			—			—			—			—		—
Total	$	4,216		$	4,377		$	48		$	698		$	803		$	367		$	149	$	10,658
Loans and leases:
Ending balance:
Individually evaluated for impairment	$	1,916		$	6,860		$	36		$	985		$	1,234		$	331		$	0	$	11,362
Collectively evaluated for impairment		105,891			348,403			3,788			70,882			54,211			3,024			0		586,199
Loans acquired with deteriorated credit quality		—			—			30			—			—			—			—		30
Total	$	107,807		$	355,263		$	3,854		$	71,867		$	55,445		$	3,355		$	—	$	597,591

* Includes construction loans

^ Includes other loans

Note: Loan and lease balances do not include $332 thousand in net deferred loan and lease origination costs as of June 30, 2012.

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June 30, 2011
(in thousands)	Commercial			Commercial Real Estate Mortgages*			Consumer ^			Residential Mortgages*		HELOC		Finance Leases		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,435		$	4,252		$	29		$	548	$	540	$	1,471	$	149	$	10,424
Charge-offs		(1,124	)		($142	)		($11	)		—		—		—		—		(1,277	)
Recoveries		16			—			6			—		1		—		—		23
Provision	$	1,244		$	184		$	20		$	30	$	19	$	0	$	0		1,497
Ending balance	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667
Allowance for loan and lease losses:
Individually evaluated for impairment	$	209		$	721		$	12		$	0	$	0	$	41	$	0	$	983
Collectively evaluated for impairment		3,362		$	3,573		$	32			578		560		1,430		149		9,684
Loans acquired with deteriorated credit quality		—			—			—			—		—		—		—		—
Total	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667
Loans and leases:
Ending balance:
Individually evaluated for impairment	$	1,390		$	8,132		$	58		$	0	$	0	$	271	$	0	$	9,851
Collectively evaluated for impairment		99,967		$	295,820		$	2,544			69,833		54,385		9,686		—		532,235
Loans acquired with deteriorated credit quality		—			—			79			—		—		—		—		79
Total	$	101,357		$	303,952		$	2,681		$	69,833	$	54,385	$	9,957	$	—	$	542,165

* Includes construction loans

^ Includes other loans

Note: Loan and lease balances do not include $329 thousand in net deferred loan and lease origination costs as of June 30, 2011.

The following tables present the activity in the allowance for loan and lease losses according to portfolio segment, for the three month period ended June 30, 2012 and June 30, 2011:

June 30, 2012
(in thousands)	Commercial and Industrial			Commercial Real Estate Mortgages			Consumer			Residential Mortgages			HELOC		Direct Financing Leases			Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,946		$	4,565		$	43		$	719		$	785	$	583		$	149	$	10,790
Charge-offs		(15	)		(487	)		(7	)		0			0		0			0		(509	)
Recoveries		52			15			9			—			—		—			—		76
Provision		233			284			3			(21	)		18		(216	)		0		301
Ending balance	$	4,216		$	4,377		$	48		$	698		$	803	$	367		$	149	$	10,658

23

June 30, 2011
(in thousands)	Commercial			Commercial Real Estate Mortgages			Consumer			Residential Mortgages		HELOC		Finance Leases		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,330		$	4,384		$	37		$	564	$	547	$	1,471	$	149	$	10,482
Charge-offs		(691	)		($142	)		($7	)		—		—		—		—		(840	)
Recoveries		13			—			3			—		—		—		—		16
Provision		919			52			11			14		13		0		0		1,009
Ending balance	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667

In the first quarter of 2012, the Company changed its methodology for reserving for non-accruing residential mortgages and home equities in response to the Interagency Supervisory Guidance. Previously, estimated loss percentages were applied to pools of non-accruing residential mortgages and home equity loans. The Company now evaluates required loss reserves on an individual loan basis. This change resulted from the Company’s successful efforts to obtain more information about the financial status of borrowers and the fair value of loan collateral. The change from reserving for non-accruing residential mortgages and home equities on an individual basis versus a pooled approach resulted in a reduction of allowance for loan and lease losses of $0.1 million.

There were no other changes in the Company’s allowance for loan and lease loss methodology in the six month period ended June 30, 2012.

24

Impaired Loans and Leases

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

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With no related allowance recorded:
Commercial and industrial	$	252	$	275	$	0	$	265	$	18	$	1
Residential real estate:
Residential		985		1,092		—		989		36		0
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		2,261		2,886		—		2,569		100		—
Construction		—		—		—		—		—		—
Home equities		1,028		1,059		—		1,029		16		5
Direct financing leases		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	4,526	$	5,312	$	—	$	4,852	$	170	$	6

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With a related allowance recorded:
Commercial and industrial	$	1,664	$	1,728	$	851	$	1,689	$	36	$	0
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		3,788		3,929		241		3,797		98		—
Construction		811		867		11		814		13		—
Home equities		206		206		102		170		4		1
Direct financing leases		331		341		95		394		10		—
Consumer		66		138		16		68		5		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	6,866	$	7,209	$	1,316	$	6,933	$	166	$	1

25

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
Total
Commercial and industrial	$	1,916	$	2,003	$	851	$	1,954	$	54	$	1
Residential real estate:
Residential		985		1,092		—		989		36		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		6,049		6,815		241		6,366		198		—
Construction		811		867		11		814		13		—
Home equities		1,234		1,265		102		1,199		20		6
Direct financing leases		331		341		95		394		10		—
Consumer		66		138		16		68		5		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	11,392	$	12,521	$	1,316	$	11,784	$	336	$	7

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With no related allowance recorded:
Commercial and industrial	$	261	$	270	$	—	$	371	$	9	$	7
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		2,723		2,916		—		2,503		215		44
Construction		1,442		1,497		—		1,355		48		3
Home equities		327		327		—		331		—		9
Direct financing leases		—		—		—		—		—		—
Consumer		32		95		—		79		7		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	4,785	$	5,105	$	—	$	4,639	$	279	$	63

26

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With a related allowance recorded:
Commercial and industrial	$	1,969	$	2,007	$	405	$	2,151	$	58	$	36
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		4,135		4,418		844		4,257		267		—
Construction		—		—		—		—		—		—
Home equities		170		170		31		170		4		2
Direct financing leases		847		907		350		1,214		60		1
Consumer		44		49		9		56		4		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	7,165	$	7,551	$	1,639	$	7,848	$	393	$	39

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
Total
Commercial and industrial	$	2,230	$	2,277	$	405	$	2,522	$	67	$	43
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		6,858		7,334		844		6,760		482		44
Construction		1,442		1,497		—		1,355		48		3
Home equities		497		497		31		501		4		11
Direct financing leases		847		907		350		1,214		60		1
Consumer		76		144		9		135		11		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	11,950	$	12,656	$	1,639	$	12,487	$	672	$	102

27

Non-performing loans and leases

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

	June 30, 2012			December 31, 2011
	(in thousands)
Non-accruing loans and leases:
Commercial and industrial loans	$	1,895		$	2,180
Residential real estate:
Residential		985			1,048
Construction		—			167
Commercial real estate:
Commercial and multi-family		5,504			6,858
Construction		811			1,442
Home equities		907			946
Direct financing leases		430			1,160
Consumer loans		66			76
Other		—			—
Total non-accruing loans and leases	$	10,598		$	13,877
Accruing loans 90+ days past due		410			1,299
Total non-performing loans and leases	$	11,008		$	15,176
Total non-performing loans and leases to total assets		1.41	%		2.05	%
Total non-performing loans and leases to total loans and leases		1.84	%		2.60	%

28

Troubled debt restructurings

The Company had $7.9 million in loans and leases that were restructured in a troubled debt restructuring (“TDR”) at June 30, 2012, compared with $7.7 million at December 31, 2011. $6.8 million and $7.1 million of those balances were in non-accrual status at June 30, 2012 and December 31, 2011, 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. Those loans and leases that are in accruing status have shown evidence of performance for at least six months as of June 30, 2012 and December 31, 2011. None of the restructurings were made under a government assistance program. Two commercial mortgages with a combined balance of $0.3 million and one residential mortgage with a balance of $44 thousand are covered under the Bank’s loss-sharing arrangement with the FDIC. These restructurings were allowed in an effort to maximize the Company’s ability to collect on loans and leases where borrowers were experiencing financial difficulty. Modifications made to loans in a troubled debt restructuring did not have a material impact on the Company’s net income for the three and six month periods ended June 30, 2012 and 2011. The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. This reserve methodology is used because all TDR loans are considered impaired. As of June 30, 2012, there were no commitments to lend additional funds to debtors owing loans or leases whose terms have been modified in TDRs. The following tables summarize the loans and leases that were classified as troubled debt restructurings as of the dates indicated:

	June 30, 2012
			($ in thousands)
	Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,609	$	1,588	$	21	$	712
Residential real estate:
Residential		44		44		—		—
Construction		—		—		—		—
Commercial real estate:
Commercial and multi family		5,621		5,076		545		190
Construction		—		—		—		—
Home equities		327		—		327		—
Direct financing leases		331		138		193		95
Consumer loans		—		—		—		—
Other		—		—		—		—
Total troubled restructured loans and leases	$	7,932	$	6,846	$	1,086	$	997

29

	December 31, 2011
	($ in thousands)
	Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,432	$	1,362	$	70	$	64
Residential real estate:
Residential		—		—		—		—
Construction		—		—		—		—
Commercial real estate:
Commercial and multi family		5,258		5,258		—		708
Construction		—		—		—		—
Home equities		327		—		327		—
Direct financing leases		714		439		275		330
Consumer loans		—		—		—		—
Other		—		—		—		—
Total troubled restructured loans and leases	$	7,731	$	7,059	$	672	$	1,102

The following table shows the data for TDR activity for the three and six month periods ended June 30, 2012:

	Three Months Ended June 30, 2012						Six Months Ended June 30, 2012
	($ in thousands)						($ in thousands)
Troubled Debt Restructurings	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		—		—		—		2	$	256	$	256
Residential Real Estate:
Residential		1		44		44		1		44		44
Construction		—		—		—		—		—		—
Commercial Real Estate:
Commercial & Multi-Family		1		637		637		2		722		722
Construction		—		—		—		—		—		—
Home Equities		—		—		—		—		—		—
Direct financing leases		—		—		—		—		—		—
Consumer loans		—		—		—		—		—		—
Other		—		—		—		—		—		—

The general practice of the Bank is to work with borrowers so that they are able to pay back their loan or lease in full. If a borrower continues to be delinquent or cannot meet the terms of a TDR and the loan or lease is determined to be uncollectible, the loan or lease will be charged off. The following table presents loans and leases which were classified as TDR’s during the previous 12 months which have defaulted during the three and six month periods ended June 30, 2012:

30

	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
	($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial and Industrial		—		—		4	$	1,272
Residential Real Estate:
Residential		—		—		—		—
Construction		—		—		—		—
Commercial Real Estate:
Commercial and Multi-Family		—		—		6		4,289
Construction		—		—		—		—
Home Equities		—		—		—		—
Direct financing leases		—		—		—		—

Covered Loans and the Related Allowance

On July 24, 2009, the Bank entered into a definitive purchase and assumption agreement with the FDIC under which the Bank assumed approximately $51.0 million in liabilities, consisting almost entirely of deposits, and purchased substantially all of the assets of Waterford Village Bank. The loan portfolio acquired in the transaction was $42.0 million. The loans acquired in that acquisition are referred to as “covered” loans because they are “covered” by a loss sharing agreement with the FDIC. The agreement calls for the FDIC to reimburse the Bank for 80% of losses up to $5.6 million and 95% of losses beyond that threshold. At acquisition, the Company marked the covered loan portfolio to its market value and the allowance for loan and lease losses related to the covered loans was zero. Since acquisition, management has provisioned for any incremental increases in estimated credit losses due to deterioration in specific loans or increased risk factors on pools of loans. As a result of the FDIC guarantees, the provision for loan and lease losses and the allowance for loan and lease losses at June 30, 2012 and December 31, 2011 are presented net of FDIC guarantees related to covered loans. The following table depicts the allowance for loan and lease losses related to covered loans as of June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
	(in thousands)
Covered loans	$	23,408		$	26,429
Incremental estimated credit losses since acquisition		578			506
FDIC guarantee		(462	)		(405	)
Allowance for loan and lease losses	$	116		$	101

5. PER SHARE DATA

The common stock per share information is based upon the weighted average number of shares outstanding during each period. For the three and six month periods ended June 30, 2012 the Company had 17,063 and 8,979 dilutive shares, respectively. The Company had 6,170 and 7,739 dilutive shares for the three and six month periods ended June 30, 2011, 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 and six month periods ended June 30, 2012 there were approximately 162,414 and 167,994 shares, respectively, that were not included in calculating diluted earnings per share because their effect was anti-dilutive. There were 170,706 and 117,186 potentially anti-dilutive shares for the three and six month periods ended June 30, 2011.

31

6. OTHER COMPREHENSIVE INCOME

The following tables display the components of other comprehensive income (loss):

	Three months ended June 30, 2012
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	23		($9	)	$	14
Defined benefit pension plans:
Amortization of prior service cost		22		(9	)		13
Amortization of actuarial loss		43		(17	)		26
Total		65		(26	)		39
Other Comprehensive Income	$	88		($35	)	$	53

	Three months ended June 30, 2011
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	1,210		($469	)	$	741
Defined benefit pension plans:
Amortization of prior service cost		22		(9	)		13
Amortization of actuarial loss		9		(3	)		6
Total		31		(12	)		19
Other Comprehensive Income	$	1,241		($481	)	$	760

	Six months ended June 30, 2012
				Income Tax
	Before-Tax			(Provision)			Net-of-Tax
	Amount			Benefit			Amount
Unrealized loss on investment securities		($165	)	$	64			($101	)
Defined benefit pension plans:
Amortization of prior service cost		44			(17	)		27
Amortization of actuarial loss		86			(34	)		52
Total		130			(51	)		79
Other Comprehensive Loss		($35	)	$	13			($22	)

32

	Six months ended June 30, 2011
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	1,412		($547	)	$	865
Defined benefit pension plans:
Amortization of prior service cost		44		(17	)		27
Amortization of actuarial loss		19		(7	)		12
Total		63		(24	)		39
Other Comprehensive Income	$	1,475		($571	)	$	904

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 and six month periods ended June 30, 2012 and 2011.

	Three Months Ended June 30, 2012
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	6,912		(31	)	$	6,881
Provision for loan and lease losses		301		—			301
Net interest income (expense) after provision for loan and lease losses		6,611		(31	)		6,580
Non-interest income		1,395		—			1,395
Insurance service and fees		—		1,643			1,643
Non-interest expense		6,060		1,263			7,323
Income before income taxes		1,946		349			2,295
Income tax provision		661		139			800
Net income	$	1,285	$	210		$	1,495

33

	Three Months Ended June 30, 2011
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	6,316		($29	)	$	6,287
Provision for loan and lease losses		1,009		—			1,009
Net interest income (expense) after provision for loan and lease losses		5,307		(29	)		5,278
Non-interest income		1,324		—			1,324
Insurance service and fees		—		1,601			1,601
Non-interest expense		5,348		1,414			6,762
Income before income taxes		1,283		158			1,441
Income tax provision		408		61			469
Net income	$	875	$	97		$	972

	Six Months Ended June 30, 2012
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	13,795		($62	)	$	13,733
Provision for loan and lease losses		52		—			52
Net interest income (expense) after provision for loan and lease losses		13,743		(62	)		13,681
Non-interest income		2,738		—			2,738
Insurance service and fees		—		3,589			3,589
Non-interest expense		11,727		2,505			14,232
Income before income taxes		4,754		1,022			5,776
Income tax provision		1,503		399			1,902
Net income	$	3,251	$	623		$	3,874

34

	Six Months Ended June 30, 2011
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	12,642		($59	)	$	12,583
Provision for loan and lease losses		1,497		—			1,497
Net interest income (expense) after provision for loan and lease losses		11,145		(59	)		11,086
Non-interest income		2,696		—			2,696
Insurance service and fees		—		3,690			3,690
Non-interest expense		10,629		2,737			13,366
Income before income taxes		3,212		894			4,106
Income tax provision		914		345			1,259
Net income	$	2,298		$549		$	2,847

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:

	June 30, 2012		December 31, 2011
	(in thousands)
Commitments to extend credit	$	145,052	$	134,204
Standby letters of credit		3,227		3,429
Total	$	148,279	$	137,633

Commitments to extend credit and standby letters of credit include some exposure to credit loss in the event of nonperformance of the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded on the Company’s unaudited consolidated balance sheets. Because these instruments have fixed maturity dates, and because they may expire without being drawn upon, they do not necessarily represent cash requirements of the Bank. The Bank has not incurred any losses on its commitments and has not recorded a reserve for its commitments during 2011 and 2012.

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

The Company is subject to possible litigation proceedings in the normal course of business. As of June 30, 2012 and December 31, 2011, there were no claims pending against the Company that management considered material.

35

9. NET PERIODIC BENEFIT COSTS

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

The Bank used 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 contributed $310 thousand to the defined benefit pension plan in the second quarter of 2012 and plans to contribute an additional $60 thousand before the end of the year.

The following table presents the net periodic cost for the Bank’s defined benefit pension plan and supplemental executive retirement plan for the three and six month periods ended June 30, 2012 and 2011:

	Three months ended June 30,
	(in thousands)
							Supplemental Executive
	Pension Benefits						Retirement Plan
	2012			2011			2012		2011
Service cost	$	—		$	—		$	45	$	45
Interest cost		53			55			38		47
Expected return on plan assets		(57	)		(57	)		—		—
Amortization of prior service cost		—			—			22		22
Amortization of the net loss		16			6			27		3
Net periodic cost	$	12		$	4		$	132	$	117

36

	Six months ended June 30,
	(in thousands)
							Supplemental Executive
	Pension Benefits						Retirement Plan
	2012			2011			2012		2011
Service cost	$	—		$	—		$	90	$	90
Interest cost		106			109			76		95
Expected return on plan assets		(114	)		(114	)		—		—
Amortization of prior service cost		—			—			44		44
Amortization of the net loss		32			13			54		5
Net periodic cost	$	24		$	8		$	264	$	234

10. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update (“ASU”) 2011-03, Reconsideration of Effective Control for Repurchase Agreements. This ASU relates to accounting for repurchase agreements (“repos”) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. During the global economic crisis, capital market participants questioned the necessity and usefulness of the collateral maintenance guidance for the transferor’s ability criterion when determining whether a repo should be accounted for as a sale or as a secured borrowing. The amendments in this ASU remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The new guidance is effective for interim and annual periods beginning after December 15, 2011. The Company adopted this ASU effective January 1, 2012, which did not have a significant impact on the Company’s repo accounting.

ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). This ASU was issued to provide largely identical guidance about fair value measurement and disclosure requirements for IFRS and U.S. GAAP. The new guidance clarifies that the application of the highest and best use and valuation premise concepts are not relevant when measuring the fair value of financial assets or liabilities. This ASU also requires new and enhanced disclosures on the quantification and valuation process for significant unobservable inputs, transfers between Levels 1 and 2 and the categorization of all fair value measurements in the fair value hierarchy, even when those measurements are only for disclosure purposes. The Company adopted this ASU effective January 1, 2012. The enhanced disclosures are included in Note 3, “Fair Value Measurements.”

ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The objective of this ASU is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate the convergence of U.S. GAAP and IFRS, the Financial Accounting Standards Board (“FASB”) decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendments in this ASU will be applied retrospectively. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. In the interim period ended March 31, 2012, the Company adopted this ASU and elected to use the two-statement approach.

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ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. This ASU permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this ASU effective January 1, 2012. The Company will evaluate the need for a two-step goodwill impairment test each period subsequent to adoption. The Company typically performs its goodwill impairment test as of December 31^st on an annual basis. As there were no triggering events in the quarter ended June 30, 2012, management did not test goodwill for impairment. The Company does not expect adoption of this ASU to have a material effect on its financial statements.

ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2011-12 defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income for all periods presented. The ASU does not change the other requirements of FASB ASU No. 2011-05, Presentation of Comprehensive Income. Entities are still required to present reclassification adjustments within other comprehensive income either on the face of the statement that reports other comprehensive income or in the notes to the financial statements. The requirement to present comprehensive income in either a single continuous statement or two consecutive condensed statements remains for both annual and interim reporting. The deferral of the requirement for the presentation of reclassification adjustments is intended to be temporary until the FASB reconsiders the operational concerns and needs of financial statement users.

The Company adopted the amendments in this Update at the same time as ASU 2011-05, which became effective beginning in the interim period ended March 31, 2012. As the Company had no reclassifications adjustments within other comprehensive income, this Update had no impact on its financial statements.

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ITEM 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

These forward-looking statements are based largely on the expectations of the Company’s management and are subject to a number of risks and uncertainties, including but not limited to general economic conditions, either nationally or in the Company’s market areas, that are worse than expected; increased competition among depository or other financial institutions; inflation and changes in the interest rate environment that reduce the Company’s margins or reduce the fair value of financial instruments; changes in laws or government regulations affecting financial institutions, including changes in regulatory fees, monetary policy, and capital requirements; the Company’s ability to enter new markets successfully and capitalize on growth opportunities; the Company’s ability to successfully integrate acquired entities; changes in accounting pronouncements and practices, as adopted by financial institution regulatory agencies, the Financial Accounting Standards Board and the Public Company Accounting Oversight Board; changes in consumer spending, borrowing and saving habits; changes in the Company’s organization, compensation and benefit plans; and other factors discussed elsewhere in this Quarterly Report on Form 10-Q, as well as in the Company’s periodic reports filed with the SEC, in particular the “Risk Factors” discussed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. Many of these factors are beyond the Company’s control and are difficult to predict.

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

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

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

Significant accounting policies followed by the Company are presented in Note 1 – “Organization and Summary of Significant Accounting Policies” to the Audited Consolidated Financial Statements included in Item 8 in its Annual

39

Report on Form 10-K for the year ended December 31, 2011. 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 and lease 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 and Lease Losses

The allowance for loan and lease losses represents management’s estimate of probable losses in the Company’s loan and lease portfolio. Determining the amount of the allowance for loan and lease 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 and leases, estimated losses on pools of homogeneous loans and leases based on historical loss experience and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan and lease 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, 2011, describes the methodology used to determine the allowance for loan and lease 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 typically performed annually on December 31^st. No impairment charges were incurred in the most recent test and the fair value of the tested reporting unit substantially exceeded its fair value. There were no triggering events in the three and six month periods ended June 30, 2012 that resulted in an interim impairment test.

ANALYSIS OF FINANCIAL CONDITION

Loan and Lease Activity

Total loans and leases grew to $597.9 million at June 30, 2012, reflecting an $18.2 million or 3.1% increase from March 31, 2012 and a $14.5 million or 2.5% increase from December 31, 2011. The national direct financing lease portfolio declined $1.1 million during the second quarter to $3.4 million at June 30, 2012 as the Company ceased lease originations in the second quarter of 2009 and is winding down the portfolio and exiting this business line.

Core loans, defined as total loans less leases, were $594.6 million at June 30, 2012, a $19.4 million, or 3.4% increase from $575.2 million at March 31, 2012 and a $17.2 million, or 3.0% increase from December 31, 2011. The large amount of loans closed in the fourth quarter of 2011 left the Company’s loan pipeline relatively lighter to start 2012. The Company re-filled the pipeline in the first quarter and early second quarter and was able to generate significant loan closings in the second quarter, with the highest level of growth coming in commercial and multi-family real estate loans. Compared with gross core loan balances of $532.2 million at June 30, 2011, the growth rate over the past twelve months has been 11.7%.

Loans secured by real estate were $482.6 million at June 30, 2012, an increase of $12.8 million or 2.7% from March 31, 2012, and $17.4 million or 3.7% from December 31, 2011. The strongest growth was in commercial and multi-family real estate loans, which increased $12.4 million or 4.0% in the second quarter of 2012. Year-to-date, growth in commercial real estate was $16.8 million, or 5.5%. Commercial real estate lending has long been a strength of the Bank and its loan officers and the historical strong performance has continued in 2012.

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Residential mortgages decreased to $69.3 million at June 30, 2012, compared with $71.7 million at March 31, 2012 and $73.6 million at December 31, 2011. The Company has sold the majority of its originated residential mortgage loans as long-term fixed rate mortgage loan rates remain near all-time historic lows. This, along with prepayments from existing customers re-financing their homes, has resulted in the decrease in residential mortgage balances in 2012. Residential mortgage originations declined to $7.1 million and $14.4 million in the three and six month periods ended June 30, 2012, respectively, compared with $8.6 million and $17.6 million in the three and six month periods ended June 30, 2011, respectively, as the Company has been less aggressive in pricing its mortgage products in 2012.

The Bank sells certain fixed rate residential mortgages to FNMA, while maintaining the servicing rights for those mortgages. During the three and six month periods ended June 30, 2012, the Bank sold mortgages to FNMA totaling $4.9 million and $11.1 million, respectively as compared with $5.8 million and $13.1 million sold during the three and six month periods ended June 30, 2011, respectively. At June 30, 2012, the Bank had a loan servicing portfolio principal balance of $68.4 million upon which it earns servicing fees, as compared with $67.0 million at March 31, 2012 and $62.4 million at December 31, 2011. The value of the mortgage servicing rights for that portfolio was $0.4 million at June 30, 2012, March 31, 2012 and December 31, 2011. Residential mortgage loans held-for-sale were $1.0 million at June 30, 2012, compared with $1.4 million at March 31, 2012 and $3.6 million at December 31, 2011. The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

The Company continues to focus on commercial and industrial (“C&I”) lending as a way to diversify its loan portfolio, which has historically experienced strong growth rates in real estate loans. However, the Company faces the headwinds of a low growth economy and a very competitive local market. With line of credit usage down at March 31, 2012 compared with December 31, 2011, C&I loans had declined from $109.5 million to $103.1 million. Line of credit commitments and line of credit usage both increased in the second quarter, resulting in C&I balances growing to $107.8 million at June 30, 2012.

Leasing Portfolio

As noted above, management made the strategic decision in April 2009 to exit the national direct financing lease business and market the portfolio for sale. This decision resulted in the classification of the leasing portfolio as held-for-sale and the portfolio being marked to its market value at June 30, 2009. The mark-to-market adjustment was $7.2 million. At September 30, 2009, management determined to keep the lease portfolio and service it to maturity, terminated its plans to actively market the portfolio for sale, and the portfolio was placed back into held-for-investment at the revised carrying amount as of June 30, 2009. The difference between the principal value and the carrying value, initially created by the mark-to-market adjustment at June 30, 2009, reduces over time as individual leases deteriorate, become uncollectible, and are written off. The allowance for lease losses was zero at June 30, 2009 when the portfolio was classified as held-for-sale and reported at its fair market value. With the portfolio classified as held-for-investment at June 30, 2012, the portfolio has been evaluated in accordance with the Company’s normal credit review policies in determining the appropriate allowance for lease losses. During the second quarter of 2012, $351 thousand in leases were written off and the difference between the principal value and carrying value of the leasing portfolio declined from $0.4 million to $0.1 million. While second quarter write-offs were at their highest point in the last five quarters, the charge-offs were not totally unexpected. The Company has consistently maintained a significant reserve for non-performing leases. Non-performing leases of $0.4 million at June 30, 2012 declined from $1.0 million at March 31, 2012 and $1.2 million at December 31, 2011. There were no leases placed in nonaccrual in the second quarter. With both performing and non-performing lease balances declining, management determined that the allowance for leasing losses should decrease by $0.2 million in the second quarter of 2012, following a $0.4 million decrease in the first quarter of 2012. The following table illustrates the write-off and allowance activity related to the leasing portfolio over the past five quarters.

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	($ in thousands)
	2012						2011
	June 30,			March 31,			December 31,			September 30,			June 30,
Leasing Principal Balance	$	3,445		$	4,953		$	6,509		$	8,467		$	10,736
Mark		(90	)		(441	)		(488	)		(684	)		(779	)
Leasing Carrying Value	$	3,355		$	4,512		$	6,021		$	7,783		$	9,957
Mark-to-Market Adjustment	$	441		$	488		$	684		$	779		$	890
Net Write-Offs		(351	)		(47	)		(196	)		(95	)		(111	)
Remaining Mark	$	90		$	441		$	488		$	684		$	779
	For the three months ended
	2012			2012			2011
	June 30,			March 31,			December 31,			September 30,			June 30,
Allowance for lease losses	$	583		$	994		$	1,229		$	1,471		$	1,471
Provision for leases		(216	)		(411	)		(235	)		(242	)		—
Leasing net charge-offs		—			—			—			—			—
Allowance for lease losses	$	367		$	583		$	994		$	1,229		$	1,471
Total mark plus allowance	$	457		$	1,024		$	1,482		$	1,913		$	2,250
Mark + allowance/leasing principal balance		13.27	%		20.67	%		22.77	%		22.59	%		20.96	%

Credit Quality of Loan Portfolio

Total non-performing loans and leases, defined as accruing loans and leases greater than 90 days past due and non-accrual loans and leases, totaled $11.0 million, or 1.84% of total loans and leases outstanding, at June 30, 2012, compared with $13.0 million, or 2.25%, at March 31, 2012 and $15.2 million, or 2.60% of total loans and leases outstanding at December 31, 2011. There were several reasons for the decline in non-performing loans and leases during the past two quarters.

The primary reason for the decrease in the first quarter was related to two commercial constructions loans which totaled $1.2 million as of December 31, 2011. These loans were converted to permanent loans that were current and accruing as of March 31, 2012 and June 30, 2012, but were 90 days past their maturity date as of December 31, 2011 due to administrative delays in closing the permanent loans. Also in the first quarter, two previously non-accruing residential construction loans with a combined balance of $0.2 million were converted to permanent residential mortgage loans and were current and performing as of March 31, 2012 and June 30, 2012. The remaining decrease in the first quarter was from payoffs ($0.3 million), continued improvement in leasing ($0.2 million), and charge-offs ($0.2 million).

In the second quarter, in addition to further decreases in leasing non-accruals of $0.5 million, a non-accruing commercial construction loan for $0.6 million paid off, a previously non-accruing commercial real estate loan for $0.5 million was moved to accrual status after six months of timely payments, and there was the partial charge-off of a commercial real estate loan of $0.4 million. For the loan that was partially charged off, $0.5 million remains outstanding after the borrower received an offer on the property that serves as the Company’s collateral.

The allowance for loan and lease losses totaled $10.7 million, or 1.78% of total loans and leases outstanding as of June 30, 2012, compared with $10.8 million or 1.86% at March 31, 2012,and $11.5 million or 1.97% at December 31, 2011. The decrease in the allowance over the prior year resulted from a $0.6 million release of reserves on the leasing portfolio and net charge-offs of $0.9 million in the six month period ended June 30, 2012, partially offset by a $0.7 million provision for loan losses. The provision for loan losses resulted from the charge-off of three loans that exceeded the reserve associated with those loans at the time of the charge-offs, as well as the loan growth in the second quarter. The $0.4 million in net charge-offs in the second quarter of 2012 equates to a 0.30% annualized ratio as a percentage of average net loans and leases. This compares with a 0.32% ratio in the first quarter of 2012 and 0.63% in the second quarter of 2011. For the six months ended June 30, 2012, the $0.9 million in net charge-

42

offs equated to 0.31% of average net loans and leases, compared with $1.3 million in net charge-offs for a ratio of 0.47% in the first six months of 2011.

The coverage ratio of the allowance for loan and lease losses to non-performing loans and leases increased from 76% at December 31, 2011 to 83% at March 31, 2012 and 97% at June 30, 2012. There are two factors that significantly influence these ratios. The first factor is the covered loan portfolio acquired in the Waterford transaction which are covered by an FDIC loss-sharing agreement that guarantees 80% of any losses incurred in the portfolio up $5.6 million, and 95% of losses beyond that threshold. The second factor is the leasing portfolio, which carries significantly higher risk, but also has the remaining mark to consider as depicted in the table above. The following table depicts the allowance and non-performing ratios by segregating the covered and non-covered loan portfolios and the leasing portfolio as of the following dates:

	June 30, 2012
	($ in thousands)
	Balance		Allowance for loan and lease losses		Non- performing loans and leases		Allowance for loan  and lease losses / Total loans and leases			Non- performing loans and leases/Total loans and leases			Allowance for loan  and lease losses/Non- performing loans and leases
Non-covered loans	$	571,160	$	10,175	$	8,586		1.78	%		1.50	%		118.51	%
Covered loans		23,408		116		1,992		0.50	%		8.51	%		5.82	%
Leases		3,355		367		430		10.94	%		12.82	%		85.35	%
Total	$	597,923	$	10,658	$	11,008		1.78	%		1.84	%		96.82	%

	December 31, 2011
	($ in thousands)
	Balance		Allowance for loan and lease losses		Non- performing loans and leases		Allowance for loan  and lease losses / Total loans and leases			Non- performing loans and leases/Total loans and leases			Allowance for loan  and lease losses/Non- performing loans and leases
Non-covered loans	$	550,955	$	10,400	$	11,488		1.89	%		2.09	%		90.53	%
Covered loans		26,429		101		2,528		0.38	%		9.57	%		4.00	%
Leases		6,021		994		1,160		16.51	%		19.27	%		85.69	%
Total	$	583,405	$	11,495	$	15,176		1.97	%		2.60	%		75.74	%

Investing Activities

Total securities were $96.8 million at June 30, 2012, compared with $112.5 million at March 31, 2012 and $103.8 million at December 31, 2011. The reduction in the investment securities portfolio from March 31, 2012 reflects the use of excess liquidity garnered in the first quarter 2012 to fund the loan growth in the second quarter 2012. The growth in securities in the first quarter of 2012 was primarily in short-term U.S. Treasury bonds with the expectation of deployment into loans in the second quarter 2012. Interest-bearing deposits at other banks, which consist of overnight funds kept at correspondent banks, increased from $3.2 million at December 31, 2011 to $31.9 million at March 31, 2012 and $31.4 million at June 30, 2012. Interest-bearing cash has increased as deposit growth outpaced loan growth. The Company plans to eventually deploy these short-term investments into loans. Securities and interest-bearing deposits at correspondent banks made up 19.6 % of the Bank’s total average interest earning assets in the second quarter of 2012, compared with 18.4% in the first quarter of 2012.

The Company’s highest concentration in its securities portfolio is in government-sponsored mortgage-backed securities with 37.1% at June 30, 2012, compared with 36.0% at December 31, 2011. Tax-advantaged municipal bonds comprised 36.7% of the total portfolio at June 30, 2012, compared with 34.8% at December 31, 2011, while

43

the concentration in U.S. government-sponsored agency bonds was 26.1% of the portfolio at June 30, 2012, compared with 29.2% of the portfolio at December 31, 2011.

The credit quality of the securities portfolio as a whole is believed to be strong as the portfolio has no individual securities in a significant unrealized loss position. With interest rates remaining near historic lows, the net unrealized gain position of the investment portfolio decreased slightly from $4.1 million at December 31, 2011 to $4.0 million at June 30, 2012. However, this was an increase from $3.9 million at March 31, 2012.

The Company monitors extension and prepayment risk in the securities portfolio to limit potential exposures. Available-for-sale securities with a total fair value of $75.2 million at June 30, 2012, as compared with $76.7 million at December 31, 2011, were pledged as collateral to secure public deposits and for other purposes required or permitted by law. The Company has no direct exposure to subprime mortgages, nor does the Company hold private mortgage-backed securities, credit default swaps, or FNMA or FHLMC preferred stock investments in its investment portfolio.

Funding Activities

Total deposits at June 30, 2012 were $653.9 million, reflecting a $4.2 million or 0.7% increase from March 31, 2012 and a $37.7 million, or 6.1%, increase from December 31, 2011. Total demand deposits at June 30, 2012 were $116.2 million, reflecting a $1.8 million or 1.6% increase from March 31, 2012, but a $1.8 million or 1.5% decrease from December 31, 2011. Demand deposit balances fluctuate day-to-day based on the high volume of transactions normally associated with the demand product, and therefore average demand deposit growth is a better measure of sustained growth. Average demand deposits of $115.0 million during the three month period ended June 30, 2012 was 0.2% higher than the first quarter of 2012, but 8.8% higher than the prior year’s second quarter. Most of the Company’s growth in the past year in demand deposits has come from commercial customers.

The Company’s retail deposit growth vehicle continues to be the complementary Better Checking and Better Savings products, which are included in the NOW and regular savings deposit categories, respectively, on the Company’s balance sheet. The Better Checking product is unique in the Bank’s Western New York footprint as it pays a premium interest rate as a reward to customers who demonstrate a deep relationship with the Bank as evidenced by regular use of their debit card, use of direct deposit, and electronic statements. Overall, Better Checking deposits increased $2.4 million during the second quarter of 2012 and $6.4 million during the first six months of the year. Overall NOW deposit growth was less as the Better Checking growth was offset by a decrease in municipal NOW accounts. Regular savings deposits increased $9.0 million, or 2.7%, during the second quarter of 2012 and $29.2 million, or 9.3% during the first six months of the year. That growth is mostly a result of an increase in Better Savings deposits, offset by decreases in legacy savings products. Growth in NOW and savings deposits slowed in the second quarter as the Company lowered rates on selected deposit products given the Company’s current excess liquidity and declining net interest margin in this extended low rate environment.

Time deposits were $108.3 million at June 30, 2012, a decrease of $1.4 million, or 1.2%, from March 31, 2012, and a $5.2 million, or 4.6%, decrease from December 31, 2011. Time deposit rates remain near historic lows. As a result, customers have continued to show a preference for liquid savings products over time deposits.

Other borrowings, which typically include the Bank’s overnight line of credit and other advances with the FHLBNY, were $19.0 million at June 30, 2012 compared with $22.0 million at March 31, 2012 and December 31, 2011 as a $3.0 million advance with FHLBNY matured and was not replaced. Because the Company’s deposit growth has outpaced its loan growth this year, the Bank has not needed to add to its wholesale borrowings.

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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 and lease balances include both performing and non-performing loans and leases. Investments are included at amortized cost. Yields are presented on a non-tax-equivalent basis.

	Three Months Ended							Three Months Ended
	June 30, 2012							June 30, 2011
	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 and leases, net	$	574,639	$	7,521		5.24	%	$	524,178	$	7,081		5.40	%
Taxable securities		67,460		457		2.71	%		61,069		538		3.52	%
Tax-exempt securities		33,592		296		3.52	%		39,570		389		3.93	%
Interest bearing deposits at banks		39,198		15		0.15	%		16,952		7		0.17	%
Total interest-earning assets		714,889		8,289		4.64	%		641,769		8,015		5.00	%
Non interest-earning assets:
Cash and due from banks		11,509							16,523
Premises and equipment, net		10,442							10,612
Other assets		36,311							35,382
Total Assets	$	773,151						$	704,286
LIABILITIES & STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
NOW	$	60,472	$	150		0.99	%	$	44,707	$	131		1.17	%
Regular savings		336,798		483		0.57	%		268,220		463		0.69	%
Muni-Vest savings		26,821		21		0.31	%		29,483		35		0.47	%
Time deposits		109,170		492		1.80	%		139,727		832		2.38	%
Other borrowed funds		20,645		173		3.35	%		22,029		182		3.30	%
Junior subordinated debentures		11,330		85		3.00	%		11,330		82		2.89	%
Securities sold U/A to repurchase		8,644		4		0.19	%		6,022		3		0.20	%
Total interest-bearing liabilities		573,880	$	1,408		0.98	%		521,518	$	1,728		1.33	%
Noninterest-bearing liabilities:
Demand deposits		115,033							105,725
Other		12,472							11,144
Total liabilities		701,385						$	638,387
Stockholders’ equity		71,766							65,899
Total Liabilities and Equity		773,151						$	704,286
Net interest earnings			$	6,881						$	6,287
Net interest margin						3.85	%						3.92	%
Interest rate spread						3.66	%						3.67	%

45

	Six Months Ended							Six Months Ended
	June 30, 2012									June 30, 2011
	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 and leases, net	$	571,735	$	15,029		5.26	%	$	521,228	$	14,233		5.46	%
Taxable securities		69,184		1,002		2.90	%		59,265		1,024		3.46	%
Tax-exempt securities		34,003		603		3.55	%		39,060		760		3.89	%
Interest bearing deposits at banks		31,252		24		0.15	%		12,731		11		0.17	%
Total interest-earning assets		706,174		16,658		4.72	%		632,284		16,028		5.07	%
Non interest-earning assets:
Cash and due from banks		11,490							15,960
Premises and equipment, net		10,430							10,685
Other assets		36,515							35,689
Total Assets	$	764,609						$	694,618
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW	$	57,791	$	290		1.00	%	$	41,608	$	237		1.14	%
Regular savings		331,445		1,048		0.63	%		262,226		873		0.67	%
Muni-Vest savings		24,450		41		0.34	%		27,072		64		0.47	%
Time deposits		110,625		1,009		1.82	%		141,436		1,708		2.42	%
Other borrowed funds		21,324		354		3.32	%		24,594		393		3.20	%
Junior subordinated debentures		11,330		173		3.05	%		11,330		163		2.88	%
Securities sold U/A to repurchase		8,910		10		0.22	%		6,201		7		0.23	%
Total interest-bearing liabilities		565,875	$	2,925		1.03	%		514,467	$	3,445		1.34	%
Noninterest-bearing liabilities:
Demand deposits		114,902							103,772
Other		12,946							11,411
Total liabilities		693,723						$	629,650
Stockholders’ equity		70,886							64,968
Total Liabilities and Equity	$	764,609						$	694,618
Net interest earnings			$	13,733						$	12,583
Net yield on interest earning assets						3.89	%						3.98	%
Interest rate spread						3.69	%						3.73	%

46

Net Income

Net income grew to $1.5 million in the second quarter of 2012, up 54.0% from net income of $1.0 million in the second quarter of 2011. The improvement in net income reflected a combination of higher net interest income, which resulted from growing interest earning assets, and a $0.7 million year-over-year reduction in the provision for loan and lease losses due to the declining balance in the leasing portfolio and the improving credit quality trends in both the leasing and loan portfolios. The Company released $0.2 million in leasing provision in the 2012 second quarter compared with no leasing provision for the prior-year period. Return on average equity was 8.34% for the second quarter of 2012 compared with 5.90% in the second quarter of 2011.

For the six months ended June 30, 2012, net income was $3.9 million, or $0.94 per diluted share, compared with net income of $2.8 million, or $0.69 per diluted share, in the same period in 2011. The return on average equity was 10.93% for the six-month period ended June 30, 2012, compared with 8.80% in the same period in 2011.

Other Results of Operations—Quarterly Comparison

Net interest income was $6.9 million for the 2012 second quarter, up 9.4% compared with the second quarter of 2011 and flat compared with the first quarter of 2012. Growth in interest-earning assets drove the increase from the second quarter of 2011 and offset the net interest margin contraction relative to the same period. Core loans, which are defined as total loans and leases less national direct financing leases, were $594.6 million at June 30, 2012, an increase of 11.7% from $532.5 million at June 30, 2011, and up 3.4% (13.5% annualized) from $575.2 million at March 31, 2012. The majority of the loan growth in the second quarter of 2012 was in the commercial mortgage loan portfolios.

The Company’s net interest margin decreased to 3.85% for the second quarter of 2012, down from 3.93% in the first quarter of 2012 and 3.92% in the second quarter of 2011. As compared to the second quarter 2011, the Company has been able to off-set the decrease in yield on interest-earning assets of 36 basis points by re-pricing its interest bearing liabilities, resulting in a reduction in the rate paid on interest-bearing liabilities of 35 basis points. The contribution of interest-free funds declined by 6 basis points when compared with the second quarter of 2011. As compared with the linked first quarter the decrease in the net interest margin is a result of a continuation of the declining interest rate environment. While the Company’s loan and investment portfolios continue to re-price into lower yields, as evidenced by a decrease in yield on interest-earning assets of 16 basis points from the first quarter of 2012, the Company only benefited from re-pricing its interest-bearing liabilities during the second quarter of 2012 at a pace of 11 basis points.

The provision for loan and lease losses decreased to $0.3 million in the second quarter of 2012 from a provision of $1.0 million in the second quarter of 2011, and an increase from a release of provision of $(0.2) million in the linked first quarter of 2012. The second quarter of 2012 benefitted from a release of $0.2 million in leasing provision after continued improvement in the leasing portfolio’s performance. This benefit was off-set by provision of $0.3 million for the growth in loans in the second quarter of 2012 and the charge-off of an impaired commercial real estate loan that was $0.2 million higher than its reserve at March 31, 2012.

Non-interest income, which represented 30.6% of total revenue in the second quarter of 2012, increased 3.9%, or $0.1 million, to $3.0 million when compared with the second quarter of 2011, reflecting positive performance for all categories. Service charges on deposits increased $21 thousand, or 5.0%, compared with the second quarter 2011, primarily due to increases in fee rates to be more in-line with market competition. Insurance agency revenue of $1.6 million was up $42 thousand, or 2.6%, when compared with the 2011 second quarter due mostly to an increase in profit sharing revenue from the insurance carriers. The higher profit sharing was driven by the timing of payouts from insurance carriers; however, profit sharing trends are still down year over year as indicated in our year-to-date comparison below. Other income was up $44 thousand from second quarter 2011 partly from higher merchant services fees due to a more beneficial contract with the Company’s provider. Compared with the first quarter of 2012, total non-interest income was down $0.2 million due mainly to TEA’s decrease in revenue of $0.3 million, reflecting the typical revenue cycle seasonality.

Total non-interest expense was $7.3 million in the second quarter of 2012, an increase of $0.6 million, or 8.3%, from $6.8 million in the second quarter of 2011. The largest component of the increase was salaries and employee benefits, which was up $0.3 million, or 8.1%, to $4.2 million compared with the second quarter of 2011. This rise

47

reflected merit increases awarded for 2011 performance, higher health care costs and increased staff levels. Additionally, advertising expense was higher by $89 thousand in the second quarter of 2012 from the prior year second quarter as the Company looked to capitalize on disruption in the marketplace from the HSBC sale of its Western New York branch network. Professional services expense also increased during the quarter due mainly to higher legal expenses, particularly those related to resolving and collecting impaired loans. These increases were partially offset by lower occupancy costs, mostly related to fully depreciated assets lowering depreciation expense.

As a result of the increase in non-interest expense, the efficiency ratio increased to 72.76% for the second quarter of 2012 from 72.04% for the second quarter of 2011.

Income tax expense for the quarter ended June 30, 2012, was $0.8 million, representing an effective tax rate of 34.9% compared with an effective tax rate of 32.6% in the second quarter of 2011. The effective tax rate increased as tax-exempt income such as interest income from municipal bonds and the increase in the cash surrender value of bank-owned life insurance made up a smaller percentage of total income.

Other Results of Operations—Year-to-Date Comparison

Net interest income was $13.7 million for the six months ended June 30, 2012, a 9.1% increase from the first six months of 2011. Growth in interest-earning assets, particularly loans, drove the increase from 2011 and offset the net interest margin contraction relative to the same period.

The Company’s net interest margin decreased to 3.89% for the six month period ended June 30, 2012, down from 3.98% in the first six months of 2011. As the low interest rate cycle continues, the Company’s loan and investment portfolios re-price into lower yields as evidenced by a decrease in yield on interest-earning assets of 35 basis points in the first six months of 2012 when compared with the same period in 2011. The Company benefited from re-pricing its interest-bearing liabilities earlier in the interest rate cycle so these rates have fallen less than the yield on interest-earning assets in the past year. Correspondingly, the cost of interest-bearing liabilities for the first six months of 2012 declined only 31 basis points when compared with the same period in 2011.

The provision for loan and lease losses decreased to $0.1 million in the six month period ended June 30, 2012 from a provision of $1.5 million in the six month period ended June 30, 2011. With the continuing improvement in the performance of the leasing portfolio including a steep decrease in non-performing leases, the Company released $0.6 million in leasing reserves in the first six month of 2012 compared with a provision for lease losses of zero in the first six months of 2011. The provision for loan losses (not including leases) decreased from $1.5 million in the six month period ended June 30, 2011 to $0.7 million in the first six months of 2012. In the prior year period there was deterioration in several commercial loan relationships that drove the higher provision. In contrast, in 2012, non-performing loans and leases as a percentage of total loans and leases has decreased from 2.60% at December 31, 2011 to 1.84% at June 30, 2012.

Non-interest income, which represented 31.5% of total revenue in the first six months of 2012, decreased 0.9%, or $0.1 million, to $6.3 million when compared with the first six months of 2011. Data center income, which declined $0.2 million from the prior year’s first six months, is from the Bank’s wholly-owned subsidiary, Suchak Data Systems, LLC (“SDS”). SDS is a data processing company which was acquired by the Bank on December 31, 2008. The original contracted revenue generated by service agreements with other banks is expiring as expected. The Company is focusing on the original purpose for the purchase of SDS, which was to provide resources for its own internal bank processing needs. Insurance agency revenue of $3.6 million for the six month period ended June 30, 2012 was down $0.1 million, or 2.7%, when compared with the six month period ended June 30, 2011 due mostly to a decrease in profit sharing revenue from the insurance carriers. The lower profit sharing is driven by higher loss ratios related to lower premium levels. These negative trends were somewhat offset by increased deposit service charges, premiums on loans sold, bank-owned life insurance (“BOLI”) income and other income. Deposit service charges increased $71 thousand, or 8.9%, compared with the first six months of 2011, primarily due to increases in fee rates to be more in-line with market competition. Premiums on loans sold increased $56 thousand year over year due to more disciplined pricing and improved execution on loan sales to FNMA. BOLI income increased $39 thousand, or 18.3%, due to an increased investment in BOLI, which increased from $12.6 million at June 30, 2011 to $15.1 million at June 30, 2012. Other income was up $63 thousand in the first six months of 2012 when compared to the prior year mostly from higher merchant services fees due to a more beneficial contract with the Company’s provider.

48

Total non-interest expense was $14.2 million in the six month period ended June 30, 2012, an increase of $0.9 million, or 6.5%, from $13.4 million in the second quarter of 2011. The largest component of the increase was salaries and employee benefits, which was up $0.6 million, or 8.0%, from the first six months of 2011 to $8.4 million in the first six months of 2012. This rise primarily reflected merit increases awarded for 2011 performance, higher health care costs and increased staff levels. Additionally, advertising expense was higher by $0.1 million in the six month period ended June 30, 2012 from the prior year as the Company looked to capitalize on disruption in the marketplace from the HSBC sale of its Western New York branch network. Professional services expenses increased $0.3 million from $0.8 million in the six month period ended June 30, 2011 to $1.1 million in the first six months of 2012. The increase is due mainly to higher legal expenses, particularly those related to resolving and collecting impaired loans. These increases were partially offset by occupancy costs of $1.3 million, which were $0.3 million lower in the first six months of 2012 when compared with 2011, mostly related to fully depreciated assets lowering depreciation expense.

As a result of the increase in non-interest expense, the efficiency ratio increased to 69.90% for the six month period ended June 30, 2012 from 69.11% in the corresponding period in 2011.

Income tax expense for the six months ended June 30, 2012, was $1.9 million, representing an effective tax rate of 32.9% compared with an effective tax rate of 30.7% in the six month period ended June 30, 2011. The effective tax rate increased as tax-exempt income such as interest income from municipal bonds and the increase in the cash surrender value of bank-owned life insurance was a smaller percentage of total income.

CAPITAL

The Company consistently maintains regulatory capital ratios measurably above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 9.77% at June 30, 2012 and 9.71% at December 31, 2011. Book value per share of the Company’s common stock was $17.40 at June 30, 2012, compared with $16.72 at December 31, 2011. Tangible book value per share at June 30, 2012 was $15.34, compared with $14.60 at December 31, 2011. The increase in both book value and tangible book value per share is a result of the Company’s $3.9 million in net income, somewhat offset by the dividend paid in the second quarter of 2012.

On February 21, 2012, the Company declared a semi-annual cash dividend of $0.22 per share on the Company’s outstanding common stock. The dividend was paid on April 10, 2012 to shareholders of record as of March 20, 2012. The dividend was a 10% increase from the previous semi-annual dividend of $0.20 paid on October 4, 2011.

LIQUIDITY

The Bank utilizes cash flows from the investment portfolio and federal funds sold balances to manage the liquidity requirements related to loan demand and deposit fluctuations. The Bank also has many borrowing options. As a member of the FHLB the Bank is able to borrow funds at competitive rates. Advances of up to $129.5 million can be drawn on the FHLB via an Overnight Line of Credit Agreement between the Bank and the FHLB. An amount equal to 25% of the Bank’s total assets could be borrowed through the advance programs under certain qualifying circumstances. The Bank also has the ability to purchase up to $14.0 million in federal funds from its correspondent banks. By placing sufficient collateral in safekeeping at the Federal Reserve Bank, the Bank could borrow at the discount window. The Bank’s liquidity needs also can be met by more aggressively pursuing time deposits, or accessing the brokered time deposit market, including the Certificate of Deposit Account Registry Service (“CDARS”) network. The Company’s primary source of liquidity is dividends from the Bank. Additionally, the Company has access to capital markets as a funding source. The Company has accessed the capital markets as recently as May 2010 when it raised $13.4 million in net proceeds in connection with its registered offering and sale of 1.2 million shares of common stock.

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 June 30, 2012, approximately 4.9% of the Bank’s securities had contractual maturity dates of one year or less and approximately 23.0% had maturity dates of five years or less.

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

49

business. As part of that monitoring process, management calculates the 90-day liquidity each month by analyzing the cash needs of the Bank. Included in the calculation are liquid assets and potential liabilities. Management stresses the potential liabilities calculation to ensure a strong liquidity position. Included in the calculation are assumptions of some significant deposit run-off as well as funds needed for loan closings and investment purchases. At June 30, 2012, in the Company’s internal stress test, the Company had net short-term liquidity of $75.0 million as compared with $82.6 million at December 31, 2011. Available assets of $131.0 million, divided by public and purchased funds of $118.5 million, resulted in a long-term liquidity ratio of 111% at June 30, 2012, compared with 99% at December 31, 2011.

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. However, continued economic recession could negatively impact the Company’s liquidity.

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

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

50

	Calculated increase in projected annual net interest income
	(in thousands)
	June 30, 2012			December 31, 2011
Changes in interest rates
+200 basis points		($121	)	$	1,126
+100 basis points		657			1,452
-100 basis points		N/A			NM
-200 basis points		N/A			NM

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

ITEM 4—CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2012 (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 June 30, 2012 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 June 30, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

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.

51

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 August 3, 2012	/s/ David J. Nasca
	David J. Nasca
	President and CEO (Principal Executive Officer)
DATE August 3, 2012	/s/ Gary A. Kajtoch
	Gary A. Kajtoch
	Treasurer (Principal Financial Officer)

52

EXHIBIT INDEX

Exhibit No.	Name	Page No.
10.1*	Evans Bancorp, Inc. Executive Severance Plan (incorporated by reference to the Company’s Current Report on Form 8-K filed on May 23, 2012).
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		54
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		55
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.		56
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.		57
101	The following materials from Evans Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Consolidated Balance Sheets – June 30, 2012 and December 31, 2011; (ii) Unaudited Consolidated Statements of Income – Three months ended June 30, 2012 and 2011; (iii) Unaudited Consolidated Statements of Income – Six months ended June 30, 2012 and 2011; (iv) Unaudited Statements of Consolidated Comprehensive Income – Three months ended June 30, 2012 and 2011; (v) Unaudited Statements of Consolidated Comprehensive Income – Six months ended June 30, 2012 and 2011; (vi) Unaudited Consolidated Statements of Stockholder’s Equity – Six months ended June 30, 2012 and 2011; (vii) Unaudited Consolidated Statements of Cash Flows – Six months ended June 30, 2012 and 2011; and (vi) Notes toUnaudited Consolidated Financial Statements.**

* Indicates a management contract or compensatory plan or arrangement.

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

53

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 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: August 3, 2012

/s/ David J. Nasca

David J. Nasca

President & Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification

I, Gary A. Kajtoch, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 3, 2012

/s/ Gary A. Kajtoch

Gary A. Kajtoch

Treasurer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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, 2012 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: August 3, 2012

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 CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary A. Kajtoch, the Treasurer of Evans Bancorp, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) the Quarterly Report of Evans Bancorp, Inc. on Form 10-Q for the fiscal quarter ended March 31, 2012 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: August 3, 2012

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

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Recorded Investment In Loans And Leases That Are Past Due) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	$ 442	$ 4,964
60-89 days	1,460	354
90+ days	5,995	9,667
Total Past Due	7,897	14,985
Current Balance	590,026	568,420
Total gross loans	597,923	583,405
90+ Days Accruing	410	1,299
Non-accruing Loans and Leases	10,598	13,877
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	254	279
60-89 days	1,069	94
90+ days	805	1,702
Total Past Due	2,128	2,075
Current Balance	105,679	107,438
Total gross loans	107,807	109,513
90+ Days Accruing	2
Non-accruing Loans and Leases	1,895	2,180
Residential Real Estate: Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days		735
60-89 days	269	55
90+ days	1,183	1,062
Total Past Due	1,452	1,852
Current Balance	67,880	71,727
Total gross loans	69,332	73,579
90+ Days Accruing	241	73
Non-accruing Loans and Leases	985	1,048
Residential Real Estate: Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90+ days		167
Total Past Due		167
Current Balance	2,535	2,225
Total gross loans	2,535	2,392
Non-accruing Loans and Leases		167
Commercial Real Estate: Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days		3,086
60-89 days		64
90+ days	2,136	2,686
Total Past Due	2,136	5,836
Current Balance	321,320	300,847
Total gross loans	323,456	306,683
90+ Days Accruing	151	59
Non-accruing Loans and Leases	5,504	6,858
Commercial Real Estate: Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90+ days	811	2,609
Total Past Due	811	2,609
Current Balance	30,996	25,278
Total gross loans	31,807	27,887
90+ Days Accruing		1,167
Non-accruing Loans and Leases	811	1,442
Home Equities [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	154	481
60-89 days	104	110
90+ days	773	683
Total Past Due	1,031	1,274
Current Balance	54,414	53,399
Total gross loans	55,445	54,673
90+ Days Accruing	16
Non-accruing Loans and Leases	907	946
Direct Financing Leases [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	33	327
60-89 days	14	26
90+ days	250	754
Total Past Due	297	1,107
Current Balance	3,058	4,914
Total gross loans	3,355	6,021
Non-accruing Loans and Leases	430	1,160
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 days	1	56
60-89 days	4	5
90+ days	37	4
Total Past Due	42	65
Current Balance	1,509	1,612
Total gross loans	1,551	1,677
Non-accruing Loans and Leases	66	76
Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current Balance	2,635	980
Total gross loans	2,635	980
Non-accruing Loans and Leases

XML

Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Other Comprehensive Income [Abstract]
Unrealized gain (loss) on investment securities, Before-Tax Amount	$ 23	$ 1,210	$ (165)	$ 1,412
Defined benefit pension plans: Amortization of prior service cost, Before-Tax Amount	22	22	44	44
Defined benefit pension plans: Amortization of actuarial loss, Before-Tax Amount	43	9	86	19
Total, Before-Tax Amount	65	31	130	63
Other Comprehensive Income, Before-Tax Amount	88	1,241	(35)	1,475
Unrealized gain (loss) on investment securities, Income Tax (Provision) Benefit	(9)	(469)	64	(547)
Defined benefit pension plans: Amortization of prior service cost, Income Tax (Provision) Benefit	(9)	(9)	(17)	(17)
Defined benefit pension plans: Amortization of actuarial loss, Income Tax (Provision) Benefit	(17)	(3)	(34)	(7)
Total, Income Tax (Provision) Benefit	(26)	(12)	(51)	(24)
Other Comprehensive Income, Income Tax (Provision) Benefit	(35)	(481)	13	(571)
Unrealized gain (loss) on investment securities, Net-of-Tax Amount	14	741	(101)	865
Defined benefit pension plans: Amortization of prior service cost, Net-of-Tax Amount	13	13	27	27
Defined benefit pension plans: Amortization of actuarial loss, Net-of-Tax Amount	26	6	52	12
Total	39	19	79	39
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX	$ 53	$ 760	$ (22)	$ 904

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Allowance For Loan And Lease Losses Related To Covered Loans) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	$ 597,923	$ 583,405
Covered Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	23,408	26,429
Incremental estimated credit losses since acquisition	578	506
FDIC guarantee	(462)	(405)
Allowance for loan and lease losses	$ 116	$ 101

XML

Fair Value Measurements (Quantitative Information About Significant Unobservable Inputs Used In The Fair Value Measurement Of MSRs) (Details)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Fair Value Measurements [Abstract]
Servicing fees	0.25%	0.25%
Discount rate	10.08%	10.12%
Prepayment rate (CPR)	15.82%	13.07%

XML

Net Periodic Benefit Costs (Tables)

6 Months Ended

Jun. 30, 2012

Net Periodic Benefit Costs [Abstract]

Defined Benefit Pension Plan And Supplemental Executive Retirement Plan

	Three months ended June 30,
	(in thousands)
							Supplemental Executive
	Pension Benefits						Retirement Plan
	2012			2011			2012		2011
Service cost	$	—		$	—		$	45	$	45
Interest cost		53			55			38		47
Expected return on plan assets		(57	)		(57	)		—		—
Amortization of prior service cost		—			—			22		22
Amortization of the net loss		16			6			27		3
Net periodic cost	$	12		$	4		$	132	$	117

36

	Six months ended June 30,
	(in thousands)
							Supplemental Executive
	Pension Benefits						Retirement Plan
	2012			2011			2012		2011
Service cost	$	—		$	—		$	90	$	90
Interest cost		106			109			76		95
Expected return on plan assets		(114	)		(114	)		—		—
Amortization of prior service cost		—			—			44		44
Amortization of the net loss		32			13			54		5
Net periodic cost	$	24		$	8		$	264	$	234

XML

Contingent Liabilities And Commitments (Summary Of Commitments And Contingent Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Contingent Liabilities And Commitments [Line Items]
Commitments and contingent liabilities	$ 148,279	$ 137,633
Claims pending against the management considered material	0	0
Commitments To Extend Credit [Member]
Contingent Liabilities And Commitments [Line Items]
Commitments and contingent liabilities	145,052	134,204
Standby Letters Of Credit [Member]
Contingent Liabilities And Commitments [Line Items]
Commitments and contingent liabilities	$ 3,227	$ 3,429

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Non-Performing Loans And Leases) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases	$ 10,598	$ 13,877
Accruing loans 90+ days past due	410	1,299
Total non-performing loans and leases	11,008	15,176
Total non-performing loans and leases to total assets	1.41%	2.05%
Total non-performing loans and leases to total loans and leases	1.84%	2.60%
Commercial And Industrial [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases	1,895	2,180
Accruing loans 90+ days past due	2
Residential Real Estate: Residential [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases	985	1,048
Accruing loans 90+ days past due	241	73
Residential Real Estate: Construction [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases		167
Commercial Real Estate: Commercial [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases	5,504	6,858
Accruing loans 90+ days past due	151	59
Commercial Real Estate: Construction [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases	811	1,442
Accruing loans 90+ days past due		1,167
Home Equities [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases	907	946
Accruing loans 90+ days past due	16
Direct Financing Leases [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases	430	1,160
Consumer [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases	66	76
Other [Member]
Financing Receivable Non-performing Loans And Leases [Line Items]
Total non-accruing loans and leases

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Composition Of The Company's Loan And Lease Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Loans, Leases, And The Allowance For Loan And Lease Losses [Abstract]
Residential mortgages	$ 69,332	$ 73,579
Commercial and multi-family	323,456	306,683
Construction-Residential	2,535	2,392
Construction-Commercial	31,807	27,887
Home equities	55,445	54,673
Total real estate loans	482,575	465,214
Direct financing leases	3,355	6,021
Commercial and industrial loans	107,807	109,513
Consumer loans	1,551	1,677
Other	2,303	586
Net deferred loan origination costs	332	394	329
Total gross loans	597,923	583,405
Allowance for loan losses	(10,658)	(11,495)
Loans, net	$ 587,265	$ 571,910

XML

Net Periodic Benefit Costs (Defined Benefit Pension Plan And Supplemental Executive Retirement Plan) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pension Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 53	$ 55	$ 106	$ 109
Expected return on plan assets	(57)	(57)	(114)	(114)
Amortization of the net loss	16	6	32	13
Net periodic cost	12	4	24	8
Supplemental Executive Retirement Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	45	45	90	90
Interest cost	38	47	76	95
Expected return on plan assets
Amortization of prior service cost	22	22	44	44
Amortization of the net loss	27	3	54	5
Net periodic cost	$ 132	$ 117	$ 264	$ 234

XML

Per Share Data (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Per Share Data [Abstract]
Weighted average number of shares outstanding, dilutive	17,063	6,170		7,739
Potential anti-dilutive shares	162,414	170,706	167,994	117,186

XML

Organization And Summary Of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Organization And Summary Of Significant Accounting Policies [Abstract]

Organization And Summary Of Significant Accounting Policies

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Company's financial position and results of operations for the interim periods have been made. Certain reclassifications have been made to the 2011 unaudited consolidated financial statements to conform to the presentation used in 2012.

The results of operations for the three and six month periods ended June 30, 2012 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, 2011. The Company has evaluated subsequent events for potential recognition and/or disclosure through the date of filing.

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Troubled Restructured Loans And Leases) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	$ 7,932	$ 7,731
Troubled restructured loans and leases, Nonaccruing	6,846	7,059
Troubled restructured loans and leases, Accruing	1,086	672
Troubled restructured loans and leases, Related Allowance	997	1,102
Commercial And Industrial [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	1,609	1,432
Troubled restructured loans and leases, Nonaccruing	1,588	1,362
Troubled restructured loans and leases, Accruing	21	70
Troubled restructured loans and leases, Related Allowance	712	64
Residential Real Estate: Residential [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	44
Troubled restructured loans and leases, Nonaccruing	44
Troubled restructured loans and leases, Accruing
Troubled restructured loans and leases, Related Allowance
Residential Real Estate: Construction [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total
Troubled restructured loans and leases, Nonaccruing
Troubled restructured loans and leases, Accruing
Troubled restructured loans and leases, Related Allowance
Commercial Real Estate: Commercial [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	5,621	5,258
Troubled restructured loans and leases, Nonaccruing	5,076	5,258
Troubled restructured loans and leases, Accruing	545
Troubled restructured loans and leases, Related Allowance	190	708
Commercial Real Estate: Construction [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total
Troubled restructured loans and leases, Nonaccruing
Troubled restructured loans and leases, Accruing
Troubled restructured loans and leases, Related Allowance
Home Equities [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	327	327
Troubled restructured loans and leases, Accruing	327	327
Direct Financing Leases [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total	331	714
Troubled restructured loans and leases, Nonaccruing	138	439
Troubled restructured loans and leases, Accruing	193	275
Troubled restructured loans and leases, Related Allowance	95	330
Consumer [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total
Troubled restructured loans and leases, Nonaccruing
Troubled restructured loans and leases, Accruing
Troubled restructured loans and leases, Related Allowance
Other [Member]
Troubled Debt Restructured Loans And Leases [Line Items]
Troubled restructured loans and leases, Total
Troubled restructured loans and leases, Nonaccruing
Troubled restructured loans and leases, Accruing
Troubled restructured loans and leases, Related Allowance

XML

Securities (Unrealized Losses On Available For Sale Securities) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Investment [Line Items]
Total temporarily impaired securities, Less than 12 months, Fair Value	$ 8,660	$ 2,640
Total temporarily impaired securities, Less than 12 months, Unrealized Losses	(58)	(13)
Total temporarily impaired securities, 12 months or longer, Fair Value	303	1,310
Total temporarily impaired securities, 12 months or longer, Unrealized Losses	(4)	(6)
Total temporarily impaired securities, Total, Fair Value	8,963	3,950
Total temporarily impaired securities, Total, Unrealized Losses	(62)	(19)
States and Political Subdivisions [Member]
Investment [Line Items]
Held To Maturity, Less than 12 months, Fair Value	2,174	2,239
Held To Maturity, Less than 12 months, Unrealized Losses	(9)	(12)
Held To Maturity, 12 months or longer, Fair Value	0	1,006
Held To Maturity, 12 months or longer, Unrealized Losses	0	(3)
Held To Maturity, Total, Fair Value	2,174	3,245
Held To Maturity, Total, Unrealized Losses	(9)	(15)
U.S. Treasury And Other U.S. Government Agencies [Member]
Investment [Line Items]
Available for Sale, Less than 12 months, Fair Value
Available for Sale, Less than 12 months, Unrealized Losses
Available for Sale, 12 months or longer, Fair Value
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Fair Value
Available for Sale, Total, Unrealized Losses
States and Political Subdivisions [Member]
Investment [Line Items]
Available for Sale, Less than 12 months, Fair Value	4,326	401
Available for Sale, Less than 12 months, Unrealized Losses	(39)	(1)
Available for Sale, 12 months or longer, Fair Value	303	304
Available for Sale, 12 months or longer, Unrealized Losses	(4)	(3)
Available for Sale, Total, Fair Value	4,629	705
Available for Sale, Total, Unrealized Losses	(43)	(4)
Debt Securities [Member]
Investment [Line Items]
Available for Sale, Less than 12 months, Fair Value	4,326	401
Available for Sale, Less than 12 months, Unrealized Losses	(39)	(1)
Available for Sale, 12 months or longer, Fair Value	303	304
Available for Sale, 12 months or longer, Unrealized Losses	(4)	(3)
Available for Sale, Total, Fair Value	4,629	705
Available for Sale, Total, Unrealized Losses	(43)	(4)
FNMA [Member]
Investment [Line Items]
Available for Sale, Less than 12 months, Fair Value
Available for Sale, Less than 12 months, Unrealized Losses
Available for Sale, 12 months or longer, Fair Value
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Fair Value
Available for Sale, Total, Unrealized Losses
FHLMC [Member]
Investment [Line Items]
Available for Sale, Less than 12 months, Fair Value
Available for Sale, Less than 12 months, Unrealized Losses
Available for Sale, 12 months or longer, Fair Value
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Fair Value
Available for Sale, Total, Unrealized Losses
GNMA [Member]
Investment [Line Items]
Available for Sale, Less than 12 months, Fair Value	2,160
Available for Sale, Less than 12 months, Unrealized Losses	(10)
Available for Sale, 12 months or longer, Fair Value
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Fair Value	2,160
Available for Sale, Total, Unrealized Losses	(10)
CMO'S [Member]
Investment [Line Items]
Available for Sale, Less than 12 months, Fair Value
Available for Sale, Less than 12 months, Unrealized Losses
Available for Sale, 12 months or longer, Fair Value
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Fair Value
Available for Sale, Total, Unrealized Losses
Mortgage-Backed Securities [Member]
Investment [Line Items]
Available for Sale, Less than 12 months, Fair Value	2,160
Available for Sale, Less than 12 months, Unrealized Losses	(10)
Available for Sale, 12 months or longer, Fair Value
Available for Sale, 12 months or longer, Unrealized Losses
Available for Sale, Total, Fair Value	2,160
Available for Sale, Total, Unrealized Losses	$ (10)

XML

Securities (Scheduled Maturities Of Debt And Mortgage Backed Securities) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Securities [Abstract]
Debt securities available for sale, Due in one year or less, Amortized cost	$ 2,121	$ 2,426
Debt securities available for sale, Due after one year through five years, Amortized cost	16,299	18,454
Debt securities available for sale, Due after five years through ten years, Amortized cost	26,644	24,995
Debt securities available for sale, Due after ten years, Amortized cost	9,404	13,759
Debt securities available for sale, Amortized cost	54,468	59,634
Debt securities available for sale, Due in one year or less, Fair Value	2,148	2,453
Debt securities available for sale, Due after one year through five years, Fair Value	17,013	19,231
Debt securities available for sale, Due after five years through ten years, Fair Value	27,774	26,238
Debt securities available for sale, Due after ten years, Fair Value	10,231	14,656
Debt securities available for sale, Fair Value	57,166	62,578
Mortgage-backed securities available for sale, Amortized cost	34,657	36,214
Mortgage-backed securities available for sale, Fair value	35,928	37,403
Debt securities available for sale, Total securities designated as available for sale, Amortized cost	89,125	95,848
Debt securities available for sale, Total securities designated as available for sale, Fair Value	93,094	99,981
Debt securities held to maturity, Due in one year or less, Amortized cost	2,581	2,656
Debt securities held to maturity, Due after one year through five years, Amortized cost	534	518
Debt securities held to maturity, Due after five years through ten years, Amortized cost	35	40
Debt securities held to maturity, Due after ten years, Amortized cost	558	588
Debt securities held to maturity, Amortized cost	3,708	3,802
Debt securities held to maturity, Due in one year or less, Fair Value	2,573	2,644
Debt securites held to maturity, Due after one year through five years, Fair Value	547	529
Debt securites held to maturity, Due after five years through ten years, Fair Value	37	42
Debt securities held to maturity, Due after ten years, Fair Value	573	596
Debt securities held to maturity, Fair Value	3,730	3,811
Held-to-maturity Securities, Fair Value	$ 3,730	$ 3,811

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Troubled Debt Restructurings Activity) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Commercial And Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		2
Pre-Modification Outstanding Recorded Investment		$ 256
Post-Modification Outstanding Recorded Investment		256
Residential Real Estate: Residential [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	1
Pre-Modification Outstanding Recorded Investment	44	44
Post-Modification Outstanding Recorded Investment	44	44
Residential Real Estate: Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Commercial Real Estate: Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	2
Pre-Modification Outstanding Recorded Investment	637	722
Post-Modification Outstanding Recorded Investment	637	722
Commercial Real Estate: Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Home Equities [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Direct Financing Leases [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Consumer [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Other [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment

XML

Fair Value Measurements (Narrative) (Details) (USD $) In Millions, unless otherwise specified			6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Minimum [Member]	Jun. 30, 2012 Maximum [Member]
Discount on appraisals of the collateral securing the loan, range			10.00%	(50.00%)
Impaired loans, gross value	$ 11.4	$ 11.9
Valuation allowance, impaired loans	$ 1.3	$ 1.6

XML

Fair Value Measurements (Financial Instruments Measured At Fair Value On Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage servicing rights
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage servicing rights	448		407
Fair Value, Measurements, Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage servicing rights	448	454	407	442	435	388
U.S. Treasury And Other 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
U.S. Treasury And Other 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	25,307		30,252
U.S. Treasury And Other U.S. Government Agencies [Member] | Fair Value, Measurements, Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	25,307		30,252
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
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	31,859		32,326
States and Political Subdivisions [Member] | Fair Value, Measurements, Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	31,859		32,326
Mortgage-Backed Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale
Mortgage-Backed Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	35,928		37,403
Mortgage-Backed Securities [Member] | Fair Value, Measurements, Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 35,928		$ 37,403

XML

Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
OPERATING ACTIVITIES:
Interest received	$ 16,526	$ 15,833
Fees received	5,802	6,327
Interest paid	(2,968)	(3,493)
Cash paid to employees and vendors	(13,137)	(12,007)
Cash contributed to pension plan	(310)
Income taxes paid	(2,274)	(1,712)
Proceeds from sale of loans held for resale	11,268	13,116
Originations of loans held for resale	(8,575)	(15,590)
Net cash provided by operating activities	6,332	2,474
INVESTING ACTIVITIES:
Available for sales securities, Purchases	(23,936)	(10,290)
Available for sales securities, Proceeds from maturities, calls, and payments	30,741	7,470
Held to maturity securities:
Held to maturity securities, Purchases	(638)	(435)
Held to maturity securities, Proceeds from maturities, calls, and payments	732	91
Additions to properties and equipment	(563)	(176)
Net increase in loans	(18,214)	(13,609)
Net cash used in investing activities	(11,878)	(16,949)
FINANCING ACTIVITIES:
Repayments of borrowings	(2,155)	(13,304)
Net increase in deposits	37,718	42,310
Dividends paid	(909)	(816)
Issuance of common stock	199	178
Net cash provided by financing activities	34,853	28,368
Net increase in cash and equivalents	29,307	13,893
CASH AND CASH EQUIVALENTS:
Beginning of period	14,678
End of period	43,985	27,615
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income	3,874	2,847
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	636	662
Deferred tax expense	398	109
Provision for loan and lease losses	52	1,497
Premium on loans sold	(128)	(72)
Stock options expense	151	127
Proceeds from sale of loans held for resale	11,268	13,116
Originations of loans held for resale	(8,575)	(15,590)
Cash contributed to pension plan	(310)
Changes in assets and liabilities affecting cash flow:
Other assets	213	536
Other liabilities	(1,247)	(758)
NET CASH PROVIDED BY OPERATING ACTIVITIES	$ 6,332	$ 2,474

XML

Fair Value Measurements (Changes In Fair Value For Mortgage Servicing Rights) (Details) (Fair Value, Measurements, Recurring Basis [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Fair Value, Measurements, Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage servicing rights, Beginning balance	$ 454	$ 435	$ 407	$ 388
Losses included in earnings	(47)	(41)	(54)	(36)
Additions from loan sales	41	48	95	90
Mortgage servicing rights, Ending balance	$ 448	$ 442	$ 448	$ 442

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Summary Of Activity In The Allowance For Loan And Lease Losses According To Portfolio Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 10,790		$ 10,482		$ 11,495		$ 10,424
Charge-offs	(509)		(840)		(993)		(1,277)
Recoveries	76		16		104		23
Provision	301		1,009		52		(1,497)
Ending balance	10,658		10,667		10,658		10,667
Allowance for loan and lease losses, Individually evaluated for impairment	1,316		983		1,316		983
Allowance for loan and lease losses, Collectively evaluated for impairment	9,342		9,684		9,342		9,684
Allowance for loan and lease losses, Loans acquired with deteriorated credit quality
Allowance for loan and lease losses, Total	10,658		10,667		10,658		10,667
Loans and leases, Individually evaluated for impairment	11,362		9,851		11,362		9,851
Loans and leases, Collectively evaluated for impairment	586,199		532,235		586,199		532,235
Loans and leases, Loans acquired with deteriorated credit quality	30		79		30		79
Loans and leases, Total	597,591		542,165		597,591		542,165
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	3,946		3,330		4,085		3,435
Charge-offs	(15)		(691)		(424)		(1,124)
Recoveries	52		13		70		16
Provision	233		919		485		(1,244)
Ending balance	4,216		3,571		4,216		3,571
Allowance for loan and lease losses, Individually evaluated for impairment	851		209		851		209
Allowance for loan and lease losses, Collectively evaluated for impairment	3,365		3,362		3,365		3,362
Allowance for loan and lease losses, Loans acquired with deteriorated credit quality
Allowance for loan and lease losses, Total	4,216		3,571		4,216		3,571
Loans and leases, Individually evaluated for impairment	1,916		1,390		1,916		1,390
Loans and leases, Collectively evaluated for impairment	105,891		99,967		105,891		99,967
Loans and leases, Total	107,807		101,357		107,807		101,357
Commercial Real Estate Mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	4,565		4,384		4,670	[1]	4,252	[1]
Charge-offs	(487)		(142)		(546)	[1]	(142)	[1]
Recoveries	15				15	[1]
Provision	284		52		238	[1]	(184)	[1]
Ending balance	4,377	[1]	4,294	[1]	4,377	[1]	4,294	[1]
Allowance for loan and lease losses, Individually evaluated for impairment	252	[1]	721	[1]	252	[1]	721	[1]
Allowance for loan and lease losses, Collectively evaluated for impairment	4,125	[1]	3,573	[1]	4,125	[1]	3,573	[1]
Allowance for loan and lease losses, Loans acquired with deteriorated credit quality				[1]				[1]
Allowance for loan and lease losses, Total	4,377	[1]	4,294	[1]	4,377	[1]	4,294	[1]
Loans and leases, Individually evaluated for impairment	6,860	[1]	8,132	[1]	6,860	[1]	8,132	[1]
Loans and leases, Collectively evaluated for impairment	348,403	[1]	295,820	[1]	348,403	[1]	295,820	[1]
Loans and leases, Total	355,263	[1]	303,952	[1]	355,263	[1]	303,952	[1]
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	43		37		36	[2]	29	[2]
Charge-offs	(7)		(7)		(10)	[2]	(11)	[2]
Recoveries	9		3		13	[2]	6	[2]
Provision	3		11		9	[2]	(20)	[2]
Ending balance	48	[2]	44	[2]	48	[2]	44	[2]
Allowance for loan and lease losses, Individually evaluated for impairment	16	[2]	12	[2]	16	[2]	12	[2]
Allowance for loan and lease losses, Collectively evaluated for impairment	32	[2]	32	[2]	32	[2]	32	[2]
Allowance for loan and lease losses, Loans acquired with deteriorated credit quality				[2]				[2]
Allowance for loan and lease losses, Total	48	[2]	44	[2]	48	[2]	44	[2]
Loans and leases, Individually evaluated for impairment	36	[2]	58	[2]	36	[2]	58	[2]
Loans and leases, Collectively evaluated for impairment	3,788	[2]	2,544	[2]	3,788	[2]	2,544	[2]
Loans and leases, Loans acquired with deteriorated credit quality	30	[2]	79	[2]	30	[2]	79	[2]
Loans and leases, Total	3,854	[2]	2,681	[2]	3,854	[2]	2,681	[2]
Residential Real Estate: Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	719		564		793	[1]	548	[1]
Charge-offs	0				0	[1]
Provision	(21)		14		(95)	[1]	(30)	[1]
Ending balance	698	[1]	578	[1]	698	[1]	578	[1]
Allowance for loan and lease losses, Individually evaluated for impairment	0	[1]	0	[1]	0	[1]	0	[1]
Allowance for loan and lease losses, Collectively evaluated for impairment	698	[1]	578	[1]	698	[1]	578	[1]
Allowance for loan and lease losses, Loans acquired with deteriorated credit quality				[1]				[1]
Allowance for loan and lease losses, Total	698	[1]	578	[1]	698	[1]	578	[1]
Loans and leases, Individually evaluated for impairment	985	[1]	0	[1]	985	[1]	0	[1]
Loans and leases, Collectively evaluated for impairment	70,882	[1]	69,833	[1]	70,882	[1]	69,833	[1]
Loans and leases, Total	71,867	[1]	69,833	[1]	71,867	[1]	69,833	[1]
Home Equities [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	785		547		768		540
Charge-offs	0				(13)
Recoveries					6		1
Provision	18		13		42		(19)
Ending balance	803		560		803		560
Allowance for loan and lease losses, Individually evaluated for impairment	102		0		102		0
Allowance for loan and lease losses, Collectively evaluated for impairment	701		560		701		560
Allowance for loan and lease losses, Loans acquired with deteriorated credit quality
Allowance for loan and lease losses, Total	803		560		803		560
Loans and leases, Individually evaluated for impairment	1,234		0		1,234		0
Loans and leases, Collectively evaluated for impairment	54,211		54,385		54,211		54,385
Loans and leases, Total	55,445		54,385		55,445		54,385
Direct Financing Leases [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	583		1,471		994		1,471
Charge-offs	0				0
Provision	(216)		0		(627)		0
Ending balance	367		1,471		367		1,471
Allowance for loan and lease losses, Individually evaluated for impairment	95		41		95		41
Allowance for loan and lease losses, Collectively evaluated for impairment	272		1,430		272		1,430
Allowance for loan and lease losses, Loans acquired with deteriorated credit quality
Allowance for loan and lease losses, Total	367		1,471		367		1,471
Loans and leases, Individually evaluated for impairment	331		271		331		271
Loans and leases, Collectively evaluated for impairment	3,024		9,686		3,024		9,686
Loans and leases, Total	3,355		9,957		3,355		9,957
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	149		149		149		149
Charge-offs	0				0
Provision	0		0		0		0
Ending balance	149		149		149		149
Allowance for loan and lease losses, Individually evaluated for impairment	0		0		0		0
Allowance for loan and lease losses, Collectively evaluated for impairment	149		149		149		149
Allowance for loan and lease losses, Loans acquired with deteriorated credit quality
Allowance for loan and lease losses, Total	149		149		149		149
Loans and leases, Individually evaluated for impairment	0		0		0		0
Loans and leases, Collectively evaluated for impairment	$ 0				$ 0

[1] Includes construction loans

[2] Includes other loans

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and due from banks	$ 12,540	$ 11,486
Interest-bearing deposits at banks	31,445	3,192
Securities:
Available for sale, at fair value (cost: $89,125 at June 30, 2012; $95,848 at December 31, 2011)	93,094	99,981
Held to maturity, at amortized cost (fair value: $3,730 at June 30, 2012; $3,811 at December 31, 2011)	3,708	3,802
Federal Home Loan Bank common stock, at amortized cost	1,804	1,830
Federal Reserve Bank common stock, at amortized cost	1,434	1,425
Loans and leases, net of allowance for loan and lease losses of $10,658 at June 30, 2012 and $11,495 at December 31, 2011	587,265	571,910
Properties and equipment, net of depreciation of $13,687 at June 30, 2012 and $13,145 at December 31, 2011	10,497	10,477
Goodwill	8,101	8,101
Intangible assets	468	678
Bank-owned life insurance	15,095	14,843
Other assets	12,671	13,177
TOTAL ASSETS	778,122	740,902
Deposits:
Demand	116,231	118,037
NOW	63,535	50,761
Regular savings	342,992	313,777
Muni-vest	22,883	20,161
Time	108,279	113,467
Total deposits	653,920	616,203
Securities sold under agreement to repurchase	9,855	9,010
Other borrowings	19,000	22,000
Other liabilities	11,736	13,371
Junior subordinated debentures	11,330	11,330
Total liabilities	705,841	671,914
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value, 10,000,000 shares authorized; 4,153,332 and 4,125,272 shares issued at June 30, 2012 and December 31, 2011 respectively, and 4,153,332 and 4,124,892 shares outstanding at June 30, 2012 and December 31, 2011, respectively	2,077	2,063
Capital surplus	41,611	41,275
Retained earnings	28,269	25,304
Accumulated other comprehensive gain, net of tax	324	346
Total stockholders' equity	72,281	68,988
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 778,122	$ 740,902

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Troubled Debt Restructurings That Subsequently Defaulted) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Commercial And Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		4
Recorded Investment		$ 1,272
Residential Real Estate: Residential [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded Investment
Residential Real Estate: Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded Investment
Commercial Real Estate: Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		6
Recorded Investment		4,289
Commercial Real Estate: Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded Investment
Home Equities [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded Investment
Direct Financing Leases [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Recorded Investment

XML

Consolidated Statements Of Changes In Stockholders' Equity (USD $) In Thousands	Common Stock [Member]	Capital Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss) Income [Member]	Total
Balance at Dec. 31, 2010	$ 2,041	$ 40,660	$ 20,836	$ (473)	$ 63,064
Net Income			2,847		2,847
Other comprehensive income (loss)				904	904
Cash dividends			(816)		(816)
Stock options expense		127			127
Excess tax benefit from stock-based compensation		9			9
Issued restricted shares	6	(6)
Issued shares under ESPP	4	87			91
Issued shares under DRIP	3	84			87
Balance at Jun. 30, 2011	2,054	40,961	22,867	431	66,313
Balance at Dec. 31, 2011	2,063	41,275	25,304	346	68,988
Net Income			3,874		3,874
Other comprehensive income (loss)				(22)	(22)
Cash dividends			(909)		(909)
Stock options expense		151			151
Issued restricted shares	6	(6)
Issued shares under ESPP	5	99			104
Issued shares under DRIP	3	92			95
Balance at Jun. 30, 2012	$ 2,077	$ 41,611	$ 28,269	$ 324	$ 72,281

XML

Fair Value Measurements (Estimated Fair Value Of The Company's Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
NOW deposits	$ 63,535	$ 50,761
Securities sold under agreement to repurchase	9,855	9,010
Time deposits	108,279	113,467
Level 1 [Member] | Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	43,985	14,678
Demand deposits	116,231	118,037
NOW deposits	63,535	50,761
Regular savings deposits	342,992	313,777
Muni-vest deposits	22,883	20,161
Junior subordinated debentures	11,330	11,330
Commitments to extend credit	64	161
Securities sold under agreement to repurchase	9,855	9,010
Level 1 [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	43,985	14,678
Demand deposits	116,231	118,037
NOW deposits	63,535	50,761
Regular savings deposits	342,992	313,777
Muni-vest deposits	22,883	20,161
Junior subordinated debentures	11,330	11,330
Commitments to extend credit	64	161
Securities sold under agreement to repurchase	9,855	9,010
Level 2 [Member] | Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	93,094	99,981
FHLB and FRB stock	3,238	3,255
Other borrowed funds	19,000	22,000
Level 2 [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale securities	93,094	99,981
FHLB and FRB stock	3,238	3,255
Other borrowed funds	19,751	22,988
Level 3 [Member] | Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held to maturity securities	3,708	3,802
Loans and leases, net	587,265	571,910
Mortgage servicing rights	448	407
Time deposits	108,279	113,467
Level 3 [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held to maturity securities	3,730	3,811
Loans and leases, net	621,700	602,534
Mortgage servicing rights	448	407
Time deposits	$ 111,558	$ 116,666

XML

Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2012

Other Comprehensive Income [Abstract]

Components Of Other Comprehensive Income (Loss)

	Three months ended June 30, 2012
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	23		($9	)	$	14
Defined benefit pension plans:
Amortization of prior service cost		22		(9	)		13
Amortization of actuarial loss		43		(17	)		26
Total		65		(26	)		39
Other Comprehensive Income	$	88		($35	)	$	53

	Three months ended June 30, 2011
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	1,210		($469	)	$	741
Defined benefit pension plans:
Amortization of prior service cost		22		(9	)		13
Amortization of actuarial loss		9		(3	)		6
Total		31		(12	)		19
Other Comprehensive Income	$	1,241		($481	)	$	760

	Six months ended June 30, 2012
				Income Tax
	Before-Tax			(Provision)			Net-of-Tax
	Amount			Benefit			Amount
Unrealized loss on investment securities		($165	)	$	64			($101	)
Defined benefit pension plans:
Amortization of prior service cost		44			(17	)		27
Amortization of actuarial loss		86			(34	)		52
Total		130			(51	)		79
Other Comprehensive Loss		($35	)	$	13			($22	)

32

	Six months ended June 30, 2011
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	1,412		($547	)	$	865
Defined benefit pension plans:
Amortization of prior service cost		44		(17	)		27
Amortization of actuarial loss		19		(7	)		12
Total		63		(24	)		39
Other Comprehensive Income	$	1,475		($571	)	$	904

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Loans, Leases, And The Allowance For Loan And Lease Losses (Narrative) (Details) (USD $)	3 Months Ended	6 Months Ended				3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2012	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Jun. 30, 2012 Waterford Village Bank [Member]	Jun. 30, 2012 Residential Real Estate: Residential [Member]	Jun. 30, 2011 Residential Real Estate: Residential [Member]	Jun. 30, 2012 Residential Real Estate: Residential [Member]	Jun. 30, 2011 Residential Real Estate: Residential [Member]	Dec. 31, 2011 Residential Real Estate: Residential [Member]	Jun. 30, 2012 Commercial Real Estate: Commercial [Member]	Dec. 31, 2011 Commercial Real Estate: Commercial [Member]	Jun. 30, 2012 Direct Financing Leases [Member]	Dec. 31, 2011 Direct Financing Leases [Member]	Jun. 30, 2012 Commercial And Industrial [Member]	Dec. 31, 2011 Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Sale of mortgages						$ 4,900,000	$ 5,800,000	$ 11,100,000	$ 13,100,000
Loans and leases, restructured and deemed to be a TDR		7,932,000	7,731,000			44,000		44,000			5,621,000	5,258,000	331,000	714,000	1,609,000	1,432,000
Troubled Debt Restructured Loans And Leases, Nonaccruing		6,846,000	7,059,000			44,000		44,000			5,076,000	5,258,000	138,000	439,000	1,588,000	1,362,000
FDIC Indemnification Asset						44,000		44,000			300,000
Period of timely payments before reversion to accruing status, months		6 months
Loan servicing portfolio principal balance								68,400,000		62,400,000
Value of mortgage servicing rights		400,000	400,000
Residential mortgage loans held-for-sale						1,000,000		1,000,000		3,600,000
Allowance for loan losses		(10,658,000)	(11,495,000)		0
Definitive and assumption agreement with FDIC, bank assumed liabilities					51,000,000
Covered loan portfolio acquired in the transaction					42,000,000
Loss sharing agreement to reimburse losses up to minimum threshold, percentage		80.00%
Loss sharing agreement threshold limit, minimum		5,600,000
Loss sharing agreement to reimburse losses for excess of minimum threshold, percentage		95.00%
Allowance for Loan and Lease Losses, Period Increase (Decrease)	100,000
Net deferred loan origination costs		$ 332,000	$ 394,000	$ 329,000

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Contingent Liabilities And Commitments (Tables)

6 Months Ended

Jun. 30, 2012

Contingent Liabilities And Commitments [Abstract]

Summary Of Commitments And Contingent Liabilities

	June 30, 2012		December 31, 2011
	(in thousands)
Commitments to extend credit	$	145,052	$	134,204
Standby letters of credit		3,227		3,429
Total	$	148,279	$	137,633

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Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements Of Stockholders' Equity [Abstract]
Cash dividends per common share	$ 0.22	$ 0.2
Issued under DRIP, shares	6,680	6,172
Issued under ESPP	10,267	7,784
Issued restricted shares	11,493	12,260

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Available for sale, cost	$ 89,125	$ 95,848
Held to maturity, fair value	3,730	3,811
Allowance for loan and lease losses	10,658	11,495
Properties and equipment, depreciation	$ 13,687	$ 13,145
Common stock, par value	$ 0.5	$ 0.5
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	4,153,332	4,125,272
Common stock, shares outstanding	4,153,332	4,124,892

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Net Periodic Benefit Costs

6 Months Ended

Jun. 30, 2012

Net Periodic Benefit Costs [Abstract]

Net Periodic Benefit Costs

9. NET PERIODIC BENEFIT COSTS

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

The Bank used 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 contributed $310 thousand to the defined benefit pension plan in the second quarter of 2012 and plans to contribute an additional $60 thousand before the end of the year.

The following table presents the net periodic cost for the Bank's defined benefit pension plan and supplemental executive retirement plan for the three and six month periods ended June 30, 2012 and 2011:

	Three months ended June 30,
	(in thousands)
							Supplemental Executive
	Pension Benefits						Retirement Plan
	2012			2011			2012		2011
Service cost	$	—		$	—		$	45	$	45
Interest cost		53			55			38		47
Expected return on plan assets		(57	)		(57	)		—		—
Amortization of prior service cost		—			—			22		22
Amortization of the net loss		16			6			27		3
Net periodic cost	$	12		$	4		$	132	$	117

	Six months ended June 30,
	(in thousands)
							Supplemental Executive
	Pension Benefits						Retirement Plan
	2012			2011			2012		2011
Service cost	$	—		$	—		$	90	$	90
Interest cost		106			109			76		95
Expected return on plan assets		(114	)		(114	)		—		—
Amortization of prior service cost		—			—			44		44
Amortization of the net loss		32			13			54		5
Net periodic cost	$	24		$	8		$	264	$	234

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Document And Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 31, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012
Entity Registrant Name	EVANS BANCORP INC
Entity Central Index Key	0000842518
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,153,332

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

10. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update ("ASU") 2011-03, Reconsideration of Effective Control for Repurchase Agreements. This ASU relates to accounting for repurchase agreements ("repos") and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. During the global economic crisis, capital market participants questioned the necessity and usefulness of the collateral maintenance guidance for the transferor's ability criterion when determining whether a repo should be accounted for as a sale or as a secured borrowing. The amendments in this ASU remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The new guidance is effective for interim and annual periods beginning after December 15, 2011. The Company adopted this ASU effective January 1, 2012, which did not have a significant impact on the Company's repo accounting.

ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS"). This ASU was issued to provide largely identical guidance about fair value measurement and disclosure requirements for IFRS and U.S. GAAP. The new guidance clarifies that the application of the highest and best use and valuation premise concepts are not relevant when measuring the fair value of financial assets or liabilities. This ASU also requires new and enhanced disclosures on the quantification and valuation process for significant unobservable inputs, transfers between Levels 1 and 2 and the categorization of all fair value measurements in the fair value hierarchy, even when those measurements are only for disclosure purposes. The Company adopted this ASU effective January 1, 2012. The enhanced disclosures are included in Note 3, "Fair Value Measurements."

ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The objective of this ASU is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate the convergence of U.S. GAAP and IFRS, the Financial Accounting Standards Board ("FASB") decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in shareholders' equity. The amendments require that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendments in this ASU will be applied retrospectively. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. In the interim period ended March 31, 2012, the Company adopted this ASU and elected to use the two-statement approach.

ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. This ASU permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this ASU effective January 1, 2012. The Company will evaluate the need for a two-step goodwill impairment test each period subsequent to adoption. The Company typically performs its goodwill impairment test as of December 31^st on an annual basis. As there were no triggering events in the quarter ended June 30, 2012, management did not test goodwill for impairment. The Company does not expect adoption of this ASU to have a material effect on its financial statements.

ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2011-12 defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income for all periods presented. The ASU does not change the other requirements of FASB ASU No. 2011-05, Presentation of Comprehensive Income. Entities are still required to present reclassification adjustments within other comprehensive income either on the face of the statement that reports other comprehensive income or in the notes to the financial statements. The requirement to present comprehensive income in either a single continuous statement or two consecutive condensed statements remains for both annual and interim reporting. The deferral of the requirement for the presentation of reclassification adjustments is intended to be temporary until the FASB reconsiders the operational concerns and needs of financial statement users.

The Company adopted the amendments in this Update at the same time as ASU 2011-05, which became effective beginning in the interim period ended March 31, 2012. As the Company had no reclassifications adjustments within other comprehensive income, this Update had no impact on its financial statements.

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Consolidated Statements Of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
INTEREST INCOME
Loans and leases	$ 7,521	$ 7,081	$ 15,029	$ 14,233
Interest bearing deposits at banks	15	7	24	11
Securities:
Taxable	457	538	1,002	1,024
Non-taxable	296	389	603	760
Total interest income	8,289	8,015	16,658	16,028
INTEREST EXPENSE
Deposits	1,146	1,461	2,388	2,882
Other borrowings	177	185	364	400
Junior subordinated debentures	85	82	173	163
Total interest expense	1,408	1,728	2,925	3,445
NET INTEREST INCOME	6,881	6,287	13,733	12,583
PROVISION FOR LOAN AND LEASE LOSSES	301	1,009	52	1,497
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES	6,580	5,278	13,681	11,086
NON-INTEREST INCOME
Bank charges	437	416	873	802
Insurance service and fees	1,643	1,601	3,589	3,690
Data center income	119	192	244	431
Gain on loans sold	75	20	128	72
Bank-owned life insurance	134	110	252	213
Other	630	586	1,241	1,178
Total non-interest income	3,038	2,925	6,327	6,386
NON-INTEREST EXPENSE
Salaries and employee benefits	4,229	3,912	8,443	7,816
Occupancy	645	816	1,330	1,593
Repairs and maintenance	177	155	346	314
Advertising and public relations	336	247	481	377
Professional services	567	407	1,106	809
Technology and communications	269	220	517	454
Amortization of intangibles	106	126	210	256
FDIC insurance	139	135	274	364
Other	855	744	1,525	1,383
Total non-interest expense	7,323	6,762	14,232	13,366
INCOME BEFORE INCOME TAXES	2,295	1,441	5,776	4,106
INCOME TAX PROVISION	800	469	1,902	1,259
NET INCOME	$ 1,495	$ 972	$ 3,874	$ 2,847
Net income per common share-basic	$ 0.36	$ 0.24	$ 0.94	$ 0.70
Net income per common share-diluted	$ 0.36	$ 0.24	$ 0.94	$ 0.69
Cash dividends per common share	$ 0.00	$ 0.00	$ 0.22	$ 0.2
Weighted average number of common shares outstanding	4,139,805	4,100,201	4,133,230	4,092,896
Weighted average number of diluted shares outstanding	4,156,868	4,106,371	4,142,209	4,100,635

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

6 Months Ended

Jun. 30, 2012

Loans, Leases, And The Allowance For Loan And Lease Losses [Abstract]

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

4. LOANS, LEASES, AND THE ALLOWANCE FOR LOAN AND LEASE LOSSES

Loan and Lease Portfolio Composition

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

	June 30, 2012			December 31, 2011
Mortgage loans on real estate:	(in thousands)
Residential Mortgages	$	69,332		$	73,579
Commercial and multi-family		323,456			306,683
Construction-Residential		2,535			2,392
Construction-Commercial		31,807			27,887
Home equities		55,445			54,673
Total real estate loans		482,575			465,214
Direct financing leases		3,355			6,021
Commercial and industrial loans		107,807			109,513
Consumer loans		1,551			1,677
Other		2,303			586
Net deferred loan origination costs		332			394
Total gross loans		597,923			583,405
Allowance for loan losses		(10,658	)		(11,495	)
Loans, net	$	587,265		$	571,910

The Bank sells certain fixed rate residential mortgages to FNMA, while maintaining the servicing rights for those mortgages. During the three and six month periods ended June 30, 2012, the Bank sold mortgages to FNMA totaling $4.9 million and $11.1 million, respectively as compared with $5.8 million and $13.1 million sold during the three and six month periods ended June 30, 2011, respectively. At June 30, 2012, the Bank had a loan servicing portfolio principal balance of $68.4 million upon which it earns servicing fees, as compared with $62.4 million at December 31, 2011. The value of the mortgage servicing rights for that portfolio was $0.4 million at June 30, 2012 and $0.4 million at December 31, 2011. Residential mortgage loans held-for-sale were $1.0 million at June 30, 2012, compared with $3.6 million at December 31, 2011. The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

As noted in Note 1, these financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011. Disclosures related to the basis for accounting for loans and leases, the method for recognizing interest income on loans and leases, the policy for placing loans and leases 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 and lease losses, the policy for charging off loans and leases, 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 Annual Report on Form 10-K for the year ended December 31, 2011. Unless otherwise noted in this Form 10-Q, the policies and methodology described in the Annual Report for the year ended December 31, 2011 are consistent with those utilized in the six months ended June 30, 2012.

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 C&I portfolios is the individual loan's credit risk rating. The following list provides a description of the credit risk ratings that are used internally by the Bank when assessing the adequacy of its allowance for loan and lease losses:

• 1-3-Pass

• 4-Watch

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

• 6-Substandard

• 7-Doubtful

• 8-Loss

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

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

June 30, 2012
(in thousands)
Corporate Credit Exposure—By Credit Rating	Commercial Real Estate Construction		Commercial Real Estate Other		Total Commercial Real Estate		Commercial and Industrial
3	$	27,328	$	278,067	$	305,395	$	79,307
4		2,825		35,953		38,778		19,362
5		843		1,858		2,701		4,415
6		811		3,766		4,577		3,362
7		—		3,812		3,812		1,361
Total	$	31,807	$	323,456	$	355,263	$	107,807

December 31, 2011
(in thousands)
Corporate Credit Exposure—By Credit Rating	Commercial Real Estate Construction		Commercial Real Estate Other		Total Commercial Real Estate		Commercial and Industrial
3	$	21,607	$	250,575	$	272,182	$	77,017
4		4,421		45,505		49,926		21,448
5		362		1,758		2,120		5,939
6		1,497		8,845		10,342		4,761
7		—		—		—		348
Total	$	27,887	$	306,683	$	334,570	$	109,513

Past Due Loans and Leases

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

June 30, 2012
(in thousands)
	30-59 days		60-89 days		90+ days		Total Past Due		Current Balance		Total Balance		90+ Days Accruing		Non-accruing Loans and Leases
Commercial and industrial	$	254	$	1,069	$	805	$	2,128	$	105,679	$	107,807	$	2	$	1,895
Residential real estate:
Residential		—		269		1,183		1,452		67,880		69,332		241		985
Construction		—		—		—		—		2,535		2,535		—		—
Commercial real estate:
Commercial		—		—		2,136		2,136		321,320		323,456		151		5,504
Construction		—		—		811		811		30,996		31,807		—		811
Home equities		154		104		773		1,031		54,414		55,445		16		907
Direct financing leases		33		14		250		297		3,058		3,355		—		430
Consumer		1		4		37		42		1,509		1,551		—		66
Other		—		—		—		—		2,635		2,635		—		—
Total Loans	$	442	$	1,460	$	5,995	$	7,897	$	590,026	$	597,923	$	410	$	10,598

December 31, 2011
(in thousands)
	30-59 days		60-89 days		90+ days		Total Past Due		Current Balance		Total Balance		90+ Days Accruing		Non-accruing Loans and Leases
Commercial and industrial	$	279	$	94	$	1,702	$	2,075	$	107,438	$	109,513	$	—	$	2,180
Residential real estate:
Residential		735		55		1,062		1,852		71,727		73,579		73		1,048
Construction		—		—		167		167		2,225		2,392		—		167
Commercial real estate:
Commercial		3,086		64		2,686		5,836		300,847		306,683		59		6,858
Construction		—		—		2,609		2,609		25,278		27,887		1,167		1,442
Home equities		481		110		683		1,274		53,399		54,673		—		946
Direct financing leases		327		26		754		1,107		4,914		6,021		—		1,160
Consumer		56		5		4		65		1,612		1,677		—		76
Other		—		—		—		—		980		980		—		—
Total Loans	$	4,964	$	354	$	9,667	$	14,985	$	568,420	$	583,405	$	1,299	$	13,877

Allowance for loan and lease losses

The following tables present the activity in the allowance for loan and lease losses according to portfolio segment, for the six month period ended June 30, 2012 and June 30, 2011:

June 30, 2012
(in thousands)	Commercial and Industrial			Commercial Real Estate Mortgages*			Consumer ^			Residential Mortgages*			HELOC			Direct Financing Leases			Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	4,085		$	4,670		$	36		$	793		$	768		$	994		$	149	$	11,495
Charge-offs		(424	)		(546	)		(10	)		0			(13	)		0			0		(993	)
Recoveries		70			15			13			—			6			—			—		104
Provision	$	485		$	238			$9			($95	)	$	42			($627	)		$0		52
Ending balance	$	4,216		$	4,377		$	48		$	698		$	803		$	367		$	149	$	10,658
Allowance for loan and lease losses:
Individually evaluated for impairment	$	851		$	252		$	16			$0		$	102		$	95			$0	$	1,316
Collectively evaluated for impairment		3,365			4,125			32			698			701			272			149		9,342
Loans acquired with deteriorated credit quality		—			—			—			—			—			—			—		—
Total	$	4,216		$	4,377		$	48		$	698		$	803		$	367		$	149	$	10,658
Loans and leases:
Ending balance:
Individually evaluated for impairment	$	1,916		$	6,860		$	36		$	985		$	1,234		$	331		$	0	$	11,362
Collectively evaluated for impairment		105,891			348,403			3,788			70,882			54,211			3,024			0		586,199
Loans acquired with deteriorated credit quality		—			—			30			—			—			—			—		30
Total	$	107,807		$	355,263		$	3,854		$	71,867		$	55,445		$	3,355		$	—	$	597,591

* Includes construction loans

^ Includes other loans

Note: Loan and lease balances do not include $332 thousand in net deferred loan and lease origination costs as of June 30, 2012.

June 30, 2011
(in thousands)	Commercial			Commercial Real Estate Mortgages*			Consumer ^			Residential Mortgages*		HELOC		Finance Leases		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,435		$	4,252		$	29		$	548	$	540	$	1,471	$	149	$	10,424
Charge-offs		(1,124	)		($142	)		($11	)		—		—		—		—		(1,277	)
Recoveries		16			—			6			—		1		—		—		23
Provision	$	1,244		$	184		$	20		$	30	$	19	$	0	$	0		1,497
Ending balance	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667
Allowance for loan and lease losses:
Individually evaluated for impairment	$	209		$	721		$	12		$	0	$	0	$	41	$	0	$	983
Collectively evaluated for impairment		3,362		$	3,573		$	32			578		560		1,430		149		9,684
Loans acquired with deteriorated credit quality		—			—			—			—		—		—		—		—
Total	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667
Loans and leases:
Ending balance:
Individually evaluated for impairment	$	1,390		$	8,132		$	58		$	0	$	0	$	271	$	0	$	9,851
Collectively evaluated for impairment		99,967		$	295,820		$	2,544			69,833		54,385		9,686		—		532,235
Loans acquired with deteriorated credit quality		—			—			79			—		—		—		—		79
Total	$	101,357		$	303,952		$	2,681		$	69,833	$	54,385	$	9,957	$	—	$	542,165

* Includes construction loans

^ Includes other loans

Note: Loan and lease balances do not include $329 thousand in net deferred loan and lease origination costs as of June 30, 2011.

The following tables present the activity in the allowance for loan and lease losses according to portfolio segment, for the three month period ended June 30, 2012 and June 30, 2011:

June 30, 2012
(in thousands)	Commercial and Industrial			Commercial Real Estate Mortgages			Consumer			Residential Mortgages			HELOC		Direct Financing Leases			Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,946		$	4,565		$	43		$	719		$	785	$	583		$	149	$	10,790
Charge-offs		(15	)		(487	)		(7	)		0			0		0			0		(509	)
Recoveries		52			15			9			—			—		—			—		76
Provision		233			284			3			(21	)		18		(216	)		0		301
Ending balance	$	4,216		$	4,377		$	48		$	698		$	803	$	367		$	149	$	10,658

June 30, 2011
(in thousands)	Commercial			Commercial Real Estate Mortgages			Consumer			Residential Mortgages		HELOC		Finance Leases		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,330		$	4,384		$	37		$	564	$	547	$	1,471	$	149	$	10,482
Charge-offs		(691	)		($142	)		($7	)		—		—		—		—		(840	)
Recoveries		13			—			3			—		—		—		—		16
Provision		919			52			11			14		13		0		0		1,009
Ending balance	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667

In the first quarter of 2012, the Company changed its methodology for reserving for non-accruing residential mortgages and home equities in response to the Interagency Supervisory Guidance. Previously, estimated loss percentages were applied to pools of non-accruing residential mortgages and home equity loans. The Company now evaluates required loss reserves on an individual loan basis. This change resulted from the Company's successful efforts to obtain more information about the financial status of borrowers and the fair value of loan collateral. The change from reserving for non-accruing residential mortgages and home equities on an individual basis versus a pooled approach resulted in a reduction of allowance for loan and lease losses of $0.1 million.

There were no other changes in the Company's allowance for loan and lease loss methodology in the six month period ended June 30, 2012.

Impaired Loans and Leases

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

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With no related allowance recorded:
Commercial and industrial	$	252	$	275	$	0	$	265	$	18	$	1
Residential real estate:
Residential		985		1,092		—		989		36		0
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		2,261		2,886		—		2,569		100		—
Construction		—		—		—		—		—		—
Home equities		1,028		1,059		—		1,029		16		5
Direct financing leases		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	4,526	$	5,312	$	—	$	4,852	$	170	$	6

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With a related allowance recorded:
Commercial and industrial	$	1,664	$	1,728	$	851	$	1,689	$	36	$	0
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		3,788		3,929		241		3,797		98		—
Construction		811		867		11		814		13		—
Home equities		206		206		102		170		4		1
Direct financing leases		331		341		95		394		10		—
Consumer		66		138		16		68		5		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	6,866	$	7,209	$	1,316	$	6,933	$	166	$	1

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
Total
Commercial and industrial	$	1,916	$	2,003	$	851	$	1,954	$	54	$	1
Residential real estate:
Residential		985		1,092		—		989		36		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		6,049		6,815		241		6,366		198		—
Construction		811		867		11		814		13		—
Home equities		1,234		1,265		102		1,199		20		6
Direct financing leases		331		341		95		394		10		—
Consumer		66		138		16		68		5		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	11,392	$	12,521	$	1,316	$	11,784	$	336	$	7

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With no related allowance recorded:
Commercial and industrial	$	261	$	270	$	—	$	371	$	9	$	7
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		2,723		2,916		—		2,503		215		44
Construction		1,442		1,497		—		1,355		48		3
Home equities		327		327		—		331		—		9
Direct financing leases		—		—		—		—		—		—
Consumer		32		95		—		79		7		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	4,785	$	5,105	$	—	$	4,639	$	279	$	63

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With a related allowance recorded:
Commercial and industrial	$	1,969	$	2,007	$	405	$	2,151	$	58	$	36
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		4,135		4,418		844		4,257		267		—
Construction		—		—		—		—		—		—
Home equities		170		170		31		170		4		2
Direct financing leases		847		907		350		1,214		60		1
Consumer		44		49		9		56		4		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	7,165	$	7,551	$	1,639	$	7,848	$	393	$	39

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
Total
Commercial and industrial	$	2,230	$	2,277	$	405	$	2,522	$	67	$	43
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		6,858		7,334		844		6,760		482		44
Construction		1,442		1,497		—		1,355		48		3
Home equities		497		497		31		501		4		11
Direct financing leases		847		907		350		1,214		60		1
Consumer		76		144		9		135		11		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	11,950	$	12,656	$	1,639	$	12,487	$	672	$	102

Non-performing loans and leases

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

	June 30, 2012			December 31, 2011
	(in thousands)
Non-accruing loans and leases:
Commercial and industrial loans	$	1,895		$	2,180
Residential real estate:
Residential		985			1,048
Construction		—			167
Commercial real estate:
Commercial and multi-family		5,504			6,858
Construction		811			1,442
Home equities		907			946
Direct financing leases		430			1,160
Consumer loans		66			76
Other		—			—
Total non-accruing loans and leases	$	10,598		$	13,877
Accruing loans 90+ days past due		410			1,299
Total non-performing loans and leases	$	11,008		$	15,176
Total non-performing loans and leases to total assets		1.41	%		2.05	%
Total non-performing loans and leases to total loans and leases		1.84	%		2.60	%

Troubled debt restructurings

The Company had $7.9 million in loans and leases that were restructured in a troubled debt restructuring ("TDR") at June 30, 2012, compared with $7.7 million at December 31, 2011. $6.8 million and $7.1 million of those balances were in non-accrual status at June 30, 2012 and December 31, 2011, 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. Those loans and leases that are in accruing status have shown evidence of performance for at least six months as of June 30, 2012 and December 31, 2011. None of the restructurings were made under a government assistance program. Two commercial mortgages with a combined balance of $0.3 million and one residential mortgage with a balance of $44 thousand are covered under the Bank's loss-sharing arrangement with the FDIC. These restructurings were allowed in an effort to maximize the Company's ability to collect on loans and leases where borrowers were experiencing financial difficulty. Modifications made to loans in a troubled debt restructuring did not have a material impact on the Company's net income for the three and six month periods ended June 30, 2012 and 2011. The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan's original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. This reserve methodology is used because all TDR loans are considered impaired. As of June 30, 2012, there were no commitments to lend additional funds to debtors owing loans or leases whose terms have been modified in TDRs. The following tables summarize the loans and leases that were classified as troubled debt restructurings as of the dates indicated:

	June 30, 2012
			($ in thousands)
	Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,609	$	1,588	$	21	$	712
Residential real estate:
Residential		44		44		—		—
Construction		—		—		—		—
Commercial real estate:
Commercial and multi family		5,621		5,076		545		190
Construction		—		—		—		—
Home equities		327		—		327		—
Direct financing leases		331		138		193		95
Consumer loans		—		—		—		—
Other		—		—		—		—
Total troubled restructured loans and leases	$	7,932	$	6,846	$	1,086	$	997

	December 31, 2011
	($ in thousands)
	Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,432	$	1,362	$	70	$	64
Residential real estate:
Residential		—		—		—		—
Construction		—		—		—		—
Commercial real estate:
Commercial and multi family		5,258		5,258		—		708
Construction		—		—		—		—
Home equities		327		—		327		—
Direct financing leases		714		439		275		330
Consumer loans		—		—		—		—
Other		—		—		—		—
Total troubled restructured loans and leases	$	7,731	$	7,059	$	672	$	1,102

The following table shows the data for TDR activity for the three and six month periods ended June 30, 2012:

	Three Months Ended June 30, 2012						Six Months Ended June 30, 2012
	($ in thousands)						($ in thousands)
Troubled Debt Restructurings	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		—		—		—		2	$	256	$	256
Residential Real Estate:
Residential		1		44		44		1		44		44
Construction		—		—		—		—		—		—
Commercial Real Estate:
Commercial & Multi-Family		1		637		637		2		722		722
Construction		—		—		—		—		—		—
Home Equities		—		—		—		—		—		—
Direct financing leases		—		—		—		—		—		—
Consumer loans		—		—		—		—		—		—
Other		—		—		—		—		—		—

The general practice of the Bank is to work with borrowers so that they are able to pay back their loan or lease in full. If a borrower continues to be delinquent or cannot meet the terms of a TDR and the loan or lease is determined to be uncollectible, the loan or lease will be charged off. The following table presents loans and leases which were classified as TDR's during the previous 12 months which have defaulted during the three and six month periods ended June 30, 2012:

	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
	($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial and Industrial		—		—		4	$	1,272
Residential Real Estate:
Residential		—		—		—		—
Construction		—		—		—		—
Commercial Real Estate:
Commercial and Multi-Family		—		—		6		4,289
Construction		—		—		—		—
Home Equities		—		—		—		—
Direct financing leases		—		—		—		—

Covered Loans and the Related Allowance

On July 24, 2009, the Bank entered into a definitive purchase and assumption agreement with the FDIC under which the Bank assumed approximately $51.0 million in liabilities, consisting almost entirely of deposits, and purchased substantially all of the assets of Waterford Village Bank. The loan portfolio acquired in the transaction was $42.0 million. The loans acquired in that acquisition are referred to as "covered" loans because they are "covered" by a loss sharing agreement with the FDIC. The agreement calls for the FDIC to reimburse the Bank for 80% of losses up to $5.6 million and 95% of losses beyond that threshold. At acquisition, the Company marked the covered loan portfolio to its market value and the allowance for loan and lease losses related to the covered loans was zero. Since acquisition, management has provisioned for any incremental increases in estimated credit losses due to deterioration in specific loans or increased risk factors on pools of loans. As a result of the FDIC guarantees, the provision for loan and lease losses and the allowance for loan and lease losses at June 30, 2012 and December 31, 2011 are presented net of FDIC guarantees related to covered loans. The following table depicts the allowance for loan and lease losses related to covered loans as of June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
	(in thousands)
Covered loans	$	23,408		$	26,429
Incremental estimated credit losses since acquisition		578			506
FDIC guarantee		(462	)		(405	)
Allowance for loan and lease losses	$	116		$	101

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

3. FAIR VALUE MEASUREMENTS

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

There are three levels of inputs to fair value measurements:

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

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

• Level 3, meaning the use of unobservable inputs.

Observable market data should be used when available.

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A RECURRING BASIS

The following table presents for each of the fair-value hierarchy levels as defined in this footnote, those financial instruments which are measured at fair value on a recurring basis at June 30, 2012 and December 31, 2011:

	Level 1		Level 2		Level 3		Fair Value
June 30, 2012
Securities available-for-sale:
U.S. government agencies	$	—	$	25,307	$	—	$	25,307
States and political subdivisions		—		31,859		—		31,859
Mortgage-backed securities		—		35,928		—		35,928
Mortgage servicing rights		—		—		448		448
December 31, 2011
Securities available-for-sale:
U.S. Treasury and other U.S. government agencies	$	—	$	30,252	$	—	$	30,252
States and political subdivisions		—		32,326		—		32,326
Mortgage-backed securities		—		37,403		—		37,403
Mortgage servicing rights		—		—		407		407

Securities available for sale

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

Management believes that it has a sufficient understanding of the third party service's valuation models, assumptions and inputs used in determining the fair value of securities to enable management to maintain an appropriate system of internal control. On a quarterly basis the Company reviews changes in the market value of its security portfolio. Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities. Additionally, on an annual basis the Company has its entire security portfolio priced by a second pricing service to determine consistency with another market evaluator. If, on the Company's review or in comparing with another servicer, a material difference between pricing evaluations were to exist, the Company may submit an inquiry to the servicing provider regarding the data used to value a particular security. If the Company determines it has market information that would support a different valuation than the initial evaluation it can submit a challenge for a change to that security's valuation. There were no material differences in valuations noted in 2012 or 2011.

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. All assumptions are market driven. 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 and six month periods ended June 30, 2012 and 2011, respectively:

	Three months ended June 30,
	2012			2011
Beginning balance, March 31	$	454		$	435
Losses included in earnings		(47	)		(41	)
Additions from loan sales		41			48
Ending balance, June 30	$	448		$	442

	Six months ended June 30,
	2012			2011
Beginning balance, December 31	$	407		$	388
Losses included in earnings		(54	)		(36	)
Additions from loan sales		95			90
Ending balance, June 30	$	448		$	442

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

	6/30/2012			6/30/2011
Servicing fees		0.25	%		0.25	%
Discount rate		10.08	%		10.12	%
Prepayment rate (CPR)		15.82	%		13.07	%

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 June 30, 2012 and December 31, 2011:

	Level 1		Level 2		Level 3		Fair Value
June 30, 2012
Impaired loans	$	—	$	—	$	10,076	$	10,076
December 31, 2011
Impaired loans	$	—	$	—	$	10,311	$	10,311

Impaired loans

The Company evaluates and 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 $11.4 million, with a valuation allowance of $1.3 million, at June 30, 2012, compared to a gross value for impaired loans of $11.9 million, with a valuation allowance of $1.6 million, at December 31, 2011.

FAIR VALUE OF FINANCIAL INSTRUMENTS

At June 30, 2012 and December 31, 2011, 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:

	June 30, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	43,985	$	43,985	$	14,678	$	14,678
Level 2:
Available for sale securities		93,094		93,094		99,981		99,981
FHLB and FRB stock		3,238		3,238		3,255		3,255
Level 3:
Held to maturity securities		3,708		3,730		3,802		3,811
Loans and leases, net		587,265		621,700		571,910		602,534
Mortgage servicing rights		448		448		407		407
Financial liabilities:
Level 1:
Demand deposits	$	116,231	$	116,231	$	118,037	$	118,037
NOW deposits		63,535		63,535		50,761		50,761
Regular savings deposits		342,992		342,992		313,777		313,777
Muni-vest deposits		22,883		22,883		20,161		20,161
Junior subordinated debentures		11,330		11,330		11,330		11,330
Commitments to extend credit		64		64		161		161
Securities sold under agreement to repurchase		9,855		9,855		9,010		9,010
Level 2:
Other borrowed funds		19,000		19,751		22,000		22,988
Level 3:
Time deposits		108,279		111,558		113,467		116,666

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

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

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

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

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

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

Junior Subordinated Debentures. The carrying amount of Junior Subordinated Debentures is a reasonable estimate of fair value due to the fact that they bear a floating interest rate that adjusts on a quarterly basis.

Commitments to extend credit and standby letters of credit. As described in Note 8—"Contingent Liabilities and Commitments" to these Unaudited Consolidated Financial Statements, the Company was a party to financial instruments with off-balance sheet risk at June 30, 2012 and December 31, 2011. Such financial instruments consist of commitments to extend permanent financing and letters of credit. If the options are exercised by the prospective borrowers, these financial instruments will become interest-earning assets of the Company. If the options expire, the Company retains any fees paid by the counterparty in order to obtain the commitment or guarantee. The fees collected for these commitments are recorded as "unearned commitment fees" in Other Liabilities. The carrying value approximates the fair value.

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

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

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

Business Segment Information

	Three Months Ended June 30, 2012
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	6,912		(31	)	$	6,881
Provision for loan and lease losses		301		—			301
Net interest income (expense) after provision for loan and lease losses		6,611		(31	)		6,580
Non-interest income		1,395		—			1,395
Insurance service and fees		—		1,643			1,643
Non-interest expense		6,060		1,263			7,323
Income before income taxes		1,946		349			2,295
Income tax provision		661		139			800
Net income	$	1,285	$	210		$	1,495

33

	Three Months Ended June 30, 2011
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	6,316		($29	)	$	6,287
Provision for loan and lease losses		1,009		—			1,009
Net interest income (expense) after provision for loan and lease losses		5,307		(29	)		5,278
Non-interest income		1,324		—			1,324
Insurance service and fees		—		1,601			1,601
Non-interest expense		5,348		1,414			6,762
Income before income taxes		1,283		158			1,441
Income tax provision		408		61			469
Net income	$	875	$	97		$	972

	Six Months Ended June 30, 2012
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	13,795		($62	)	$	13,733
Provision for loan and lease losses		52		—			52
Net interest income (expense) after provision for loan and lease losses		13,743		(62	)		13,681
Non-interest income		2,738		—			2,738
Insurance service and fees		—		3,589			3,589
Non-interest expense		11,727		2,505			14,232
Income before income taxes		4,754		1,022			5,776
Income tax provision		1,503		399			1,902
Net income	$	3,251	$	623		$	3,874

34

	Six Months Ended June 30, 2011
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	12,642		($59	)	$	12,583
Provision for loan and lease losses		1,497		—			1,497
Net interest income (expense) after provision for loan and lease losses		11,145		(59	)		11,086
Non-interest income		2,696		—			2,696
Insurance service and fees		—		3,690			3,690
Non-interest expense		10,629		2,737			13,366
Income before income taxes		3,212		894			4,106
Income tax provision		914		345			1,259
Net income	$	2,298		$549		$	2,847

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Securities (Tables)

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

Schedule Of Amortized Cost And Fair Value Of Securities

	June 30, 2012
	(in thousands)
			Unrealized
	Amortized Cost		Gains		Losses			Fair Value
Available for Sale:
Debt securities:
U.S. government agencies	$	24,061	$	1,246	$	—		$	25,307
States and political subdivisions		30,407		1,495		(43	)		31,859
Total debt securities	$	54,468	$	2,741	($	43	)	$	57,166
Mortgage-backed securities:
FNMA	$	18,210	$	807	$	—		$	19,017
FHLMC		5,621		222		—			5,843
GNMA		8,885		223		(10	)		9,098
CMO		1,941		29		—			1,970
Total mortgage-backed securities	$	34,657	$	1,281	($	10	)	$	35,928
Total securities designated as available for sale	$	89,125	$	4,022	($	53	)	$	93,094
Held to Maturity:
Debt securities
States and political subdivisions		3,708		31		(9	)		3,730
Total securities designated as held to maturity	$	3,708	$	31	($	9	)	$	3,730
Total securities	$	92,833	$	4,053	($	62	)	$	96,824

	December 31, 2011
	(in thousands)
			Unrealized
	Amortized Cost		Gains		Losses			Fair Value
Available for Sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	29,002	$	1,250	$	—		$	30,252
States and political subdivisions		30,632		1,698		(4	)		32,326
Total debt securities	$	59,634	$	2,948	($	4	)	$	62,578
Mortgage-backed securities:
FNMA	$	20,071	$	647		—		$	20,718
FHLMC		8,052		269		—			8,321
GNMA		5,895		248		—			6,143
CMO		2,196		25		—			2,221
Total mortgage-backed securities	$	36,214	$	1,189		—		$	37,403
Total securities designated as available for sale	$	95,848	$	4,137	($	4	)	$	99,981
Held to Maturity:
Debt securities
States and political subdivisions		3,802		24		(15	)		3,811
Total securities designated as held to maturity	$	3,802	$	24	($	15	)	$	3,811
Total securities	$	99,650	$	4,161	($	19	)	$	103,792

Scheduled Maturities Of Debt And Mortgage Backed Securities

	June 30, 2012				December 31, 2011
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)				(in thousands)
Debt securities available for sale:
Due in one year or less	$	2,121	$	2,148	$	2,426	$	2,453
Due after one year through five years		16,299		17,013		18,454		19,231
Due after five years through ten years		26,644		27,774		24,995		26,238
Due after ten years		9,404		10,231		13,759		14,656
		54,468		57,166		59,634		62,578
Mortgage-backed securities available for sale		34,657		35,928		36,214		37,403
Total available for sale securities	$	89,125	$	93,094	$	95,848	$	99,981
Debt securities held to maturity:
Due in one year or less	$	2,581	$	2,573	$	2,656	$	2,644
Due after one year through five years		534		547		518		529
Due after five years through ten years		35		37		40		42
Due after ten years		558		573		588		596
Total held to maturity securities	$	3,708	$	3,730	$	3,802	$	3,811

Unrealized Losses On Available For Sale Securities

	June 30, 2012
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
States and political subdivisions		4,326		(39	)		303		(4	)		4,629		(43	)
Total debt securities		$4,326		($39	)		$303		($4	)	$	4,629		($43	)
Mortgage-backed securities:
FNMA	$	—	$	—		$	—	$	—		$	—	$	—
FHLMC		—		—			—		—			—		—
GNMA		2,160		(10	)		—		—			2,160		(10	)
CMO'S		—		—			—		—			—		—
Total mortgage-backed securities	$	2,160		($10	)	$	—	$	—		$	2,160		($10	)
Held To Maturity:
Debt securities:
States and political subdivisions	$	2,174		($9	)	$	0	$	0		$	2,174		($9	)
Total temporarily impaired securities	$	8,660		($58	)	$	303		($4	)	$	8,963		($62	)

	December 31, 2011
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
Available for Sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
States and political subdivisions		401		(1	)		304		(3	)		705		(4	)
Total debt securities	$	401		($1	)		$304		($3	)	$	705		($4	)
Mortgage-backed securities:
FNMA	$	—	$	—		$	—	$	—		$	—	$	—
FHLMC		—		—			—		—			—		—
GNMA		—		—			—		—			—		—
CMO'S		—		—			—		—			—		—
Total mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Held To Maturity:
Debt securities:
States and political subdivisions	$	2,239		($12	)	$	1,006		($3	)	$	3,245		($15	)
Total temporarily impaired securities	$	2,640		($13	)	$	1,310		($6	)	$	3,950		($19	)

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Segment Information

6 Months Ended

Jun. 30, 2012

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 and six month periods ended June 30, 2012 and 2011.

	Three Months Ended June 30, 2012
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	6,912		(31	)	$	6,881
Provision for loan and lease losses		301		—			301
Net interest income (expense) after provision for loan and lease losses		6,611		(31	)		6,580
Non-interest income		1,395		—			1,395
Insurance service and fees		—		1,643			1,643
Non-interest expense		6,060		1,263			7,323
Income before income taxes		1,946		349			2,295
Income tax provision		661		139			800
Net income	$	1,285	$	210		$	1,495

	Three Months Ended June 30, 2011
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	6,316		($29	)	$	6,287
Provision for loan and lease losses		1,009		—			1,009
Net interest income (expense) after provision for loan and lease losses		5,307		(29	)		5,278
Non-interest income		1,324		—			1,324
Insurance service and fees		—		1,601			1,601
Non-interest expense		5,348		1,414			6,762
Income before income taxes		1,283		158			1,441
Income tax provision		408		61			469
Net income	$	875	$	97		$	972

	Six Months Ended June 30, 2012
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	13,795		($62	)	$	13,733
Provision for loan and lease losses		52		—			52
Net interest income (expense) after provision for loan and lease losses		13,743		(62	)		13,681
Non-interest income		2,738		—			2,738
Insurance service and fees		—		3,589			3,589
Non-interest expense		11,727		2,505			14,232
Income before income taxes		4,754		1,022			5,776
Income tax provision		1,503		399			1,902
Net income	$	3,251	$	623		$	3,874

	Six Months Ended June 30, 2011
	(in thousands)
			Insurance Agency
	Banking Activities		Activities			Total
Net interest income (expense)	$	12,642		($59	)	$	12,583
Provision for loan and lease losses		1,497		—			1,497
Net interest income (expense) after provision for loan and lease losses		11,145		(59	)		11,086
Non-interest income		2,696		—			2,696
Insurance service and fees		—		3,690			3,690
Non-interest expense		10,629		2,737			13,366
Income before income taxes		3,212		894			4,106
Income tax provision		914		345			1,259
Net income	$	2,298		$549		$	2,847

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Per Share Data

6 Months Ended

Jun. 30, 2012

Per Share Data [Abstract]

Per Share Data

5. PER SHARE DATA

The common stock per share information is based upon the weighted average number of shares outstanding during each period. For the three and six month periods ended June 30, 2012 the Company had 17,063 and 8,979 dilutive shares, respectively. The Company had 6,170 and 7,739 dilutive shares for the three and six month periods ended June 30, 2011, 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 and six month periods ended June 30, 2012 there were approximately 162,414 and 167,994 shares, respectively, that were not included in calculating diluted earnings per share because their effect was anti-dilutive. There were 170,706 and 117,186 potentially anti-dilutive shares for the three and six month periods ended June 30, 2011.

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Other Comprehensive Income

6 Months Ended

Jun. 30, 2012

Other Comprehensive Income [Abstract]

Other Comprehensive Income

6. OTHER COMPREHENSIVE INCOME

The following tables display the components of other comprehensive income (loss):

	Three months ended June 30, 2012
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	23		($9	)	$	14
Defined benefit pension plans:
Amortization of prior service cost		22		(9	)		13
Amortization of actuarial loss		43		(17	)		26
Total		65		(26	)		39
Other Comprehensive Income	$	88		($35	)	$	53

	Three months ended June 30, 2011
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	1,210		($469	)	$	741
Defined benefit pension plans:
Amortization of prior service cost		22		(9	)		13
Amortization of actuarial loss		9		(3	)		6
Total		31		(12	)		19
Other Comprehensive Income	$	1,241		($481	)	$	760

	Six months ended June 30, 2012
				Income Tax
	Before-Tax			(Provision)			Net-of-Tax
	Amount			Benefit			Amount
Unrealized loss on investment securities		($165	)	$	64			($101	)
Defined benefit pension plans:
Amortization of prior service cost		44			(17	)		27
Amortization of actuarial loss		86			(34	)		52
Total		130			(51	)		79
Other Comprehensive Loss		($35	)	$	13			($22	)

	Six months ended June 30, 2011
			Income Tax
	Before-Tax		(Provision)			Net-of-Tax
	Amount		Benefit			Amount
Unrealized gain on investment securities	$	1,412		($547	)	$	865
Defined benefit pension plans:
Amortization of prior service cost		44		(17	)		27
Amortization of actuarial loss		19		(7	)		12
Total		63		(24	)		39
Other Comprehensive Income	$	1,475		($571	)	$	904

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Contingent Liabilities And Commitments

6 Months Ended

Jun. 30, 2012

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:

	June 30, 2012		December 31, 2011
	(in thousands)
Commitments to extend credit	$	145,052	$	134,204
Standby letters of credit		3,227		3,429
Total	$	148,279	$	137,633

Commitments to extend credit and standby letters of credit include some exposure to credit loss in the event of nonperformance of the customer. The Bank's credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded on the Company's unaudited consolidated balance sheets. Because these instruments have fixed maturity dates, and because they may expire without being drawn upon, they do not necessarily represent cash requirements of the Bank. The Bank has not incurred any losses on its commitments and has not recorded a reserve for its commitments during 2011 and 2012.

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

The Company is subject to possible litigation proceedings in the normal course of business. As of June 30, 2012 and December 31, 2011, there were no claims pending against the Company that management considered material.

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Fair Value Measurements (Financial Instruments Measured At Fair Value On Nonrecurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fair Value, Measurements, Nonrecurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 10,076	$ 10,311
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 10,076	$ 10,311

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Net Periodic Benefit Costs (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012 Scenario, Forecast [Member]
Contribution to the defined benefit pension plan	$ 310	$ 60

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Loans, Leases, And The Allowance For Loan And Lease Losses (Tables)

6 Months Ended

Jun. 30, 2012

Loans, Leases, And The Allowance For Loan And Lease Losses [Abstract]

Composition Of The Company's Loan And Lease Portfolio

	June 30, 2012			December 31, 2011
Mortgage loans on real estate:	(in thousands)
Residential Mortgages	$	69,332		$	73,579
Commercial and multi-family		323,456			306,683
Construction-Residential		2,535			2,392
Construction-Commercial		31,807			27,887
Home equities		55,445			54,673
Total real estate loans		482,575			465,214
Direct financing leases		3,355			6,021
Commercial and industrial loans		107,807			109,513
Consumer loans		1,551			1,677
Other		2,303			586
Net deferred loan origination costs		332			394
Total gross loans		597,923			583,405
Allowance for loan losses		(10,658	)		(11,495	)
Loans, net	$	587,265		$	571,910

Credit Quality Indicators Of Loans And Leases

June 30, 2012
(in thousands)
Corporate Credit Exposure—By Credit Rating	Commercial Real Estate Construction		Commercial Real Estate Other		Total Commercial Real Estate		Commercial and Industrial
3	$	27,328	$	278,067	$	305,395	$	79,307
4		2,825		35,953		38,778		19,362
5		843		1,858		2,701		4,415
6		811		3,766		4,577		3,362
7		—		3,812		3,812		1,361
Total	$	31,807	$	323,456	$	355,263	$	107,807

December 31, 2011
(in thousands)
Corporate Credit Exposure—By Credit Rating	Commercial Real Estate Construction		Commercial Real Estate Other		Total Commercial Real Estate		Commercial and Industrial
3	$	21,607	$	250,575	$	272,182	$	77,017
4		4,421		45,505		49,926		21,448
5		362		1,758		2,120		5,939
6		1,497		8,845		10,342		4,761
7		—		—		—		348
Total	$	27,887	$	306,683	$	334,570	$	109,513

Recorded Investment In Loans And Leases That Are Past Due

June 30, 2012
(in thousands)
	30-59 days		60-89 days		90+ days		Total Past Due		Current Balance		Total Balance		90+ Days Accruing		Non-accruing Loans and Leases
Commercial and industrial	$	254	$	1,069	$	805	$	2,128	$	105,679	$	107,807	$	2	$	1,895
Residential real estate:
Residential		—		269		1,183		1,452		67,880		69,332		241		985
Construction		—		—		—		—		2,535		2,535		—		—
Commercial real estate:
Commercial		—		—		2,136		2,136		321,320		323,456		151		5,504
Construction		—		—		811		811		30,996		31,807		—		811
Home equities		154		104		773		1,031		54,414		55,445		16		907
Direct financing leases		33		14		250		297		3,058		3,355		—		430
Consumer		1		4		37		42		1,509		1,551		—		66
Other		—		—		—		—		2,635		2,635		—		—
Total Loans	$	442	$	1,460	$	5,995	$	7,897	$	590,026	$	597,923	$	410	$	10,598

December 31, 2011
(in thousands)
	30-59 days		60-89 days		90+ days		Total Past Due		Current Balance		Total Balance		90+ Days Accruing		Non-accruing Loans and Leases
Commercial and industrial	$	279	$	94	$	1,702	$	2,075	$	107,438	$	109,513	$	—	$	2,180
Residential real estate:
Residential		735		55		1,062		1,852		71,727		73,579		73		1,048
Construction		—		—		167		167		2,225		2,392		—		167
Commercial real estate:
Commercial		3,086		64		2,686		5,836		300,847		306,683		59		6,858
Construction		—		—		2,609		2,609		25,278		27,887		1,167		1,442
Home equities		481		110		683		1,274		53,399		54,673		—		946
Direct financing leases		327		26		754		1,107		4,914		6,021		—		1,160
Consumer		56		5		4		65		1,612		1,677		—		76
Other		—		—		—		—		980		980		—		—
Total Loans	$	4,964	$	354	$	9,667	$	14,985	$	568,420	$	583,405	$	1,299	$	13,877

Summary Of Activity In The Allowance For Loan And Lease Losses According To Portfolio Segment

June 30, 2012
(in thousands)	Commercial and Industrial			Commercial Real Estate Mortgages*			Consumer ^			Residential Mortgages*			HELOC			Direct Financing Leases			Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	4,085		$	4,670		$	36		$	793		$	768		$	994		$	149	$	11,495
Charge-offs		(424	)		(546	)		(10	)		0			(13	)		0			0		(993	)
Recoveries		70			15			13			—			6			—			—		104
Provision	$	485		$	238			$9			($95	)	$	42			($627	)		$0		52
Ending balance	$	4,216		$	4,377		$	48		$	698		$	803		$	367		$	149	$	10,658
Allowance for loan and lease losses:
Individually evaluated for impairment	$	851		$	252		$	16			$0		$	102		$	95			$0	$	1,316
Collectively evaluated for impairment		3,365			4,125			32			698			701			272			149		9,342
Loans acquired with deteriorated credit quality		—			—			—			—			—			—			—		—
Total	$	4,216		$	4,377		$	48		$	698		$	803		$	367		$	149	$	10,658
Loans and leases:
Ending balance:
Individually evaluated for impairment	$	1,916		$	6,860		$	36		$	985		$	1,234		$	331		$	0	$	11,362
Collectively evaluated for impairment		105,891			348,403			3,788			70,882			54,211			3,024			0		586,199
Loans acquired with deteriorated credit quality		—			—			30			—			—			—			—		30
Total	$	107,807		$	355,263		$	3,854		$	71,867		$	55,445		$	3,355		$	—	$	597,591

* Includes construction loans

^ Includes other loans

Note: Loan and lease balances do not include $332 thousand in net deferred loan and lease origination costs as of June 30, 2012.

June 30, 2011
(in thousands)	Commercial			Commercial Real Estate Mortgages*			Consumer ^			Residential Mortgages*		HELOC		Finance Leases		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,435		$	4,252		$	29		$	548	$	540	$	1,471	$	149	$	10,424
Charge-offs		(1,124	)		($142	)		($11	)		—		—		—		—		(1,277	)
Recoveries		16			—			6			—		1		—		—		23
Provision	$	1,244		$	184		$	20		$	30	$	19	$	0	$	0		1,497
Ending balance	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667
Allowance for loan and lease losses:
Individually evaluated for impairment	$	209		$	721		$	12		$	0	$	0	$	41	$	0	$	983
Collectively evaluated for impairment		3,362		$	3,573		$	32			578		560		1,430		149		9,684
Loans acquired with deteriorated credit quality		—			—			—			—		—		—		—		—
Total	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667
Loans and leases:
Ending balance:
Individually evaluated for impairment	$	1,390		$	8,132		$	58		$	0	$	0	$	271	$	0	$	9,851
Collectively evaluated for impairment		99,967		$	295,820		$	2,544			69,833		54,385		9,686		—		532,235
Loans acquired with deteriorated credit quality		—			—			79			—		—		—		—		79
Total	$	101,357		$	303,952		$	2,681		$	69,833	$	54,385	$	9,957	$	—	$	542,165

* Includes construction loans

^ Includes other loans

Note: Loan and lease balances do not include $394 thousand in net deferred loan and lease origination costs as of June 30, 2011.

June 30, 2012
(in thousands)	Commercial and Industrial			Commercial Real Estate Mortgages			Consumer			Residential Mortgages			HELOC		Direct Financing Leases			Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,946		$	4,565		$	43		$	719		$	785	$	583		$	149	$	10,790
Charge-offs		(15	)		(487	)		(7	)		0			0		0			0		(509	)
Recoveries		52			15			9			—			—		—			—		76
Provision		233			284			3			(21	)		18		(216	)		0		301
Ending balance	$	4,216		$	4,377		$	48		$	698		$	803	$	367		$	149	$	10,658

23

June 30, 2011
(in thousands)	Commercial			Commercial Real Estate Mortgages			Consumer			Residential Mortgages		HELOC		Finance Leases		Unallocated		Total
Allowance for loan and lease losses:
Beginning balance	$	3,330		$	4,384		$	37		$	564	$	547	$	1,471	$	149	$	10,482
Charge-offs		(691	)		($142	)		($7	)		—		—		—		—		(840	)
Recoveries		13			—			3			—		—		—		—		16
Provision		919			52			11			14		13		0		0		1,009
Ending balance	$	3,571		$	4,294		$	44		$	578	$	560	$	1,471	$	149	$	10,667

Impaired Loans And Leases

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With no related allowance recorded:
Commercial and industrial	$	252	$	275	$	0	$	265	$	18	$	1
Residential real estate:
Residential		985		1,092		—		989		36		0
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		2,261		2,886		—		2,569		100		—
Construction		—		—		—		—		—		—
Home equities		1,028		1,059		—		1,029		16		5
Direct financing leases		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	4,526	$	5,312	$	—	$	4,852	$	170	$	6

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With a related allowance recorded:
Commercial and industrial	$	1,664	$	1,728	$	851	$	1,689	$	36	$	0
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		3,788		3,929		241		3,797		98		—
Construction		811		867		11		814		13		—
Home equities		206		206		102		170		4		1
Direct financing leases		331		341		95		394		10		—
Consumer		66		138		16		68		5		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	6,866	$	7,209	$	1,316	$	6,933	$	166	$	1

	At June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
Total
Commercial and industrial	$	1,916	$	2,003	$	851	$	1,954	$	54	$	1
Residential real estate:
Residential		985		1,092		—		989		36		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		6,049		6,815		241		6,366		198		—
Construction		811		867		11		814		13		—
Home equities		1,234		1,265		102		1,199		20		6
Direct financing leases		331		341		95		394		10		—
Consumer		66		138		16		68		5		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	11,392	$	12,521	$	1,316	$	11,784	$	336	$	7

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With no related allowance recorded:
Commercial and industrial	$	261	$	270	$	—	$	371	$	9	$	7
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		2,723		2,916		—		2,503		215		44
Construction		1,442		1,497		—		1,355		48		3
Home equities		327		327		—		331		—		9
Direct financing leases		—		—		—		—		—		—
Consumer		32		95		—		79		7		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	4,785	$	5,105	$	—	$	4,639	$	279	$	63

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
With a related allowance recorded:
Commercial and industrial	$	1,969	$	2,007	$	405	$	2,151	$	58	$	36
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		4,135		4,418		844		4,257		267		—
Construction		—		—		—		—		—		—
Home equities		170		170		31		170		4		2
Direct financing leases		847		907		350		1,214		60		1
Consumer		44		49		9		56		4		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	7,165	$	7,551	$	1,639	$	7,848	$	393	$	39

	At December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
	(in thousands)
Total
Commercial and industrial	$	2,230	$	2,277	$	405	$	2,522	$	67	$	43
Residential real estate:
Residential		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Commercial real estate:
Commercial		6,858		7,334		844		6,760		482		44
Construction		1,442		1,497		—		1,355		48		3
Home equities		497		497		31		501		4		11
Direct financing leases		847		907		350		1,214		60		1
Consumer		76		144		9		135		11		—
Other		—		—		—		—		—		—
Total impaired loans and leases	$	11,950	$	12,656	$	1,639	$	12,487	$	672	$	102

Non-Performing Loans And Leases

	June 30, 2012			December 31, 2011
	(in thousands)
Non-accruing loans and leases:
Commercial and industrial loans	$	1,895		$	2,180
Residential real estate:
Residential		985			1,048
Construction		—			167
Commercial real estate:
Commercial and multi-family		5,504			6,858
Construction		811			1,442
Home equities		907			946
Direct financing leases		430			1,160
Consumer loans		66			76
Other		—			—
Total non-accruing loans and leases	$	10,598		$	13,877
Accruing loans 90+ days past due		410			1,299
Total non-performing loans and leases	$	11,008		$	15,176
Total non-performing loans and leases to total assets		1.41	%		2.05	%
Total non-performing loans and leases to total loans and leases		1.84	%		2.60	%

Troubled Restructured Loans And Leases

	June 30, 2012
			($ in thousands)
	Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,609	$	1,588	$	21	$	712
Residential real estate:
Residential		44		44		—		—
Construction		—		—		—		—
Commercial real estate:
Commercial and multi family		5,621		5,076		545		190
Construction		—		—		—		—
Home equities		327		—		327		—
Direct financing leases		331		138		193		95
Consumer loans		—		—		—		—
Other		—		—		—		—
Total troubled restructured loans and leases	$	7,932	$	6,846	$	1,086	$	997

	December 31, 2011
	($ in thousands)
	Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,432	$	1,362	$	70	$	64
Residential real estate:
Residential		—		—		—		—
Construction		—		—		—		—
Commercial real estate:
Commercial and multi family		5,258		5,258		—		708
Construction		—		—		—		—
Home equities		327		—		327		—
Direct financing leases		714		439		275		330
Consumer loans		—		—		—		—
Other		—		—		—		—
Total troubled restructured loans and leases	$	7,731	$	7,059	$	672	$	1,102

Troubled Debt Restructurings Activity

	Three Months Ended June 30, 2012						Six Months Ended June 30, 2012
	($ in thousands)						($ in thousands)
Troubled Debt Restructurings	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		—		—		—		2	$	256	$	256
Residential Real Estate:
Residential		1		44		44		1		44		44
Construction		—		—		—		—		—		—
Commercial Real Estate:
Commercial & Multi-Family		1		637		637		2		722		722
Construction		—		—		—		—		—		—
Home Equities		—		—		—		—		—		—
Direct financing leases		—		—		—		—		—		—
Consumer loans		—		—		—		—		—		—
Other		—		—		—		—		—		—

Troubled Debt Restructurings That Subsequently Defaulted

	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
	($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial and Industrial		—		—		4	$	1,272
Residential Real Estate:
Residential		—		—		—		—
Construction		—		—		—		—
Commercial Real Estate:
Commercial and Multi-Family		—		—		6		4,289
Construction		—		—		—		—
Home Equities		—		—		—		—
Direct financing leases		—		—		—		—

Allowance For Loan And Lease Losses Related To Covered Loans

	June 30, 2012			December 31, 2011
	(in thousands)
Covered loans	$	23,408		$	26,429
Incremental estimated credit losses since acquisition		578			506
FDIC guarantee		(462	)		(405	)
Allowance for loan and lease losses	$	116		$	101

XML

Securities (Narrative) (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities pledged as collateral	$ 75,200,000	$ 76,700,000
FHLBNY stock	1,804,000	1,830,000
Other-than-temporary impairment charges	0	0
Gross unrealized losses to total fair value	0.10%	0.10%
FHLBNY [Member]
Schedule of Available-for-sale Securities [Line Items]
Borrowed funds	$ 19,000,000	$ 22,000,000

XML

Segment Information (Business Segment Information) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Segment Reporting Information [Line Items]
Net interest income (expense)	$ 6,881	$ 6,287	$ 13,733	$ 12,583
Provision for loan and lease losses	301	1,009	52	1,497
Net interest income (expense) after provision for loan and lease losses	6,580	5,278	13,681	11,086
Non-interest income	1,395	1,324	2,738	2,696
Insurance service and fees	1,643	1,601	3,589	3,690
Non-interest expense	7,323	6,762	14,232	13,366
Income before income taxes	2,295	1,441	5,776	4,106
Income tax provision	800	469	1,902	1,259
Net income	1,495	972	3,874	2,847
Banking Activities [Member]
Segment Reporting Information [Line Items]
Net interest income (expense)	6,912	6,316	13,795	12,642
Provision for loan and lease losses	301	1,009	52	1,497
Net interest income (expense) after provision for loan and lease losses	6,611	5,307	13,743	11,145
Non-interest income	1,395	1,324	2,738	2,696
Insurance service and fees
Non-interest expense	6,060	5,348	11,727	10,629
Income before income taxes	1,946	1,283	4,754	3,212
Income tax provision	661	408	1,503	914
Net income	1,285	875	3,251	2,298
Insurance Agency Activities [Member]
Segment Reporting Information [Line Items]
Net interest income (expense)	(31)	(29)	(62)	(59)
Net interest income (expense) after provision for loan and lease losses	(31)	(29)	(62)	(59)
Insurance service and fees	1,643	1,601	3,589	3,690
Non-interest expense	1,263	1,414	2,505	2,737
Income before income taxes	349	158	1,022	894
Income tax provision	139	61	399	345
Net income	$ 210	$ 97	$ 623	$ 549

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Impaired Loans And Leases) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded	$ 4,526	$ 4,785
Impaired loans, Recorded Investment, With a related allowance recorded	6,866	7,165
Impaired loans, Recorded Investment, Total	11,392	11,950
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	5,312	5,105
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	7,209	7,551
Impaired loans, Unpaid Principal Balance, Total	12,521	12,656
Impaired loans, Related Allowance	1,316	1,639
Impaired loans, Related Allowance, Total	1,316	1,639
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans, Average Recorded Investment, With no related allowance recorded	4,852	4,639
Impaired loans, Average Recorded Investment, With a related allowance recorded	6,933	7,848
Impaired loans, Average Recorded Investment, Total	11,784	12,487
Impaired Loans, Interest Income Foregone, With no related allowance recorded	170	279
Impaired Loans, Interest Income Foregone, With a related allowance recorded	166	393
Impaired Loans, Interest Income Foregone, Total	336	672
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Loans, Interest Income Recognized, With No Related Allowance Recorded	6	63
Impaired Loans, Interest Income Recognized, With a Related Allowance Recorded	1	39
Impaired Loans, Interest Income Recognized, Total	7	102
Commercial And Industrial [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded	252	261
Impaired loans, Recorded Investment, With a related allowance recorded	1,664	1,969
Impaired loans, Recorded Investment, Total	1,916	2,230
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	275	270
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	1,728	2,007
Impaired loans, Unpaid Principal Balance, Total	2,003	2,277
Impaired loans, Related Allowance	851	405
Impaired loans, Related Allowance, Total	851	405
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans, Average Recorded Investment, With no related allowance recorded	265	371
Impaired loans, Average Recorded Investment, With a related allowance recorded	1,689	2,151
Impaired loans, Average Recorded Investment, Total	1,954	2,522
Impaired Loans, Interest Income Foregone, With no related allowance recorded	18	9
Impaired Loans, Interest Income Foregone, With a related allowance recorded	36	58
Impaired Loans, Interest Income Foregone, Total	54	67
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Loans, Interest Income Recognized, With No Related Allowance Recorded	1	7
Impaired Loans, Interest Income Recognized, With a Related Allowance Recorded	0	36
Impaired Loans, Interest Income Recognized, Total	1	43
Residential Real Estate: Residential [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded	985
Impaired loans, Recorded Investment, With a related allowance recorded
Impaired loans, Recorded Investment, Total	985
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	1,092
Impaired loans, Unpaid Principal Balance, With a related allowance recorded
Impaired loans, Unpaid Principal Balance, Total	1,092
Impaired loans, Related Allowance
Impaired loans, Related Allowance, Total
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans, Average Recorded Investment, With no related allowance recorded	989
Impaired loans, Average Recorded Investment, With a related allowance recorded
Impaired loans, Average Recorded Investment, Total	989
Impaired Loans, Interest Income Foregone, With no related allowance recorded	36
Impaired Loans, Interest Income Foregone, With a related allowance recorded
Impaired Loans, Interest Income Foregone, Total	36
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Loans, Interest Income Recognized, With No Related Allowance Recorded	0
Impaired Loans, Interest Income Recognized, With a Related Allowance Recorded
Impaired Loans, Interest Income Recognized, Total
Residential Real Estate: Construction [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded
Impaired loans, Recorded Investment, With a related allowance recorded
Impaired loans, Recorded Investment, Total
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
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, Related Allowance, Total
Impaired Financing Receivable, Average Recorded Investment [Abstract]
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 Financing Receivable, Interest Income, Accrual Method [Abstract]
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
Commercial Real Estate: Commercial [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded	2,261	2,723
Impaired loans, Recorded Investment, With a related allowance recorded	3,788	4,135
Impaired loans, Recorded Investment, Total	6,049	6,858
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	2,886	2,916
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	3,929	4,418
Impaired loans, Unpaid Principal Balance, Total	6,815	7,334
Impaired loans, Related Allowance	241	844
Impaired loans, Related Allowance, Total	241	844
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans, Average Recorded Investment, With no related allowance recorded	2,569	2,503
Impaired loans, Average Recorded Investment, With a related allowance recorded	3,797	4,257
Impaired loans, Average Recorded Investment, Total	6,366	6,760
Impaired Loans, Interest Income Foregone, With no related allowance recorded	100	215
Impaired Loans, Interest Income Foregone, With a related allowance recorded	98	267
Impaired Loans, Interest Income Foregone, Total	198	482
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Loans, Interest Income Recognized, With No Related Allowance Recorded		44
Impaired Loans, Interest Income Recognized, Total		44
Commercial Real Estate: Construction [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded		1,442
Impaired loans, Recorded Investment, With a related allowance recorded	811
Impaired loans, Recorded Investment, Total	811	1,442
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans, Unpaid Principal Balance, With no related allowance recorded		1,497
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	867
Impaired loans, Unpaid Principal Balance, Total	867	1,497
Impaired loans, Related Allowance	11
Impaired loans, Related Allowance, Total	11
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans, Average Recorded Investment, With no related allowance recorded		1,355
Impaired loans, Average Recorded Investment, With a related allowance recorded	814
Impaired loans, Average Recorded Investment, Total	814	1,355
Impaired Loans, Interest Income Foregone, With no related allowance recorded		48
Impaired Loans, Interest Income Foregone, With a related allowance recorded	13
Impaired Loans, Interest Income Foregone, Total	13	48
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Loans, Interest Income Recognized, With No Related Allowance Recorded		3
Impaired Loans, Interest Income Recognized, Total		3
Home Equities [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded	1,028	327
Impaired loans, Recorded Investment, With a related allowance recorded	206	170
Impaired loans, Recorded Investment, Total	1,234	497
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans, Unpaid Principal Balance, With no related allowance recorded	1,059	327
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	206	170
Impaired loans, Unpaid Principal Balance, Total	1,265	497
Impaired loans, Related Allowance	102	31
Impaired loans, Related Allowance, Total	102	31
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans, Average Recorded Investment, With no related allowance recorded	1,029	331
Impaired loans, Average Recorded Investment, With a related allowance recorded	170	170
Impaired loans, Average Recorded Investment, Total	1,199	501
Impaired Loans, Interest Income Foregone, With no related allowance recorded	16
Impaired Loans, Interest Income Foregone, With a related allowance recorded	4	4
Impaired Loans, Interest Income Foregone, Total	20	4
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Loans, Interest Income Recognized, With No Related Allowance Recorded	5	9
Impaired Loans, Interest Income Recognized, With a Related Allowance Recorded	1	2
Impaired Loans, Interest Income Recognized, Total	6	11
Direct Financing Leases [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded
Impaired loans, Recorded Investment, With a related allowance recorded	331	847
Impaired loans, Recorded Investment, Total	331	847
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans, Unpaid Principal Balance, With no related allowance recorded
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	341	907
Impaired loans, Unpaid Principal Balance, Total	341	907
Impaired loans, Related Allowance	95	350
Impaired loans, Related Allowance, Total	95	350
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans, Average Recorded Investment, With no related allowance recorded
Impaired loans, Average Recorded Investment, With a related allowance recorded	394	1,214
Impaired loans, Average Recorded Investment, Total	394	1,214
Impaired Loans, Interest Income Foregone, With no related allowance recorded
Impaired Loans, Interest Income Foregone, With a related allowance recorded	10	60
Impaired Loans, Interest Income Foregone, Total	10	60
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Loans, Interest Income Recognized, With No Related Allowance Recorded
Impaired Loans, Interest Income Recognized, With a Related Allowance Recorded		1
Impaired Loans, Interest Income Recognized, Total		1
Consumer [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded		32
Impaired loans, Recorded Investment, With a related allowance recorded	66	44
Impaired loans, Recorded Investment, Total	66	76
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired loans, Unpaid Principal Balance, With no related allowance recorded		95
Impaired loans, Unpaid Principal Balance, With a related allowance recorded	138	49
Impaired loans, Unpaid Principal Balance, Total	138	144
Impaired loans, Related Allowance	16	9
Impaired loans, Related Allowance, Total	16	9
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired loans, Average Recorded Investment, With no related allowance recorded		79
Impaired loans, Average Recorded Investment, With a related allowance recorded	68	56
Impaired loans, Average Recorded Investment, Total	68	135
Impaired Loans, Interest Income Foregone, With no related allowance recorded		7
Impaired Loans, Interest Income Foregone, With a related allowance recorded	5	4
Impaired Loans, Interest Income Foregone, Total	5	11
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Loans, Interest Income Recognized, With No Related Allowance Recorded
Other [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired loans, Recorded Investment, With no related allowance recorded
Impaired loans, Recorded Investment, With a related allowance recorded
Impaired loans, Recorded Investment, Total
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
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, Related Allowance, Total
Impaired Financing Receivable, Average Recorded Investment [Abstract]
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 Financing Receivable, Interest Income, Accrual Method [Abstract]
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

XML

Statements Of Consolidated Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Statements Of Consolidated Comprehensive Income [Abstract]
Net Income	$ 1,495	$ 972	$ 3,874	$ 2,847
Unrealized (loss) gain on available-for-sale securities	14	741	(101)	865
Defined benefit pension plans:
Amortization of prior service cost	13	13	27	27
Amortization of actuarial loss	26	6	52	12
Total	39	19	79	39
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX	53	760	(22)	904
COMPREHENSIVE INCOME	$ 1,548	$ 1,732	$ 3,852	$ 3,751

XML

Securities

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

Securities

2. SECURITIES

The amortized cost of securities and their approximate fair value at June 30, 2012 and December 31, 2011 were as follows:

	June 30, 2012
	(in thousands)
			Unrealized
	Amortized Cost		Gains		Losses			Fair Value
Available for Sale:
Debt securities:
U.S. government agencies	$	24,061	$	1,246	$	—		$	25,307
States and political subdivisions		30,407		1,495		(43	)		31,859
Total debt securities	$	54,468	$	2,741	($	43	)	$	57,166
Mortgage-backed securities:
FNMA	$	18,210	$	807	$	—		$	19,017
FHLMC		5,621		222		—			5,843
GNMA		8,885		223		(10	)		9,098
CMO		1,941		29		—			1,970
Total mortgage-backed securities	$	34,657	$	1,281	($	10	)	$	35,928
Total securities designated as available for sale	$	89,125	$	4,022	($	53	)	$	93,094
Held to Maturity:
Debt securities
States and political subdivisions		3,708		31		(9	)		3,730
Total securities designated as held to maturity	$	3,708	$	31	($	9	)	$	3,730
Total securities	$	92,833	$	4,053	($	62	)	$	96,824

	December 31, 2011
	(in thousands)
			Unrealized
	Amortized Cost		Gains		Losses			Fair Value
Available for Sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	29,002	$	1,250	$	—		$	30,252
States and political subdivisions		30,632		1,698		(4	)		32,326
Total debt securities	$	59,634	$	2,948	($	4	)	$	62,578
Mortgage-backed securities:
FNMA	$	20,071	$	647		—		$	20,718
FHLMC		8,052		269		—			8,321
GNMA		5,895		248		—			6,143
CMO		2,196		25		—			2,221
Total mortgage-backed securities	$	36,214	$	1,189		—		$	37,403
Total securities designated as available for sale	$	95,848	$	4,137	($	4	)	$	99,981
Held to Maturity:
Debt securities
States and political subdivisions		3,802		24		(15	)		3,811
Total securities designated as held to maturity	$	3,802	$	24	($	15	)	$	3,811
Total securities	$	99,650	$	4,161	($	19	)	$	103,792

Available for sale securities with a total fair value of $75.2 million and $76.7 million at June 30, 2012 and December 31, 2011, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

The Company uses the Federal Home Loan Bank of New York ("FHLBNY") as its primary source of overnight funds and also has several long-term advances with FHLBNY. The Company had a total of $19.0 million and $22 million in borrowed funds with FHLBNY at June 30, 2012 and December 31, 2011, respectively. The Company has placed sufficient collateral in the form of residential and commercial real estate loans at FHLBNY that meet FHLB collateral requirements. As a member of the Federal Home Loan Bank ("FHLB") System, the Bank is required to hold stock in FHLBNY. The Bank held $1.8 million in FHLBNY stock as of June 30, 2012 and December 31, 2011, respectively, at amortized cost.

The scheduled maturities of debt and mortgage-backed securities at June 30, 2012 and December 31, 2011 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.

	June 30, 2012				December 31, 2011
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)				(in thousands)
Debt securities available for sale:
Due in one year or less	$	2,121	$	2,148	$	2,426	$	2,453
Due after one year through five years		16,299		17,013		18,454		19,231
Due after five years through ten years		26,644		27,774		24,995		26,238
Due after ten years		9,404		10,231		13,759		14,656
		54,468		57,166		59,634		62,578
Mortgage-backed securities available for sale		34,657		35,928		36,214		37,403
Total available for sale securities	$	89,125	$	93,094	$	95,848	$	99,981
Debt securities held to maturity:
Due in one year or less	$	2,581	$	2,573	$	2,656	$	2,644
Due after one year through five years		534		547		518		529
Due after five years through ten years		35		37		40		42
Due after ten years		558		573		588		596
Total held to maturity securities	$	3,708	$	3,730	$	3,802	$	3,811

Information regarding unrealized losses within the Company's available for sale securities at June 30, 2012 and December 31, 2011, is summarized below. The securities are primarily U.S. government-guaranteed agency securities or municipal securities. All unrealized losses are considered temporary and related to market interest rate fluctuations.

	June 30, 2012
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
States and political subdivisions		4,326		(39	)		303		(4	)		4,629		(43	)
Total debt securities		$4,326		($39	)		$303		($4	)	$	4,629		($43	)
Mortgage-backed securities:
FNMA	$	—	$	—		$	—	$	—		$	—	$	—
FHLMC		—		—			—		—			—		—
GNMA		2,160		(10	)		—		—			2,160		(10	)
CMO'S		—		—			—		—			—		—
Total mortgage-backed securities	$	2,160		($10	)	$	—	$	—		$	2,160		($10	)
Held To Maturity:
Debt securities:
States and political subdivisions	$	2,174		($9	)	$	0	$	0		$	2,174		($9	)
Total temporarily impaired securities	$	8,660		($58	)	$	303		($4	)	$	8,963		($62	)

	December 31, 2011
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
Available for Sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
States and political subdivisions		401		(1	)		304		(3	)		705		(4	)
Total debt securities	$	401		($1	)		$304		($3	)	$	705		($4	)
Mortgage-backed securities:
FNMA	$	—	$	—		$	—	$	—		$	—	$	—
FHLMC		—		—			—		—			—		—
GNMA		—		—			—		—			—		—
CMO'S		—		—			—		—			—		—
Total mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
Held To Maturity:
Debt securities:
States and political subdivisions	$	2,239		($12	)	$	1,006		($3	)	$	3,245		($15	)
Total temporarily impaired securities	$	2,640		($13	)	$	1,310		($6	)	$	3,950		($19	)

In regard to municipal securities, the Company's general investment policy is that in-state securities must be rated at least Moody's Baa (or equivalent) at the time of purchase. The Company reviews the ratings report and municipality financial statements and prepares a pre-purchase analysis report before the purchase of any municipal securities. Out-of-state issues must be rated by Moody's at least Aa (or equivalent) at the time of purchase. The Company did not own any out-of-state municipal bonds at June 30, 2012 or December 31, 2011. Bonds rated below A are reviewed periodically to ensure their continued credit worthiness. While purchase of non-rated municipal securities is permitted under the Company's investment policy, such purchases are limited to bonds issued by municipalities in the Company's general market area. Those municipalities are typically customers of the Bank whose financial situation is familiar to management. The financial statements of the issuers of non-rated securities are reviewed by the Bank and a credit file of the issuers is kept on each non-rated municipal security with relevant financial information.

Although concerns have been raised in the marketplace recently about the health of municipal bonds, the Company has not experienced any significant credit troubles in this portfolio and does not believe any credit troubles are imminent. Aside from the non-rated municipal securities to local municipalities discussed above that are considered held-to-maturity, all of the Company's available-for-sale municipal bonds are investment-grade government obligation ("G.O.") bonds. G.O. bonds are generally considered safer than revenue bonds because they are backed by the full faith and credit of the government while revenue bonds rely on the revenue produced by a particular project. All of the Company's municipal bonds are issued by municipalities in New York State. To the Company's knowledge, there has never been a default of a NY G.O. in the history of the state. The Company believes that its risk of loss on default of a G.O. municipal bond for the Company is relatively low. However, historical performance does not guarantee future performance.

Management has assessed the securities available for sale in an unrealized loss position at June 30, 2012 and December 31, 2011 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 charges in 2012 or 2011, with the gross unrealized losses at an immaterial level, amounting to less than 0.1% of the total fair value of the securities portfolio at June 30, 2012 and December 31, 2011. Nevertheless, it remains possible that there could be deterioration in the asset quality of the securities portfolio in the future. The credit worthiness of the Company's portfolio is largely reliant on the ability of U.S. government sponsored agencies such as FHLB, Federal National Mortgage Association ("FNMA"), Government National Mortgage Association ("GNMA"), and Federal Home Loan Mortgage Corporation ("FHLMC"), and municipalities throughout New York State to meet their obligations. In addition, dysfunctional markets could materially alter the liquidity, interest rate, and pricing risk of the portfolio. The relatively stable past performance is not a guarantee for similar performance of the Company's securities portfolio going forward.

XML

Securities (Schedule Of Amortized Cost And Fair Value Of Securities) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	$ 89,125	$ 95,848
Available-for-sale Securities, Unrealized Gains	4,022	4,137
Available-for-sale Securities, Unrealized Losses	(53)	(4)
Available-for-sale Securities, Fair Value	93,094	99,981
Held-to-maturity Securities, Amortized Cost	3,708	3,802
Held-to-maturity Securities, Unrealized Gains	31	24
Held-to-maturity Securities, Unrealized Losses	(9)	(15)
Held-to-maturity Securities, Fair Value	3,730	3,811
Securities, Amortized Cost	92,833	99,650
Securities, Unrealized Gains	4,053	4,161
Securities, Unrealized Losses	(62)	(19)
Securities, Fair Value	96,824	103,792
States and Political Subdivisions [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Held-to-maturity Securities, Amortized Cost	3,708	3,802
Held-to-maturity Securities, Unrealized Gains	31	24
Held-to-maturity Securities, Unrealized Losses	(9)	(15)
Held-to-maturity Securities, Fair Value	3,730	3,811
U.S. Treasury And Other U.S. Government Agencies [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	24,061	29,002
Available-for-sale Securities, Unrealized Gains	1,246	1,250
Available-for-sale Securities, Fair Value	25,307	30,252
States and Political Subdivisions [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	30,407	30,632
Available-for-sale Securities, Unrealized Gains	1,495	1,698
Available-for-sale Securities, Unrealized Losses	(43)	(4)
Available-for-sale Securities, Fair Value	31,859	32,326
Debt Securities [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	54,468	59,634
Available-for-sale Securities, Unrealized Gains	2,741	2,948
Available-for-sale Securities, Unrealized Losses	(43)	(4)
Available-for-sale Securities, Fair Value	57,166	62,578
FNMA [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	18,210	20,071
Available-for-sale Securities, Unrealized Gains	807	647
Available-for-sale Securities, Fair Value	19,017	20,718
FHLMC [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	5,621	8,052
Available-for-sale Securities, Unrealized Gains	222	269
Available-for-sale Securities, Fair Value	5,843	8,321
GNMA [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	8,885	5,895
Available-for-sale Securities, Unrealized Gains	223	248
Available-for-sale Securities, Unrealized Losses	(10)
Available-for-sale Securities, Fair Value	9,098	6,143
CMO'S [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	1,941	2,196
Available-for-sale Securities, Unrealized Gains	29	25
Available-for-sale Securities, Fair Value	1,970	2,221
Mortgage-Backed Securities [Member]
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) [Line Items]
Available-for-sale Securities, Amortized Cost	34,657	36,214
Available-for-sale Securities, Unrealized Gains	1,281	1,189
Available-for-sale Securities, Unrealized Losses	(10)
Available-for-sale Securities, Fair Value	$ 35,928	$ 37,403

XML

Loans, Leases, And The Allowance For Loan And Lease Losses (Credit Quality Indicators Of Loans And Leases) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Commercial Real Estate Construction	$ 31,807	$ 27,887
Commercial Real Estate Other	323,456	306,683
Total Commercial Real Estate	355,263	334,570
Commercial	107,807	109,513
Corporate Credit Exposure-By Credit Rating 3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Real Estate Construction	27,328	21,607
Commercial Real Estate Other	278,067	250,575
Total Commercial Real Estate	305,395	272,182
Commercial	79,307	77,017
Corporate Credit Exposure-By Credit Rating 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Real Estate Construction	2,825	4,421
Commercial Real Estate Other	35,953	45,505
Total Commercial Real Estate	38,778	49,926
Commercial	19,362	21,448
Corporate Credit Exposure-By Credit Rating 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Real Estate Construction	843	362
Commercial Real Estate Other	1,858	1,758
Total Commercial Real Estate	2,701	2,120
Commercial	4,415	5,939
Corporate Credit Exposure-By Credit Rating 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Real Estate Construction	811	1,497
Commercial Real Estate Other	3,766	8,845
Total Commercial Real Estate	4,577	10,342
Commercial	3,362	4,761
Corporate Credit Exposure-By Credit Rating 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Real Estate Other	3,812
Total Commercial Real Estate	3,812
Commercial	$ 1,361	$ 348

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Financial Instruments Measured At Fair Value On Recurring Basis

	Level 1		Level 2		Level 3		Fair Value
June 30, 2012
Securities available-for-sale:
U.S. government agencies	$	—	$	25,307	$	—	$	25,307
States and political subdivisions		—		31,859		—		31,859
Mortgage-backed securities		—		35,928		—		35,928
Mortgage servicing rights		—		—		448		448
December 31, 2011
Securities available-for-sale:
U.S. Treasury and other U.S. government agencies	$	—	$	30,252	$	—	$	30,252
States and political subdivisions		—		32,326		—		32,326
Mortgage-backed securities		—		37,403		—		37,403
Mortgage servicing rights		—		—		407		407

Changes In Fair Value For Mortgage Servicing Rights

	Three months ended June 30,
	2012			2011
Beginning balance, March 31	$	454		$	435
Losses included in earnings		(47	)		(41	)
Additions from loan sales		41			48
Ending balance, June 30	$	448		$	442

	Six months ended June 30,
	2012			2011
Beginning balance, December 31	$	407		$	388
Losses included in earnings		(54	)		(36	)
Additions from loan sales		95			90
Ending balance, June 30	$	448		$	442

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

	6/30/2012			6/30/2011
Servicing fees		0.25	%		0.25	%
Discount rate		10.08	%		10.12	%
Prepayment rate (CPR)		15.82	%		13.07	%

Financial Instruments Measured At Fair Value On Nonrecurring Basis

	Level 1		Level 2		Level 3		Fair Value
June 30, 2012
Impaired loans	$	—	$	—	$	10,076	$	10,076
December 31, 2011
Impaired loans	$	—	$	—	$	10,311	$	10,311

Estimated Fair Value Of The Company's Financial Instruments

	June 30, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(in thousands)				(in thousands)
Financial assets:
Level 1:
Cash and cash equivalents	$	43,985	$	43,985	$	14,678	$	14,678
Level 2:
Available for sale securities		93,094		93,094		99,981		99,981
FHLB and FRB stock		3,238		3,238		3,255		3,255
Level 3:
Held to maturity securities		3,708		3,730		3,802		3,811
Loans and leases, net		587,265		621,700		571,910		602,534
Mortgage servicing rights		448		448		407		407
Financial liabilities:
Level 1:
Demand deposits	$	116,231	$	116,231	$	118,037	$	118,037
NOW deposits		63,535		63,535		50,761		50,761
Regular savings deposits		342,992		342,992		313,777		313,777
Muni-vest deposits		22,883		22,883		20,161		20,161
Junior subordinated debentures		11,330		11,330		11,330		11,330
Commitments to extend credit		64		64		161		161
Securities sold under agreement to repurchase		9,855		9,855		9,010		9,010
Level 2:
Other borrowed funds		19,000		19,751		22,000		22,988
Level 3:
Time deposits		108,279		111,558		113,467		116,666