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 the quarterly period ended September  30, 2013

OR

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

For the quarterly period _______________ to ___________________

Commission file number 0-28366

Norwood Financial Corp.

(Exact name of Registrant as specified in its charter)

Pennsylvania	23-2828306
(State or other jurisdiction of Incorporation or organization)	(I.R.S. employer identification no.)

717 Main Street, Honesdale, Pennsylvania	18431
(Address of principal executive offices)	(Zip Code)

(570) 253-1455

(Registrant’s telephone number, including area code)

NA

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check (x) 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.

Large accelerated filer  [  ]                                                                Accelerated filer   [ X]

Non-accelerated filer   [  ]                                                                Smaller reporting company   [  ]

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    [ ]  Yes   [X] No

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

Class	Outstanding as of November 1, 2013
Common stock, par value $0.10 per share	3,627,469

1

NORWOOD FINANCIAL CORP.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2013

		Page Number
PART I -	CONSOLIDATED FINANCIAL INFORMATION OF NORWOOD FINANCIAL CORP.
Item 1.	Financial Statements (unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 4.	Controls and Procedures	47
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	48
Signatures		50

2

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

NORWOOD FINANCIAL CORP.

Consolidated Balance Sheets  (unaudited)

(dollars in thousands, except share and per share data)

	September 30,			December 31,
	2013			2012
ASSETS
Cash and due from banks	$	15,193		$	10,867
Interest bearing deposits with banks		12,221			1,428
Cash and cash equivalents		27,414			12,295
Securities available for sale, at fair value		150,904			145,390
Securities held to maturity, fair value 2013: $176
2012: $177		174			173
Loans receivable (net of unearned income)		486,968			476,710
Less:  Allowance for loan losses		5,559			5,502
Net loans receivable		481,409			471,208
Regulatory stock, at cost		2,141			2,630
Bank premises and equipment, net		7,250			7,326
Bank owned life insurance		14,653			15,357
Accrued interest receivable		2,373			2,393
Foreclosed real estate owned		993			852
Goodwill		9,715			9,715
Other intangibles		543			647
Other assets		6,202			4,313
TOTAL ASSETS	$	703,771		$	672,299
LIABILITIES
Deposits:
Non-interest bearing demand	$	101,632		$	82,075
Interest-bearing		447,066			442,350
Total deposits		548,698			524,425
Short-term borrowings		38,466			28,697
Other borrowings		19,956			22,487
Accrued interest payable		1,075			1,242
Other liabilities		4,230			3,027
TOTAL LIABILITIES		612,425			579,878
STOCKHOLDERS’ EQUITY
Common stock, $.10 par value per share, authorized
10,000,000; shares issued 2013: 3,708,718 shares,
2012: 3,371,849 shares		371			337
Surplus		34,991			24,737
Retained earnings		59,710			66,742
Treasury stock at cost: 2013: 81,249 shares,
2012: 75,426 shares		(2,154	)		(2,192	)
Accumulated other comprehensive income (loss)		(1,572	)		2,797
TOTAL STOCKHOLDERS’ EQUITY		91,346			92,421
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	703,771		$	672,299

See accompanying notes to the unaudited consolidated financial statements.

3

NORWOOD FINANCIAL CORP.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
INTEREST INCOME
Loans receivable, including fees	$	6,202		$	6,429		$	18,557		$	19,233
Securities		939			971			2,685			3,004
Other		5			9			17			20
Total interest income		7,146			7,409			21,259			22,257
INTEREST EXPENSE
Deposits		701			897			2,174			2,800
Short-term borrowings		17			14			44			38
Other borrowings		158			246			525			733
Total interest expense		876			1,157			2,743			3,571
NET INTEREST INCOME		6,270			6,252			18,516			18,686
PROVISION FOR LOAN LOSSES		400			900			2,000			1,650
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		5,870			5,352			16,516			17,036
OTHER INCOME
Service charges and fees		614			561			1,834			1,674
Income from fiduciary activities		111			96			285			274
Net realized gains on sales of securities		198			631			590			1,318
Gains (losses) on sale of loans and servicing rights, net		(12	)		83			(9	)		143
Earnings and proceeds on Bank Owned Life Insurance		150			132			1,224			395
Other		155			88			381			284
Total other income		1,216			1,591			4,305			4,088
OTHER EXPENSES
Salaries and employee benefits		2,103			2,102			6,438			6,300
Occupancy, furniture & equipment, net		507			512			1,586			1,489
Data processing related		221			222			673			670
Taxes, other than income		179			150			531			451
Professional fees		139			157			498			601
Federal Deposit Insurance Corporation insurance assessment		114			94			335			290
Foreclosed real estate owned		217			(23	)		494			184
Other		693			743			2,052			2,076
Total other expenses		4,173			3,957			12,607			12,061
INCOME BEFORE INCOME TAXES		2,913			2,986			8,214			9,063
INCOME TAX EXPENSE		777			786			1,930			2,419
NET INCOME	$	2,136		$	2,200		$	6,284		$	6,644
BASIC EARNINGS PER SHARE	$	0.59		$	0.61		$	1.73		$	1.84
DILUTED EARNINGS PER SHARE	$	0.59		$	0.61		$	1.73		$	1.84

See accompanying notes to the unaudited consolidated financial statements.

4

NORWOOD FINANCIAL CORP

Consolidated Statements of Comprehensive Income (unaudited)

(dollars in thousands)

	Three Months Ended			Three Months Ended
	September 30, 2013			September 30, 2012
Net income	$	2,136		$	2,200
Other comprehensive (loss) income:
Investment securities available for sale:
Unrealized holding gains (losses)		(385	)		1,331
Tax effect		130			(453	)
Reclassification of gains recognized in net income		(198	)		(631	)
Tax effect		68			214
Other comprehensive (loss) income		(385	)		461
Comprehensive Income	$	1,751		$	2,661

	Nine Months Ended			Nine Months Ended
	September 30, 2013			September 30, 2012
Net income	$	6,284		$	6,644
Other comprehensive (loss) income:
Investment securities available for sale:
Unrealized holding gains (losses)		(6,028	)		1,775
Tax effect		2,048			(602	)
Reclassification of gains recognized in net income		(590	)		(1,318	)
Tax effect		201			450
Other comprehensive (loss) income		(4,369	)		305
Comprehensive Income	$	1,915		$	6,949

See accompanying notes to the unaudited consolidated financial statements.

5

NORWOOD FINANCIAL CORP.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Nine Months Ended September 30, 2013

(dollars in thousands, except share and per share data)

																					Accumulated
																					Other
	Common Stock									Retained				Treasury Stock							Comprehensive
	Shares		Amount			Surplus				Earnings				Shares			Amount				Income (Loss)				Total
Balance December 31, 2012		3,371,849		$	337		$	24,737			$	66,742			75,426			$	(2,192	)		$	2,797			$	92,421
Net Income												6,284															6,284
Other comprehensive loss																							(4,369	)			(4,369	)
Cash dividends declared ($.86 per share)												(3,123	)														(3,123	)
Acquisition of  treasury  stock															10,712				(319	)							(319	)
10% stock dividend		336,869			34			10,149				(10,183	)		8,043												-
Compensation expense related to stock
options								119																			119
Stock options exercised								(37	)						(12,933	)			357								320
Tax benefit on stock options								23																			23
Balance, September 30, 2013		3,708,718		$	371		$	34,991			$	59,710			81,248			$	(2,154	)		$	(1,572	)		$	91,346

See accompanying notes to the unaudited consolidated financial statements.

6

NORWOOD FINANCIAL CORP.

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)	Nine Months Ended September 30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	6,284		$	6,644
Adjustments to reconcile net income to net cash provided by operating  activities:
Provision for loan losses		2,000			1,650
Depreciation		447			420
Amortization of intangible assets		104			116
Deferred income taxes		(36	)		(404	)
Net amortization of securities premiums and discounts		831			888
Net realized gain on sales of securities		(590	)		(1,318	)
Gain on life insurance policy		(770	)		-
Net increase in value of life insurance		(454	)		(395	)
Loss (gain) on sale of bank premises and equipment and foreclosed real estate		290			(24	)
Net gain on sale of mortgage loans		(25	)		(163	)
Mortgage loans originated for sale		(1,609	)		(4,343	)
Proceeds from sale of mortgage loans originated for sale		1,634			4,506
Compensation expense related to stock options		119			98
Decrease in accrued interest receivable and other assets		428			1,434
Increase (decrease) in accrued interest payable and other liabilities		1,006			(281	)
Net cash provided by operating activities		9,659			8,828
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales		29,962			23,265
Proceeds from maturities and principal reductions on mortgage-backed securities		16,998			25,251
Purchases		(59,334	)		(45,780	)
Redemption of FHLB stock		489			661
Net increase in loans		(12,908	)		(24,261	)
Proceeds from life insurance policy		1,859			-
Purchase of bank premises and equipment		(371	)		(394	)
Proceeds from sale of bank premises and equipment and foreclosed real estate		333			3,229
Net cash used in investing activities		(22,972	)		(18,029	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		24,273			15,823
Net increase (decrease) in short-term borrowings		9,769			10,592
Repayments of other borrowings		(5,531	)		(137	)
Proceeds from other borrowings		3,000			-
Stock options exercised		320			99
Tax benefit of stock options exercised		23			11
Acquisition of treasury stock		(319	)		(320	)
Cash dividends paid		(3,103	)		(2,951	)
Net cash provided by financing activities		28,432			23,117
Increase in cash and cash equivalents		15,119			13,916
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		12,295			21,423
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	27,414		$	35,339

See accompanying notes to the unaudited consolidated financial statements.

7

NORWOOD FINANCIAL CORP.

Consolidated Statements of Cash Flows (continued)

(dollars in thousands)	Nine Months Ended September 30,
	2013			2012
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest on deposits and borrowings		$	2,910		$	3,430
Income taxes paid, net of refunds			1,664			1,408
Supplemental Schedule of Noncash Investing Activities
Investment purchases		$	-		$	(774	)
Transfers of loans to foreclosed real estate and repossession of other assets			787			954

See accompanying notes to the unaudited consolidated financial statements.

8

Notes to the Unaudited Consolidated Financial Statements

1.            Basis of Presentation

The unaudited consolidated financial statements include the accounts of Norwood Financial Corp. (Company) and its wholly-owned subsidiary, Wayne Bank (Bank) and the Bank’s wholly-owned subsidiaries, WCB Realty Corp., Norwood Investment Corp., Norwood Settlement Services, LLC,  and WTRO Properties.   All significant intercompany transactions have been eliminated in consolidation.

The accompanying unaudited consolidated  financial statements have been prepared in conformity with generally accepted accounting principles for interim financial statements and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period.  Actual results could differ from those estimates.  The financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the financial position and results of operations of the Company.  The operating results for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any other future interim period.

These statements should be read in conjunction with the consolidated financial statements and related notes which are incorporated by reference in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2012.

2.            Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.  Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

The following table sets forth the weighted average shares outstanding used in the computations of basic and diluted earnings per share.  All share and per share data has been adjusted to reflect the retroactive effect of the 10% stock dividend declared during the period ending March 31, 2013.

(in thousands)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Basic EPS weighted average shares outstanding		3,626		3,606		3,624		3,607
Dilutive effect of stock options		12		9		13		5
Diluted EPS weighted average shares outstanding		3,638		3,615		3,637		3,612

Stock options which had no intrinsic value, because their effect would be anti-dilutive and therefore would not be included in the diluted EPS calculation were 0 and 66,000 as of September 30, 2013 and 2012, respectively, based upon the closing prices of Norwood common stock of $28.95 and $27.45 per share on September 30, 2013 and 2012, respectively.

9

3.           Stock-Based Compensation

The Company’s shareholders approved the Norwood Financial Corp 2006 Stock Option Plan at the annual meeting on April 25, 2006.  The Company awarded 1,100 options in 2013 which have a twelve-month vesting period. As of September 30, 2013, there was $40,000 of total unrecognized compensation cost related to non-vested options granted in 2012 and 2013 under the plan, which will be fully amortized by December 31, 2013.  All share and per share data has been adjusted to reflect the retroactive effect of the 10% stock dividend declared during the period ended March 31, 2013.

A summary of stock options from all plans, adjusted for stock dividends declared, is shown below.

		Weighted
		Average Exercise		Weighted Average	Aggregate
		Price		Remaining	Intrinsic Value
	Options	Per Share		Contractual Term	($000)
Outstanding at January 1, 2013	225,670	$	26.39	6.1 Yrs.	$	256
Granted	1,100		27.55	9.2 Yrs.		-
Exercised	(12,933)		24.77	4.2 Yrs.		-
Forfeited	(7,825)		29.33	4.7 Yrs.		-
Outstanding at September 30, 2013	206,012	$	26.39	5.5 Yrs.	$	527
Exercisable at September 30, 2013	176,862	$	26.28	4.8 Yrs.	$	472

Intrinsic value represents the amount by which the market price of the stock on the measurement date exceeded the exercise price of the option.  The stock price was $28.95 as of September 30, 2013 and $27.05 as of December 31, 2012.

4.            Accumulated Other Comprehensive Income

The following table presents the changes in accumulated other comprehensive income (in thousands) by component net of tax for the three months and nine months ended September 30, 2013:

	Unrealized gains on
	available for sale
	securities (a)
Balance as of December 31, 2012	$	2,797
Other comprehensive loss before reclassification		(3,980)
Amount reclassified from accumulated other comprehensive income		(389)
Total other comprehensive loss		(4,369)
Balance as of September 30, 2013	$	(1,572)

10

	Unrealized gains on
	available for sale
	securities (a)
Balance as of June 30, 2013	$	(1,187)
Other comprehensive loss before reclassification		(255)
Amount reclassified from accumulated other comprehensive income		(130)
Total other comprehensive loss		(385)
Balance as of September 30, 2013	$	(1,572)

(a)  All amounts are net of tax.  Amounts in parentheses indicate debits.

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) (in thousands) for the three months and nine months ended September 30, 2013:

	Amount Reclassified
	From Accumulated			Affected Line Item in
	Other			the Statement Where
	Comprehensive			Net Income is
Details about other comprehensive income	Income (a)			Presented
		Three months	Nine months
		ended	ended
		September 30,	September 30,
		2013	2013
Unrealized gains on available for sale securities	$	198	590	Net realized gains on sales of securities
		(68)	(201)	Income tax expense
	$	130	389	Net of tax

(a)  Amounts in parentheses indicate debits to net income

5.            Off-Balance Sheet Financial Instruments and Guarantees

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

11

A summary of the Bank’s financial instrument commitments is as follows:

(in thousands)	September 30,
	2013			2012
Unfunded availability under loan commitments		$	23,223		38,297
Unfunded commitments under lines of credit			46,597		37,081
Standby letters of credit			6,991		11,277
		$	76,811		86,655

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since some of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.  The Bank evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer and generally consists of real estate.

The Bank does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit.  Standby letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Generally, all letters of credit, when issued, have expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers.  The Bank, generally, holds collateral and/or personal guarantees supporting these commitments.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.  The current amount of the liability as of September 30, 2013 for guarantees under standby letters of credit issued is not material.

6.         Securities

The amortized cost and fair value of securities were as follows:

	September 30, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
Available for Sale:
U.S. Government agencies	$	28,259	$	5	$	(745	)	$	27,519
States and political subdivisions		64,413		942		(1,561	)		63,794
Corporate obligations		4,690		138		(74	)		4,754
Mortgage-backed securities-
government sponsored entities		55,628		214		(1,348	)		54,494
Equity securities-financial services		292		51		-			343
	$	153,282	$	1,350	$	(3,728	)	$	150,904
Held to Maturity:
States and political subdivisions	$	174	$	2	$	-		$	176

12

	December 31, 2012
				Gross			Gross
	Amortized			Unrealized			Unrealized				Fair
	Cost			Gains			Losses				Value
	(In Thousands)
Available for Sale:
U.S. Government agencies		$	13,076		$	36		$	(20	)		$	13,092
States and political subdivisions			55,864			2,995			(73	)			58,786
Corporate obligations			8,521			347			-				8,868
Mortgage-backed securities-government
sponsored entities			63,397			1,041			(113	)			64,325
Equity securities-financial services			292			27			-				319
		$	141,150		$	4,446		$	(206	)		$	145,390
Held to Maturity:
States and political subdivisions		$	173		$	4		$	-			$	177

The following tables show the Company’s investments’ gross unrealized losses and fair value aggregated by length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	September 30, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	25,401	$	(745)	$	-	$	-	$	25,401	$	(745)
States and political subdivisions		24,672		(1,550)		772		(11)		25,444		(1,561)
Corporate Obligations		2,505		(74)		-		-		2,505		(74)
Mortgage-backed securities-government sponsored agencies		33,903		(1,337)		820		(11)		34,723		(1,348)
	$	86,481	$	(3,706)	$	1,592	$	(22)	$	88,073	$	(3,728)

	December 31, 2012
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	7,056	$	(20)	$	-	$	-	$	7,056	$	(20)
States and political subdivisions		5,821		(73)		-		-		5,821		(73)
Mortgage-backed securities-government sponsored agencies		17,199		(113)		-		-		17,199		(113)
	$	30,076	$	(206)	$	-	$	-	$	30,076	$	(206)

13

At September 30, 2013, the Company has 107 debt securities in an unrealized loss position in the less than twelve months category and two debt securities in the twelve months or more category.  In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities.  No other-than-temporary-impairment charges were recorded in 2013.  Management believes that all unrealized losses represent temporary impairment of the securities as the Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

The amortized cost and fair value of debt securities as of September 30, 2013 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
Due in one year or less	$	2,418	$	2,436	$	174	$	176
Due after one year through five years		13,948		14,009		-		-
Due after five years through ten years		38,573		38,015		-		-
Due after ten years		42,423		41,607		-		-
Mortgage-backed securities-government sponsored agencies		55,628		54,494		-		-
	$	152,990	$	150,561	$	174	$	176

Gross realized gains and gross realized losses on sales of securities available for sale were as follows (in thousands):

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2013			2012			2013				2012
Gross realized gains		$	198		$	631		$	608			$	1,318
Gross realized losses			-			-			(18	)			-
Net realized gain		$	198		$	631		$	590			$	1,318
Proceeds from sales of securities		$	14,663		$	15,549		$	29,962			$	23,265

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7.        Loans Receivable and Allowance for Loan Losses

Set forth below is selected data relating to the composition of the loan portfolio at the dates indicated:

	Types of loans
	(dollars in thousands)
	September 30, 2013						December 31, 2012
Real Estate-Residential		$	160,034		32.8	%		$	150,043		31.4	%
Commercial			267,385		54.9				274,484		57.5
Construction			20,146		4.1				13,435		2.8
Commercial, financial and agricultural			24,520		5.0				25,113		5.3
Consumer loans to individuals			15,379		3.2				14,154		3.0
Total loans			487,464		100.0	%			477,229		100.0	%
Deferred fees, net			(496	)					(519	)
Total loans receivable			486,968						476,710
Allowance for loan losses			(5,559	)					(5,502	)
Net loans receivable		$	481,409					$	471,208

Changes in the accretable yield for purchased credit-impaired loans were as follows for the nine months ended September 30 (in thousands):

	2013			2012
Balance at beginning of period	$	76		$	171
Accretion		(49	)		(71	)
Reclassification and other		-			-
Balance at end of period	$	27		$	100

The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 (in thousands):

	September 30, 2013			December 31, 2012
Outstanding Balance		$	1,121		$	1,145
Carrying Amount		$	1,094		$	1,069

There were no material increases or decreases in the expected cash flows of these loans between May 31, 2011 (the “acquisition date”) and September 30, 2013.  There has been no allowance for loan losses recorded for acquired loans with specific evidence of deterioration in credit quality as of May 31, 2011. In addition, there has been no allowance for loan losses on these loans reversed.  For loans that were acquired without specific evidence of deterioration in credit quality, adjustments to the allowance for loan losses have been accounted for through the allowance for loan loss adequacy calculation.

The Company maintains a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans.  Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers.  Specific loan loss allowances are established for identified losses based on a review of such information.  A loan evaluated for impairment is considered to be impaired when, based on current information

15

and events, it is probably that we will be unable to collect all amounts due according to the contractual terms of the loan agreement.  All loans identified as impaired are evaluated independently.  We do not aggregate such loans for evaluation purposes.  Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.  Accordingly, the Company does not separately identify individual consumer and residential mortgage loans for impairment disclosures, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restructuring.

A loan is considered to be a troubled debt restructuring (“TDR”) loan when the Company grants a concession to the borrower because of the borrower’s financial condition that it would not otherwise consider.  Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk.

The following table shows the amount of loans in each category that were individually and collectively evaluated for impairment at the dates indicated:

	Real Estate Loans
										Commercial			Consumer
	Residential			Commercial			Construction			Loans			Loans			Total
September 30, 2013	(In thousands)
Individually evaluated for  impairment		$	-		$	8,275		$	-		$	-		$	-		$	8,275
Loans acquired with deteriorated credit quality			245			849			-			-			-			1,094
Collectively evaluated for impairment			159,789			258,261			20,146			24,520			15,379			478,095
Total Loans		$	160,034		$	267,385		$	20,146		$	24,520		$	15,379		$	487,464

	Real Estate Loans
										Commercial			Consumer
	Residential			Commercial			Construction			Loans			Loans			Total
	(In thousands)
December 31, 2012
Individually evaluated for impairment		$	-		$	10,246		$	-		$	310		$	-		$	10,556
Loans acquired with deteriorated credit quality			270			799			-			-			-			1,069
Collectively evaluated for impairment			149,773			263,439			13,435			24,803			14,154			465,604
Total Loans		$	150,043		$	274,484		$	13,435		$	25,113		$	14,154		$	477,229

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The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable.  Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired.

			Unpaid Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
September 30, 2013	(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	245	$	254	$	-
Commercial		9,124		9,141		-
Subtotal		9,369		9,395		-
With an allowance recorded:
Subtotal		-		-		-
Total:
Real Estate Loans
Residential		245		254		-
Commercial		9,124		9,141		-
Total Impaired Loans	$	9,369	$	9,395	$	-

			Unpaid Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2012			(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	270	$	286	$	-
Commercial		10,494		10,554		-
Commercial Loans		310		310		-
Subtotal		11,074		11,150		-
With an allowance recorded:
Real Estate Loans
Commercial		551		551		9
Subtotal		551		551		9
Total:
Real Estate Loans
Residential		270		286		-
Commercial		11,045		11,105		9
Commercial Loans		310		310		-
Total Impaired Loans	$	11,625	$	11,701	$	9

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The following information for impaired loans is presented (in thousands) for the nine months ended September 30, 2013 and 2012:

	Average Recorded				Interest Income
	Investment				Recognized
	2013		2012		2013		2012
Total:
Real Estate Loans
Residential	$	255	$	284	$	4	$	4
Commercial		10,120		12,937		47		206
Commercial Loans		-		401		-		-
Total Loans	$	10,375	$	13,622	$	51	$	210

The following information for impaired loans is presented (in thousands) for the three months ended September 30, 2013 and 2012:

	Average Recorded						Interest Income
	Investment						Recognized
	2013			2012			2013			2012
Total:
Real Estate Loans
Residential		$	245		$	275		$	2		$	1
Commercial			9,124			13,536			30			71
Commercial Loans			-			385			-			-
Total Loans		$	9,369		$	14,916		$	32		$	72

Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of financial difficulties experienced by the borrower, who could not obtain comparable terms from alternate financing sources.  As of September 30, 2013, troubled debt restructured loans totaled $7.7 million and had no specific reserves. During 2013, four loans with a balance of $3.4 million were classified as a troubled debt restructuring.  One credit in the amount of $1.2 million resulted in a decrease in the borrower’s debt but the remaining balance was classified as troubled debt since it would be unlikely that the borrower could obtain comparable financing elsewhere.  Three credits in the amount of $2.2 million  were classified as troubled debt restructurings based on extended periods of principal deferrals on the loans.  As of December 31, 2012, troubled debt restructured loans totaled $5.6 million and resulted in specific reserves of $9,000. For the period ended September 30, 2013, there were no loans identified as troubled debt restructurings that subsequently defaulted during the period. For the period ended September 30, 2012, there were no new loans identified as troubled debt restructurings, nor were there any loan modifications classified as troubled debt restructurings that subsequently defaulted during the period.

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The following is a summary of troubled debt restructurings granted during the three and nine month periods ended September 30, 2013 (dollars in thousands):

	For the Three Months Ended September 30, 2013
			Pre-Modification		Post-Modification
			Outstanding Recorded		Outstanding Recorded
	Number of Contracts		Investment		Investment
Troubled Debt Restructurings
Real Estate Loans:
Commercial	3	$	2,165	$	2,165

	For the Nine Months Ended September 30, 2013
			Pre-Modification		Post-Modification
			Outstanding Recorded		Outstanding Recorded
	Number of Contracts		Investment		Investment
Troubled Debt Restructurings
Real Estate Loans:
Commercial	4	$	3,424	$	3,424

Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio.  The first four categories are considered not criticized, and are aggregated as “Pass” rated.  The criticized rating categories utilized by management generally follow bank regulatory definitions.  The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification.  Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected.  All loans greater than 90 days past due are considered Substandard.  Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as non performance, repossession, or death occurs to raise awareness of a possible credit event.  The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis.  Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration.  Loan Review also annually reviews relationships of $500,000 and over to assign or re-affirm risk ratings.  Loans in the Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of  September 30, 2013 and December 31, 2012 (in thousands):

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			Special				Doubtful
	Pass		Mention		Substandard		and Loss		Total
September 30, 2013
Commercial real estate loans	$	240,217	$	17,371	$	9,797	$	-	$	267,385
Commercial loans		24,520		-		-		-		24,520
Total	$	264,737	$	17,371	$	9,797	$	-	$	291,905

			Special				Doubtful
	Pass		Mention		Substandard		and Loss		Total
December 31, 2012
Commercial real estate loans	$	251,484	$	11,245	$	11,755	$	-	$	274,484
Commercial loans		24,427		318		368		-		25,113
Total	$	275,911	$	11,563	$	12,123	$	-	$	299,597

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits.  The following table presents the recorded investment in the loan classes based on payment activity as of September 30, 2013 and December 31, 2012 (in thousands):

	Performing			Nonperforming			Total
September 30, 2013
Residential real estate loans		$	158,083		$	1,951		$	160,034
Construction			20,146			-			20,146
Consumer loans			15,379			-			15,379
Total		$	193,608		$	1,951		$	195,559

	Performing			Nonperforming			Total
December 31, 2012
Residential real estate loans		$	147,197		$	2,846		$	150,043
Construction			13,435			-			13,435
Consumer loans			14,154			-			14,154
Total		$	174,786		$	2,846		$	177,632

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.  The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of September 30, 2013 and December 31, 2012 (in thousands):

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	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing		Non-Accrual		Total Past Due and Non- Accrual		Total Loans
September 30, 2013
Real Estate loans
Residential	$	157,035	$	1,038	$	10	$	-	$	1,951	$	2,999	$	160,034
Commercial		254,215		2,038		2,798		-		8,334		13,170		267,385
Construction		20,146		-		-		-		-		-		20,146
Commercial  loans		24,490		30		-		-		-		30		24,520
Consumer  loans		15,336		43		-		-		-		43		15,379
Total	$	471,222	$	3,149	$	2,808	$	-	$	10,285	$	16,242	$	487,464

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	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing		Non-Accrual		Total Past Due and Non- Accrual		Total Loans
December 31, 2012
Real Estate loans
Residential	$	146,847	$	94	$	256	$	-	$	2,846	$	3,196	$	150,043
Commercial		261,527		2,333		598		-		10,026		12,957		274,484
Construction		13,363		72		-		-		-		72		13,435
Commercial  loans		24,785		-		-		-		328		328		25,113
Consumer  loans		14,029		114		11		-		-		125		14,154
Total	$	460,551	$	2,613	$	865	$	-	$	13,200	$	16,678	$	477,229

The following table presents the allowance for loan losses by the classes of the loan portfolio:

(In thousands)	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Consumer			Total
Beginning balance, December 31, 2012	$	1,797		$	3,183		$	119		$	223		$	180		$	5,502
Charge Offs		(547	)		(1,308	)		(40	)		-			(74	)		(1,969	)
Recoveries		9			-			-			-			17			26
Provision Expense		406			1,288			329			(76	)		53			2,000
Ending balance, September 30, 2013	$	1,665		$	3,163		$	408		$	147		$	176		$	5,559
Ending balance individually evaluated for impairment	$	-		$	-		$	-		$	-		$	-		$	-
Ending balance collectively evaluated for impairment	$	1,665		$	3,163		$	408		$	147		$	176		$	5,559

(In thousands)	Residential Real Estate			Commercial Real Estate			Construction			Commercial		Consumer			Total
Beginning balance, June 30, 2013	$	1,764		$	3,318		$	363		$	147	$	157		$	5,749
Charge Offs		(157	)		(380	)		(40	)		-		(28	)		(605	)
Recoveries		9			-			-			-		6			15
Provision Expense		49			225			85			-		41			400
Ending balance, September 30, 2013	$	1,665			3,163			408			147		176		$	5,559

(In thousands)	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Consumer			Total
Beginning balance, December 31, 2011	$	1,257		$	3,838		$	72		$	147		$	144		$	5,458
Charge Offs		(402	)		(1,316	)		(7	)		(23	)		(46	)		(1,794	)
Recoveries		6			1			-			-			20			27
Provision Expense		836			594			10			158			52			1,650
Ending balance, September 30, 2012	$	1,697		$	3,117		$	75		$	282		$	170		$	5,341
Ending balance individually evaluated for impairment	$	-		$	89		$	-		$	-		$	-		$	89
Ending balance collectively evaluated for impairment	$	1,697		$	3,028		$	75		$	282		$	170		$	5,252

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(In thousands)	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Consumer			Total
Beginning balance, June 30, 2012	$	1,559		$	3,691		$	87		$	263		$	175		$	5,775
Charge Offs		(94	)		(1,220	)		-			(23	)		(13	)		(1,350	)
Recoveries		5			1			-			-			10			16
Provision Expense		227			645			(12	)		42			(2	)		900
Ending balance, September 30, 2012	$	1,697		$	3,117		$	75		$	282		$	170		$	5,341

The Company’s primary business activity is with customers located in northeastern Pennsylvania. Accordingly, the Company has extended credit primarily to commercial entities and individuals in this area whose ability to honor their contracts is influenced by the region’s economy.

As of September 30, 2013, the Company considered its concentration of credit risk to be acceptable.  The highest concentrations are in the hospitality lodging industry and property owners associations with loans outstanding of $37.4 million, or 39.5% of capital, to the hospitality lodging industry and $12.6 million, or 13.3% of capital, to property owners associations. There were no losses recognized on loans within these concentrations during the current period.

Gross realized gains and gross realized losses on sales of residential mortgage loans were $32,000 and $7,000, respectively, in the first nine months of 2013 compared to $163,000 and $0, respectively, in the same period in 2012.  The proceeds from the sales of residential mortgage loans totaled $1.6 million and $4.5 million for the nine months ended September 30, 2013 and 2012, respectively.

Gross realized gains and gross realized losses on sales of residential mortgage loans were $0 and $0 respectively, for the three months ended September 30, 2013 compared to $88,000 and $0, respectively, in the same period in 2012.  The proceeds from the sales of residential mortgage loans totaled $0 and $2.2 million for the three months ended September 30, 2013 and 2012, respectively.

8.         Fair Value Measurements

Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques.  These valuations are significantly affected by discount rates, cash flow assumptions and risk assumptions used.  Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.

Fair value is determined at one point in time and is not representative of future value.  These amounts do not reflect the total value of a going concern organization.  Management does not have the intention to dispose of a significant portion of its assets and liabilities and therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.

23

The following is a discussion of assets and liabilities measured at fair value on a recurring basis and valuation techniques applied:

Securities:

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) are used to support fair values of certain Level 3 investments, if applicable.

Impaired loans (generally carried at fair value):

The Company measures impairment generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the lowest level of input that is significant to the fair value measurements.

Foreclosed real estate owned (carried at fair value):

Real estate properties acquired through, or in lieu of loan foreclosure are to be sold and are carried at fair value less estimated cost to sell.  Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral.  These assets are included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2013 and December 31, 2012 are as follows:

	Fair Value Measurement Using
	Reporting Date
Description	Total		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
September 30, 2013
Available for Sale:
U.S. Government agencies	$	27,519	$	-	$	27,519	$	-
States and political subdivisions		63,794		-		63,794		-
Corporate obligations		4,754		-		4,754		-
Mortgage-backed securities-government
sponsored agencies		54,494		-		54,494		-
Equity securities-financial services		343		343		-		-
Total	$	150,904	$	343	$	150,561	$	-

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December 31, 2012
Available for Sale:
U.S. Government agencies	$	13,092	$	-	$	13,092	$	-
States and political subdivisions		58,786		-		58,786		-
Corporate obligations		8,868		-		8,868		-
Mortgage-backed securities-government						64,325
sponsored agencies		64,325		-				-
Equity securities-financial services		319		319		-		-
Total	$	145,390	$	319	$	145,071	$	-

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2013 and December 31, 2012 are as follows:

			Fair Value Measurement Using Reporting Date
(In thousands)
Description	Total		(Level 1)			(Level 2)			(Level 3)
September 30, 2013
Impaired Loans	$	9,369		$	-		$	-		$	9,369
Foreclosed Real Estate Owned		993			-			-			993
December 31, 2012
Impaired Loans	$	11,616		$	-		$	-		$	11,616
Foreclosed Real Estate Owned		852			-			-			852

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

	Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
September 30, 2013
Impaired loans	$	9,369	Appraisal of collateral(1)	Appraisal adjustments(2)	10%(10.0)%
Foreclosed real estate owned	$	993	Appraisal of collateral(1)	Liquidation Expenses(2)	10%

25

	Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2012
Impaired loans	$	11,616	Appraisal of collateral(1)	Appraisal adjustments(2)	0-30% (24.10%)
Foreclosed real estate owned	$	852	Appraisal of collateral(1)	Liquidation Expenses(2)	20%

(1)   Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable, less any associated allowance.

(2)   Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.  The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2013 and December 31, 2012.

Cash and cash equivalents (carried at cost):

The carrying amounts reported in the consolidated balance sheet for cash and short-term instruments approximate those assets’ fair values.

Loans receivable (carried at cost):

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Mortgage servicing rights (generally carried at cost)

The Company utilizes a third party provider to estimate the fair value of certain loan servicing rights.  Fair value for the purpose of this measurement is defined as the amount at which the asset could be exchanged in a current transaction between willing parties, other than in a forced liquidation.

Regulatory stock (carried at cost):

The Bank as a member of the Federal Home Loan Bank (FHLB) system is required to maintain an investment in capital stock of its district FHLB according to a predetermined formula.  This restricted stock has no quoted market value and is carried at cost.

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Bank Owned Life Insurance (carried at cost):

The fair value is equal to the cash surrender value of the Bank-owned life insurance.

Accrued interest receivable and payable (carried at cost):

The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.

Deposit liabilities (carried at cost):

The fair values disclosed for demand deposits (e.g. interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings (carried at cost):

The carrying amounts of short-term borrowings approximate their fair values.

Other borrowings (carried at cost):

Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity.  These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-balance sheet financial instruments (disclosed at cost):

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.

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The estimated fair values of the Bank’s financial instruments were as follows at September 30, 2013 and December 31, 2012. (In thousands)

	Fair Value Measurements at September 30, 2013
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	27,414	$	27,414	$	27,414	$	-	$	-
Securities		151,078		151,080		343		150,737		-
Loans receivable, net		481,409		490,413		-		-		490,413
Mortgage servicing rights		210		210		-		-		210
Regulatory Stock		2,141		2,141		2,141		-		-
Bank owned life insurance		14,653		14,653		14,653		-		-
Accrued interest receivable		2,373		2,373		2,373		-		-
Financial liabilities:
Deposits		548,698		549,844		346,586		-		203,258
Short-term borrowings		38,466		38,466		38,466		-		-
Other borrowings		19,956		22,155		-		-		22,155
Accrued interest payable		1,075		1,075		1,075		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

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	Fair Value Measurements at December 31, 2012
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	12,295	$	12,295	$	12,295	$	-	$	-
Securities		145,563		145,567		319		145,248		-
Loans receivable, net		471,208		485,848		-		-		485,848
Mortgage servicing rights		243		243		-		243		-
Regulatory stock		2,630		2,630		2,630		-		-
Bank owned life insurance		15,357		15,357		15,357		-		-
Accrued interest receivable		2,393		2,393		2,393		-		-
Financial liabilities:
Deposits		524,425		526,081		313,166		-		212,915
Short-term borrowings		28,697		28,697		28,697		-		-
Other borrowings		22,487		25,426		-		-		25,426
Accrued interest payable		1,242		1,242		1,242		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of  credit		-		-		-		-		-

9.         New and Recently Adopted Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.  The standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. The new requirements will take effect for public companies in fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company adopted this standard on January 1, 2013. The effect of adopting this standard increased our disclosure surrounding reclassification items out of accumulated other comprehensive income.

In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date. The ASU requires the measurement of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement with its co-obligors as well as any additional amount that the entity

29

expects to pay on behalf of its co-obligors. The new standard is effective retrospectively for fiscal years and interim periods within those years, beginning after December 15, 2013, and early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In June 2013, the FASB issued ASU 2013-08, Financial Services – Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The amendments in this Update affect the scope, measurement, and disclosure requirements for investment companies under U.S. GAAP. The amendments do all of the following: 1. Change the approach to the investment company assessment in Topic 946, clarify the characteristics of an investment company, and provide comprehensive guidance for assessing whether an entity is an investment Company. 2. Require an investment company to measure non-controlling ownership interests in other investment companies at fair value rather than using the equity method of accounting. 3. Require the following additional disclosures: (a) the fact that the entity is an investment company and is applying the guidance in Topic 946, (b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support provided or contractually required to be provided by an investment company to any of its investees. The amendments in this Update are effective for an entity’s interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is prohibited. This ASU is not expected to have a significant impact on the Company’s financial statements.

In July 2013, the FASB issued ASU 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in this Update permit the Fed Funds Effective Swap Rate (OIS) to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments are effective prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013.  This ASU did not have a significant impact on the Company’s financial statements.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists. This Update applies to all entities that have unrecognized tax benefits when a net operating loss carry forward, a similar tax loss, or a tax credit carry forward exists at the reporting date. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carry forward, a similar tax loss, or a tax credit carry forward, except as follows. To the extent a net operating loss carry forward, a similar tax loss, or a tax credit carry forward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted.  This ASU is not expected to have a significant impact on the Company’s financial statements.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words “believes,” “anticipates,” “contemplates,” “expects,” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. Those risks and uncertainties are as follows:

• our ability to realize the anticipated benefits from our acquisition of North Penn Bancorp, Inc.

• possible future impairment of intangible assets

• our ability to effectively manage future growth

• loan losses in excess of our allowance

• risks inherent in commercial lending

• real estate collateral which is subject to declines in value

• potential other-than-temporary impairments

• higher deposit insurance premiums

• soundness of other financial institutions

• increased compliance burden under new financial reform legislation

• risk of failure to stabilize the financial system

• current market volatility

• potential liquidity risk

• availability of capital

• regional economic factors

• loss of senior officers

• comparatively low legal lending limits

• risks of new capital requirements

• limited market for the Company’s stock

• restrictions on ability to pay dividends

• common stock may lose value

• competitive environment

• issuing additional shares may dilute ownership

• extensive and complex governmental regulation and associated cost

• interest rate risks

Norwood Financial Corp. undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Critical Accounting Policies

Note 2 to the Company’s consolidated financial statements for the year ended December 31, 2012 (incorporated by reference in Item 8 of the Form 10-K) lists significant accounting policies used in the development and presentation of its financial statements.  This discussion and analysis, the significant accounting policies, and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of the Company and its results of operations.

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Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, potential impairment of restricted stock, accounting for stock options, the valuation of deferred tax assets, the fair value of financial instruments, valuation of impaired loans, and the determination of other-than-temporary impairment losses on securities.  Please refer to the discussion of the allowance for loan losses calculation under “Allowance for Loan Losses and Non-performing Assets” in the “Changes in Financial Condition” section.

The Company uses the modified prospective transition method to account for stock based compensation.  Under this method companies are required to record compensation expense, based on the fair value of options over the vesting period.

Deferred income taxes reflect temporary differences in the recognition of the revenue and expenses for tax reporting and financial statement purposes, principally because certain items are recognized in different periods for financial reporting and tax return purposes.  Although realization is not assured, the Company believes that it is more likely than not that all deferred tax assets will be realized.

Bonds, notes and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the term of the security.

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each Consolidated Balance Sheet date.

Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, the Company considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent of the Company to not sell the securities and it is more likely than not that it will not have to sell the securities before recovery of their cost basis.  The Company believes that the unrealized loss on all other securities at September 30, 2013 and December 31, 2012 represent temporary impairment of the securities, related to changes in interest rates.

The Company, as a member of the Federal Home Loan Bank (FHLB) system, is required to maintain an investment in capital stock of its district FHLB according to a predetermined formula.  This restricted stock has no quoted market value and is carried at cost.

Management evaluates the restricted stock for impairment. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management evaluated the stock and concluded that the stock was not impaired for the periods presented herein.  More consideration was given to the long-term prospects for the FHLB as opposed to the recent stress caused by the extreme economic conditions the world is facing.  Management also considered that the FHLB’s regulatory capital ratios have increased from the prior year, liquidity appears adequate, and the new shares of FHLB stock continue to change hands at the $100 par value.  Management believes no impairment charge is necessary related to FHLB stock as of September 30, 2013.

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In connection with the acquisition of North Penn, we recorded goodwill in the amount of $9.7 million, representing the excess of amounts paid over the fair value of net assets of the institutions acquired in purchase transactions, at its fair value at the date of acquisition.  Goodwill is tested and deemed impaired when the carrying value of goodwill exceeds its implied fair value.  The value of the goodwill can change in the future.  We expect the value of the goodwill to decrease if there is a significant decrease in the franchise value of the Bank.  If an impairment loss is determined in the future, we will reflect the loss as an expense for the period in which the impairment is determined, leading to a reduction of our net income for that period by the amount of the impairment loss.

Changes in Financial Condition

General

Total assets as of September 30, 2013 were $703.8 million compared to $672.3 million as of December 31, 2012, an increase of $31.5 million.  The increase includes $10.3 million of loan growth and a $10.8 million increase in overnight liquidity which was funded with a $24.3 million increase in deposits and a $9.8 million increase in short-term borrowings.

Securities

The fair value of securities available for sale as of September 30, 2013 was $150.9 million compared to $145.4 million as of December 31, 2012.  The Company purchased $59.3 million of securities principally using the proceeds from $47.0 million of sales, calls, maturities and principal reductions of securities.  Growth in deposits also funded a portion of security purchases.

The carrying value of the Company’s securities portfolio (Available-for Sale and Held-to Maturity) consisted of the following:

	September 30, 2013					December 31, 2012
(dollars in thousands)	Amount		% of portfolio			Amount		% of portfolio
U.S. Government agencies	$	27,519		18.2	%	$	13,092		9.0	%
States and political subdivisions		63,968		42.3			58,959		40.5
Corporate obligations		4,754		3.2			8,868		6.1
Mortgage-backed securities-
government sponsored entities		54,494		36.1			64,325		44.2
Equity securities-financial services		343		0.2			319		0.2
Total	$	151,078		100.0	%	$	145,563		100.0	%

The Company has securities in an unrealized loss position.  In management’s opinion, the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities.  The Company holds a small amount of equity securities in other financial institutions, the value of which has been impacted by the weakening conditions of the financial markets.  Management believes that the unrealized losses on all other equity holdings represent temporary impairment of the securities, as the Company has the intent and ability to hold these investments until maturity or market price recovery.

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Loans

Loans receivable totaled $487.0 million at September 30, 2013 compared to $476.7 million as of December 31, 2012.  The $10.3 million of growth recorded in 2013 was attributed to a $10.0 million increase in residential mortgage loans and a $6.7 million increase in construction lending.  Commercial real estate loans decreased $7.1 million during the period while other loans increased $700,000.

The allowance for loan losses totaled $5,559,000 as of September 30, 2013 and represented 1.14% of total loans, compared to $5,502,000, or 1.15% of total loans, at December 31, 2012, and $5,341,000, or 1.11% of total loans, as of September 30, 2012.  The Company had net charge-offs for the nine months ended September 30, 2013 of $1,943,000 compared to $1,767,000 in the comparable period in 2012.  The Company’s loan review process assesses the adequacy of the allowance for loan losses on a quarterly basis.  The process includes an analysis of the risks inherent in the loan portfolio.  It includes an analysis of impaired loans and a historical review of credit losses by loan type.  Other factors considered include:  concentration of credit in specific industries, economic and industry conditions, trends in delinquencies and loan classifications, large dollar exposures and loan growth.  Management considers the allowance adequate at September 30, 2013 based on the Company’s criteria.  However, there can be no assurance that the allowance for loan losses will be adequate to cover significant losses, if any, that might be incurred in the future.

As of September 30, 2013, non-performing loans totaled $10.3 million, or 2.11% of total loans compared to $13.2 million, or 2.77% of total loans at December 31, 2012.

The following table sets forth information regarding non-performing loans and foreclosed real estate at the dates indicated:

(dollars in thousands)	September 30, 2013			December 31, 2012
Loans accounted for on a non-accrual basis:
Commercial and all other	$	-		$	328
Real Estate		10,285			12,872
Total		10,285			13,200
Accruing loans which are contractually
past due 90 days or more		-			-
Total non-performing loans		10,285			13,200
Foreclosed real estate		993			852
Total non-performing assets	$	11,278		$	14,052
Allowance for loans losses	$	5,559		$	5,502
Coverage of non-performing loans		0.54	x		0.42	x
Non-performing loans to total loans		2.11	%		2.77	%
Non-performing loans to total assets		1.46	%		1.96	%
Non-performing assets to total assets		1.60	%		2.09	%

Deposits

During the period, total deposits increased $24.3 million which includes growth of $19.6 million in non-interest bearing demand deposits, a $13.3 million increase in money market and NOW accounts, and a $500,000 increase in savings deposits.  Certificates of deposit decreased $9.1 million due primarily to the runoff of deposits acquired through promotions.

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The following table sets forth deposit balances as of the dates indicated:

(dollars in thousands)	September 30, 2013		December 31, 2012
Non-interest bearing demand	$	101,632	$	82,075
Interest bearing demand		51,056		45,616
Money market deposit accounts		124,747		116,841
Savings		69,151		68,633
Time deposits <$100,000		134,103		139,949
Time deposits >$100,000		68,009		71,311
Total	$	548,698	$	524,425

Borrowings

Short-term borrowings as of September 30, 2013 totaled $38.5 million compared to $28.7 million as of December 31, 2012.  Short-term borrowings, which consisted of securities sold under agreements to repurchase increased $9.8 million principally due to the seasonality of municipal cash management accounts.

Other borrowings consisted of the following:

(dollars in thousands)

	September 30, 2013		December 31, 2012
Notes with the FHLB:
Convertible note due May 2013 at 3.015%	$	-	$	5,000
Fixed rate note due July 2015 at 4.34%		7,348		7,487
Convertible note due January 2017 at 4.71%		10,000		10,000
Amortizing advance due January, 2018 at 0.91%		2,608		-
	$	19,956	$	22,487

The convertible notes contain an option which allows the FHLB, at quarterly intervals to change the note to an adjustable-rate advance at three month LIBOR plus 17 to 22 basis points.  If the notes are converted, the option allows the Bank to put the funds back to the FHLB at no charge.  The fixed rate borrowing due July 2015 includes a $348,000 fair value adjustment recorded at the time of the North Penn acquisition.

Off-Balance Sheet Arrangements

The Bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.  Commitments to grant loans totaled $23.2 million as of September 30, 2013 compared to $17.6 million as of December 31, 2012.

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A summary of the contractual amount of the Company’s financial instrument commitments is as follows:

	September 30, 2013		December 31, 2012
	(in thousands)
Unfunded availability under loan commitments	$	23,223	$	17,582
Unfunded commitments under lines of credit		46,597		42,735
Standby letters of credit		6,991		6,128
	$	76,811	$	66,445

Stockholders’ Equity and Capital Ratios

As of September 30, 2013, stockholders’ equity totaled $91.3 million, compared to $92.4 million as of December 31, 2012.   The net change in stockholders’ equity included a $6.3 million of net income, that was partially offset by $3.1 million of dividends declared, a $319,000 reduction due to an increase in Treasury Stock, and a $462,000 increase due to the exercise and vesting of stock options.  In addition, accumulated other comprehensive income (loss) decreased $4.4 million due to a decrease in fair value of securities in the available for sale portfolio, net of tax.  This decrease in fair value is the result of a change in interest rates and spreads, which may impact the value of the securities. Because of interest rate volatility, the Company’s accumulated other comprehensive income could materially fluctuate for each interim and year-end period.

A comparison of the Company’s regulatory capital ratios is as follows:

	September 30, 2013			December 31, 2012
Tier 1 Capital
(To average assets)		12.07	%		11.77	%
Tier 1 Capital
(To risk-weighted assets)		16.84	%		16.37	%
Total Capital
(To risk-weighted assets)		17.98	%		17.51	%

The minimum capital requirements imposed by the FDIC on the Bank for leverage, Tier 1 and Total Capital are 4%, 4% and 8%, respectively.  The Company has similar capital requirements imposed by the Board of Governors of the Federal Reserve System (FRB).  The Bank is also subject to more stringent Pennsylvania Department of Banking and Securities (PDB&S) guidelines.  The Bank’s capital ratios do not differ significantly from the Company’s ratios.  Although not adopted in regulation form, the PDB&S utilizes capital standards requiring a minimum of 6.5% leverage capital and 10% total capital.  The Company and the Bank were in compliance with FRB, FDIC and PDB&S capital requirements as of September 30, 2013 and December 31, 2012.

Liquidity

As of September 30, 2013, the Company had cash and cash equivalents of $27.4 million in the form of cash, due from banks and short-term deposits with other institutions.  In addition, the Company had total securities available for sale of $150.9 million which could be used for liquidity needs.  This totals $178.3 million of liquidity and represents 25.3% of total assets compared to $157.7 million and 23.5% of total assets as of December 31, 2012.  The Company also monitors other liquidity measures, all of which were within the

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Company’s policy guidelines as of September 30, 2013 and December 31, 2012.  Based upon these measures, the Company believes its liquidity is adequate.

Capital Resources

The Company has a line of credit commitment available from the Federal Home Loan Bank (FHLB) of Pittsburgh for borrowings of up to $20,000,000 which expires in December 2016.  There were no borrowings under this line at September 30, 2013 and December 31, 2012.

The Company has a line of credit commitment from Atlantic Central Bankers Bank for $7,000,000 which expires June 30, 2014.  There were no borrowings under this line as of September 30, 2013 and December 31, 2012.

The Company has a line of credit commitment available which has no stated expiration date from PNC Bank for $16,000,000.  There were no borrowings under this line as of September 30, 2013 and December 31, 2012.

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank was approximately $284,810,000 as of September 30, 2013, of which $19,608,000 and $22,000,000 was outstanding at September 30, 2013 and December 31, 2012 respectively.  Advances from the Federal Home Loan Bank are secured by qualifying assets of the Bank.

Non-GAAP Financial Measures

This report contains or references fully taxable-equivalent (fte) interest income and net interest income, which are non-GAAP financial measures.  Interest income (fte) and net interest income (fte) are derived from GAAP interest income and net interest income using an assumed tax rate of 34%.  We believe the presentation of interest income (fte) and net interest income (fte) ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.  Net interest income (fte) is reconciled to GAAP net interest income on pages 38 and 42.  Although the Company believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP measures.

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Results of Operations

NORWOOD FINANCIAL CORP.

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis, dollars in thousands)	Three Months Ended September 30,
	2013									2012
	Average						Average			Average						Average
	Balance			Interest			Rate			Balance			Interest			Rate
	(2)			(1)			(3)			(2)			(1)			(3)
Assets
Interest-earning assets:
Interest bearing deposits with banks	$	7,965		$	5			0.25	%	$	15,212		$	9			0.24	%
Securities held-to-maturity		174			3			6.90			172			2			4.65
Securities available for sale:
Taxable		95,071			412			1.73			93,289			479			2.05
Tax-exempt (1)		63,006			796			5.05			54,664			742			5.43
Total securities available for sale (1)		158,077			1,208			3.06			147,953			1,221			3.30
Loans receivable (1) (4) (5)		483,333			6,238			5.16			481,841			6,485			5.38
Total interest earning assets		649,549			7,454			4.59			645,178			7,717			4.78
Non-interest earning assets:
Cash and due from banks		9,390									9,765
Allowance for loan losses		(5,865	)								(5,917	)
Other assets		38,857									37,849
Total non-interest earning assets		42,382									41,697
Total Assets	$	691,931								$	686,875
Liabilities and Stockholders' Equity
Interest bearing liabilities:
Interest bearing demand and money market	$	176,779			97			0.22		$	170,573			125			0.29
Savings		69,581			9			0.05			67,668			16			0.09
Time		203,889			595			1.17			212,590			756			1.42
Total interest bearing deposits		450,249			701			0.62			450,831			897			0.79
Short-term borrowings		32,677			17			0.21			27,565			14			0.20
Other borrowings		20,058			158			3.15			27,557			246			3.57
Total interest bearing liabilities		502,984			876			0.70			505,953			1,157			0.91
Non-interest bearing liabilities:
Demand deposits		93,851									85,194
Other liabilities		4,257									3,947
Total non-interest bearing liabilities		98,108									89,141
Stockholders' equity		90,839									91,781
Total Liabilities and Stockholders' Equity	$	691,931								$	686,875
Net interest income (tax equivalent basis)					6,578			3.89	%					6,560			3.87	%
Tax-equivalent basis adjustment					(308	)								(308	)
Net interest income				$	6,270								$	6,252
Net interest margin (tax equivalent basis)								4.05	%								4.07	%

(1)   Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 34%.

(2)   Average balances have been calculated based on daily balances.

(3)   Annualized

(4)   Loan balances include non-accrual loans and are net of unearned income.

(5)   Loan yields include the effect of amortization of deferred fees, net of costs.

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Rate/Volume Analysis.  The following table shows the fully taxable equivalent effect of changes in volumes and rates on interest income and interest expense.

	Increase/(Decrease)
	Three months ended September 30, 2013 Compared to
	Three months ended September 30, 2012
	Variance due to
	Volume			Rate			Net
	(dollars in thousands)
Interest earning assets:
Interest bearing deposits with banks	$	(7	)	$	3		$	(4	)
Securities held to maturity		-			1			1
Securities available for sale:
Taxable		58			(125	)		(67	)
Tax-exempt securities		320			(266	)		54
Total securities		378			(391	)		(13	)
Loans receivable		132			(379	)		(247	)
Total interest earning assets		503			(766	)		(263	)
Interest bearing liabilities:
Interest-bearing demand and money market		28			(56	)		(28	)
Savings		3			(10	)		(7	)
Time		(30	)		(131	)		(161	)
Total interest bearing deposits		1			(197	)		(196	)
Short-term borrowings		3			-			3
Other borrowings		(61	)		(27	)		(88	)
Total interest bearing liabilities		(57	)		(224	)		(281	)
Net interest income (tax-equivalent basis)	$	560		$	(542	)	$	18

Changes in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate.

39

Comparison of Operating Results for The Three Months Ended September 30, 2013 to September 30, 2012

General

For the three months ended September 30, 2013, net income totaled $2,136,000 compared to $2,200,000 earned in the similar period in 2012.  The decreased net income for the three months ended September 30, 2013 was due primarily to a $528,000 decrease in gains recognized on the sale of loans and securities compared to the same period of last year.  An increase of $240,000 in foreclosed real estate expenses also contributed to the reduced earnings.   A $500,000 reduction in the provision for loan losses partially offset the negative variances noted above.  Earnings per share for the current period were $.59 for basic and fully diluted compared to $.61 per share basis and fully diluted for the three months ended September 30, 2012.  The resulting annualized return on average assets and annualized return on average equity for the three months ended September 30, 2013 were 1.22% and 9.33%, respectively, compared to 1.27% and 9.54%, respectively, for the similar period in 2012.

The following table sets forth changes in net income:

(dollars in thousands)	Three months ended
	September 30, 2013 to September 30, 2012
Net income three months ended September 30, 2012	$	2,200
Change due to:
Net interest income		18
Provision for loan losses		500
Gain on sales of loans and securities		(528	)
Other income		153
Salaries and employee benefits		(1	)
Occupancy, furniture and equipment		5
Foreclosed real estate owned		(240	)
All other expenses		20
Income tax expense		9
Net income three months ended September 30, 2013	$	2,136

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the three months ended September 30, 2013 totaled $6,578,000, an increase of $18,000 from the similar period in 2012.  The increase in net interest income largely reflects the improved mix and growth of the balance sheet which offset the reduced earnings on loans and investments due to repricing in the current low interest rate environment.  The fte net interest spread and net interest margin were 3.89% and 4.05%, respectively, for the three months ended September 30, 2013 compared to 3.87% and 4.07%, respectively, for the similar period in 2012.

Interest income (fte) totaled $7,454,000 with a yield on average earning assets of 4.59% compared to $7,717,000 and 4.78% for the 2012 period. Average loans increased $1.5 million over the comparable period of last year but resulted in a 22 basis point reduction in the yield earned, resulting in a $247,000 reduction in loan income.  Reduced yields on securities offset additional earnings due to growth.  Average earning assets totaled $649.5 million for the three months ended September 30, 2013, an increase of $4.4 million over the average for the similar period in 2012.  This increase in average earning assets helped offset the decline in asset yields.

40

Interest expense for the three months ended September 30, 2013 totaled $876,000 at an average cost of 0.70% compared to $1,157,000 and 0.91% for the similar period in 2012.  As a result of the continued low interest rate environment, the Company further reduced rates paid on its money market and savings accounts.  The cost of time deposits, which is the most significant component of funding, declined to 1.17% from 1.42% for the similar period in the prior year.  As time deposits matured, they repriced at the current lower rates resulting in the decrease.

Provision for Loan Losses

The Company’s provision for loan losses for the three months ended September 30, 2013 was $400,000 compared to $900,000 for the three months ended September 30, 2012.  The Company makes provisions for loan losses in an amount necessary to maintain the allowance for loan losses at an acceptable level.  Net charge-offs were $590,000 for the quarter ended September 30, 2013 compared to $1,334,000 for the similar period in 2012.

Other Income

Other income totaled $1,216,000 for the three months ended September 30, 2013 compared to $1,591,000 for the similar period in 2012.  Service charges and fees improved $53,000 compared to the prior year period which partially offset a $528,000 decrease in net gains from the sale of loans and securities.  The current period includes a $198,000 gain on the sale of investment securities compared to a $631,000 gain in the third quarter of 2012.  Net gains on the sale of residential mortgage loans decreased $95,000 compared to the same quarter of last year due to decreased sales during the current period.  All other items of other income increased $100,000, net, compared to the third quarter of last year.

Other Expense

Other expense for the three months ended September 30, 2013 totaled $4,173,000 or an increase of $216,000 from $3,957,000 for the similar period in 2012.  Costs associated with foreclosed real estate properties increased $240,000 due to write downs and on-going maintenance on the properties.  All other operating expenses decreased $24,000, net.

Income Tax Expense

Income tax expense totaled $777,000 for an effective tax rate of 26.7% for the period ending September 30, 2013 compared to $786,000 for an effective tax rate of 26.3% for the similar period in 2012.

41

Results of Operations

NORWOOD FINANCIAL CORP.

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis, dollars in thousands)	Nine Months Ended September 30,
	2013									2012
	Average						Average			Average						Average
	Balance			Interest			Rate			Balance			Interest			Rate
	(2)			(1)			(3)			(2)			(1)			(3)
Assets
Interest-earning assets:
Interest bearing deposits with banks	$	9,138		$	17			0.25	%	$	10,747		$	20			0.25	%
Securities held-to-maturity		173			10			7.71			172			7			5.43
Securities available for sale:
Taxable		91,909			1,208			1.75			95,511			1,539			2.15
Tax-exempt (1)		58,386			2,228			5.09			53,536			2,209			5.50
Total securities available for sale (1)		150,295			3,436			3.05			149,047			3,748			3.35
Loans receivable (1) (4) (5)		480,975			18,676			5.18			477,782			19,426			5.42
Total interest earning assets		640,581			22,139			4.61			637,748			23,201			4.85
Non-interest earning assets:
Cash and due from banks		9,154									9,049
Allowance for loan losses		(5,765	)								(5,746	)
Other assets		42,104									39,018
Total non-interest earning assets		45,493									42,321
Total Assets	$	686,074								$	680,069
Liabilities and Stockholders' Equity
Interest bearing liabilities:
Interest bearing demand and money market	$	173,171			311			0.24		$	168,500			399			0.31
Savings		69,436			35			0.07			68,174			66			0.13
Time		207,832			1,828			1.17			220,536			2,335			1.41
Total interest bearing deposits		450,439			2,174			0.64			457,210			2,800			0.82
Short-term borrowings		27,425			44			0.21			21,811			38			0.23
Other borrowings		22,617			525			3.10			27,604			733			3.54
Total interest bearing liabilities		500,481			2,743			0.73			506,625			3,571			0.91
Non-interest bearing liabilities:
Demand deposits		88,830									78,906
Other liabilities		4,107									3,995
Total non-interest bearing liabilities		92,937									82,901
Stockholders' equity		92,656									90,543
Total Liabilities and Stockholders' Equity	$	686,074								$	680,069
Net interest income (tax equivalent basis)					19,396			3.88	%					19,630			3.91	%
Tax-equivalent basis adjustment					(880	)								(944	)
Net interest income				$	18,516								$	18,686
Net interest margin (tax equivalent basis)								4.04	%								4.10	%

(1)   Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 34%.

(2)   Average balances have been calculated based on daily balances.

(3)   Annualized

(4)   Loan balances include non-accrual loans and are net of unearned income.

(5)   Loan yields include the effect of amortization of deferred fees, net of costs.

42

Rate/Volume Analysis.  The following table shows the fully taxable equivalent effect of changes in volumes and rates on interest income and interest expense.  Changes in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate.

	Increase/(Decrease)
	Nine months ended September 30, 2013  Compared to
	Nine months ended September 30, 2012
	Variance due to
	Volume			Rate			Net
	(dollars in thousands)
Interest earning assets:
Interest bearing deposits with banks	$	(3	)	$	-		$	(3	)
Securities held to maturity		-			3			3
Securities available for sale:
Taxable		(56	)		(275	)		(331	)
Tax-exempt securities		252			(233	)		19
Total securities		196			(508	)		(312	)
Loans receivable		204			(954	)		(750	)
Total interest earning assets		397			(1,459	)		(1,062	)
Interest bearing liabilities:
Interest-bearing demand and money market		17			(105	)		(88	)
Savings		2			(33	)		(31	)
Time		(129	)		(378	)		(507	)
Total interest bearing deposits		(110	)		(516	)		(626	)
Short-term borrowings		11			(5	)		6
Other borrowings		(123	)		(85	)		(208	)
Total interest bearing liabilities		(222	)		(606	)		(828	)
Net interest income (tax-equivalent basis)	$	619		$	(853	)	$	(234	)

Changes in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate.

43

Comparison of Operating Results for The Nine Months Ended September 30, 2013 to September 30, 2012

General

For the nine months ended September 30, 2013, net income totaled $6,284,000 compared to $6,644,000 earned in the similar period in 2012.  The decrease in net income for the nine month period ending September 30, 2013 was due primarily to a $350,000 increase in the provision for loan losses and a $310,000 increase in foreclosed real estate costs. Earnings per share for the current period were $1.73 for basic and fully diluted compared to $1.84 per share basic and fully diluted for the nine months ended September 30, 2012.  The resulting annualized return on average assets and annualized return on average equity for the nine months ended September 30, 2013 were 1.22% and 9.07%, respectively, compared to 1.30% and 9.80%, respectively, for the similar period in 2012.

The following table sets forth changes in net income:

(dollars in thousands)	Nine months ended
	September 30, 2013 to September 30, 2012
Net income nine months ended September 30, 2012	$	6,644
Change due to:
Net interest income		(170	)
Provision for loan losses		(350	)
Gain on sales of loans and securities		(880	)
Proceeds on Bank Owned Life Insurance		770
Other income		327
Salaries and employee benefits		(138	)
Occupancy, furniture and equipment		(97	)
Foreclosed real estate expense		(310	)
All other expenses		(1	)
Income tax expense		489
Net income nine months ended September 30, 2013	$	6,284

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the nine months ended September 30, 2013 totaled $19,396,000 a decrease of $235,000 or 1.2% from the similar period in 2012.  The decrease in net interest income largely reflects the reduced yields earned on loans and securities due to growth and reinvestment at today’s lower rates.  The fte net interest spread and net interest margin were 3.88% and 4.04%, respectively, for the nine months ended September 30, 2013 compared to 3.91% and 4.10%, respectively, for the similar period in 2012.

Interest income (fte) totaled $22,139,000 with a yield on average earning assets of 4.61% compared to $23,201,000 and 4.85% for the 2012 period.  Residential mortgage rates remain historically low causing a portion of the portfolio to refinance at lower rates.  As a result, the fte yield on average loans in the current period was 5.18%, a decrease from 5.42% in the 2012 period.  The yield on investment securities also declined 30 basis points reflecting the reinvestment of cash flow, maturities and calls at the current lower rate.  Average earning assets totaled $640.6 million for the nine months ended September 30, 2013 an increase of $2.8 million over the similar period in 2012. The growth in average earning assets helped to partially offset the decline in loan and securities yields.

44

Interest expense for the nine months ended September 30, 2013 totaled $2,743,000 at an average cost of 0.73% compared to $3,571,000 and 0.94% for the 2012 period.  The Company reduced rates paid on its deposits by 18 basis points and on other borrowings by 44 basis points.  The cost of time deposits, which is the largest component of interest expense, was 1.17% for the 2013 period decreasing from 1.41% in 2012.  This reflects time deposits maturing and repricing at the current lower rates.

Provision for Loan Losses

The Company’s provision for loan losses for the nine months ended September 30, 2013 was $2,000,000 compared to $1,650,000 for the nine months ended September 30, 2012.  The Company makes provisions for loan losses in an amount necessary to maintain the allowance for loan losses at an acceptable level.  The increase in the provision was necessary to maintain the reserve at an adequate level after accounting for loan growth and charge-offs for the period ended September 30, 2013. Net charge-offs were $1.9 million for the nine months ended September 30, 2013 compared to $1.8 million for the similar period in 2012.

Other Income

Other income totaled $4,305,000 for the nine months ended September 30, 2013 compared to $4,088,000 for the similar period in 2012.  The 2013 period includes $770,000 of proceeds from a bank-owned life insurance policy and a $160,000 improvement in all other service charges and fees compared to the same period of last year.  The current period includes a $9,000 loss, net of mortgage servicing rights, on the sale of $1.6 million of residential mortgage loans compared to $143,000 in similar gains on the sales of $4.3 million of mortgage loans in the 2012 period.  Gains on the sales of investment securities totaled $590,000 on sales of $30.0 million for the 2013 period compared to $1,318,000 of gains on sales of $23.3 million in the similar 2012 period.  The proceeds from investment securities sales were reinvested in the Company’s bond portfolio as well as to fund new loan growth.

Other Expense

Other expenses totaled $12,607,000 for the nine months ended September 30, 2013 an increase of $546,000 compared to $12,061,000 for the similar period in 2012.  Salary and benefit costs increased $138,000, or 2.2%, due to the  staff additions and merit increases while occupancy and equipment expenses rose $97,000.  Foreclosed real estate costs increased $310,000 over the comparable period in 2012 due to write downs and maintenance costs on foreclosed properties.  All other operating expenses increased $1,000, net.  The efficiency ratio for the 2013 period was 55.2% compared to 50.8% in the 2012 period.

Income Tax Expense

Income tax expense totaled $1,930,000 for an effective tax rate of 23.5% in the 2013 period compared to $2,419,000 and 26.7% in 2012.  The decrease in the effective tax rate reflects a higher level of tax-exempt income.

45

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Interest rate sensitivity and the repricing characteristics of assets and liabilities are managed by the Asset and Liability Management Committee (ALCO).  The principal objective of ALCO is to maximize net interest income within acceptable levels of risk, which are established by policy.  Interest rate risk is monitored and managed by using financial modeling techniques to measure the impact of changes in interest rates.

Net interest income, which is the primary source of the Company’s earnings, is impacted by changes in interest rates and the relationship of different interest rates.  To manage the impact of the rate changes, the balance sheet must be structured so that repricing opportunities exist for both assets and liabilities at approximately the same time intervals.  The Company uses net interest simulation to assist in interest rate risk management.  The process includes simulating various interest rate environments and their impact on net interest income.  As of September 30, 2013, the level of net interest income at risk in a 200 basis point increase in interest rates was within the Company’s policy limits, while a 200 basis point decrease in rates would result in a net interest fluctuation that exceeds the policy limit.  The Company’s policy allows for a decline of no more than 8% of net interest income for a ± 200 basis point shift in interest rates. Based on the current level of interest rates, the risk in the declining 200 basis point scenario is considered acceptable.

Imbalance in repricing opportunities at a given point in time reflects interest-sensitivity gaps measured as the difference between rate-sensitive assets (RSA) and rate-sensitive liabilities (RSL).  These are static gap measurements that do not take into account any future activity, and as such are principally used as early indications of potential interest rate exposures over specific intervals.

As of September 30, 2013, the Company had a positive 90 day interest sensitivity gap of $70.7 million or 10.1% of total assets, compared to the $54.3 million or 8.1% of total assets as of December 31, 2012.  Rate sensitive assets repricing within 90 days increased $16.8 million due to a $10.8 million increase in interest-bearing deposits and a $6.8 million increase in loans repricing within the period.  Time deposits repricing within 90 days decreased $4.6 million, while non-maturity interest bearing balances and other borrowings increased $5.0 million.  A positive gap means that rate-sensitive assets are greater than rate-sensitive liabilities at the time interval.  This would indicate that in a rising rate environment, the yield on interest-earning assets could increase faster than the cost of interest-bearing liabilities in the 90 day time frame.  The repricing intervals are managed by ALCO strategies, including adjusting the average life of the investment portfolio, pricing of deposit liabilities to attract longer term time deposits, loan pricing to encourage variable rate products and evaluation of loan sales of long-term fixed rate mortgages.

46

September 30, 2013

Rate Sensitivity Table

(dollars in thousands)

	3 Months			3-12 Months			1 to 3 Years			Over 3 Years			Total
Federal funds sold and interest bearing deposits	$	12,221		$	-		$	-		$	-		$	12,221
Securities		8,762			22,412			43,103			76,801			151,078
Loans Receivable		123,934			122,031			128,591			112,412			486,968
Total RSA	$	144,917		$	144,443		$	171,694		$	189,213		$	650,267
Non-maturity interest-bearing deposits	$	39,676		$	44,253		$	117,943		$	43,082		$	244,954
Time Deposits		25,705			67,166			79,406			29,835			202,112
Other		8,833			13,585			25,159			10,845			58,422
Total RSL	$	74,214		$	125,004		$	222,508		$	83,762		$	505,488
Interest Sensitivity Gap	$	70,703		$	19,439		$	(50,814	)	$	105,451		$	144,779
Cumulative Gap		70,703			90,142			39,328			144,779
RSA/RSL-cumulative		204.80	%		145.30	%		109.30	%		128.60	%
December 31, 2012
Interest Sensitivity Gap	$	54,309		$	8,226		$	(19,404	)	$	87,036		$	130,167
Cumulative Gap		54,309			62,535			43,131			130,167
RSA/RSL-cumulative		173.60	%		130.70	%		110.40	%		126.40	%

Item 4.  Controls and Procedures

The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II.  OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable

Item 1A. Risk Factors

There have been no material changes in the risk factors affecting the Company that were identified in Item 1A of Part 1 of the Company’s Form 10-K for the year ended December 31, 2012.

47

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

None

Item 3.  Defaults Upon Senior Securities

Not applicable

Item 4.  Mine Safety Disclosures

Not applicable

Item 5.  Other Information

None

Item 6.  Exhibits

No.	Description
3(i)	Articles of Incorporation of Norwood Financial Corp.(1)
3(ii)	Bylaws of Norwood Financial Corp. (2)
4.0	Specimen Stock Certificate of Norwood Financial Corp. (1)
10.1	Employment Agreement with Lewis J. Critelli (2)
10.2	Change in Control Severance Agreement with William S. Lance(2)
10.3	Norwood Financial Corp. Stock Option Plan (3)
10.4	Change in Control Severance Agreement with Robert J. Mancuso(4)
10.5	Salary Continuation Agreement between the Bank and William W. Davis, Jr. (5)
10.6	Salary Continuation Agreement between the Bank and Lewis J. Critelli (5)
10.7	1999 Directors Stock Compensation Plan (3)
10.8	Salary Continuation Agreement between the Bank and John H. Sanders (6)
10.9	2006 Stock Option Plan (7)
10.10	First and Second Amendments to Salary Continuation Agreement with William W. Davis, Jr. (8)
10.11	First and Second Amendments to Salary Continuation Agreement with Lewis J. Critelli (8)
10.12	First and Second Amendments to Salary Continuation Agreement with John H. Sanders (8)
10.13	Change In Control Severance Agreement with James F. Burke
31	Rule 13a-14(a)/15d-14(a) Certification of CEO and CFO
32	Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of Sarbanes Oxley Act of 2002
101.INS	XBRL Instance Document *
101.SCH	XBRL Schema Document *
101.CAL	XBRL Calculation Linkbase Document *
101.LAB	XBRL Labels Linkbase Document *
101.PRE	XBRL Presentation Linkbase Document *
101.DEF	XBRL Definition Linkbase Document *

______________________

* Submitted as Exhibits 101 to this Form 10-Q are documents formatted in XBRL (Extensible Business Reporting Language).  Pursuant to Rule 402 of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.

48

(1)   Incorporated herein by reference into this document from the Exhibits to Form 10, Registration Statement initially filed with the Commission on April 29, 1996, Registration No. 0-28364

(2)   Incorporated by reference into this document from the identically numbered exhibits to the Registrant’s Form 10-K filed with the Commission on March 15, 2010.

(3)   Incorporated herein by reference to the identically numbered exhibits of the Registrant’s Form 10-K filed with the Commission on March 23, 2000.

(4)   Incorporated by reference into this document from the identically numbered exhibit to the Registrant’s Form 10-K filed with the Commission on March 14, 2013, File No. 0-28364.

(5)   Incorporated by reference into this document from the Exhibits to Form S-8 filed with the Commission on August 14, 1998, File No. 333-61487.

(6)   Incorporated herein by reference to the identically numbered exhibit to the Registrant’s Form 10-K filed with the Commission on March 22, 2004.

(7)   Incorporated by reference to this document from Exhibit 4.1 to Registrant’s Registration Statement on Form S-8 (File No. 333-134831) filed with the Commission on June 8, 2006.

(8)   Incorporated herein by reference from the Exhibits to the Registrant’s Current Report on Form 8-K filed on April 4, 2006.

49

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.

			NORWOOD FINANCIAL CORP.
Date:	November 7, 2013	By:	/s/ Lewis J. Critelli
			Lewis J. Critelli
			President and Chief Executive Officer
			(Principal Executive Officer)
Date:	November 7, 2013	By:	/s/ William S. Lance
			William S. Lance
			Executive Vice President and
			Chief Financial Officer
			(Principal Financial Officer)

 50

EX-10.13

CHANGE-IN-CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT entered into this 7th day of October, 2013 (the "Effective Date"), by and between James F. Burke, (the "Employee"), Wayne Bank (the "Bank"), and Norwood Financial Corp. (the "Company").

WHEREAS, the Employee has heretofore been employed by the Bank and the Company as Senior Vice President and Chief Lending Officer, and the Bank and the Company deem it to be in their best interest to enter into this Agreement as additional incentive to the Employee to continue as an executive employee of the Bank and the Company; and

WHEREAS, the parties desire by this writing to set forth their understanding as to their respective rights and obligations in the event a change of control occurs with respect to the Bank or the Company.

NOW, THEREFORE, the undersigned parties AGREE as follows:

1.             Defined Terms

When used anywhere in this Agreement, the following terms shall have the meaning set forth herein.

(a)           "Change in Control" shall mean any one of the following events:  (I) the acquisition of ownership, holding or power to vote more than 25% of the Bank's or the Company's voting stock, (ii) the acquisition of the ability to control the election of a majority of the Bank's or the Company's directors, (iii) the acquisition of a controlling influence over the management or policies of the Bank or the Company by any person or by persons acting as a "group" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or (iv) during any period of two consecutive years, individuals (the "Continuing Directors") who at the beginning of such period constitute the Board of Directors of the Bank or the Company (the "Existing Board") cease for any reason to constitute at least two-thirds thereof, provided that any individual whose election or nomination for election as a member of the Existing Board was approved by a vote of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director.  Notwithstanding the foregoing, in the case of (I), (ii) and (iii) hereof, ownership or control of the Bank by the Company itself shall not constitute a Change in Control.  For purposes of this paragraph only, the term "person" refers to an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.  The decision of the Bank's non-employee directors as to whether or not a Change in Control has occurred shall be conclusive and binding.

(b)           "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and as interpreted through applicable rulings and regulations in effect from time to time.

(c)           "Code §280G Maximum" shall mean product of 2.99 and his "base amount" as defined in Code §280G(b)(3).

(d)           "Good Reason" shall mean any of the following events, which has not been consented to in advance by the Employee in writing: (I) the requirement that the Employee move his personal residence, or perform his principal executive functions, more than thirty (30) miles from his primary office as of the date of the Change in Control; (ii) a material reduction in the Employee's base compensation as in effect on the date of the Change in Control or as the same may be increased from time to time; (iii) the failure by the Bank or the Company to continue to provide the Employee with compensation and benefits provided for on the date of the Change in Control, as the same may be increased from time to time, or with benefits substantially similar to those provided to him under any of the employee benefit plans in which the Employee now or hereafter becomes a participant, or the taking of any action by the Bank or the Company which would directly or indirectly reduce any of such benefits or deprive the Employee of any material fringe benefit enjoyed by him at the time of the Change in Control; (iv) the assignment to the Employee of duties and responsibilities materially different from those normally associated with his position; (v) a failure to elect or reelect the Employee to the Board of Directors of the Bank or the Company, if the Employee is serving on such Board on the date of the Change in Control; (vi) a material diminution or reduction in the Employee's respon­sibilities or authority (including reporting responsibilities) in connection with his employment with the Bank or the Company; or (vii) a material reduction in the secretarial or other administrative support of the Employee.

(e)           "Just Cause" shall mean, in the good faith determination of the Bank's Board of Directors, the Employee's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement.  The Employee shall have no right to receive compensation or other benefits for any period after termination for Just Cause.  No act, or failure to act, on the Employee's part shall be considered "willful" unless he has acted, or failed to act, with an absence of good faith and without a reasonable belief that his action or failure to act was in the best interest of the Bank and the Company.

(f)           "Protected Period" shall mean the period that begins on the date six months before a Change in Control and ends on the later of the first annual anniversary of the Change in Control or the expiration date of this Agreement.

2.             Trigger Events

The Employee shall be entitled to collect the severance benefits set forth in Section 3 of this Agreement in the event that (I) the Employee voluntarily terminates employment either for any reason within the 30-day period beginning on the date of a Change in Control, (ii) the Employee voluntarily terminates employment within 90 days of an event that both occurs during

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the Protected Period and constitutes Good Reason, or (iii) the Bank or the Company or their successor(s) in interest terminate the Employee's employment for any reason other than Just Cause during the Protected Period.

3.             Amount of Severance Benefit

If the Employee becomes entitled to collect severance benefits pursuant to Section 2 hereof, the Employee shall receive from the Bank an amount equal to two times the base salary as of the employee’s date of hire and subsequently as of the last date of the prior calendar year preceding the Change in Control, but in no event more than Code §280G Maximum.  Said sum shall be paid in one lump sum within ten (10) days of the later of the date of the Change in Control and the Employee's last day of employment with the Bank or the Company.

In the event that the Employee, the Bank, and the Company jointly agree that the Employee has collected an amount exceeding the Code §280G Maximum, the parties may jointly agree in writing that such excess shall be treated as a loan ab initio which the Employee shall repay to the Bank, on terms and conditions mutually agreeable to the parties, together with interest at the applicable federal rate provided for in Section 7872(f)(2)(B) of the Code.

4.             Funding of Grantor Trust upon Change in Control

Not later than ten business days after a Change in Control, the Bank shall (I) establish a grantor trust (the "Trust") designed in accordance with Revenue Procedure 92-64 and having a trustee independent of the Bank and the Company, (ii) deposit in said Trust an amount equal to the Code §280G Maximum, unless the Employee has previously provided a written release of any claims under this Agreement, and (I) provide the trustee of the Trust with a written direction to hold said amount and any investment return thereon in a segregated account for the benefit of the Employee, and to follow the procedures set forth in the next paragraph as to the payment of such amounts from the Trust.  Upon the earlier of the Trust's final payment of all amounts due under the following paragraph or the date 15 months after the Change in Control, the trustee of the Trust shall pay to the Bank the entire balance remaining in the segregated account maintained for the benefit of the Employee.  The Employee shall thereafter have no further interest in the Trust.

During the 12-consecutive month period after a Change in Control, the Employee may provide the trustee of the Trust with a written notice requesting that the trustee pay to the Employee an amount designated in the notice as being payable pursuant to this Agreement.  Within three business days after receiving said notice, the trustee of the Trust shall send a copy of the notice to the Bank via overnight and registered mail return receipt requested.  On the tenth (10th) business day after mailing said notice to the Bank, the trustee of the Trust shall pay the Employee the amount designated therein in immediately available funds, unless prior thereto the Bank provides the trustee with a written notice directing the trustee to withhold such payment.  In the latter event, the trustee shall submit the dispute to non-appealable binding arbitration for a determination of the amount payable to the Employee pursuant to this Agreement, and the costs of such arbitration shall be paid by the Bank.  The trustee shall choose the arbitrator to settle the

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dispute, and such arbitrator shall be bound by the rules of the American Arbitration Association in making his determination.  The parties and the trustee shall be bound by the results of the arbitration and, within 3 days of the determination by the arbitrator, the trustee shall pay from the Trust the amounts required to be paid to the Employee and/or the Bank, and in no event shall the trustee be liable to either party for making the payments as determined by the arbitrator.

5.             Term of the Agreement.  This Agreement shall remain in effect for the period commencing on the Effective Date and ending on the earlier of (I) the date sixty months after the Effective Date, and (ii) the date on which the Employee terminates employment with the Bank; provided that the Employee's rights hereunder shall continue following the termination of this employment with the Bank under any of the circumstances described in Section 2 hereof.

6.             Termination or Suspension Under Federal Law.

(a)           Any payments made to the Employee pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.

(b)           If the Employee is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) or (g)(1)), all obliga­tions of the Bank under this Agreement shall terminate, as of the effective date of the order, but the vested rights of the parties shall not be affected.

(c)           If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations of the Bank under this Agreement shall terminate as of the date of default; however, this Paragraph shall not affect the vested rights of the parties.

(d)           If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee from participating in the conduct of the Bank's affairs, the Bank's obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings.  If the charges in the notice are dis­missed, the Bank shall (I) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obliga­tions which were suspended.

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7.             Expense Reimbursement.

In the event that any dispute arises between the Employee and the Bank or the Company as to the terms or interpretation of this Agreement, whether instituted by formal legal proceed­ings or otherwise, including any action that the Employee takes to enforce the terms of this Agreement or to defend against any action taken by the Bank or the Company, the Employee shall be reimbursed for all costs and expenses, including reasonable attor­neys' fees, arising from such dispute, proceedings or actions, provided that the Employee shall obtain a final judgment in favor of the Employee in a court of competent jurisdiction or in binding arbitration under the rules of the American Arbitration Association.  Such reimbur­sement shall be paid within ten (10) days of Employee's furnishing to the Bank and the Company written evidence, which may be in the form, among other things, of a cancelled check or receipt, of any costs or expenses incurred by the Employee.

8.             Successors and Assigns.

(a)           This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Bank or the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Bank or Company.

(b)           Since the Bank and the Company are contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Bank and the Company.

9.             Joint and Several Liability

The Company hereby agrees that to the extent permitted by law, it shall be jointly and severally liable for both the payment of all amounts due under this Agreement, and the taking of any actions required under this Agreement.

10.             Amendments

No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.

11.             Applicable Law

Except to the extent preempted by Federal law, the laws of the State of Pennsylvania shall govern this Agreement in all respects, whether as to its validity, construc­tion, capacity, perfor­mance or otherwise.

--

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12.             Severability

The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

13.             Entire Agreement

This Agreement, together with any under­standing or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first hereinabove written.

ATTEST:	WAYNE BANK
/s/ William S. Lance	By:	/s/ Lewis J. Critelli
Secretary		President and Chief Executive Officer
ATTEST:
	NORWOOD FINANCIAL CORP.
/s/ William S. Lance	By:	/s/ Lewis J. Critelli
Secretary		President and Chief Executive Officer
WITNESS:	EMPLOYEE:
/s/ Kelly S. Teeple	/s/ James F. Burke

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EX-31

Exhibit 31.1

CERTIFICATION

I, Lewis J. Critelli, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Norwood Financial Corp.;

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

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

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

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

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

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

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (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 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:	November 7, 2013	/s/ Lewis J. Critelli
		Lewis J. Critelli
		President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, William S. Lance, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Norwood Financial Corp.;

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

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

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

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

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

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

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (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 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:	November 7, 2013	/s/ William S. Lance
		William S. Lance
		Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Norwood Financial Corp. (the Company) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, Lewis J. Critelli, President and Chief Executive Officer, and William S. Lance, Executive Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

/s/ Lewis J. Critelli	/s/ William S. Lance
Lewis J. Critelli	William S. Lance
President and Chief Executive Officer	Executive Vice President and Chief Financial Officer

November 7, 2013

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New and Recently Adopted Accounting Pronouncements

9 Months Ended

Sep. 30, 2013

New and Recently Adopted Accounting Pronouncements [Abstract]

New and Recently Adopted Accounting Pronouncements

9.New and Recently Adopted Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.  The standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. The new requirements will take effect for public companies in fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company adopted this standard on January 1, 2013. The effect of adopting this standard increased our disclosure surrounding reclassification items out of accumulated other comprehensive income.

In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date. The ASU requires the measurement of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement with its co-obligors as well as any additional amount that the entity expects to pay on behalf of its co-obligors. The new standard is effective retrospectively for fiscal years and interim periods within those years, beginning after December 15, 2013, and early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In June 2013, the FASB issued ASU 2013-08, Financial Services – Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The amendments in this Update affect the scope, measurement, and disclosure requirements for investment companies under U.S. GAAP. The amendments do all of the following: 1. Change the approach to the investment company assessment in Topic 946, clarify the characteristics of an investment company, and provide comprehensive guidance for assessing whether an entity is an investment Company. 2. Require an investment company to measure non-controlling ownership interests in other investment companies at fair value rather than using the equity method of accounting. 3. Require the following additional disclosures: (a) the fact that the entity is an investment company and is applying the guidance in Topic 946, (b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support provided or contractually required to be provided by an investment company to any of its investees. The amendments in this Update are effective for an entity’s interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is prohibited. This ASU is not expected to have a significant impact on the Company’s financial statements.

In July 2013, the FASB issued ASU 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in this Update permit the Fed Funds Effective Swap Rate (OIS) to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments are effective prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013.  This ASU did not have a significant impact on the Company’s financial statements.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This Update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted.  This ASU is not expected to have a significant impact on the Company’s financial statements.

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
INTEREST INCOME
Loans receivable, including fees	$ 6,202	$ 6,429	$ 18,557	$ 19,233
Securities	939	971	2,685	3,004
Other	5	9	17	20
Total interest income	7,146	7,409	21,259	22,257
INTEREST EXPENSE
Deposits	701	897	2,174	2,800
Short-term borrowings	17	14	44	38
Other borrowings	158	246	525	733
Total Interest Expense	876	1,157	2,743	3,571
NET INTEREST INCOME	6,270	6,252	18,516	18,686
PROVISION FOR LOAN LOSSES	400	900	2,000	1,650
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	5,870	5,352	16,516	17,036
OTHER INCOME
Service charges and fees	614	561	1,834	1,674
Income from fiduciary activities	111	96	285	274
Net realized gains on sales of securities	198	631	590	1,318
Gains (losses) on sale of loans and servicing rights, net	(12)	83	(9)	143
Earnings and proceeds on Bank Owned Life Insurance	150	132	1,224	395
Other	155	88	381	284
Total Other Income	1,216	1,591	4,305	4,088
OTHER EXPENSES
Salaries and employee benefits	2,103	2,102	6,438	6,300
Occupancy, furniture & equipment, net	507	512	1,586	1,489
Data processing related	221	222	673	670
Taxes, other than income	179	150	531	451
Professional fees	139	157	498	601
Federal Deposit Insurance Corporation insurance assessment	114	94	335	290
Foreclosed real estate owned	217	(23)	494	184
Other	693	743	2,052	2,076
Total other expenses	4,173	3,957	12,607	12,061
INCOME BEFORE INCOME TAXES	2,913	2,986	8,214	9,063
INCOME TAX EXPENSE	777	786	1,930	2,419
NET INCOME	$ 2,136	$ 2,200	$ 6,284	$ 6,644
BASIC EARNINGS PER SHARE	$ 0.59	$ 0.61	$ 1.73	$ 1.84
DILUTED EARNINGS PER SHARE	$ 0.59	$ 0.61	$ 1.73	$ 1.84

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Earnings Per Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share

2.         Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.  Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

The following table sets forth the weighted average shares outstanding used in the computations of basic and diluted earnings per share.  All share and per share data has been adjusted to reflect the retroactive effect of the 10% stock dividend declared during the period ending March 31, 2013.

(in thousands)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Basic EPS weighted average shares outstanding	3,626	3,606	3,624	3,607
Dilutive effect of stock options	12	9	13	5
Diluted EPS weighted average shares outstanding	3,638	3,615	3,637	3,612

Stock options which had no intrinsic value, because their effect would be anti-dilutive and therefore would not be included in the diluted EPS calculation were 0 and 66,000 as of September 30, 2013 and 2012, respectively, based upon the closing prices of Norwood common stock of $28.95 and $27.45 per share on September 30, 2013 and 2012, respectively.

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Securities (Tables)

9 Months Ended

Sep. 30, 2013

Securities [Abstract]

Amortized Cost and Fair Values of Securities [Table Text Block]

	September 30, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Government agencies	$	28,259	$	5	$	(745)	$	27,519
States and political subdivisions		64,413		942		(1,561)		63,794
Corporate obligations		4,690		138		(74)		4,754
Mortgage-backed securities-
government sponsored entities		55,628		214		(1,348)		54,494
Equity securities-financial services		292		51		-		343
	$	153,282	$	1,350	$	(3,728)	$	150,904
Held to Maturity:
States and political subdivisions	$	174	$	2	$	-	$	176

	December 31, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Government agencies	$	13,076	$	36	$	(20)	$	13,092
States and political subdivisions		55,864		2,995		(73)		58,786
Corporate obligations		8,521		347		-		8,868
Mortgage-backed securities-government
sponsored entities		63,397		1,041		(113)		64,325
Equity securities-financial services		292		27		-		319
	$	141,150	$	4,446	$	(206)	$	145,390
Held to Maturity:
States and political subdivisions	$	173	$	4	$	-	$	177

Investments' Gross Unrealized Losses and Fair Value [Table Text Block]

	September 30, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	25,401	$	(745)	$	-	$	-	$	25,401	$	(745)
States and political subdivisions		24,672		(1,550)		772		(11)		25,444		(1,561)
Corporate Obligations		2,505		(74)		-		-		2,505		(74)
Mortgage-backed securities-government sponsored agencies		33,903		(1,337)		820		(11)		34,723		(1,348)
	$	86,481	$	(3,706)	$	1,592	$	(22)	$	88,073	$	(3,728)

	December 31, 2012
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	7,056	$	(20)	$	-	$	-	$	7,056	$	(20)
States and political subdivisions		5,821		(73)		-		-		5,821		(73)
Mortgage-backed securities-government sponsored agencies		17,199		(113)		-		-		17,199		(113)
	$	30,076	$	(206)	$	-	$	-	$	30,076	$	(206)

Securities by Contractual Maturity [Table Text Block]

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
Due in one year or less	$	2,418	$	2,436	$	174	$	176
Due after one year through five years		13,948		14,009		-		-
Due after five years through ten years		38,573		38,015		-		-
Due after ten years		42,423		41,607		-		-
Mortgage-backed securities-government sponsored agencies		55,628		54,494		-		-
	$	152,990	$	150,561	$	174	$	176

Gross Realized Gains and Losses on Sales of Securities Available-for-Sale [Table Text Block]

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2013		2012		2013		2012
Gross realized gains	$	198	$	631	$	608	$	1,318
Gross realized losses		-		-		(18)		-
Net realized gain	$	198	$	631	$	590	$	1,318
Proceeds from sales of securities	$	14,663	$	15,549	$	29,962	$	23,265

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Basis of Presentation (Policy)

9 Months Ended

Sep. 30, 2013

Basis of Presentation [Abstract]

Basis of Accounting, Policy [Policy Text Block]

The accompanying unaudited consolidated  financial statements have been prepared in conformity with generally accepted accounting principles for interim financial statements and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period.  Actual results could differ from those estimates.  The financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the financial position and results of operations of the Company.  The operating results for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any other future interim period.

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Fair Value Measurements (Fair Value, by Balance Sheet Grouping) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Cash and due from banks, interest-bearing deposits with banks and federal funds sold, Fair Value Disclosure	$ 27,414	$ 12,295
Financial assets: Securities, Fair Value Disclosure	151,080	145,567
Financial assets: Loans receivable, net, Fair Value Disclosure	490,413	485,848
Financial assets: Mortgage servicing rights, Fair Value Disclosure	210	243
Financial assets: Regulatory stock, Fair Value Disclosure	2,141	2,630
Financial assets: Bank owned life insurance, Fair Value Disclosure	14,653	15,357
Financial assets: Accrued interest receivable, Fair Value Disclosure	2,373	2,393
Financial liabilities: Deposits, Fair Value Disclosure	549,844	526,081
Financial liabilities: Short-term borrowings, Fair Value Disclosure	38,466	28,697
Financial liabilities: Other borrowings, Fair Value Disclosure	22,155	25,426
Financial liabilities: Accrued interest payable, Fair Value Disclosure	1,075	1,242
Financial assets: Cash and due from banks, interest-bearing deposits with banks and federal funds sold	27,414	12,295	35,339	21,423
Financial assets: Securities	151,078	145,563
Financial assets: Loans receivable, net	481,409	471,208
Financial assets: Mortgage servicing rights	210	243
Financial assets: Investment in FHLB stock	2,141	2,630
Financial assets: Bank owned life insurance	14,653	15,357
Financial assets: Accrued interest receivable	2,373	2,393
Financial liabilities: Deposits	548,698	524,425
Financial liabilities: Short-term borrowings	38,466	28,697
Financial liabilities: Other borrowings	19,956	22,487
Financial liabilities: Accrued interest payable	1,075	1,242
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Cash and due from banks, interest-bearing deposits with banks and federal funds sold, Fair Value Disclosure	27,414	12,295
Financial assets: Securities, Fair Value Disclosure	343	319
Financial assets: Regulatory stock, Fair Value Disclosure	2,141	2,630
Financial assets: Bank owned life insurance, Fair Value Disclosure	14,653	15,357
Financial assets: Accrued interest receivable, Fair Value Disclosure	2,373	2,393
Financial liabilities: Deposits, Fair Value Disclosure	346,586	313,166
Financial liabilities: Short-term borrowings, Fair Value Disclosure	38,466	28,697
Financial liabilities: Accrued interest payable, Fair Value Disclosure	1,075	1,242
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Securities, Fair Value Disclosure	150,737	145,248
Financial assets: Mortgage servicing rights, Fair Value Disclosure		243
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Loans receivable, net, Fair Value Disclosure	490,413	485,848
Financial assets: Mortgage servicing rights, Fair Value Disclosure	210
Financial liabilities: Deposits, Fair Value Disclosure	203,258	212,915
Financial liabilities: Other borrowings, Fair Value Disclosure	$ 22,155	$ 25,426

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Loans Receivable and Allowance for Loan Losses (Changes in the Accretable Yield for Purchased Credit Impaired Loans) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Loans Receivable and Allowance for Loan Losses [Abstract]
Balance at beginning of period	$ 76	$ 171
Accretion	(49)	(71)
Balance at end of period	$ 27	$ 100

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Earnings Per Share (Details) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Earnings Per Share [Abstract]
Common Stock, Dividend Rate, Percentage		10.00%		10.00%
Denominator for basic earnings per share, weighted average shares	3,626,000		3,606,000	3,624,000	3,607,000
Effect of dilutive securities, employee stock options	12,000		9,000	13,000	5,000
Denominator for diluted earnings per share, adjusted weighted average shares and assumed conversions	3,638,000		3,615,000	3,637,000	3,612,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount				0	66,000
Share Price	$ 28.95		$ 27.45	$ 28.95	$ 27.45	$ 27.05

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Measurements [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	Fair Value Measurement Using
	Reporting Date
Description	Total		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
September 30, 2013
Available for Sale:
U.S. Government agencies	$	27,519	$	-	$	27,519	$	-
States and political subdivisions		63,794		-		63,794		-
Corporate obligations		4,754		-		4,754		-
Mortgage-backed securities-government
sponsored agencies		54,494		-		54,494		-
Equity securities-financial services		343		343		-		-
Total	$	150,904	$	343	$	150,561	$	-
December 31, 2012
Available for Sale:
U.S. Government agencies	$	13,092	$	-	$	13,092	$	-
States and political subdivisions		58,786		-		58,786		-
Corporate obligations		8,868		-		8,868		-
Mortgage-backed securities-government						64,325
sponsored agencies		64,325		-				-
Equity securities-financial services		319		319		-		-
Total	$	145,390	$	319	$	145,071	$	-

Fair Value, Assets Measured on Nonrecurring Basis [Table Text Block]

			Fair Value Measurement Using Reporting Date
(In thousands)
Description	Total		(Level 1)		(Level 2)		(Level 3)
September 30, 2013
Impaired Loans	$	9,369	$	-	$	-	$	9,369
Foreclosed Real Estate Owned		993		-		-		993
December 31, 2012
Impaired Loans	$	11,616	$	-	$	-	$	11,616
Foreclosed Real Estate Owned		852		-		-		852

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

		Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
September 30, 2013
Impaired loans	$	9,369	Appraisal of collateral(1)	Appraisal adjustments(2)	10%(10.0)%
Foreclosed real estate owned	$	993	Appraisal of collateral(1)	Liquidation Expenses(2)	10%

	Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2012
Impaired loans	$	11,616	Appraisal of collateral(1)	Appraisal adjustments(2)	0-30%(24.10%)
Foreclosed real estate owned	$	852	Appraisal of collateral(1)	Liquidation Expenses(2)	20%

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable, less any associated allowance.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

Fair Value, by Balance Sheet Grouping [Table Text Block]

	Fair Value Measurements at September 30, 2013
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	27,414	$	27,414	$	27,414	$	-	$	-
Securities		151,078		151,080		343		150,737		-
Loans receivable, net		481,409		490,413		-		-		490,413
Mortgage servicing rights		210		210		-		-		210
Regulatory Stock		2,141		2,141		2,141		-		-
Bank owned life insurance		14,653		14,653		14,653		-		-
Accrued interest receivable		2,373		2,373		2,373		-		-
Financial liabilities:
Deposits		548,698		549,844		346,586		-		203,258
Short-term borrowings		38,466		38,466		38,466		-		-
Other borrowings		19,956		22,155		-		-		22,155
Accrued interest payable		1,075		1,075		1,075		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2012
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	12,295	$	12,295	$	12,295	$	-	$	-
Securities		145,563		145,567		319		145,248		-
Loans receivable, net		471,208		485,848		-		-		485,848
Mortgage servicing rights		243		243		-		243		-
Regulatory stock		2,630		2,630		2,630		-		-
Bank owned life insurance		15,357		15,357		15,357		-		-
Accrued interest receivable		2,393		2,393		2,393		-		-
Financial liabilities:
Deposits		524,425		526,081		313,166		-		212,915
Short-term borrowings		28,697		28,697		28,697		-		-
Other borrowings		22,487		25,426		-		-		25,426
Accrued interest payable		1,242		1,242		1,242		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of  credit		-		-		-		-		-

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Fair Value Measurements (Fair Value, Assets and Liabilities Measured on Nonrecurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 9,369	$ 11,616
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	9,369	11,616
Foreclosed Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	993	852
Foreclosed Real Estate Owned [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 993	$ 852

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Securities (Investments' Gross Unrealized Losses and Fair Value) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	$ 86,481	$ 30,076
Less than 12 Months, Unrealized Losses	(3,706)	(206)
12 Months or More, Fair Value	1,592
12 Months or More, Unrealized Losses	(22)
Total, Fair Value	88,073	30,076
Total, Unrealized Losses	(3,728)	(206)
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	25,401	7,056
Less than 12 Months, Unrealized Losses	(745)	(20)
Total, Fair Value	25,401	7,056
Total, Unrealized Losses	(745)	(20)
States and political subdivisions [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	24,672	5,821
Less than 12 Months, Unrealized Losses	(1,550)	(73)
12 Months or More, Fair Value	772
12 Months or More, Unrealized Losses	(11)
Total, Fair Value	25,444	5,821
Total, Unrealized Losses	(1,561)	(73)
Corporate obligations [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	2,505
Less than 12 Months, Unrealized Losses	(74)
Total, Fair Value	2,505
Total, Unrealized Losses	(74)
Mortgage-backed securities-government sponsored entities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	33,903	17,199
Less than 12 Months, Unrealized Losses	(1,337)	(113)
12 Months or More, Fair Value	820
12 Months or More, Unrealized Losses	(11)
Total, Fair Value	34,723	17,199
Total, Unrealized Losses	$ (1,348)	$ (113)
Less than 12 Months [Member]
Schedule of Investments [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	107
12 Months or More [Member]
Schedule of Investments [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	2

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Loans Receivable and Allowance for Loan Losses (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 9,369		$ 9,369		$ 11,074
Impaired Financing Receivable, with Related Allowance, Recorded Investment					551
Impaired Financing Receivable, Recorded Investment	9,369		9,369		11,625
Unpaid Principal Balance, With no related allowance recorded	9,395		9,395		11,150
Unpaid Principal Balance, With an allowance recorded					551
Unpaid Principal Balance, Total	9,395		9,395		11,701
Associated Allowance					9
Average Recorded Investment, Total	9,369	14,916	10,375	13,622
Interest Income Recognized, Total	32	72	51	210
Residential Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	245		245		270
Impaired Financing Receivable, Recorded Investment	245		245		270
Unpaid Principal Balance, With no related allowance recorded	254		254		286
Unpaid Principal Balance, Total	254		254		286
Average Recorded Investment, Total	245	275	255	284
Interest Income Recognized, Total	2	1	4	4
Commercial Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	9,124		9,124		10,494
Impaired Financing Receivable, with Related Allowance, Recorded Investment					551
Impaired Financing Receivable, Recorded Investment	9,124		9,124		11,045
Unpaid Principal Balance, With no related allowance recorded	9,141		9,141		10,554
Unpaid Principal Balance, With an allowance recorded					551
Unpaid Principal Balance, Total	9,141		9,141		11,105
Associated Allowance					9
Average Recorded Investment, Total	9,124	13,536	10,120	12,937
Interest Income Recognized, Total	30	71	47	206
Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment					310
Impaired Financing Receivable, Recorded Investment					310
Unpaid Principal Balance, With no related allowance recorded					310
Unpaid Principal Balance, Total					310
Average Recorded Investment, Total		$ 385		$ 401

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Accumulated Other Comprehensive Income (Items Reclassified Out of Each Component of OCI) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of securities	$ 198	$ 631	$ 590	$ 1,318
Income tax expense	(777)	(786)	(1,930)	(2,419)
Net Income	2,136	2,200	6,284	6,644
Unrealized gains on available for sale securities [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of securities	198		590
Income tax expense	(68)		(201)
Net Income	$ 130		$ 389

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Loans Receivable and Allowance for Loan Losses (Loan Portfolio Summarized by the Past Due Status) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 471,222	$ 460,551
31-60 Days Past Due	3,149	2,613
61-90 Days Past Due	2,808	865
Non-Accrual	10,285	13,200
Total Past Due and Non-Accrual	16,242	16,678
Total Loans	487,464	477,229
Residential Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	157,035	146,847
31-60 Days Past Due	1,038	94
61-90 Days Past Due	10	256
Non-Accrual	1,951	2,846
Total Past Due and Non-Accrual	2,999	3,196
Total Loans	160,034	150,043
Construction Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	20,146	13,363
31-60 Days Past Due		72
Total Past Due and Non-Accrual		72
Total Loans	20,146	13,435
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	254,215	261,527
31-60 Days Past Due	2,038	2,333
61-90 Days Past Due	2,798	598
Non-Accrual	8,334	10,026
Total Past Due and Non-Accrual	13,170	12,957
Total Loans	267,385	274,484
Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	24,490	24,785
31-60 Days Past Due	30
Non-Accrual		328
Total Past Due and Non-Accrual	30	328
Total Loans	24,520	25,113
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	15,336	14,029
31-60 Days Past Due	43	114
61-90 Days Past Due		11
Total Past Due and Non-Accrual	43	125
Total Loans	$ 15,379	$ 14,154

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Loans Receivable and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2013

Loans Receivable and Allowance for Loan Losses [Abstract]

Composition of Loans Receivable [Table Text Block]

	Types of loans
	(dollars in thousands)
	September 30, 2013			December 31, 2012
Real Estate-Residential	$	160,034	32.8%	$	150,043	31.4%
Commercial		267,385	54.9		274,484	57.5
Construction		20,146	4.1		13,435	2.8
Commercial, financial and agricultural		24,520	5.0		25,113	5.3
Consumer loans to individuals		15,379	3.2		14,154	3.0
Total loans		487,464	100.0%		477,229	100.0%
Deferred fees, net		(496)			(519)
Total loans receivable		486,968			476,710
Allowance for loan losses		(5,559)			(5,502)
Net loans receivable	$	481,409		$	471,208

Changes In The Accretable Yield For Purchased Credit Impaired Loans [Table Text Block]

	2013		2012
Balance at beginning of period	$	76	$	171
Accretion		(49)		(71)
Reclassification and other		-		-
Balance at end of period	$	27	$	100

Loans Acquired And Accounted For in Accordance With ASC 310-30 [Table Text Block]

	September 30, 2013		December 31, 2012
Outstanding Balance	$	1,121	$	1,145
Carrying Amount	$	1,094	$	1,069

Impaired Loans and Related Interest Income by Loan Portfolio Class [Table Text Block]

The following table shows the amount of loans in each category that were individually and collectively evaluated for impairment at the dates indicated:

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
September 30, 2013	(In thousands)
Individually evaluated for  impairment	$	-	$	8,275	$	-	$	-	$	-	$	8,275
Loans acquired with deteriorated credit    quality		245		849		-		-		-		1,094
Collectively evaluated for impairment		159,789		258,261		20,146		24,520		15,379		478,095
Total Loans	$	160,034	$	267,385	$	20,146	$	24,520	$	15,379	$	487,464

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
	(In thousands)
December 31, 2012
Individually evaluated for impairment	$	-	$	10,246	$	-	$	310	$	-	$	10,556
Loans acquired with deteriorated credit   quality		270		799		-		-		-		1,069
Collectively evaluated for impairment		149,773		263,439		13,435		24,803		14,154		465,604
Total Loans	$	150,043	$	274,484	$	13,435	$	25,113	$	14,154	$	477,229

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable.  Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired.

			Unpaid Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
September 30, 2013				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	245	$	254	$	-
Commercial		9,124		9,141		-
Subtotal		9,369		9,395		-
With an allowance recorded:
Subtotal		-		-		-
Total:
Real Estate Loans
Residential		245		254		-
Commercial		9,124		9,141		-
Total Impaired Loans	$	9,369	$	9,395	$	-

			Unpaid Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2012				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	270	$	286	$	-
Commercial		10,494		10,554		-
Commercial Loans		310		310		-
Subtotal		11,074		11,150		-
With an allowance recorded:
Real Estate Loans
Commercial		551		551		9
Subtotal		551		551		9
Total:
Real Estate Loans
Residential		270		286		-
Commercial		11,045		11,105		9
Commercial Loans		310		310		-
Total Impaired Loans	$	11,625	$	11,701	$	9

The following information for impaired loans is presented (in thousands) for the nine months ended September 30, 2013 and 2012:

	Average Recorded				Interest Income
	Investment				Recognized
	2013		2012		2013		2012
Total:
Real Estate Loans
Residential	$	255	$	284	$	4	$	4
Commercial		10,120		12,937		47		206
Commercial Loans		-		401		-		-
Total Loans	$	10,375	$	13,622	$	51	$	210

The following information for impaired loans is presented (in thousands) for the three months ended September 30, 2013 and 2012:

	Average Recorded				Interest Income
	Investment				Recognized
	2013		2012		2013		2012
Total:
Real Estate Loans
Residential	$	245	$	275	$	2	$	1
Commercial		9,124		13,536		30		71
Commercial Loans		-		385		-		-
Total Loans	$	9,369	$	14,916	$	32	$	72

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

The following is a summary of troubled debt restructurings granted during the three and nine month periods ended September 30, 2013 (dollars in thousands):

	For the Three Months Ended September 30, 2013
			Pre-Modification		Post-Modification
			Outstanding Recorded		Outstanding Recorded
	Number of Contracts		Investment		Investment
Troubled Debt Restructurings
Real Estate Loans:
Commercial	3	$	2,165	$	2,165

	For the Nine Months Ended September 30, 2013
			Pre-Modification		Post-Modification
			Outstanding Recorded		Outstanding Recorded
	Number of Contracts		Investment		Investment
Troubled Debt Restructurings
Real Estate Loans:
Commercial	4	$	3,424	$	3,424

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating [Table Text Block]

			Special					Doubtful
	Pass		Mention		Substandard		and Loss		Total
September 30, 2013
Commercial real estate loans	$	240,217	$	17,371	$	9,797	$	-	$	267,385
Commercial loans		24,520		-		-		-		24,520
Total	$	264,737	$	17,371	$	9,797	$	-	$	291,905

			Special					Doubtful
	Pass		Mention		Substandard		and Loss		Total
December 31, 2012
Commercial real estate loans	$	251,484	$	11,245	$	11,755	$	-	$	274,484
Commercial loans		24,427		318		368		-		25,113
Total	$	275,911	$	11,563	$	12,123	$	-	$	299,597

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits.  The following table presents the recorded investment in the loan classes based on payment activity as of September 30, 2013 and December 31, 2012 (in thousands):

	Performing		Nonperforming		Total
September 30, 2013
Residential real estate loans	$	158,083	$	1,951	$	160,034
Construction		20,146		-		20,146
Consumer loans		15,379		-		15,379
Total	$	193,608	$	1,951	$	195,559

	Performing		Nonperforming		Total
December 31, 2012
Residential real estate loans	$	147,197	$	2,846	$	150,043
Construction		13,435		-		13,435
Consumer loans		14,154		-		14,154
Total	$	174,786	$	2,846	$	177,632

Loan Portfolio Summarized by the Past Due Status [Table Text Block]

	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing		Non-Accrual		Total Past Due and Non-Accrual		Total Loans
September 30, 2013
Real Estate loans
Residential	$	157,035	$	1,038	$	10	$	-	$	1,951	$	2,999	$	160,034
Commercial		254,215		2,038		2,798		-		8,334		13,170		267,385
Construction		20,146		-		-		-		-		-		20,146
Commercial  loans		24,490		30		-		-		-		30		24,520
Consumer  loans		15,336		43		-		-		-		43		15,379
Total	$	471,222	$	3,149	$	2,808	$	-	$	10,285	$	16,242	$	487,464

	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing		Non-Accrual		Total Past Due and Non-Accrual		Total Loans
December 31, 2012
Real Estate loans
Residential	$	146,847	$	94	$	256	$	-	$	2,846	$	3,196	$	150,043
Commercial		261,527		2,333		598		-		10,026		12,957		274,484
Construction		13,363		72		-		-		-		72		13,435
Commercial  loans		24,785		-		-		-		328		328		25,113
Consumer  loans		14,029		114		11		-		-		125		14,154
Total	$	460,551	$	2,613	$	865	$	-	$	13,200	$	16,678	$	477,229

Allowance for Loan Losses and Recorded Investment in Financing Receivables [Table Text Block]

The following table presents the allowance for loan losses by the classes of the loan portfolio:

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2012	$	1,797	$	3,183	$	119	$	223	$	180	$	5,502
Charge Offs		(547)		(1,308)		(40)		-		(74)		(1,969)
Recoveries		9		-		-		-		17		26
Provision Expense		406		1,288		329		(76)		53		2,000
Ending balance, September 30, 2013	$	1,665	$	3,163	$	408	$	147	$	176	$	5,559
Ending balance individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-
Ending balance collectively evaluated for impairment	$	1,665	$	3,163	$	408	$	147	$	176	$	5,559

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2013	$	1,764	$	3,318	$	363	$	147	$	157	$	5,749
Charge Offs		(157)		(380)		(40)		-		(28)		(605)
Recoveries		9		-		-		-		6		15
Provision Expense		49		225		85		-		41		400
Ending balance, September 30, 2013	$	1,665		3,163		408		147		176	$	5,559

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2011	$	1,257	$	3,838	$	72	$	147	$	144	$	5,458
Charge Offs		(402)		(1,316)		(7)		(23)		(46)		(1,794)
Recoveries		6		1		-		-		20		27
Provision Expense		836		594		10		158		52		1,650
Ending balance, September 30, 2012	$	1,697	$	3,117	$	75	$	282	$	170	$	5,341
Ending balance individually evaluated for impairment	$	-	$	89	$	-	$	-	$	-	$	89
Ending balance collectively evaluated for impairment	$	1,697	$	3,028	$	75	$	282	$	170	$	5,252

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2012	$	1,559	$	3,691	$	87	$	263	$	175	$	5,775
Charge Offs		(94)		(1,220)		-		(23)		(13)		(1,350)
Recoveries		5		1		-		-		10		16
Provision Expense		227		645		(12)		42		(2)		900
Ending balance, September 30, 2012	$	1,697	$	3,117	$	75	$	282	$	170	$	5,341

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Consolidated Statements of Changes in Stockholders' Equity (USD $) In Thousands, except Share data	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income [Member]	Total
Balance, at Dec. 31, 2012	$ 337	$ 24,737	$ 66,742	$ (2,192)	$ 2,797	$ 92,421
Shares, Issued, Beginning Balance at Dec. 31, 2012	3,371,849			75,426
Net Income			6,284			6,284
Other comprehensive loss					(4,369)	(4,369)
Cash dividends declared per share			(3,123)			(3,123)
Acquisition of treasury stock				(319)		(319)
Acquisition of treasury stock, shares				10,712
10% stock dividend	34	10,149	(10,183)
10% stock dividend, shares	336,869			8,043
Compensation expense related to stock options		119				119
Stock options exercised		(37)		357		320
Stock options exercised, shares				(12,933)		(12,933)
Tax benefit on stock options exercised		23				23
Balance, at Sep. 30, 2013	$ 371	$ 34,991	$ 59,710	$ (2,154)	$ (1,572)	$ 91,346
Shares, Issued, Ending Balance at Sep. 30, 2013	3,708,718			81,248

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 6,284	$ 6,644
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	2,000	1,650
Depreciation	447	420
Amortization of intangible assets	104	116
Deferred income taxes	(36)	(404)
Net amortization of securities premiums and discounts	831	888
Net realized gains on sales of securities	(590)	(1,318)
Gain on life insurance policy	(770)
Net increase in value of life insurance	(454)	(395)
Loss (gain) on sale of bank premises and equipment and foreclosed real estate	290	(24)
Net gain on sale of mortgage loans	(25)	(163)
Mortgage loans originated for sale	(1,609)	(4,343)
Proceeds from sale of mortgage loans originated for sale	1,634	4,506
Compensation expense related to stock options	119	98
Decrease in accrued interest receivable and other assets	428	1,434
Increase (decrease) in accrued interest payable and other liabilities	1,006	(281)
Net cash provided by operating activities	9,659	8,828
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale: Proceeds from sales	29,962	23,265
Securities available for sale: Proceeds from maturities and principal reductions on mortgage-backed securities	16,998	25,251
Securities available for sale: Purchases	(59,334)	(45,780)
Redemption of FHLB stock	489	661
Net increase in loans	(12,908)	(24,261)
Proceeds from life insurance policy	1,859
Purchase of bank premises and equipment	(371)	(394)
Proceeds from sale of bank premises and equipment and foreclosed real estate	333	3,229
Net cash used in investing activities	(22,972)	(18,029)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	24,273	15,823
Net increase (decrease) in short-term borrowings	9,769	10,592
Repayments of other borrowings	(5,531)	(137)
Proceeds from other borrowings	3,000
Stock options exercised	320	99
Tax benefit of stock options exercised	23	11
Acquisition of treasury stock	(319)	(320)
Cash dividends paid	(3,103)	(2,951)
Net Cash Provided by Financing Activities	28,432	23,117
Increase in cash and cash Equivalents	15,119	13,916
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	12,295	21,423
CASH AND CASH EQUIVALENTS, END OF PERIOD	27,414	35,339
Supplemental Disclosure of Cash Flow Information
Cash payments for: Interest on deposits and borrowings	2,910	3,430
Cash payments for: Income taxes paid, net of refunds	1,664	1,408
Supplemental Schedule of Noncash Investing Activities
Investment purchases		(774)
Transfers of loans to foreclosed real estate and repossession of other assets	$ 787	$ 954

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

3.         Stock-Based Compensation

The Company’s shareholders approved the Norwood Financial Corp 2006 Stock Option Plan at the annual meeting on April 25, 2006.  The Company awarded 1,100options in 2013 which have a twelve-month vesting period. As of September 30, 2013, there was $40,000 of total unrecognized compensation cost related to non-vested options granted in 2012 and 2013 under the plan, which will be fully amortized by December 31, 2013.  All share and per share data has been adjusted to reflect the retroactive effect of the 10% stock dividend declared during the period ended March 31, 2013.

A summary of stock options from all plans, adjusted for stock dividends declared, is shown below.

		Weighted
		Average Exercise		Weighted Average		Aggregate
		Price		Remaining		Intrinsic Value
	Options	Per Share		Contractual Term		($000)
Outstanding at January 1, 2013	225,670	$	26.39	6.1	Yrs.	$	256
Granted	1,100		27.55	9.2	Yrs.		-
Exercised	(12,933)		24.77	4.2	Yrs.		-
Forfeited	(7,825)		29.33	4.7	Yrs.		-
Outstanding at September 30, 2013	206,012	$	26.39	5.5	Yrs.	$	527
Exercisable at September 30, 2013	176,862	$	26.28	4.8	Yrs.	$	472

Intrinsic value represents the amount by which the market price of the stock on the measurement date exceeded the exercise price of the option.  The stock price was $28.95 as of September 30, 2013 and $27.05 as of December 31, 2012.

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Basis of Presentation

9 Months Ended

Sep. 30, 2013

Basis of Presentation [Abstract]

Basis of Presentation

1.         Basis of Presentation

The unaudited consolidated financial statements include the accounts of Norwood Financial Corp. (Company) and its wholly-owned subsidiary, Wayne Bank (Bank) and the Bank’s wholly-owned subsidiaries, WCB Realty Corp., Norwood Investment Corp., Norwood Settlement Services, LLC,  and WTRO Properties.   All significant intercompany transactions have been eliminated in consolidation. 

The accompanying unaudited consolidated  financial statements have been prepared in conformity with generally accepted accounting principles for interim financial statements and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period.  Actual results could differ from those estimates.  The financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the financial position and results of operations of the Company.  The operating results for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any other future interim period.

These statements should be read in conjunction with the consolidated financial statements and related notes which are incorporated by reference in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2012.

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Loans Receivable and Allowance for Loan Losses (Troubled Debt Restructurings) (Details) (USD $)	9 Months Ended	12 Months Ended	9 Months Ended		3 Months Ended	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Customer with Decrease in Borrower's Debt [Member]	Sep. 30, 2013 Customers with Extended Periods of Principal Deferrals [Member]	Sep. 30, 2013 Commercial Loans [Member] loan	Sep. 30, 2013 Commercial Loans [Member] loan
Financing Receivable, Impaired [Line Items]
Financing Receivable, Modifications, Number of Contracts					3	4
Financing Receivable, Modifications, Pre-Modification Recorded Investment					$ 2,165,000	$ 3,424,000
Financing Receivable, Modifications, Post-Modification Recorded Investment					2,165,000	3,424,000
New Loans Identified as Troubled Debt Restructurings	3,400,000		1,200,000	2,200,000
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down		9,000
Financing Receivable, Modifications, Recorded Investment	$ 7,700,000	$ 5,600,000

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Stock-Based Compensation (Summary of Stock Option Activity) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Stock-Based Compensation [Abstract]
Options, Outstanding, beginning of year	225,670
Options, Granted	1,100
Options, Exercised	(12,933)
Options, Forfeited	(7,825)
Options, Outstanding, end of year	206,012		225,670
Options, Exercisable, end of year	176,862
Weighted Average Exercise Price Per Share, Outstanding, beginning of year	$ 26.39
Weighted Average Exercise Price Per Share, Granted	$ 27.55
Weighted Average Exercise Price Per Share, Exercised	$ 24.77
Weighted Average Exercise Price Per Share, Forfeited	$ 29.33
Weighted Average Exercise Price Per Share, Outstanding, end of year	$ 26.39		$ 26.39
Weighted Average Exercise Price Per Share, Exercisable, end of year	$ 26.28
Weighted Average Remaining Contractual Term, Outstanding,	5 years 6 months		6 years 1 month 6 days
Weighted Average Remaining Contractual Term, Granted in Period	9 years 2 months 12 days
Weighted Average Remaining Contractual Term, Exercised During Period	4 years 2 months 12 days
Weighted Average Remaining Contractual Term, Forfeited During Period	4 years 8 months 12 days
Weighted Average Remaining Contractual Term, Outstanding,	5 years 6 months		6 years 1 month 6 days
Weighted Average Remaining Contractual Term, Exercisable at End of Period	4 years 9 months 18 days
Aggregate Intrinsic Value, Outstanding,	$ 256
Aggregate Intrinsic Value, Outstanding, end of year	527		256
Aggregate Intrinsic Value, Exercisable, end of year	472
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	12 months
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	40
Share Price	$ 28.95	$ 27.45	$ 27.05
Proceeds from Stock Options Exercised	320	99
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	$ 527		$ 256

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Off-Balance Sheet Financial Instruments and Guarantees (Table) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012
Loss Contingencies [Line Items]
Financial Instrument Commitments	$ 76,811	$ 86,655
Unfunded availability under loan commitments [Member]
Loss Contingencies [Line Items]
Financial Instrument Commitments	23,223	38,297
Unfunded commitments under lines of credit [Member]
Loss Contingencies [Line Items]
Financial Instrument Commitments	46,597	37,081
Standby letters of credit [Member]
Loss Contingencies [Line Items]
Financial Instrument Commitments	$ 6,991	$ 11,277

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Loans Receivable and Allowance for Loan Losses (Composition of Loans Receivable) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 487,464		$ 477,229
Deferred fees (net)	(496)		(519)
Loans receivable, net of unearned income	486,968		476,710
Allowance for loan losses	(5,559)	(5,749)	(5,502)	(5,341)	(5,775)	(5,458)
Loans and Leases Receivable, Net Reported Amount	481,409		471,208
Percent of Loans	100.00%		100.00%
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	160,034		150,043
Percent of Loans	32.80%		31.40%
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	267,385		274,484
Percent of Loans	54.90%		57.50%
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	20,146		13,435
Percent of Loans	4.10%		2.80%
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	24,520		25,113
Percent of Loans	5.00%		5.30%
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 15,379		$ 14,154
Percent of Loans	3.20%		3.00%

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Fair Value Measurements (Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 150,904	$ 145,390
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	343	319
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	150,561	145,071
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	27,519	13,092
U.S. Government Agencies [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	27,519	13,092
States and political subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	63,794	58,786
States and political subdivisions [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	63,794	58,786
Corporate obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	4,754	8,868
Corporate obligations [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	4,754	8,868
Mortgage-backed securities-government sponsored entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	54,494	64,325
Mortgage-backed securities-government sponsored entities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	54,494	64,325
Equity securities-financial services [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	343	319
Equity securities-financial services [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 343	$ 319

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Consolidated Balance Sheets (parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Consolidated Balance Sheets [Abstract]
Held-to-maturity Securities, Fair Value	$ 176	$ 177
Common Stock, Par or Stated Value Per Share	$ 0.10	$ 0.10
Common Stock, Shares Authorized	10,000,000	10,000,000
Common Stock, Shares, Issued	3,708,718	3,371,849
Treasury Stock, Shares	81,249	75,426

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Securities

9 Months Ended

Sep. 30, 2013

Securities [Abstract]

Securities

6.         Securities

The amortized cost and fair value of securities were as follows:

	September 30, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Government agencies	$	28,259	$	5	$	(745)	$	27,519
States and political subdivisions		64,413		942		(1,561)		63,794
Corporate obligations		4,690		138		(74)		4,754
Mortgage-backed securities-
government sponsored entities		55,628		214		(1,348)		54,494
Equity securities-financial services		292		51		-		343
	$	153,282	$	1,350	$	(3,728)	$	150,904
Held to Maturity:
States and political subdivisions	$	174	$	2	$	-	$	176

	December 31, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Government agencies	$	13,076	$	36	$	(20)	$	13,092
States and political subdivisions		55,864		2,995		(73)		58,786
Corporate obligations		8,521		347		-		8,868
Mortgage-backed securities-government
sponsored entities		63,397		1,041		(113)		64,325
Equity securities-financial services		292		27		-		319
	$	141,150	$	4,446	$	(206)	$	145,390
Held to Maturity:
States and political subdivisions	$	173	$	4	$	-	$	177

The following tables show the Company’s investments’ gross unrealized losses and fair value aggregated by length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	September 30, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	25,401	$	(745)	$	-	$	-	$	25,401	$	(745)
States and political subdivisions		24,672		(1,550)		772		(11)		25,444		(1,561)
Corporate Obligations		2,505		(74)		-		-		2,505		(74)
Mortgage-backed securities-government sponsored agencies		33,903		(1,337)		820		(11)		34,723		(1,348)
	$	86,481	$	(3,706)	$	1,592	$	(22)	$	88,073	$	(3,728)

	December 31, 2012
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	7,056	$	(20)	$	-	$	-	$	7,056	$	(20)
States and political subdivisions		5,821		(73)		-		-		5,821		(73)
Mortgage-backed securities-government sponsored agencies		17,199		(113)		-		-		17,199		(113)
	$	30,076	$	(206)	$	-	$	-	$	30,076	$	(206)

At September 30, 2013, the Company has107 debt securities in an unrealized loss position in the less than twelve months category and two debt securities in the twelve months or more category.  In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities.  No other-than-temporary-impairment charges were recorded in 2013.  Management believes that all unrealized losses represent temporary impairment of the securities as the Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

The amortized cost and fair value of debt securities as of September 30, 2013 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
Due in one year or less	$	2,418	$	2,436	$	174	$	176
Due after one year through five years		13,948		14,009		-		-
Due after five years through ten years		38,573		38,015		-		-
Due after ten years		42,423		41,607		-		-
Mortgage-backed securities-government sponsored agencies		55,628		54,494		-		-
	$	152,990	$	150,561	$	174	$	176

Gross realized gains and gross realized losses on sales of securities available for sale were as follows (in thousands):

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2013		2012		2013		2012
Gross realized gains	$	198	$	631	$	608	$	1,318
Gross realized losses		-		-		(18)		-
Net realized gain	$	198	$	631	$	590	$	1,318
Proceeds from sales of securities	$	14,663	$	15,549	$	29,962	$	23,265

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Consolidated Statement of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Consolidated Statement of Comprehensive Income [Abstract]
Net Income	$ 2,136	$ 2,200	$ 6,284	$ 6,644
Other comprehensive (loss) income:
Investment securities available for sale: Unrealized holding gains (losses)	(385)	1,331	(6,028)	1,775
Investment securities available for sale: Tax effect	130	(453)	2,048	(602)
Reclassification of gains recognized in net income	(198)	(631)	(590)	(1,318)
Reclassification of gains recognized in net income: Tax effect	68	214	201	450
Other comprehensive (loss) income	(385)	461	(4,369)	305
Comprehensive Income	$ 1,751	$ 2,661	$ 1,915	$ 6,949

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and due from banks	$ 15,193	$ 10,867
Interest bearing deposits with banks	12,221	1,428
Cash and cash equivalents	27,414	12,295
Securities available for sale	150,904	145,390
Securities held to maturity, fair value 2013: $176, 2012: $177	174	173
Loans receivable (net of unearned income)	486,968	476,710
Less: Allowance for loan losses	5,559	5,502
Net loans receivable	481,409	471,208
Regulatory stock, at cost	2,141	2,630
Bank premises and equipment, net	7,250	7,326
Bank owned life insurance	14,653	15,357
Accrued interest receivable	2,373	2,393
Foreclosed real estate owned	993	852
Goodwill	9,715	9,715
Other intangibles	543	647
Other assets	6,202	4,313
Total Assets	703,771	672,299
LIABILITIES
Deposits: Non-interest bearing demand	101,632	82,075
Deposits: Interest-bearing	447,066	442,350
Total deposits	548,698	524,425
Short-term borrowings	38,466	28,697
Other borrowings	19,956	22,487
Accrued interest payable	1,075	1,242
Other liabilities	4,230	3,027
Total Liabilities	612,425	579,878
STOCKHOLDERS' EQUITY
Common stock, $.10 par value per share, authorized 10,000,000; shares issued 2013: 3,708,718 shares, 2012: 3,371,849 shares	371	337
Surplus	34,991	24,737
Retained earnings	59,710	66,742
Treasury stock at cost: 2013: 81,249 shares, 2012: 75,426 shares	(2,154)	(2,192)
Accumulated other comprehensive income (loss)	(1,572)	2,797
Total Stockholders' Equity	91,346	92,421
Total Liabilities and Stockholders' Equity	$ 703,771	$ 672,299

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Stock-Based Compensation (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	9 Months Ended
	Mar. 31, 2013	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Stock-Based Compensation [Abstract]
Options, Granted		1,100
Options, Exercised		(12,933)
Share Price		$ 28.95	$ 27.05	$ 27.45
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		12 months
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		$ 40
Common Stock, Dividend Rate, Percentage	10.00%	10.00%

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Off-Balance Sheet Financial Instruments and Guarantees (Tables)

9 Months Ended

Sep. 30, 2013

Off-Balance Sheet Financial Instruments and Guarantees [Abstract]

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

A summary of the Bank’s financial instrument commitments is as follows:

(in thousands)	September 30,
	2013		2012
Unfunded availability under loan commitments	$	23,223		38,297
Unfunded commitments under lines of credit		46,597		37,081
Standby letters of credit		6,991		11,277
	$	76,811		86,655

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Loans Receivable and Allowance for Loan Losses (Allowance for Loan Losses and Recorded Investment in Financing Receivables) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended			9 Months Ended		3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended			3 Months Ended	9 Months Ended				3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Sep. 30, 2013 Hospitality Lodging Industry [Member]	Sep. 30, 2013 Property Owners' Associations [Member]	Sep. 30, 2013 Residential Real Estate Loans [Member]	Sep. 30, 2012 Residential Real Estate Loans [Member]	Sep. 30, 2013 Residential Real Estate Loans [Member]	Sep. 30, 2012 Residential Real Estate Loans [Member]	Dec. 31, 2012 Residential Real Estate Loans [Member]	Sep. 30, 2013 Commercial Real Estate Loans [Member]	Sep. 30, 2012 Commercial Real Estate Loans [Member]	Sep. 30, 2013 Commercial Real Estate Loans [Member]	Sep. 30, 2012 Commercial Real Estate Loans [Member]	Dec. 31, 2012 Commercial Real Estate Loans [Member]	Sep. 30, 2013 Construction Real Estate Loans [Member]	Sep. 30, 2012 Construction Real Estate Loans [Member]	Sep. 30, 2013 Construction Real Estate Loans [Member]	Sep. 30, 2012 Construction Real Estate Loans [Member]	Dec. 31, 2012 Construction Real Estate Loans [Member]	Sep. 30, 2012 Commercial Loans [Member]	Sep. 30, 2013 Commercial Loans [Member]	Sep. 30, 2012 Commercial Loans [Member]	Jun. 30, 2013 Commercial Loans [Member]	Dec. 31, 2012 Commercial Loans [Member]	Sep. 30, 2013 Consumer Loans [Member]	Sep. 30, 2012 Consumer Loans [Member]	Sep. 30, 2013 Consumer Loans [Member]	Sep. 30, 2012 Consumer Loans [Member]	Dec. 31, 2012 Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	$ 8,275		$ 8,275		$ 10,556								$ 8,275		$ 8,275		$ 10,246										$ 310
Collectively evaluated for impairment	478,095		478,095		465,604			159,789		159,789		149,773	258,261		258,261		263,439	20,146		20,146		13,435		24,520			24,803	15,379		15,379		14,154
Total Loans	487,464		487,464		477,229	37,400	12,600	160,034		160,034		150,043	267,385		267,385		274,484	20,146		20,146		13,435		24,520			25,113	15,379		15,379		14,154
Beginning balance,	5,749	5,775	5,502	5,458				1,764	1,559	1,797	1,257		3,318	3,691	3,183	3,838		363	87	119	72		263	223	147	147		157	175	180	144
Charge Offs	(605)	(1,350)	(1,969)	(1,794)				(157)	(94)	(547)	(402)		(380)	(1,220)	(1,308)	(1,316)		(40)		(40)	(7)		(23)		(23)			(28)	(13)	(74)	(46)
Recoveries	15	16	26	27				9	5	9	6			1		1												6	10	17	20
Provision for loan losses	400	900	2,000	1,650				49	227	406	836		225	645	1,288	594		85	(12)	329	10		42	(76)	158			41	(2)	53	52
Ending balance,	5,559	5,341	5,559	5,341				1,665	1,697	1,665	1,697		3,163	3,117	3,163	3,117		408	75	408	75		282	147	282	147		176	170	176	170
Ending balance individually evaluated for impairment		89		89										89		89
Loans acquired with deteriorated credit quality	1,094		1,094		1,069			245		245		270	849		849		799
Ending balance collectively evaluated for impairment	5,559	5,252	5,559	5,252				1,665	1,697	1,665	1,697		3,163	3,028	3,163	3,028		408	75	408	75		282	147	282			176	170	176	170
Gross Realized Gains on Loans	0	88	32	163
Gross Realized Losses on Loans	0	0	7	0
Concentration Risk, Percentage						39.50%	13.30%
Proceeds from Sale of Mortgage Loans Held-for-sale	$ 0	$ 2,200	$ 1,634	$ 4,506

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Loans Receivable and Allowance for Loan Losses (Loans Acquired and Accounted for in Accordance with ASC 310-30) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Loans Receivable and Allowance for Loan Losses [Abstract]
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Outstanding Balance	$ 1,121	$ 1,145
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Carrying Amount	$ 1,094	$ 1,069

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Securities (Securities by Contractual Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Securities [Abstract]
Available for Sale, Amortized Cost, Due in one year or less	$ 2,418
Available for Sale, Amortized Cost, Due after one year through five years	13,948
Available for Sale, Amortized Cost, Due after five years through ten years	38,573
Available for Sale, Amortized Cost, Due after ten years	42,423
Available for Sale, Amortized Cost, Mortgage-backed securities- government sponsored agencies	55,628
Available for Sale, Amortized Cost, Total	152,990
Available for Sale, Fair Value, Due in one year or less	2,436
Available for Sale, Fair Value, Due after one year through five years	14,009
Available for Sale, Fair Value, Due after five years through ten years	38,015
Available for Sale, Fair Value, Due after ten years	41,607
Available for Sale, Fair Value, Mortgage-backed securities- government sponsored agencies	54,494
Available for Sale, Fair Value, Total	150,561
Held to Maturity, Amortized Cost, Due in one year or less	174
Held-to-maturity Securities, Total	174	173
Held to Maturity, Fair Value, Due in one year or less	176
Held to Maturity, Fair Value	$ 176	$ 177

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Securities (Gross Realized Gains and Losses on Sales of Securities Available-for-Sale) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Securities [Abstract]
Gross realized gains	$ 198	$ 631	$ 608	$ 1,318
Gross realized losses			(18)
Net realized gain	198	631	590	1,318
Proceeds from sale of securities	$ 14,663	$ 15,549	$ 29,962	$ 23,265

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Off-Balance Sheet Financial Instruments and Guarantees

9 Months Ended

Sep. 30, 2013

Off-Balance Sheet Financial Instruments and Guarantees [Abstract]

Off-Balance Sheet Financial Instruments and Guarantees

5.         Off-Balance Sheet Financial Instruments and Guarantees

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

A summary of the Bank’s financial instrument commitments is as follows:

(in thousands)	September 30,
	2013		2012
Unfunded availability under loan commitments	$	23,223		38,297
Unfunded commitments under lines of credit		46,597		37,081
Standby letters of credit		6,991		11,277
	$	76,811		86,655

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since some of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.  The Bank evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer and generally consists of real estate.

The Bank does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit.  Standby letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Generally, all letters of credit, when issued, have expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers.  The Bank, generally, holds collateral and/or personal guarantees supporting these commitments.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.  The current amount of the liability as of September 30, 2013 for guarantees under standby letters of credit issued is not material.

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Accumulated Other Comprehensive Income (Components of Accumulated Other Comprehensive Income and Accumulated Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Beginning balance			$ 2,797
Other comprehensive loss	(385)	461	(4,369)	305
Ending balance	(1,572)		(1,572)
Unrealized gains on available for sale securities [Member]
Beginning balance	(1,187)		2,797
Other comprehensive loss before reclassification	(255)		(3,980)
Amount reclassified from accumulated other comprehensive income	(130)		(389)
Other comprehensive loss	(385)		(4,369)
Ending balance	$ (1,572)		$ (1,572)

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Loans Receivable and Allowance for Loan Losses (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 264,737	$ 275,911
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	17,371	11,563
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	9,797	12,123
Performing Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	193,608	174,786
Nonperforming Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,951	2,846
Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	291,905	299,597
Total Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	195,559	177,632
Commercial Real Estate Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	240,217	251,484
Commercial Real Estate Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	17,371	11,245
Commercial Real Estate Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	9,797	11,755
Commercial Real Estate Loans [Member] | Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	267,385	274,484
Commercial Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	24,520	24,427
Commercial Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net		318
Commercial Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net		368
Commercial Loans [Member] | Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	24,520	25,113
Residential Real Estate Loans [Member] | Performing Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	158,083	147,197
Residential Real Estate Loans [Member] | Nonperforming Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,951	2,846
Residential Real Estate Loans [Member] | Total Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	160,034	150,043
Construction Real Estate Loans [Member] | Performing Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	20,146	13,435
Construction Real Estate Loans [Member] | Total Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	20,146	13,435
Consumer Loans [Member] | Performing Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	15,379	14,154
Consumer Loans [Member] | Total Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 15,379	$ 14,154

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Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Measurements [Abstract]

Fair Value Measurements

8.         Fair Value Measurements

Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques.  These valuations are significantly affected by discount rates, cash flow assumptions and risk assumptions used.  Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.

Fair value is determined at one point in time and is not representative of future value.  These amounts do not reflect the total value of a going concern organization.  Management does not have the intention to dispose of a significant portion of its assets and liabilities and therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.

The following is a discussion of assets and liabilities measured at fair value on a recurring basis and valuation techniques applied:

Securities:

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) are used to support fair values of certain Level 3 investments, if applicable.

Impaired loans (generally carried at fair value):

The Company measures impairment generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the lowest level of input that is significant to the fair value measurements.

Foreclosed real estate owned (carried at fair value):

Real estate properties acquired through, or in lieu of loan foreclosure are to be sold and are carried at fair value less estimated cost to sell.  Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral.  These assets are included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2013 and December 31, 2012 are as follows:

	Fair Value Measurement Using
	Reporting Date
Description	Total		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
September 30, 2013
Available for Sale:
U.S. Government agencies	$	27,519	$	-	$	27,519	$	-
States and political subdivisions		63,794		-		63,794		-
Corporate obligations		4,754		-		4,754		-
Mortgage-backed securities-government
sponsored agencies		54,494		-		54,494		-
Equity securities-financial services		343		343		-		-
Total	$	150,904	$	343	$	150,561	$	-
December 31, 2012
Available for Sale:
U.S. Government agencies	$	13,092	$	-	$	13,092	$	-
States and political subdivisions		58,786		-		58,786		-
Corporate obligations		8,868		-		8,868		-
Mortgage-backed securities-government						64,325
sponsored agencies		64,325		-				-
Equity securities-financial services		319		319		-		-
Total	$	145,390	$	319	$	145,071	$	-

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2013 and December 31, 2012 are as follows:

			Fair Value Measurement Using Reporting Date
(In thousands)
Description	Total		(Level 1)		(Level 2)		(Level 3)
September 30, 2013
Impaired Loans	$	9,369	$	-	$	-	$	9,369
Foreclosed Real Estate Owned		993		-		-		993
December 31, 2012
Impaired Loans	$	11,616	$	-	$	-	$	11,616
Foreclosed Real Estate Owned		852		-		-		852

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

		Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
September 30, 2013
Impaired loans	$	9,369	Appraisal of collateral(1)	Appraisal adjustments(2)	10%(10.0)%
Foreclosed real estate owned	$	993	Appraisal of collateral(1)	Liquidation Expenses(2)	10%

	Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2012
Impaired loans	$	11,616	Appraisal of collateral(1)	Appraisal adjustments(2)	0-30%(24.10%)
Foreclosed real estate owned	$	852	Appraisal of collateral(1)	Liquidation Expenses(2)	20%

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable, less any associated allowance.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.  The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2013 and December 31, 2012.

Cash and cash equivalents (carried at cost):

The carrying amounts reported in the consolidated balance sheet for cash and short-term instruments approximate those assets’ fair values.

Loans receivable (carried at cost):

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Mortgage servicing rights (generally carried at cost)

The Company utilizes a third party provider to estimate the fair value of certain loan servicing rights.  Fair value for the purpose of this measurement is defined as the amount at which the asset could be exchanged in a current transaction between willing parties, other than in a forced liquidation.

Regulatory stock (carried at cost):

The Bank as a member of the Federal Home Loan Bank (FHLB) system is required to maintain an investment in capital stock of its district FHLB according to a predetermined formula.  This restricted stock has no quoted market value and is carried at cost.

Bank Owned Life Insurance (carried at cost):

The fair value is equal to the cash surrender value of the Bank-owned life insurance.

Accrued interest receivable and payable (carried at cost):

The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.

Deposit liabilities (carried at cost):

The fair values disclosed for demand deposits (e.g. interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings (carried at cost):

The carrying amounts of short-term borrowings approximate their fair values.

Other borrowings (carried at cost):

Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity.  These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-balance sheet financial instruments (disclosed at cost):

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.

The estimated fair values of the Bank’s financial instruments were as follows at September 30, 2013 and December 31, 2012. (In thousands)

	Fair Value Measurements at September 30, 2013
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	27,414	$	27,414	$	27,414	$	-	$	-
Securities		151,078		151,080		343		150,737		-
Loans receivable, net		481,409		490,413		-		-		490,413
Mortgage servicing rights		210		210		-		-		210
Regulatory Stock		2,141		2,141		2,141		-		-
Bank owned life insurance		14,653		14,653		14,653		-		-
Accrued interest receivable		2,373		2,373		2,373		-		-
Financial liabilities:
Deposits		548,698		549,844		346,586		-		203,258
Short-term borrowings		38,466		38,466		38,466		-		-
Other borrowings		19,956		22,155		-		-		22,155
Accrued interest payable		1,075		1,075		1,075		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2012
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	12,295	$	12,295	$	12,295	$	-	$	-
Securities		145,563		145,567		319		145,248		-
Loans receivable, net		471,208		485,848		-		-		485,848
Mortgage servicing rights		243		243		-		243		-
Regulatory stock		2,630		2,630		2,630		-		-
Bank owned life insurance		15,357		15,357		15,357		-		-
Accrued interest receivable		2,393		2,393		2,393		-		-
Financial liabilities:
Deposits		524,425		526,081		313,166		-		212,915
Short-term borrowings		28,697		28,697		28,697		-		-
Other borrowings		22,487		25,426		-		-		25,426
Accrued interest payable		1,242		1,242		1,242		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of  credit		-		-		-		-		-

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Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2013

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

4.Accumulated Other Comprehensive Income

The following table presents the changes in accumulated other comprehensive income (in thousands) by component net of tax for the three months and nine months ended September 30, 2013:

	Unrealized gains on
	available for sale
	securities (a)
Balance as of December 31, 2012	$	2,797
Other comprehensive loss before reclassification		(3,980)
Amount reclassified from accumulated other comprehensive income		(389)
Total other comprehensive loss		(4,369)
Balance as of September 30, 2013	$	(1,572)

	Unrealized gains on
	available for sale
	securities (a)
Balance as of June 30, 2013	$	(1,187)
Other comprehensive loss before reclassification		(255)
Amount reclassified from accumulated other comprehensive income		(130)
Total other comprehensive loss		(385)
Balance as of September 30, 2013	$	(1,572)

(a)  All amounts are net of tax.  Amounts in parentheses indicate debits.

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) (in thousands) for the three months and nine months ended September 30, 2013:

	Amount Reclassified
	From Accumulated			Affected Line Item in
	Other			the Statement Where
	Comprehensive			Net Income is
Details about other comprehensive income	Income (a)			Presented
		Three months	Nine months
		ended	ended
		September 30,	September 30,
		2013	2013
Unrealized gains on available for sale securities	$	198	590	Net realized gains on sales of securities
		(68)	(201)	Income tax expense
	$	130	389	Net of tax

(a)  Amounts in parentheses indicate debits to net income

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Consolidated Statements of Changes in Stockholders' Equity (parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2013
Consolidated Statements of Changes in Stockholders' Equity [Abstract]
Common Stock, Dividends, Per Share, Declared	$ 0.86
Common Stock, Dividend Rate, Percentage	10.00%

XML

Fair Value Measurements and Fair Value of Financial Instruments (Additional Qualitative Information about Level 3 Assets) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 9,369	$ 11,616
Fair Value Measurements, Valuation Techniques	Appraisal of collateral(1)	Appraisal of collateral(1)
Fair Value Disclosure, Unbservable Input Range	Appraisal adjustments(2)	Appraisal adjustments(2)
Impaired Loans [Member] | Minimum [Member] | Unobservable Inputs Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	10.00%	0.00%
Impaired Loans [Member] | Maximum [Member] | Unobservable Inputs Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		30.00%
Impaired Loans [Member] | Weighted Average [Member] | Unobservable Inputs Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	10.00%	24.10%
Foreclosed Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 993	$ 852
Fair Value Measurements, Valuation Techniques	Appraisal of collateral(1)	Appraisal of collateral(1)
Fair Value Disclosure, Unbservable Input Range	Liquidation Expenses(2)	Liquidation Expenses(2)
Foreclosed Real Estate Owned [Member] | Minimum [Member] | Unobservable Inputs - Liquidation Expenses [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	10.00%	20.00%

XML

Securities (Amortized Cost and Fair Values of Securities) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	$ 153,282	$ 141,150
Available-for-sale Securities, Gross Unrealized Gains	1,350	4,446
Available for Sale, Gross Unrealized Losses	(3,728)	(206)
Available for Sale, Fair Value	150,904	145,390
Held to Maturity, Amortized Cost	174	173
Held to Maturity, Fair Value	176	177
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	28,259	13,076
Available-for-sale Securities, Gross Unrealized Gains	5	36
Available for Sale, Gross Unrealized Losses	(745)	(20)
Available for Sale, Fair Value	27,519	13,092
States and political subdivisions [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	64,413	55,864
Available-for-sale Securities, Gross Unrealized Gains	942	2,995
Available for Sale, Gross Unrealized Losses	(1,561)	(73)
Available for Sale, Fair Value	63,794	58,786
Held to Maturity, Amortized Cost	174	173
Held to Maturity, Gross Unrealized Gains	2	4
Held to Maturity, Fair Value	176	177
Corporate obligations [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	4,690	8,521
Available-for-sale Securities, Gross Unrealized Gains	138	347
Available for Sale, Gross Unrealized Losses	(74)
Available for Sale, Fair Value	4,754	8,868
Mortgage-backed securities-government sponsored entities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	55,628	63,397
Available-for-sale Securities, Gross Unrealized Gains	214	1,041
Available for Sale, Gross Unrealized Losses	(1,348)	(113)
Available for Sale, Fair Value	54,494	64,325
Equity securities-financial services [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	292	292
Available-for-sale Securities, Gross Unrealized Gains	51	27
Available for Sale, Fair Value	$ 343	$ 319

XML

Earnings Per Share (Policy)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share, Policy [Policy Text Block]

Basic earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.  Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

XML

Loans Receivable and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2013

Loans Receivable and Allowance for Loan Losses [Abstract]

Loans Receivable and Allowance for Loan Losses

7.Loans Receivable and Allowance for Loan Losses

Set forth below is selected data relating to the composition of the loan portfolio at the dates indicated:

	Types of loans
	(dollars in thousands)
	September 30, 2013			December 31, 2012
Real Estate-Residential	$	160,034	32.8%	$	150,043	31.4%
Commercial		267,385	54.9		274,484	57.5
Construction		20,146	4.1		13,435	2.8
Commercial, financial and agricultural		24,520	5.0		25,113	5.3
Consumer loans to individuals		15,379	3.2		14,154	3.0
Total loans		487,464	100.0%		477,229	100.0%
Deferred fees, net		(496)			(519)
Total loans receivable		486,968			476,710
Allowance for loan losses		(5,559)			(5,502)
Net loans receivable	$	481,409		$	471,208

Changes in the accretable yield for purchased credit-impaired loans were as follows for the nine months ended September 30 (in thousands):

	2013		2012
Balance at beginning of period	$	76	$	171
Accretion		(49)		(71)
Reclassification and other		-		-
Balance at end of period	$	27	$	100

The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 (in thousands):

	September 30, 2013		December 31, 2012
Outstanding Balance	$	1,121	$	1,145
Carrying Amount	$	1,094	$	1,069

There were no material increases or decreases in the expected cash flows of these loans between May 31, 2011 (the “acquisition date”) and September 30, 2013.  There has been no allowance for loan losses recorded for acquired loans with specific evidence of deterioration in credit quality as of May 31, 2011. In addition, there has been no allowance for loan losses on these loans reversed.  For loans that were acquired without specific evidence of deterioration in credit quality, adjustments to the allowance for loan losses have been accounted for through the allowance for loan loss adequacy calculation.

The Company maintains a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans.  Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers.  Specific loan loss allowances are established for identified losses based on a review of such information.  A loan evaluated for impairment is considered to be impaired when, based on current information and events, it is probably that we will be unable to collect all amounts due according to the contractual terms of the loan agreement.  All loans identified as impaired are evaluated independently.  We do not aggregate such loans for evaluation purposes.  Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.  Accordingly, the Company does not separately identify individual consumer and residential mortgage loans for impairment disclosures, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restructuring.

A loan is considered to be a troubled debt restructuring (“TDR”) loan when the Company grants a concession to the borrower because of the borrower’s financial condition that it would not otherwise consider.  Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk. 

The following table shows the amount of loans in each category that were individually and collectively evaluated for impairment at the dates indicated:

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
September 30, 2013	(In thousands)
Individually evaluated for  impairment	$	-	$	8,275	$	-	$	-	$	-	$	8,275
Loans acquired with deteriorated credit    quality		245		849		-		-		-		1,094
Collectively evaluated for impairment		159,789		258,261		20,146		24,520		15,379		478,095
Total Loans	$	160,034	$	267,385	$	20,146	$	24,520	$	15,379	$	487,464

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
	(In thousands)
December 31, 2012
Individually evaluated for impairment	$	-	$	10,246	$	-	$	310	$	-	$	10,556
Loans acquired with deteriorated credit   quality		270		799		-		-		-		1,069
Collectively evaluated for impairment		149,773		263,439		13,435		24,803		14,154		465,604
Total Loans	$	150,043	$	274,484	$	13,435	$	25,113	$	14,154	$	477,229

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable.  Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired.

			Unpaid Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
September 30, 2013				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	245	$	254	$	-
Commercial		9,124		9,141		-
Subtotal		9,369		9,395		-
With an allowance recorded:
Subtotal		-		-		-
Total:
Real Estate Loans
Residential		245		254		-
Commercial		9,124		9,141		-
Total Impaired Loans	$	9,369	$	9,395	$	-

			Unpaid Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2012				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	270	$	286	$	-
Commercial		10,494		10,554		-
Commercial Loans		310		310		-
Subtotal		11,074		11,150		-
With an allowance recorded:
Real Estate Loans
Commercial		551		551		9
Subtotal		551		551		9
Total:
Real Estate Loans
Residential		270		286		-
Commercial		11,045		11,105		9
Commercial Loans		310		310		-
Total Impaired Loans	$	11,625	$	11,701	$	9

The following information for impaired loans is presented (in thousands) for the nine months ended September 30, 2013 and 2012:

	Average Recorded				Interest Income
	Investment				Recognized
	2013		2012		2013		2012
Total:
Real Estate Loans
Residential	$	255	$	284	$	4	$	4
Commercial		10,120		12,937		47		206
Commercial Loans		-		401		-		-
Total Loans	$	10,375	$	13,622	$	51	$	210

The following information for impaired loans is presented (in thousands) for the three months ended September 30, 2013 and 2012:

	Average Recorded				Interest Income
	Investment				Recognized
	2013		2012		2013		2012
Total:
Real Estate Loans
Residential	$	245	$	275	$	2	$	1
Commercial		9,124		13,536		30		71
Commercial Loans		-		385		-		-
Total Loans	$	9,369	$	14,916	$	32	$	72

Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of financial difficulties experienced by the borrower, who could not obtain comparable terms from alternate financing sources.  As of September 30, 2013, troubled debt restructured loans totaled$7.7million and had no specific reserves. During 2013, four loans with a balance of $3.4 million were classified as a troubled debt restructuring.  One credit in the amount of $1.2 million resulted in a decrease in the borrower’s debt but the remaining balance was classified as troubled debt since it would be unlikely that the borrower could obtain comparable financing elsewhere.Three credits in the amount of $2.2 million  were classified as troubled debt restructurings based on extended periods of principal deferrals on the loans.  As of December 31, 2012, troubled debt restructured loans totaled $5.6 million and resulted in specific reserves of $9,000.  For the period ended September 30, 2013, there were no loans identified as troubled debt restructurings that subsequently defaulted during the period. For the period ended September 30, 2012, there were no new loans identified as troubled debt restructurings, nor were there any loan modifications classified as troubled debt restructurings that subsequently defaulted during the period.

The following is a summary of troubled debt restructurings granted during the three and nine month periods ended September 30, 2013 (dollars in thousands):

	For the Three Months Ended September 30, 2013
			Pre-Modification		Post-Modification
			Outstanding Recorded		Outstanding Recorded
	Number of Contracts		Investment		Investment
Troubled Debt Restructurings
Real Estate Loans:
Commercial	3	$	2,165	$	2,165

	For the Nine Months Ended September 30, 2013
			Pre-Modification		Post-Modification
			Outstanding Recorded		Outstanding Recorded
	Number of Contracts		Investment		Investment
Troubled Debt Restructurings
Real Estate Loans:
Commercial	4	$	3,424	$	3,424

Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio.  The first four categories are considered not criticized, and are aggregated as “Pass” rated.  The criticized rating categories utilized by management generally follow bank regulatory definitions.  The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification.  Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected.  All loans greater than 90 days past due are considered Substandard.  Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as non performance, repossession, or death occurs to raise awareness of a possible credit event.  The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis.  Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration.  Loan Review also annually reviews relationships of $500,000 and over to assign or re-affirm risk ratings.  Loans in the Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of  September 30, 2013 and December 31, 2012 (in thousands):

			Special					Doubtful
	Pass		Mention		Substandard		and Loss		Total
September 30, 2013
Commercial real estate loans	$	240,217	$	17,371	$	9,797	$	-	$	267,385
Commercial loans		24,520		-		-		-		24,520
Total	$	264,737	$	17,371	$	9,797	$	-	$	291,905

			Special					Doubtful
	Pass		Mention		Substandard		and Loss		Total
December 31, 2012
Commercial real estate loans	$	251,484	$	11,245	$	11,755	$	-	$	274,484
Commercial loans		24,427		318		368		-		25,113
Total	$	275,911	$	11,563	$	12,123	$	-	$	299,597

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits.  The following table presents the recorded investment in the loan classes based on payment activity as of September 30, 2013 and December 31, 2012 (in thousands):

	Performing		Nonperforming		Total
September 30, 2013
Residential real estate loans	$	158,083	$	1,951	$	160,034
Construction		20,146		-		20,146
Consumer loans		15,379		-		15,379
Total	$	193,608	$	1,951	$	195,559

	Performing		Nonperforming		Total
December 31, 2012
Residential real estate loans	$	147,197	$	2,846	$	150,043
Construction		13,435		-		13,435
Consumer loans		14,154		-		14,154
Total	$	174,786	$	2,846	$	177,632

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.  The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of September 30, 2013 and December 31, 2012 (in thousands):

	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing		Non-Accrual		Total Past Due and Non-Accrual		Total Loans
September 30, 2013
Real Estate loans
Residential	$	157,035	$	1,038	$	10	$	-	$	1,951	$	2,999	$	160,034
Commercial		254,215		2,038		2,798		-		8,334		13,170		267,385
Construction		20,146		-		-		-		-		-		20,146
Commercial  loans		24,490		30		-		-		-		30		24,520
Consumer  loans		15,336		43		-		-		-		43		15,379
Total	$	471,222	$	3,149	$	2,808	$	-	$	10,285	$	16,242	$	487,464

	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing		Non-Accrual		Total Past Due and Non-Accrual		Total Loans
December 31, 2012
Real Estate loans
Residential	$	146,847	$	94	$	256	$	-	$	2,846	$	3,196	$	150,043
Commercial		261,527		2,333		598		-		10,026		12,957		274,484
Construction		13,363		72		-		-		-		72		13,435
Commercial  loans		24,785		-		-		-		328		328		25,113
Consumer  loans		14,029		114		11		-		-		125		14,154
Total	$	460,551	$	2,613	$	865	$	-	$	13,200	$	16,678	$	477,229

The following table presents the allowance for loan losses by the classes of the loan portfolio:

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2012	$	1,797	$	3,183	$	119	$	223	$	180	$	5,502
Charge Offs		(547)		(1,308)		(40)		-		(74)		(1,969)
Recoveries		9		-		-		-		17		26
Provision Expense		406		1,288		329		(76)		53		2,000
Ending balance, September 30, 2013	$	1,665	$	3,163	$	408	$	147	$	176	$	5,559
Ending balance individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-
Ending balance collectively evaluated for impairment	$	1,665	$	3,163	$	408	$	147	$	176	$	5,559

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2013	$	1,764	$	3,318	$	363	$	147	$	157	$	5,749
Charge Offs		(157)		(380)		(40)		-		(28)		(605)
Recoveries		9		-		-		-		6		15
Provision Expense		49		225		85		-		41		400
Ending balance, September 30, 2013	$	1,665		3,163		408		147		176	$	5,559

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2011	$	1,257	$	3,838	$	72	$	147	$	144	$	5,458
Charge Offs		(402)		(1,316)		(7)		(23)		(46)		(1,794)
Recoveries		6		1		-		-		20		27
Provision Expense		836		594		10		158		52		1,650
Ending balance, September 30, 2012	$	1,697	$	3,117	$	75	$	282	$	170	$	5,341
Ending balance individually evaluated for impairment	$	-	$	89	$	-	$	-	$	-	$	89
Ending balance collectively evaluated for impairment	$	1,697	$	3,028	$	75	$	282	$	170	$	5,252

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2012	$	1,559	$	3,691	$	87	$	263	$	175	$	5,775
Charge Offs		(94)		(1,220)		-		(23)		(13)		(1,350)
Recoveries		5		1		-		-		10		16
Provision Expense		227		645		(12)		42		(2)		900
Ending balance, September 30, 2012	$	1,697	$	3,117	$	75	$	282	$	170	$	5,341

The Company’s primary business activity is with customers located in northeastern Pennsylvania. Accordingly, the Company has extended credit primarily to commercial entities and individuals in this area whose ability to honor their contracts is influenced by the region’s economy.

As of September 30, 2013, the Company considered its concentration of credit risk to be acceptable.  The highest concentrations are in the hospitality lodging industry and property owners associations with loans outstanding of $37.4 million, or39.5% of capital, to the hospitality lodging industry and$12.6 million, or 13.3% of capital, to property owners associations. There were no losses recognized on loans within these concentrations during the current period.

Gross realized gains and gross realized losses on sales of residential mortgage loans were $32,000 and $7,000, respectively, in the first nine months of 2013 compared to $163,000 and $0, respectively, in the same period in 2012.  The proceeds from the sales of residential mortgage loans totaled $1.6 million and $4.5 million for the nine months ended September 30, 2013 and 2012, respectively.

Gross realized gains and gross realized losses on sales of residential mortgage loans were $0 and $0 respectively, for the three months ended September 30, 2013 compared to $88,000 and $0, respectively, in the same period in 2012.  The proceeds from the sales of residential mortgage loans totaled $0 and $2.2 million for the three months ended September 30, 2013 and 2012, respectively.

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Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2013

Accumulated Other Comprehensive Income [Abstract]

Components of Accumulated Other Comprehensive Income [Table Text Block]

	Unrealized gains on
	available for sale
	securities (a)
Balance as of December 31, 2012	$	2,797
Other comprehensive loss before reclassification		(3,980)
Amount reclassified from accumulated other comprehensive income		(389)
Total other comprehensive loss		(4,369)
Balance as of September 30, 2013	$	(1,572)

	Unrealized gains on
	available for sale
	securities (a)
Balance as of June 30, 2013	$	(1,187)
Other comprehensive loss before reclassification		(255)
Amount reclassified from accumulated other comprehensive income		(130)
Total other comprehensive loss		(385)
Balance as of September 30, 2013	$	(1,572)

Items Reclassified Out of Each Component of OCI [Table Text Block]

	Amount Reclassified
	From Accumulated			Affected Line Item in
	Other			the Statement Where
	Comprehensive			Net Income is
Details about other comprehensive income	Income (a)			Presented
		Three months	Nine months
		ended	ended
		September 30,	September 30,
		2013	2013
Unrealized gains on available for sale securities	$	198	590	Net realized gains on sales of securities
		(68)	(201)	Income tax expense
	$	130	389	Net of tax

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Table Text Block]

(in thousands)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Basic EPS weighted average shares outstanding	3,626	3,606	3,624	3,607
Dilutive effect of stock options	12	9	13	5
Diluted EPS weighted average shares outstanding	3,638	3,615	3,637	3,612

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 01, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Entity Registrant Name	NORWOOD FINANCIAL CORP
Entity Central Index Key	0001013272
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		3,627,469
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Stock-Based Compensation [Abstract]

Summary of Stock Option Activity [Table Text Block]

		Weighted
		Average Exercise		Weighted Average		Aggregate
		Price		Remaining		Intrinsic Value
	Options	Per Share		Contractual Term		($000)
Outstanding at January 1, 2013	225,670	$	26.39	6.1	Yrs.	$	256
Granted	1,100		27.55	9.2	Yrs.		-
Exercised	(12,933)		24.77	4.2	Yrs.		-
Forfeited	(7,825)		29.33	4.7	Yrs.		-
Outstanding at September 30, 2013	206,012	$	26.39	5.5	Yrs.	$	527
Exercisable at September 30, 2013	176,862	$	26.28	4.8	Yrs.	$	472