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, 2016

OR

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

For the transition period from to                  

Commission file number    0-28364

Norwood Financial Corp.

(Exact name of registrant as specified in its charter)

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

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

Registrant's telephone number, including area code (570) 253-1455

N/A

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 October 31, 2016
Common stock, par value $0.10 per share	4,125,576

1

NORWOOD FINANCIAL CORP.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2016

		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	36
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4.	Controls and Procedures	52
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
Signatures		55

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,
		2016		2015
ASSETS
Cash and due from banks	$	19,404	$	9,744
Interest bearing deposits with banks		13,729		266
Cash and cash equivalents		33,133		10,010
Securities available for sale, at fair value		310,126		138,851
Loans receivable		706,199		559,925
Less:  Allowance for loan losses		6,164		7,298
Net loans receivable		700,035		552,627
Regulatory stock, at cost		2,351		3,412
Bank premises and equipment, net		13,617		6,472
Bank owned life insurance		35,889		18,820
Accrued interest receivable		3,541		2,363
Foreclosed real estate owned		5,386		2,847
Goodwill		11,679		9,715
Other intangibles		652		285
Deferred tax asset		5,560		3,669
Other assets		3,088		1,434
TOTAL ASSETS	$	1,125,057	$	750,505
LIABILITIES
Deposits:
Non-interest bearing demand	$	200,481	$	107,814
Interest-bearing		721,763		443,095
Total deposits		922,244		550,909
Short-term borrowings		33,156		53,235
Other borrowings		34,294		41,126
Junior subordinated debentures		8,248		-
Accrued interest payable		1,040		957
Other liabilities		10,375		3,280
TOTAL LIABILITIES		1,009,357		649,507
STOCKHOLDERS' EQUITY
Common stock, $.10 par value per share,
authorized 10,000,000 shares; issued 2016: 4,156,273 shares, 2015: 3,724,668 shares		416		373
Surplus		47,576		35,351
Retained earnings		66,210		65,412
Treasury stock at cost: 2016: 32,797 shares,
2015: 23,311 shares		(908)		(626)
Accumulated other comprehensive income		2,406		488
TOTAL STOCKHOLDERS' EQUITY		115,700		100,998
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,125,057	$	750,505

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,
	2016		2015		2016		2015
INTEREST INCOME
Loans receivable, including fees	$	7,267	$	5,958	$	19,752	$	17,943
Securities		1,239		911		3,008		2,884
Other		22		3		28		15
Total interest income		8,528		6,872		22,788		20,842
INTEREST EXPENSE
Deposits		677		611		1,838		1,833
Short-term borrowings		65		19		142		47
Other borrowings		216		189		669		553
Total interest expense		958		819		2,649		2,433
NET INTEREST INCOME		7,570		6,053		20,139		18,409
PROVISION FOR LOAN LOSSES		450		720		1,600		1,760
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		7,120		5,333		18,539		16,649
OTHER INCOME
Service charges and fees		829		592		2,000		1,776
Income from fiduciary activities		126		126		342		341
Net realized gains on sales of securities		-		63		269		508
Gains on sale of loans and servicing rights, net		-		16		54		56
Earnings and proceeds on bank owned life insurance		283		167		616		497
Other		161		107		408		305
Total other income		1,399		1,071		3,689		3,483
OTHER EXPENSES
Salaries and employee benefits		3,070		2,175		7,620		6,383
Occupancy, furniture & equipment, net		755		473		1,736		1,571
Data processing		423		247		949		682
Taxes, other than income		205		175		535		525
Professional fees		185		140		516		447
Federal Deposit Insurance Corporation insurance		170		119		402		278
Foreclosed real estate owned		119		47		582		436
Amortization of intangibles		34		24		81		80
Merger related		1,659		-		1,664		-
Other		1,059		670		2,471		2,023
Total other expenses		7,679		4,070		16,556		12,425
INCOME BEFORE INCOME TAXES		840		2,334		5,672		7,707
INCOME TAX EXPENSE		228		557		1,307		1,926
NET INCOME	$	612	$	1,777	$	4,365	$	5,781
BASIC EARNINGS PER SHARE	$	0.15	$	0.48	$	1.16	$	1.57
DILUTED EARNINGS PER SHARE	$	0.15	$	0.48	$	1.15	$	1.57

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
		September 30,
		2016		2015
Net income	$	612	$	1,777
Other comprehensive income (loss):
Investment securities available for sale:
Unrealized holding gain (loss)		(653)		1,938
Tax effect		221		(654)
Reclassification of gains recognized in net income		-		(63)
Tax effect		-		22
Other comprehensive income (loss)		(432)		1,243
Comprehensive Income	$	180	$	3,020

		Nine Months Ended
		September 30,
		2016		2015
Net income	$	4,365	$	5,781
Other comprehensive income:
Investment securities available for sale:
Unrealized holding gain		3,176		890
Tax effect		(1,080)		(296)
Reclassification of gains recognized in net income		(269)		(508)
Tax effect		91		173
Other comprehensive income		1,918		259
Comprehensive Income	$	6,283	$	6,040

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, 2016

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

													Accumulated
													Other
	Common Stock						Retained		Treasury Stock				Comprehensive
	Shares		Amount		Surplus		Earnings		Shares		Amount		Income		Total
Balance, December 31, 2015		3,724,668	$	373	$	35,351	$	65,412		23,311	$	(626)	$	488	$	100,998
Net Income								4,365								4,365
Other comprehensive income														1,918		1,918
Cash dividends declared ($.93 per share)								(3,567)								(3,567)
Compensation expense related to restricted stock						67										67
Acquisition of  treasury  stock										15,538		(447)				(447)
Stock options exercised						(5)				(6,052)		165				160
Tax benefit of stock options						3										3
Compensation expense related to stock options						53										53
Delaware Bancshares acquisition		431,605		43		12,107										12,150
Balance, September 30, 2016		4,156,273	$	416	$	47,576	$	66,210		32,797	$	(908)	$	2,406	$	115,700

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,
	2016		2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	4,365	$	5,781
Adjustments to reconcile net income to net cash provided by operating  activities:
Provision for loan losses		1,600		1,760
Depreciation		484		414
Amortization of intangible assets		81		80
Deferred income taxes		155		184
Net amortization of securities premiums and discounts		1,039		711
Net realized gain on sales of securities		(269)		(508)
Earnings and proceeds on bank owned life insurance		(616)		(497)
Loss on sales of fixed assets and foreclosed real estate owned		2		271
Gain on sale of mortgage loans		(54)		(56)
Mortgage loans originated for sale		(1,685)		(2,605)
Proceeds from sale of mortgage loans originated for sale		1,739		2,661
Compensation expense related to stock options		53		49
Compensation expense related to restricted stock		67		49
Decrease (increase) in accrued interest receivable and other assets		1,894		(609)
(Decrease) increase in accrued interest payable and other liabilities		(920)		531
Net cash provided by operating activities		7,935		8,216
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales		101,804		28,850
Proceeds from maturities and principal reductions on mortgage-backed securities		18,083		19,408
Purchases		(80,538)		(44,987)
Purchase of regulatory stock		(2,675)		(1,830)
Redemption of regulatory stock		4,015		1,056
Net increase in loans		(35,325)		(44,592)
Proceeds from bank-owned life insurance		205		-
Purchase of bank-owned life insurance		(2,000)		-
Purchase of premises and equipment		(337)		(184)
Proceeds from sales of fixed assets and foreclosed real estate owned		387		2,378
Acquisition, net of cash and cash equivalents acquired		11,112		-
Net cash provided by (used in) investing activities		14,731		(39,901)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		44,072		11,409
Net (decrease)  increase in short-term borrowings		(21,456)		15,851
Repayments of other borrowings		(18,439)		(9,038)
Proceeds from other borrowings		-		16,000
Stock options exercised		160		310
Tax benefit of stock options exercised		3		14
Purchase of treasury stock		(447)		(135)
Cash dividends paid		(3,436)		(3,386)
Net cash  provided by financing activities		457		31,025
Increase (decrease) in cash and cash equivalents		23,123		(660)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		10,010		12,376
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	33,133	$	11,716

See accompanying notes to the unaudited consolidated financial statements.

7

NORWOOD FINANCIAL CORP.

Consolidated Statements of Cash Flows (Unaudited) (continued)

(dollars in thousands)
	Nine Months Ended September 30,
	2016		2015
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest on deposits and borrowings	$	2,566	$	2,403
Income taxes paid, net of refunds	$	1,135	$	1,881
Supplemental Schedule of Noncash Investing Activities
Transfers of loans to foreclosed real estate and repossession of other assets	$	2,953	$	290
Cash dividends declared	$	1,278	$	1,142
Merger with Delaware Bancshares, Inc.
Noncash assets acquired:
Securities available-for-sale	$	208,488
Regulatory stock		279
Loans		116,674
Premises and equipment, net		7,292
Accrued interest receivable		1,626
Bank-owned life insurance		14,762
Core deposit intangible		449
Deferred tax assets		3,034
Other assets		2,934
Goodwill		1,964
	$	357,502
Liabilities assumed:
Time deposits	$	71,342
Deposits other than time deposits		255,921
Borrowings		21,232
Accrued interest payable		95
Other liabilities		7,873
		356,463
Net Noncash Assets Acquired		1,039
Cash Acquired	$	14,977

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, Inc.   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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 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, 2015.

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 reflect 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.

(in thousands)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Weighted average shares outstanding	3,978	3,683	3,790	3,681
Less: Unvested restricted shares	(14)	(9)	(14)	(9)
Basic EPS weighted average shares outstanding	3,964	3,674	3,776	3,672
Basic EPS weighted average shares outstanding	3,964	3,683	3,776	3,681
Add:  Dilutive effect of stock options	9	9	9	10
Diluted EPS weighted average shares outstanding	3,973	3,692	3,785	3,691

Stock options with a strike price of $29.08 which had no intrinsic value, because their effect would be anti-dilutive and therefore would not be included in the diluted EPS calculation, were 11,000 as of September

9

30, 2016 based upon the closing price of Norwood common stock of $29.07 per share on September 30, 2016.  At September 30, 2015, there were 12,000 anti-dilutive shares based on Norwood's closing price of $29.00 per share.

3.         Stock-Based Compensation

No awards were granted during the nine-month period ending September 30, 2016. As of September 30, 2016, there was $18,000 of total unrecognized compensation cost related to non-vested options granted in 2015 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2016. Compensation costs related to stock options amounted to $53,000 and $49,000 during the nine-month periods ended September 30, 2016 and 2015, respectively.

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, 2016	194,521	$	26.91	5.2	Yrs.	$	363
Granted	-		-	-			-
Exercised	(6,052)		26.37	4.1			-
Forfeited	(16,019)		27.71	0.5			-
Outstanding at September 30, 2016	172,450	$	26.85	4.9	Yrs.	$	383
Exercisable at September 30, 2016	157,950	$	26.70	4.5	Yrs.	$	375

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 $29.07 as of September 30, 2016 and $28.75 as of December 31, 2015.

A summary of the Company's restricted stock activity and related information for the nine-month period ended September 30, 2016 is as follows:

			Weighted-Average
	Number of		Grant Date
	Restricted Stock		Fair Value
Outstanding, January 1,	13,810	$	28.82
Granted	-		-
Vested	-		-
Forfeited	-		-
Non-vested at September 30,	13,810	$	28.82

The expected future compensation expense relating to the 13,810 shares of non-vested restricted stock outstanding as of September 30, 2016 is $331,000.  This cost will be recognized over the remaining vesting period of 4.25 years.  Compensation costs related to restricted stock amounted to $67,000 and $41,000 during the nine-month periods ended September 30, 2016 and 2015, respectively.

10

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, 2016 and 2015:

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  June 30, 2016	$	2,838
Other comprehensive loss before reclassification		(432)
Amount reclassified from accumulated other comprehensive income		-
Total other comprehensive loss		(432)
Balance as of September 30, 2016	$	2,406
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  June 30, 2015	$	(522)
Other comprehensive income before reclassification		1,284
Amount reclassified from accumulated other comprehensive income		(41)
Total other comprehensive income		1,243
Balance as of September 30, 2015	$	721
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2015	$	488
Other comprehensive income before reclassification		2,096
Amount reclassified from accumulated other comprehensive income		(178)
Total other comprehensive income		1,918
Balance as of September 30, 2016	$	2,406
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  December 31, 2014	$	462
Other comprehensive income before reclassification		594
Amount reclassified from accumulated other comprehensive income		(335)
Total other comprehensive income		259
Balance as of September 30, 2015	$	721

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

11

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (in thousands) for the three months and nine months ended September 30, 2016 and 2015:

	Amount Reclassified
	From Accumulated				Affected Line Item in
	Other				Consolidated
	Comprehensive				Statements
Details about other comprehensive income	Income (a)				of Income
		Three months ended
		September 30,
		2016		2015
Unrealized gains on available for sale securities	$	-	$	63	Net realized gains on sales of securities
		-		(22)	Income tax expense
	$	-	$	41
		Nine months ended
		September 30,
		2016		2015
Unrealized gains on available for sale securities	$	269	$	508	Net realized gains on sales of securities
		(91)		(173)	Income tax expense
	$	178	$	335

(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.

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

(in thousands)	September 30,
	2016		2015
Commitments to grant loans	$	21,764	$	21,279
Unfunded commitments under lines of credit		62,599		51,489
Standby letters of credit		5,642		5,504
	$	90,005	$	78,272

12

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, 2016 for guarantees under standby letters of credit issued is not material.

6.         Securities

The amortized cost, gross unrealized gains and losses, and fair value of securities were as follows:

	September 30, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Treasury securities	$	2,006	$	-	$	(2)	$	2,004
U.S. Government agencies		2,001		-		-		2,001
States and political subdivisions		127,694		3,050		(172)		130,572
Corporate obligations		10,301		101		(17)		10,385
Mortgage-backed securities-
government sponsored entities		164,158		845		(223)		164,780
Total debt securities		306,160		3,996		(414)		309,742
Equity securities-financial services		320		64		-		384
	$	306,480	$	4,060	$	(414)	$	310,126

13

	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Government agencies	$	9,275	$	2	$	(108)	$	9,169
States and political subdivisions		59,120		1,747		(112)		60,755
Corporate obligations		4,933		45		(4)		4,974
Mortgage-backed securities-government
sponsored entities		64,491		23		(945)		63,569
Total debt securities		137,819		1,817		(1,169)		138,467
Equity securities-financial services		292		92		-		384
	$	138,111	$	1,909	$	(1,169)	$	138,851

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, 2016
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	2,004	$	(2)	$	-	$	-	$	2,004	$	(2)
States and political subdivisions		33,918		(170)		210		(2)		34,128		(172)
Corporate obligations		3,312		(17)		-		-		3,312		(17)
Mortgage-backed securities-government sponsored entities		49,341		(156)		9,885		(67)		59,226		(223)
	$	88,575	$	(345)	$	10,095	$	(69)	$	98,670	$	(414)

	December 31, 2015
	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	$	6,058	$	(71)	$	2,109	$	(37)	$	8,167	$	(108)
States and political subdivisions		9,086		(99)		1,417		(13)		10,503		(112)
Corporate obligations		2,221		(4)		-		-		2,221		(4)
Mortgage-backed securities-government sponsored entities		40,300		(432)		16,595		(513)		56,895		(945)
	$	57,665	$	(606)	$	20,121	$	(563)	$	77,786	$	(1,169)

14

At September 30, 2016, the Company has 76 debt securities in an unrealized loss position in the less than twelve months category and 11 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 2016.  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, 2016 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
	Amortized Cost		Fair Value
		(In Thousands)
Due in one year or less	$	983	$	991
Due after one year through five years		20,978		21,097
Due after five years through ten years		53,744		54,044
Due after ten years		66,297		68,830
Mortgage-backed securities-government sponsored agencies		164,158		164,780
	$	306,160	$	309,742

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,
	2016		2015		2016		2015
Gross realized gains	$	-	$	63	$	269	$	508
Gross realized losses		-		-		-		-
Net realized gain	$	-	$	63	$	269	$	508
Proceeds from sales of securities	$	70,028	$	5,466	$	101,804	$	28,850

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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, 2016				December 31, 2015
Real Estate Loans:
Residential	$	237,897	33.7	%	$	161,820	28.9	%
Commercial		315,270	44.6			279,123	49.8
Construction		20,056	2.8			18,987	3.4
Commercial, financial and agricultural		85,145	12.1			71,090	12.7
Consumer loans to individuals		48,225	6.8			29,231	5.2
Total loans		706,593	100.0	%		560,251	100.0	%
Deferred fees, net		(394)				(326)
Total loans receivable		706,199				559,925
Allowance for loan losses		(6,164)				(7,298)
Net loans receivable	$	700,035			$	552,627

The following table presents the components of the purchase accounting adjustments related to the purchased impaired loans acquired:

(In Thousands)
Contractually required principal and interest	$	2,621
Non-accretable discount		(1,014)
Expected cash flows		1,607
Accretable discount		(239)
Estimated fair value	$	1,368

Changes in the amortizable yield for purchased credit-impaired loans were as follows for the nine month periods ended September 30:

	2016		2015
Balance at beginning of period	$	-	$	8
Additions		239		-
Accretion		(12)		(1)
Reclassification and other		-		-
Balance at end of period	$	227	$	7

16

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

	September 30, 2016		December 31, 2015
Outstanding Balance	$	1,855	$	498
Carrying Amount	$	1,368	$	498

As a result of the acquisition of Delaware, the Company added $1,397,000 of loans that were accounted for in accordance with ASC 310-30.  Based on a review of the loans acquired by senior lending management, which included an analysis of credit deterioration of the loans since origination, the Company recorded a specific credit fair value adjustment of $499,000.  For loans that were acquired with specific evidence of deterioration in credit quality, loan losses will be accounted for through a reduction of the specific reserve and will not impact the allowance for loan losses until actual losses exceed the allotted reserves.  For loans acquired without a deterioration of credit quality, losses incurred will result in adjustments to the allowance for loan losses through the allowance for loan loss adequacy calculation.  As of September 30, 2016, the outstanding balance of ASC 310-30 loans acquired from Delaware was $1,410,000 and the carrying value was $911,000, while one loan with an outstanding balance and carrying value of $445,000 remained from a prior acquisition.

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 probable 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.

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate owned on the Consolidated Balance Sheets.  As of September 30, 2016 and December 31, 2015, foreclosed real estate owned totaled $5,386,000 and $2,847,000, respectively.  As of September 30, 2016, included within foreclosed real estate owned is $306,000 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end.  As of September 30, 2016, the Company has initiated formal foreclosure proceedings on $222,000 of consumer residential mortgages.

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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, 2016	(In thousands)
Individually evaluated for impairment	$	24	$	2,791	$	-	$	-	$	-	$	2,815
Loans acquired with deteriorated credit quality		797		571		-		-		-		1,368
Collectively evaluated for impairment		237,076		311,908		20,056		85,145		48,225		702,410
Total Loans	$	237,897	$	315,270	$	20,056	$	85,145	$	48,225	$	706,593

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
	(In thousands)
December 31, 2015
Individually evaluated for impairment	$	28	$	8,660	$	-	$	43	$	-	$	8,731
Loans acquired with deteriorated credit quality		140		358		-		-		-		498
Collectively evaluated for impairment		161,652		270,105		18,987		71,047		29,231		551,022
Total Loans	$	161,820	$	279,123	$	18,987	$	71,090	$	29,231	$	560,251

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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
	Recorded		Principal		Associated
	Investment		Balance		Allowance
September 30, 2016				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	1,003	$	1,189	$	-
Commercial		3,349		4,267		-
Subtotal		4,352		5,456		-
With an allowance recorded:
Real Estate Loans
Commercial		74		1,020		15
Subtotal		74		1,020		15
Total:
Real Estate Loans
Residential		1,003		1,189		-
Commercial		3,423		5,287		15
Total Impaired Loans	$	4,426	$	6,476	$	15

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2015				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	168	$	173	$	-
Commercial		2,644		4,610		-
Commercial, financial and agriculture		43		43		-
Subtotal		2,855		4,826		-
With an allowance recorded:
Real Estate Loans
Commercial		6,373		6,446		1,613
Subtotal		6,373		6,446		1,613
Total:
Real Estate Loans
Residential		168		173		-
Commercial		9,017		11,056		1,613
Commercial, financial and agriculture		43		43		-
Total Impaired Loans	$	9,228	$	11,272	$	1,613

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The following information for impaired loans is presented (in thousands) for the nine months ended September 30, 2016 and 2015:

	Average Recorded				Interest Income
	Investment				Recognized
	2016		2015		2016		2015
Real Estate Loans:
Residential	$	372	$	236	$	3	$	3
Commercial		3,249		10,477		90		510
Total	$	3,621	$	10,713	$	93	$	513

The following information for impaired loans is presented (in thousands) for the three months ended September 30, 2016 and 2015:

	Average Recorded				Interest Income
	Investment				Recognized
	2016		2015		2016		2015
Real Estate Loans:
Residential	$	579	$	249	$	1	$	1
Commercial		3,253		10,294		33		45
Total	$	3,832	$	10,543	$	34	$	46

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, 2016, troubled debt restructured loans totaled $1.6 million and resulted in specific reserves of $15,000.  As of December 31, 2015, troubled debt restructured loans totaled $6.8 million and resulted in specific reserves of $1,613,000.  For the period ended September 30, 2016, there were no new loans identified as troubled debt restructurings.  During 2016, the Company has recognized write-downs of $2,519,000 on loans that were previously identified as troubled debt restructurings.

 For the period ended September 30, 2015, there were no new loans identified as troubled debt restructurings. During the 2015 period, the Company recognized write-downs in the amount of $439,000 on three loans previously identified as troubled debt restructures with a carrying value of $2.5 million as of September 30, 2015.

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

20

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 $1,000,000 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.

As 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, 2016 and December 31, 2015 (in thousands):

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
September 30, 2016
Commercial real estate loans	$	306,177	$	4,442	$	4,651	$	-	$	315,270
Commercial loans		85,087		35		23		-		85,145
Total	$	391,264	$	4,477	$	4,674	$	-	$	400,415

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
December 31, 2015
Commercial real estate loans	$	267,892	$	1,837	$	9,394	$	-	$	279,123
Commercial loans		71,047		-		43		-		71,090
Total	$	338,939	$	1,837	$	9,437	$	-	$	350,213

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, 2016 and December 31, 2015 (in thousands):

	Performing		Nonperforming		Total
September 30, 2016
Residential real estate loans	$	236,711	$	1,186	$	237,897
Construction		20,028		28		20,056
Consumer loans		48,225		-		48,225
Total	$	304,964	$	1,214	$	306,178

	Performing		Nonperforming		Total
December 31, 2015
Residential real estate loans	$	161,380	$	440	$	161,820
Construction		18,987		-		18,987
Consumer loans		29,231		-		29,231
Total	$	209,598	$	440	$	210,038

21

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, 2016 and December 31, 2015 (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, 2016
Real Estate loans
Residential	$	234,857	$	1,548	$	306	$	-	$	1,186	$	3,040	$	237,897
Commercial		313,916		198		131		49		976		1,354		315,270
Construction		20,028		-		-		-		28		28		20,056
Commercial  loans		85,083		62		-		-		-		62		85,145
Consumer  loans		48,118		96		11		-		-		107		48,225
Total	$	702,002	$	1,904	$	448	$	49	$	2,190	$	4,591	$	706,593

	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, 2015
Real Estate loans
Residential	$	160,683	$	646	$	51	$	-	$	440	$	1,137	$	161,820
Commercial		272,125		310		39		-		6,649		6,998		279,123
Construction		18,959		28		-		-		-		28		18,987
Commercial  loans		71,043		4		-		-		43		47		71,090
Consumer  loans		29,179		41		11		-		-		52		29,231
Total	$	551,989	$	1,029	$	101	$	-	$	7,132	$	8,262	$	560,251

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for loan losses.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off  against the allowance.  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, 2015	$	1,069	$	5,506	$	90	$	397	$	236	$	7,298
Charge Offs		(32)		(2,670)		-		(15)		(71)		(2,788)
Recoveries		4		11		-		-		39		54
Provision for loan losses		15		1,516		(12)		(46)		127		1,600
Ending balance, September 30, 2016	$	1,056	$	4,363	$	78	$	336	$	331	$	6,164
Ending balance individually evaluated for impairment	$	-	$	15	$	-	$	-	$	-	$	15
Ending balance collectively evaluated for impairment	$	1,056	$	4,348	$	78	$	336	$	331	$	6,149

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(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2016	$	976	$	4,191	$	59	$	293	$	279	$	5,798
Charge Offs		(15)		(28)		-		(15)		(41)		(99)
Recoveries		2		9		-		-		4		15
Provision for loan losses		93		191		19		58		89		450
Ending balance, September 30, 2016	$	1,056	$	4,363	$	78	$	336	$	331	$	6,164

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2014	$	1,323	$	3,890	$	222	$	256	$	184	$	5,875
Charge Offs		(159)		(1,692)		-		-		(59)		(1,910)
Recoveries		4		-		-		-		18		22
Provision for loan losses		(181)		1,980		(137)		28		70		1,760
Ending balance, September 30, 2015	$	987	$	4,178	$	85	$	284	$	213	$	5,747
Ending balance individually evaluated for impairment	$	-	$	389	$	-	$	-	$	-	$	389
Ending balance collectively evaluated for impairment	$	987	$	3,789	$	85	$	284	$	213	$	5,358

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2015	$	1,085	$	4,152	$	97	$	405	$	208	$	5,947
Charge Offs		(46)		(865)		-		-		(16)		(927)
Recoveries		-		-		-		-		7		7
Provision for loan losses		(52)		891		(12)		(121)		14		720
Ending balance, September 30, 2015	$	987	$	4,178	$	85	$	284	$	213	$	5,747

The Company's primary business activity as of December 31, 2015 was with customers located in northeastern Pennsylvania. As of September 30, 2016, the Company has added the New York counties of Delaware and Sullivan to its market as a result of the acquisition of Delaware Bancshares, Inc.  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, 2016, the Company considered its concentration of credit risk to be acceptable.  The highest concentrations are in commercial rentals with $64.8 million of loans outstanding, or 9.2% of total loans outstanding, and the hospitality/lodging industry with loans outstanding of $51.6 million, or 7.3% of loans outstanding.  During 2016, the Company recognized a write down of $3,000 in the named concentrations.

Gross realized gains and gross realized losses on sales of residential mortgage loans were $54,000 and $0, respectively, in the first nine months of 2016 compared to $56,000 and $0, respectively, in the same period in 2015.  The proceeds from the sales of residential mortgage loans totaled $1.7 million and $2.7 million for the nine months ended September 30, 2016 and 2015, respectively.

23

There were no sales of residential mortgage loans during the three months ended September 30, 2016. Gross realized gains and gross realized losses on sales of residential mortgage loans were $16,000 and $0, respectively, in the same period in 2015.  The proceeds from the sales of residential mortgage loans totaled  $818,000 for the three months ended September 30, 2015.

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.

24

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, 2016 and December 31, 2015 are as follows:

	Fair Value Measurement Using
	Reporting Date
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
September 30, 2016
Available for Sale:
U.S. Treasury securities	$	2,004	$	-	$	2,004	$	-
U.S. Government agencies		2,001		-		2,001		-
States and political subdivisions		130,572		-		130,572		-
Corporate obligations		10,385		-		10,385		-
Mortgage-backed securities-government
sponsored agencies		164,780		-		164,780		-
Equity securities-financial services		384		384		-		-
Total	$	310,126	$	384	$	309,742	$	-
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
December 31, 2015
Available for Sale:
U.S. Government agencies	$	9,169	$	-	$	9,169	$	-
States and political subdivisions		60,755		-		60,755		-
Corporate obligations		4,974		-		4,974		-
Mortgage-backed securities-government
sponsored agencies		63,569		-		63,569		-
Equity securities-financial services		384		384		-		-
Total	$	138,851	$	384	$	138,467	$	-

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, 2016 and December 31, 2015 are as follows:

			Fair Value Measurement Reporting Date using Reporting Date
(In thousands)
Description	Total		Level 1		Level 2		Level 3
September 30, 2016
Impaired Loans	$	4,411	$	-	$	-	$	4,411
Foreclosed Real Estate Owned		5,386		-		-		5,386
December 31, 2015
Impaired Loans	$	7,615	$	-	$	-	$	7,615
Foreclosed Real Estate Owned		2,847		-		-		2,847

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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
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
September 30, 2016
Impaired loans	$	2,847	Appraisal of collateral(1)	Appraisal adjustments(2)	0 - 10% (9.50%)
Impaired loans	$	1,564	Present value of future cash flows	Loan discount rate	4 - 6.75% (5.46%)
Foreclosed real estate owned	$	5,386	Appraisal of collateral(1)	Liquidation Expenses(2)	0 - 10% (9.90%)

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2015
Impaired loans	$	2,574	Appraisal of collateral(1)	Appraisal adjustments(2)	10% (10%)
Impaired loans	$	5,041	Present value of future cash flows	Loan discount rate	4-7% (5.61%)
Foreclosed real estate owned	$	2,847	Appraisal of collateral(1)	Liquidation Expenses(2)	10% (10%)

(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, 2016 and December 31, 2015.

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.

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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.

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.

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.

As of September 30, 2016, the fair value investment in impaired loans totaled $4,411,000 which included one loan for $74,000 for which a valuation allowance of $15,000 had been provided based on the estimated value of the collateral, and twenty-four loans for $4,352,000 which did not require a valuation allowance since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan.  As of September 30, 2016, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $1,806,000 over the life of the loans.

As of December 31, 2015, the fair value investment in impaired loans totaled $7,615,000 which included three loans for $6,373,000 for which a valuation allowance of $1,613,000 had been provided based on the estimated value of the collateral or the present value of estimated cash flows, and seventeen loans for $2,855,000 which did not require a valuation allowance since the estimated realizable value of the collateral exceeded the recorded investment in the loan.  As of December 31, 2015, the Company had recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $2,044,000 over the life of the loans.

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.

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

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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.

Regulatory stock (carried at cost):

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 regulatory 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 except certificates of deposit which are at fair value):

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, 2016 and December 31, 2015. (In thousands)

	Fair Value Measurements at September 30, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	33,133	$	33,133	$	33,133	$	-	$	-
Securities		310,126		310,126		384		309,742		-
Loans receivable, net		700,035		715,469		-		-		715,469
Mortgage servicing rights		244		260		-		-		260
Regulatory stock		2,351		2,351		2,351		-		-
Bank owned life insurance		35,889		35,889		35,889		-		-
Accrued interest receivable		3,541		3,541		3,541		-		-

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Financial liabilities:
Deposits	922,244	922,394	275,564	-	646,830
Short-term borrowings	33,156	33,156	33,156	-	-
Other borrowings	42,542	42,712	-	-	42,712
Accrued interest payable	1,040	1,040	1,040	-	-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit	-	-	-	-	-

	Fair Value Measurements at December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	10,010	$	10,010	$	10,010	$	-	$	-
Securities		138,851		138,851		384		138,467		-
Loans receivable, net		552,627		559,416		-		-		559,416
Mortgage servicing rights		261		291		-		-		291
Regulatory stock		3,412		3,412		3,412		-		-
Bank owned life insurance		18,820		18,820		18,820		-		-
Accrued interest receivable		2,363		2,363		2,363		-		-
Financial liabilities:
Deposits		550,909		551,175		354,162		-		197,013
Short-term borrowings		53,235		53,235		53,235		-		-
Other borrowings		41,126		41,260		-		-		41,260
Accrued interest payable		957		957		957		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of  credit		-		-		-		-		-

9.New and Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). The Update's core principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This Update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact the adoption of the standard will have on the Company's financial position or results of operations.

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In August 2015, the FASB issued ASU 2015-14, Revenue from Contract with Customers (Topic 606). The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year.  Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.  The Company is evaluating the effect of adopting this new accounting Update.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  This Update applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation, and disclosure of financial instruments.  Among other things, this Update (a) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (b) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (d) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (f) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (g) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (h) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.  For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  For all other entities, including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company's financial position or results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet.  A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.  A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise.  For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis.  For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years.  For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020.  The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period.  The Company is currently

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evaluating the impact the adoption of the standard will have on the Company's financial position or results of operations.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718). The amendments in this Update affect all entities that issue share-based payment awards to their employees. The standards in this Update provide simplification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as with equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. In addition to those simplifications, the amendments eliminate the guidance in Topic 718 that was indefinitely deferred shortly after the issuance of FASB Statement No. 123 (revised 2004), Share-Based Payment. This should not result in a change in practice because the guidance that is being superseded was never effective. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after    December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the impact the adoption of the standard will have on the Company's financial position or results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.  The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management's current estimate of credit losses that are expected to occur over the remaining life of a financial asset.  The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.  The Company is currently evaluating the impact the adoption of the standard will have on the Company's financial position or results of operations.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), which addresses eight specific cash flow issues with the objective of reducing diversity in practice.  Among these include recognizing cash payments for debt prepayment or debt extinguishment as cash outflows for financing activities; cash proceeds received from the settlement of insurance claims should be classified on the basis of the related insurance coverage; and cash proceeds received from the settlement of bank-owned life insurance policies should be classified as cash inflows from investing activities while the cash payments for premiums on bank-owned policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities.  The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date

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practicable. The Company is currently evaluating the impact the adoption of the standard will have on the Company's statement of cash flows.

10. Acquisition of Delaware Bancshares, Inc.

  On July 31, 2016, Norwood Financial Corp. (the "Company") completed its acquisition of Delaware Bancshares, Inc. ("Delaware")  pursuant to the terms of the Agreement and Plan of Merger, dated March 10, 2016, by and among the Company, Wayne Bank, Delaware and The National Bank of Delaware County (the "Merger Agreement").  As of June 30, 2016, Delaware had on a consolidated basis total assets of $378.3 million, total deposits of $327.5 million and total shareholders' equity of $24.1 million.

Pursuant to the terms of the Merger Agreement, Delaware was merged with and into the Company, with the Company as the surviving corporation of the merger (the "Merger").  At the effective time of the Merger, each outstanding share of the common stock of Delaware was converted into, at the election of the holder but subject to the limitations and allocation and proration provisions set forth in the Merger Agreement, either $16.68 in cash or 0.6221 of a share of the common stock, par value $0.10 per share (the "Common Stock") of the Company.  In the aggregate, the merger consideration paid to Delaware shareholders consisted of approximately $3,859,000 in cash and 431,605 shares of Norwood common stock.  Immediately following the Merger, The National Bank of Delaware County ("NBDC") was merged with and into Wayne Bank, a wholly-owned subsidiary of the Company, with Wayne Bank as the surviving entity.

In connection with the Merger, the Company assumed the obligations of Delaware under the Indenture, dated as of October 31, 2007, by and between Delaware, as issuer, and Wells Fargo Bank, National Association, as trustee (the "Indenture") and Delaware's Junior Subordinated Debt Securities, due January 1, 2038 (the "Debt Securities") issued thereunder.  The Debt Securities were issued by Delaware in connection with a private placement completed on October 31, 2007 of $8.0 million of trust preferred securities issued through the Delaware Bancshares Capital Trust I (the "Trust").  The trust preferred securities require quarterly distributions and bear interest at a variable rate equal to LIBOR plus 2.4% per annum.  The trust preferred securities mature on January 1, 2038 and are redeemable, in whole or in part, without penalty, on or after January 1, 2013 and on any January 1, April 1, July 1 or October 1 thereafter.  The Company redeemed the securities on October 3, 2016.

The proceeds from the initial sale of the trust preferred securities on October 31, 2007 were used by the Trust to purchase the Debt Securities.  The Debt Securities bear interest at a variable rate which resets quarterly at LIBOR plus 2.4%, and are redeemable, in whole or in part, without penalty, at the option of the Company, beginning on January 1, 2013 and on any January 1, April 1, July 1 or October 1 thereafter.  The interest payments on the Debt Securities made by the Company will be used to pay the quarterly distributions payable by the Trust to the holders of the trust preferred securities.  The Company redeemed the securities on October 3, 2016.

The acquired assets and assumed liabilities were measured at estimated fair values.  Management made significant estimates and exercised significant judgment in accounting for the acquisition.  Management measured loan fair values based on loan file reviews, appraised collateral values, expected cash flows, and historical loss factors of NBDC.  The Company also recorded an identifiable intangible asset representing the core deposit base of NBDC based on management's evaluation of the cost of such deposits relative to alternative funding sources.  Management used significant estimates including the average lives of depository accounts, future interest rate levels, and the cost of servicing various depository products.  Management used market quotations to determine the fair value of investment securities.

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The business combination resulted in the acquisition of loans with and without evidence of credit quality deterioration.  NBDC loans were deemed impaired at the acquisition date if the Company did not expect to receive all contractually required cash flows due to concerns about credit quality.  Such loans were fair valued and the difference between contractually required payments at the acquisition date and cash flows expected to be collected was recorded as a non-accretable difference.  At the acquisition date, the Company recorded $1,410,000 of purchased credit-impaired loans subject to a non-accretable difference of $260,000.  The method of measuring carrying value of purchased loans differs from loans originated by the Company (originated loans), and as such, the Company identifies purchased loans and purchased loans with a credit quality discount and originated loans at amortized cost.

NBDC's loans without evidence of credit deterioration were fair valued by discounting both expected principal and interest cash flows using an observable discount rate for similar instruments that a market participant would consider in determining fair value.  Additionally, consideration was given to management's best estimates of default rates and payment speeds.  At acquisition, NBDC's loan portfolio without evidence of deterioration totaled $111,307,000 and was recorded at a fair value of $109,693,000.

The following table summarizes the purchase of Delaware Bancshares, Inc. as of July 31, 2016:

(In Thousands, Except Per Share Data)

Purchase Price Consideration in Common Stock
Delaware Bancshares, Inc. common shares settled for stock	694,114
Exchange Ratio	0.6221
Norwood Financial Corp. shares issued	431,605
Value assigned to Norwood Financial Corp. common share	$28.15
Purchase price assigned to Delaware Bancshares, Inc. common shares exchanged for Norwood Financial Corp.		$12,150
Purchase Price Consideration – Cash for Common Stock
Delaware Bancshares, Inc. shares exchanged for cash	231,385
Purchase price paid to each Delaware Bancshares, Inc. common shares exchanged for cash	$16.68
Purchase price assigned to Delaware Bancshares, Inc. common shares exchanged for cash		$3,860
Purchase price consideration-Cash in Lieu of Fractional Shares		6
Total Purchase Price		$16,016
Net Assets Acquired:
Delaware Bancshares, Inc. shareholders' equity	19,357
Delaware Bancshares, Inc. goodwill and intangibles	(7,640)
Total tangible equity	11,717
Adjustments to reflect assets acquired at fair value:
Investments	219
Loans
Interest rate	1,486
General credit	(1,614)
Specific credit- non-amortizing	(260)
Specific credit – amortizing	(239)
Core deposit intangible	449
Deferred loan fees	(296)
Premises and equipment	3,053
Allowance for loan and lease losses	1,651
Deferred tax assets	(1,417)
Other	(445)
Adjustments to reflect liabilities acquired at fair value:
Time deposits	(252)
		14,052
Goodwill resulting from merger		$1,964

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The following condensed statement reflects the values assigned to Delaware Bancshares, Inc. net assets as of acquisition date:

(In Thousands)

Total purchase price		$16,016
Net assets acquired:
Cash	$14,977
Securities available for sale	208,488
Loans	116,674
Premises and equipment, net	7,292
Regulatory stock	279
Accrued interest receivable	1,626
Bank-owned life insurance	14,762
Core deposit intangible	449
Deferred tax assets	3,034
Other assets	2,934
Time deposits	(71,342)
Deposits other than time deposits	(255,921)
Borrowings	(21,232)
Accrued interest payable	(95)
Other liabilities	(7,873)
		14,052
Goodwill resulting from Delaware Bancshares, Inc.
Merger		$1,964

The Company recorded goodwill and other intangibles associated with the purchase of Delaware Bancshares, Inc. totaling $1,964,000.  Goodwill is not amortized, but is periodically evaluated for impairment.  The Company did not recognize any impairment during the nine months ended September 30, 2016.  The carrying amount of the goodwill at September 30, 2016 related to the Delaware acquisition was $1,964,000.

Identifiable intangibles are amortized to their estimated residual values over the expected useful lives.  Such lives are also periodically reassessed to determine if any amortization period adjustments are required.  During the nine months ended September 30, 2016, no such adjustments were recorded.  The identifiable

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intangible assets consist of a core deposit intangible which is being amortized on an accelerated basis over the useful life of such assets.  The gross carrying amount of the core deposit intangible at September 30, 2016 was $449,000 with $14,000 accumulated amortization as of that date.

As of September 30, 2016, the current year and estimated future amortization expense for the core deposit intangible is:

(In thousands)

2016	$	13
2017		30
2018		30
2019		30
2020		30
After five years		316
	$	449

Results of operations for Delaware Bancshares, Inc. prior to the acquisition date are not included in the Consolidated Statement of Income for the three and nine month period ended September 30, 2016.  Due to the significant amount of fair value adjustments, historical results of Delaware Bancshares, Inc. are not relevant to the Company's results of operations.  Therefore, no pro forma information is presented.

The following table presents financial information regarding the former Delaware Bancshares, Inc. operations included in our Consolidated Statement of Income from the date of acquisition through September 30, 2016 under the column "Actual from acquisition date through September 30, 2016".  In addition, the following table presents unaudited pro forma information as if the acquisition of Delaware Bancshares, Inc. had occurred on January 1, 2016 under the "Pro Forma" columns.  The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results.  Furthermore, the unaudited pro-forma information does not reflect management's estimate of any revenue-enhancing opportunities nor anticipated cost savings as a result of the integration and consolidation of the acquisition.  Merger and acquisition integration costs and amortization of fair value adjustments are included in the numbers below.

	Actual From Acquisition Date	Pro Forma Nine Months Ended September 30
(In Thousands, Except Per Share Data)	Through September 30, 2016	2016	2015
Net interest income	$1,560	$25,377	$26,340
Non-interest income	357	4,715	5,179
Net income	300	1,243	6,050
Pro forma earnings per share:
Basic	$0.08	$0.33	$1.60
Diluted	$0.08	$0.33	$1.60

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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 Delaware Bancshares, 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

• 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

• cybersecurity

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, 2015 (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, the valuation of deferred tax assets, the fair value of financial instruments, the determination of goodwill impairment and the determination of other-than-temporary impairment on securities.  Please refer to the discussion of the allowance for loan losses calculation under "Loans" in the "Changes in Financial Condition" section.

The Company uses the modified prospective transition method to account for stock options.  Under this method companies are required to record compensation expense, based on the fair value of options over the vesting period.  Restricted shares vest over a five year period.  The product of the number of shares granted and the grant date market price of the Company's common stock determines the fair value of restricted stock.

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.

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, 2016 and December 31, 2015 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 considered that the FHLB's regulatory capital ratios have increased from prior years, 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, 2016.

In connection with acquisitions, the Company recorded goodwill in the amount of $11.7 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

37

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 Company or 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, 2016 were $1.125 billion compared to $750.5 million as of December 31, 2015, an increase of $374.6 million due primarily to the acquisition of Delaware Bancshares, Inc.

Securities

The fair value of securities available for sale as of September 30, 2016 was $310.1 million compared to $138.8 million as of December 31, 2015.  The increase in the securities portfolio includes $213.0 million of securities acquired from NBDC.  The Company purchased $80.5 million of securities principally using the proceeds from $119.9  million of sales, calls, maturities and principal reductions of securities.

The carrying value of the Company's securities portfolio (Available-for Sale) consisted of the following:

	September 30, 2016				December 31, 2015
(dollars in thousands)		Amount	% of portfolio			Amount	% of portfolio
U.S. Treasury securities	$	2,004	0.7	%	$	-	-	%
U.S. Government agencies		2,001	0.7			9,169	6.6
States and political subdivisions		130,572	42.1			60,755	43.8
Corporate obligations		10,385	3.3			4,974	3.5
Mortgage-backed securities-
government sponsored entities		164,780	53.1			63,569	45.8
Equity securities-financial services		384	0.1			384	0.3
Total	$	310,126	100.0	%	$	138,851	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.  Management believes that the unrealized losses on all 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.

Loans

Loans receivable totaled $706.2 million at September 30, 2016 compared to $559.9 million as of December 31, 2015.  The $146.3 million increase recorded in the nine-month period ending September 30, 2016 includes $112.1 million that was acquired from Delaware and $34.2 million that was generated internally.

The allowance for loan losses totaled $6,164,000 as of September 30, 2016 and represented 0.87% of total loans outstanding, compared to $7,298,000, or 1.30% of total loans, at December 31, 2015, and $5,747,000, or 1.06 % of total loans, as of September 30, 2015.  The Company had net charge-offs for the nine months ended September 30, 2016 of $2,733,000 compared to $1,888,000 in the corresponding period in 2015.  Included in the 2016 total is $2,419,000 related to one relationship that was foreclosed on during the second

38

quarter of 2016.  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, 2016 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, 2016, non-performing loans totaled $2.2 million, or 0.32% of total loans compared to $7.1 million, or 1.27% of total loans at December 31, 2015. At September 30, 2016, non-performing assets totaled $7.6 million, or 0.68%, of total assets compared to $10.0 million, or 1.33%, of total assets at December 31, 2015.  The decrease in non-performing assets principally reflects payments and write-downs on loans carried in nonaccrual assets.  The decrease in non-performing loans includes payments and write-downs on loans carried in nonaccrual status, as well as the transfer of one loan relationship to foreclosed real estate which had a carrying value of $5,015,000 at December 31, 2015.

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

(dollars in thousands)	September 30, 2016			December 31, 2015
Loans accounted for on a non-accrual basis:
Real Estate
Residential	$	1,186		$	440
Commercial		976			6,649
Construction		28			-
Commercial, financial and agricultural		-			43
Consumer loans to individuals		-			-
Total non-accrual loans *		2,190			7,132
Accruing loans which are contractually
past due 90 days or more		49			-
Total non-performing loans		2,239			7,132
Foreclosed real estate		5,386			2,847
Total non-performing assets	$	7,625		$	9,979
Allowance for loans losses	$	6,164		$	7,298
Coverage of non-performing loans		275.30	%		102.33	%
Non-performing loans to total loans		0.32	%		1.27	%
Non-performing loans to total assets		0.20	%		0.95	%
Non-performing assets to total assets		0.68	%		1.33	%

*Includes non-accrual TDRs of $554,000 as of September 30, 2016 and $5.8 million on December 31, 2015. The Company also had $1.0 million of accruing TDRs on September 30, 2016 and December 31, 2015.

39

Deposits

During the period, total deposits increased $371.3 million due primarily to the $327.3 million of deposits acquired from NBDC.  Internally generated deposits increased $44.0 million, net.

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

(dollars in thousands)	September 30, 2016		December 31, 2015
Non-interest bearing demand	$	200,481	$	107,814
Interest bearing demand		96,189		52,040
Money market deposit accounts		158,156		119,028
Savings		192,005		75,280
Time deposits <$100,000		160,519		121,211
Time deposits >$100,000		114,894		75,536
Total	$	922,244	$	550,909

Borrowings

Short-term borrowings as of September 30, 2016 totaled $33.2 million compared to $53.2 million as of December 31, 2015.  Short-term borrowings, which consist of securities sold under agreements to repurchase and overnight borrowings from the FHLB, decreased $20.0 million due to a reduction in overnight borrowings.

Other borrowings consisted of the following:

(dollars in thousands)

	September 30, 2016		December 31, 2015
Notes with the FHLB:
Convertible note due January 2017 at 4.71%	$	10,000	$	10,000
Amortizing fixed rate borrowing due December 2017 at 1.275%		5,024		8,000
Amortizing fixed rate borrowing due January 2018 at 0.91%		814		1,267
Amortizing fixed rate borrowing due December 2018 at 1.425%		1,835		2,434
Amortizing fixed rate borrowing due June 2020 at 1.490%		7,569		9,033
Amortizing fixed rate borrowing due December 2020 at 1.706%		4,277		5,000
Amortizing fixed rate borrowing due March 2022 at 1.748%		4,775		5,392
	$	34,294	$	41,126

The convertible note contains an option which allows the FHLB, at quarterly intervals to change the note to an adjustable-rate advance at three month LIBOR plus 17 basis points.  If the note is converted, the option allows the Bank to put the funds back to the FHLB without penalty.

40

Stockholders' Equity and Capital Ratios

As of September 30, 2016, stockholders' equity totaled $115.7 million, compared to $101.0 million as of December 31, 2015.   The net change in stockholders' equity included $4.4 million of net income that was partially offset by $3.6 million of dividends declared, and a $447,000 decrease due to an increase in Treasury Stock, and a $283,000 increase, net, due to the exercise and vesting of stock options and restricted stock.  In addition, total equity increased $1.9 million due to an increase in the fair value of securities in the available for sale portfolio, net of tax, and $12.1 million as a result of the acquisition of Delaware Bancshares, Inc.  This increase 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 consolidated regulatory capital ratios is as follows:

	September 30, 2016	December 31, 2015
Tier 1 Capital
(To average assets)	10.64%	12.40%
Tier 1 Capital
(To risk-weighted assets)	14.22%	15.86%
Common Equity Tier 1 Capital
(To risk-weighted assets)	14.22%	15.86%
Total Capital
(To risk-weighted assets)	15.04%	17.09%

Effective January 1, 2015, the Company and the Bank became subject to new regulatory capital rules, which, among other things, impose a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), set the minimum leverage ratio for all banking organizations at a uniform 4% of total assets, increase the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assign a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.  The new rules also require unrealized gains and losses on certain "available-for-sale" securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt out is exercised which the Company and the Bank have done.  The final rule limits a banking organization's dividends, stock repurchases and other capital distributions, and certain discretionary bonus payments to executive officers, if the banking organization does not hold a "capital conservation buffer" consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above regulatory minimum risk-based requirements. The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective.  The Company and the Bank are in compliance with their respective new capital requirements, including the capital conservation buffer, as of September 30, 2016.

Liquidity

As of September 30, 2016, the Company had cash and cash equivalents of $33.1 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 $310.1 million which could be used for liquidity needs.  This totals $343.2 million of liquidity and represents 30.5% of total assets compared to $148.9 million and 19.8% of total assets as of December 31, 2015.  The Company also monitors other liquidity measures, all of which were within the

41

Company's policy guidelines as of September 30, 2016 and December 31, 2015.  Based upon these measures, the Company believes its liquidity is adequate.

Capital Resources

The Company has a line of credit commitment from Atlantic Community Bankers Bank for $7,000,000 which expires June 30, 2017.  There were no borrowings under this line as of September 30, 2016 and December 31, 2015.

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, 2016 and December 31, 2015.

The Company has a line of credit commitment available which has no stated expiration date from Zions Bank for $17,000,000.  There were no borrowings under this line as of September 30, 2016 and December 31, 2015.

The Bank's maximum borrowing capacity with the Federal Home Loan Bank was approximately $256,500,000 as of September 30, 2016, of which $34,294,000 and $60,798,000 was outstanding at September 30, 2016 and December 31, 2015, 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 43 and 47.  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.

42

Results of Operations

NORWOOD FINANCIAL CORP.

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis,	Three Months Ended September 30,
dollars in thousands)	2016						2015
	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	$	15,756	$	22		0.53%	$	4,508	$	3		0.27%
Securities available for sale:
Taxable		141,751		625		1.77		93,051		454		1.95
Tax-exempt (1)		100,538		930		3.70		60,100		692		4.61
Total securities available for sale (1)		242,289		1,555		2.57		153,151		1,146		2.99
Loans receivable (1) (4) (5)		661,781		7,437		4.50		539,487		6,083		4.51
Total interest-earning assets		919,826		9,014		3.92		697,146		7,232		4.15
Non-interest earning assets:
Cash and due from banks		13,340						9,016
Allowance for loan losses		(5,980)						(5,815)
Other assets		73,091						43,808
Total non-interest earning assets		80,451						47,009
Total Assets	$	1,000,277					$	744,155
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest bearing demand and money market	$	231,303	$	91		0.16	$	182,645	$	79		0.17
Savings		155,896		23		0.06		75,321		10		0.05
Time		245,406		563		0.92		203,658		522		1.03
Total interest-bearing deposits		632,605		677		0.43		461,624		611		0.53
Short-term borrowings		34,192		65		0.76		33,175		19		0.23
Other borrowings		35,386		216		2.44		30,541		189		2.48
Total interest-bearing liabilities		702,183		958		0.55		525,340		819		0.62
Non-interest bearing liabilities:
Demand deposits		171,329						113,094
Other liabilities		12,542						4,376
Total non-interest bearing liabilities		183,871						117,470
Stockholders' equity		114,223						101,345
Total Liabilities and Stockholders' Equity	$	1,000,277					$	744,155
Net interest income (tax equivalent basis)				8,056		3.37%				6,413		3.53%
Tax-equivalent basis adjustment				(486)						(360)
Net interest income			$	7,570					$	6,053
Net interest margin (tax equivalent basis)						3.50%						3.68%

(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.

43

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, 2016  Compared to
	Three months ended September 30, 2015
	Variance due to
	Volume		Rate		Net
	(dollars in thousands)
Interest earning assets:
Interest bearing deposits with banks	$	10	$	9	$	19
Securities available for sale:
Taxable		230		(59)		171
Tax-exempt securities		432		(194)		238
Total securities		662		(253)		409
Loans receivable		1,371		(17)		1,354
Total interest earning assets		2,043		(261)		1,782
Interest bearing liabilities:
Interest-bearing demand and money market		18		(6)		12
Savings		10		3		13
Time		104		(63)		41
Total interest bearing deposits		132		(66)		66
Short-term borrowings		2		44		46
Other borrowings		31		(4)		27
Total interest bearing liabilities		165		(26)		139
Net interest income (tax-equivalent basis)	$	1,878	$	(235)	$	1,643

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.

44

Comparison of Operating Results for The Three Months Ended September 30, 2016 to September 30, 2015

General

For the three months ended September 30, 2016, net income totaled $612,000 compared to $1,777,000 earned in the similar period in 2015.  The decrease in net income for the three months ended September 30, 2016 was due primarily to $1,659,000 of merger related expenses and approximately $795,000 of expenses related to the operations of the twelve new community offices acquired.   Earnings per share for the current period were $.15 per share for basic and fully diluted compared to $.48 per share for basic and fully diluted shares for the three months ended September 30, 2015.  The resulting annualized return on average assets and annualized return on average equity for the three months ended September 30, 2016 were 0.24% and 2.13%, respectively, compared to 0.95% and 6.95%, respectively, for the similar period in 2015.

The following table sets forth changes in net income:

(dollars in thousands)	Three months ended
	September 30, 2016 to September 30, 2015
Net income three months ended September 30, 2015	$	1,777
Change due to:
Net interest income		1,517
Provision for loan losses		270
Net gain on sales of loans and securities		(79)
Other income		407
Salaries and employee benefits		(895)
Occupancy, furniture and equipment		(282)
Foreclosed real estate owned		(72)
Merger related		(1,659)
All other expenses		(701)
Income tax expense		329
Net income three months ended September 30, 2016	$	612

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the three months ended September 30, 2016 totaled $8,056,000 which was $1,643,000 higher than the comparable period in 2015.  The increase in net interest income includes a $1,354,000 increase in interest income (fte) on loans and a $410,000 increase in interest income (fte) on other interest-earning assets resulting primarily from the acquisition.  The fte net interest spread and net interest margin were 3.37% and 3.50%, respectively, for the three months ended September 30, 2016 compared to 3.53% and 3.68%, respectively, for the similar period in 2015.

Interest income (fte) totaled $9,014,000 with a yield on average earning assets of 3.92% compared to $7,232,000 and 4.15% for the 2015 period. Average loans increased $122.3 million over the comparable period of last year primarily due to the acquisition, while average securities increased $89.1 million.  Average earning assets totaled $919.8 million for the three months ended September 30, 2016, an increase of $222.7 million over the average for the similar period in 2015.

45

Interest expense for the three months ended September 30, 2016 totaled $958,000 at an average cost of 0.55% compared to $819,000 and 0.62% for the similar period in 2015.  The decline in average cost reflects the increase in lower costing core deposits acquired.  The cost of time deposits, which is the most significant component of funding, decreased to 0.92% from 1.03% for the similar period in the prior year.

Provision for Loan Losses

The Company's provision for loan losses for the three months ended September 30, 2016 was $450,000 compared to $720,000 for the three months ended September 30, 2015.  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 $84,000 for the quarter ended September 30, 2016 compared to $920,000 for the similar period in 2015.

Other Income

Other income totaled $1,399,000 for the three months ended September 30, 2016 compared to $1,071,000 for the similar period in 2015.  Net gains from the sale of loans and securities decreased $79,000 compared to the same period of 2015. All other items of other income increased $407,000, net, compared to the same period of last year due primarily to the acquisition.

Other Expense

Other expense for the three months ended September 30, 2016 totaled $7,679,000 which was $3,609,000 higher than the same period of 2015.  Merger related expenses totaled $1,659,000 during the current year period while costs related to the operations of the offices acquired totaled $795,000.  All other operating expenses increased $1,155,000, net.

Income Tax Expense

Income tax expense totaled $228,000 for an effective tax rate of 27.1% for the period ending September 30, 2016 compared to $557,000 for an effective tax rate of 23.9% for the similar period in 2015. The increase in the effective tax rate reflects expenses related to the acquisition which are non-deductible for tax purposes.

46

Results of Operations

NORWOOD FINANCIAL CORP.

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis,	Nine Months Ended September 30,
dollars in thousands)	2016						2015
	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	$	7,117	$	28		0.52%	$	7,960	$	15		0.25%
Securities available for sale:
Taxable		101,851		1,503		1.97		97,310		1,509		2.07
Tax-exempt (1)		72,763		2,279		4.18		59,068		2,084		4.70
Total securities available for sale (1)		174,614		3,782		2.89		156,378		3,593		3.06
Loans receivable (1) (4) (5)		598,808		20,187		4.49		523,269		18,230		4.65
Total interest-earning assets		780,539		23,997		4.10		687,607		21,838		4.23
Non-interest earning assets:
Cash and due from banks		10,034						8,492
Allowance for loan losses		(6,845)						(6,001)
Other assets		56,345						45,052
Total non-interest earning assets		59,534						47,543
Total Assets	$	840,073					$	735,150
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand and money market	$	195,501	$	243		0.17	$	178,248	$	226		0.17
Savings		104,281		42		0.05		74,756		28		0.05
Time		213,518		1,553		0.97		214,076		1,579		0.98
Total interest-bearing deposits		513,300		1,838		0.48		467,080		1,833		0.52
Short-term borrowings		42,931		142		0.44		29,065		47		0.22
Other borrowings		37,656		669		2.37		28,056		553		2.63
Total interest bearing liabilities		593,887		2,649		0.59		524,201		2,433		0.62
Non-interest bearing liabilities:
Demand deposits		132,263						105,677
Other liabilities		6,955						4,250
Total non-interest bearing liabilities		139,218						109,927
Stockholders' equity		106,968						101,022
Total Liabilities and Stockholders' Equity	$	840,073					$	735,150
Net interest income (tax equivalent basis)				21,348		3.50%				19,405		3.62%
Tax-equivalent basis adjustment				(1,209)						(996)
Net interest income			$	20,139					$	18,409
Net interest margin (tax equivalent basis)						3.65%						3.76%

(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.

47

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)
	Nine months ended September 30, 2016  Compared to
	Nine months ended September 30, 2015
	Variance due to
	Volume		Rate		Net
	(dollars in thousands)
Interest earning assets:
Interest bearing deposits with banks	$	(3)	$	16	$	13
Securities available for sale:
Taxable		45		(51)		(6)
Tax-exempt securities		345		(150)		195
Total securities		390		(201)		189
Loans receivable		2,273		(316)		1,957
Total interest earning assets		2,660		(501)		2,159
Interest bearing liabilities:
Interest-bearing demand and money market		17		-		17
Savings		14		-		14
Time		(5)		(21)		(26)
Total interest bearing deposits		26		(21)		5
Short-term borrowings		38		57		95
Other borrowings		183		(67)		116
Total interest bearing liabilities		247		(31)		216
Net interest income (tax-equivalent basis)	$	2,413	$	(470)	$	1,943

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.

48

Comparison of Operating Results for The Nine Months Ended September 30, 2016 to September 30, 2015

General

For the nine months ended September 30, 2016, net income totaled $4,365,000 compared to $5,781,000 earned in the similar period in 2015.  The decrease in net income for the nine months ended September 30, 2016 was due primarily to $1,664,000 of expenses related to the acquisition of Delaware Bancshares, Inc., as well as approximately $795,000 of costs to operate the twelve offices acquired. Earnings per share for the current period were $1.16 per share for basic and $1.15 per share fully diluted compared to $1.57 per share for basic and fully diluted shares for the nine months ended September 30, 2015.  The resulting annualized return on average assets and annualized return on average equity for the nine months ended September 30, 2016 was 0.69% and 5.45%, respectively, compared to 1.05% and 7.65%, respectively, for the similar period in 2015.

The following table sets forth changes in net income:

(dollars in thousands)	Nine months ended
	September 30, 2016 to September 30, 2015
Net income nine months ended September 30, 2015	$	5,781
Change due to:
Net interest income		1,730
Provision for loan losses		160
Gain on sales of loans and securities		(241)
Other income		447
Salaries and employee benefits		(1,237)
Occupancy, furniture and equipment		(165)
Foreclosed real estate owned		(146)
Merger related		(1,664)
All other expenses		(919)
Income tax expense		619
Net income nine months ended September 30, 2016	$	4,365

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the nine months ended September 30, 2016 totaled $21,348,000 which was $1,943,000 higher than the comparable period in 2015.  The increase in net interest income largely reflects the benefits from assets acquired.  The fte net interest spread and net interest margin were 3.50% and 3.65%, respectively, for the nine months ended September 30, 2016 compared to 3.62% and 3.76%, respectively, for the similar period in 2015.

Interest income (fte) totaled $23,997,000 with a yield on average earning assets of 4.10% compared to $21,838,000 and 4.23% for the 2015 period. Average loans increased $75.5 million over the comparable period of last year due to the acquisition while average securities also increased $18.2 million.  Average earning assets totaled $780.5 million for the nine months ended September 30, 2016, an increase of $92.9 million over the average for the similar period in 2015.

Interest expense for the nine months ended September 30, 2016 totaled $2,649,000 at an average cost of 0.59% compared to $2,433,000 and 0.62% for the similar period in 2015.  The cost of time deposits, which is the most significant component of funding, decreased to 0.97% from 0.98% for the similar period in the prior year.  As time deposits matured, they repriced at the current market rates.

49

Provision for Loan Losses

The Company's provision for loan losses for the nine months ended September 30, 2016 was $1,600,000 compared to $1,760,000 for the nine months ended September 30, 2015.  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 $2,734,000 for the nine months ended September 30, 2016 compared to $1,888,000 for the similar period in 2015.

Other Income

Other income totaled $3,689,000 for the nine months ended September 30, 2016 compared to $3,483,000 for the similar period in 2015.  Net gains from the sale of loans and securities decreased $241,000 compared to the same period of 2015. All other items of other income increased $447,000, net, compared to the same period of last year.

Other Expense

Other expense for the nine months ended September 30, 2016 totaled $16,556,000 which was $4,131,000 higher than the same period of 2015.  Merger costs totaled $1,664,000 in the current period while costs to operate the offices acquired totaled $795,000.  All other operating expenses increased $1,672,000, net.

Income Tax Expense

Income tax expense totaled $1,307,000 for an effective tax rate of 23.0% for the period ending September 30, 2016 compared to $1,926,000 for an effective tax rate of 25.0% for the similar period in 2015. The reduction in the effective tax rate reflects an increase in the level of tax-exempt income.

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, 2016, the level of net interest income at risk in a ±200 basis point change in interest rates was within the Company's policy limits.  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.

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.

50

As of September 30, 2016, the Company had a positive 90-day interest sensitivity gap of $51.7 million or 4.6% of total assets, compared to the $38.8 million or 5.2% of total assets as of December 31, 2015.  Rate sensitive assets repricing within 90 days increased $52.2 million due primarily to a $32.5 million increase in loans repricing.  The majority of this increase reflects new loans acquired.  Rate sensitive liabilities increased $39.3 million since year end due to a $50.7 million increase in deposits.  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.

Certain interest-bearing deposits with no stated maturity dates are included in the interest-sensitivity table below.  The balances allocated to the respective time periods represent an estimate of the total outstanding balance that has the potential to migrate through withdrawal or transfer to time deposits, thereby impacting the interest-sensitivity position of the Company.  The estimates were derived from industry-wide statistical information and do not represent historical results.

September 30, 2016

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	$	13,629	$	-	$	100	$	-	$	13,729
Securities		10,310		26,262		59,582		213,972		310,126
Loans Receivable		161,944		161,183		193,287		189,785		706,199
Total RSA	$	185,883	$	187,445	$	252,969	$	403,757	$	1,030,054
Non-maturity interest-bearing deposits	$	70,248	$	74,399	$	198,304	$	103,399	$	446,350
Time Deposits		46,095		109,264		89,342		30,712		275,413
Other		17,824		28,016		24,793		5,065		75,698
Total RSL	$	134,167	$	211,679	$	312,439	$	139,176	$	797,461
Interest Sensitivity Gap	$	51,716	$	(24,234)	$	(59,470)	$	264,581	$	232,593
Cumulative Gap		51,716		27,482		(31,988)		232,593
RSA/RSL-cumulative		138.5%		107.9%		95.1%		129.2%
December 31, 2015
Interest Sensitivity Gap	$	38,817	$	11,614	$	(57,114)	$	168,269	$	161,586
Cumulative Gap		38,817		50,431		(6,683)		161,586
RSA/RSL-cumulative		140.9%		122.8%		98.5%		130.1%

51

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

Reference is made to Part II, Item 1 in the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

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, 2015.

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

52

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)
4.1	Amended and Restated Declaration of Trust, dated as of October 31, 2007*
4.2	Indenture, dated October 31, 2007, between Wells Fargo Bank National Association, as trustee, and Delaware Bancshares, Inc.*
4.3	First Supplemental Indenture, dated as of July 31, 2016, by and between Wells Fargo Bank, National Association, as Trustee, Delaware Bancshares, Inc. and Norwood Financial Corp.*
10.1	Employment Agreement with Lewis J. Critelli (3)
10.2	Change in Control Severance Agreement with William S. Lance(3)
10.3	Norwood Financial Corp. Stock Option Plan (4)
10.4	Change in Control Severance Agreement with Robert J. Mancuso(5)
10.5	Salary Continuation Agreement between the Bank and William W. Davis, Jr. (6)
10.6	Salary Continuation Agreement between the Bank and Lewis J. Critelli (6)
10.7	1999 Directors Stock Compensation Plan (4)
10.8	Salary Continuation Agreement between the Bank and John H. Sanders (7)
10.9	2006 Stock Option Plan (8)
10.10	First and Second Amendments to Salary Continuation Agreement with William W. Davis, Jr. (9)
10.11	First and Second Amendments to Salary Continuation Agreement with Lewis J. Critelli (9)
10.12	First and Second Amendments to Salary Continuation Agreement with John H. Sanders (9)
10.13	Change In Control Severance Agreement with James F. Burke(10)
10.14	2014 Equity Incentive Plan(11)
10.15	Addendum to Change in Control Severance Agreement with William S. Lance (12)
31.1	Rule 13a-14(a)/15d-14(a) Certification of CEO
31.2	Rule 13a-14(a)/15d-14(a) Certification of CFO
32	Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of Sarbanes Oxley Act of 2002
101	Interactive Data Files

 *  Not filed in accordance with the provisions of Item 601(b)(4)(iii)(A) of Regulation S-K.  The Registrant

     undertakes to provide a copy of this document to the Commission upon request.

(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 exhibit to the Registrant's Form 10-Q filed with the Commission on August 8, 2014.

(3) 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.

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

(5) 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.

(6) 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.

53

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

(8) 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.

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

(10) Incorporated by reference from the identically numbered exhibit to the Registrant's Form 10-Q filed with the Commission on November 7, 2013.

(11) Incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-8 (File No. 333-195643) filed with the Commission on May 2, 2014.

(12) Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on February 18, 2015.

54

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 9, 2016	By:	/s/ Lewis J. Critelli
			Lewis J. Critelli
			President and Chief Executive Officer
			(Principal Executive Officer)
Date:	November 9, 2016	By:	/s/ William S. Lance
			William S. Lance
			Executive Vice President and
			Chief Financial Officer
			(Principal Financial Officer)

55

EX-31.1

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 9, 2016	/s/ Lewis J. Critelli
	Lewis J. Critelli
	President and Chief Executive Officer

EX-31.2

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 9, 2016	/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, 2016 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 9, 2016

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 31, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
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		4,125,576
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 19,404	$ 9,744
Interest bearing deposits with banks	13,729	266
Cash and cash equivalents	33,133	10,010
Securities available for sale, at fair value	310,126	138,851
Loans receivable	706,199	559,925
Less: Allowance for loan losses	6,164	7,298
Net loans receivable	700,035	552,627
Regulatory stock, at cost	2,351	3,412
Bank premises and equipment, net	13,617	6,472
Bank owned life insurance	35,889	18,820
Accrued interest receivable	3,541	2,363
Foreclosed real estate owned	5,386	2,847
Goodwill	11,679	9,715
Other intangibles	652	285
Deferred tax asset	5,560	3,669
Other assets	3,088	1,434
Total Assets	1,125,057	750,505
LIABILITIES
Deposits: Non-interest bearing demand	200,481	107,814
Deposits: Interest-bearing	721,763	443,095
Total deposits	922,244	550,909
Short-term borrowings	33,156	53,235
Other borrowings	34,294	41,126
Junior subordinated debentures	8,248	0
Accrued interest payable	1,040	957
Other liabilities	10,375	3,280
Total Liabilities	1,009,357	649,507
STOCKHOLDERS' EQUITY
Common stock, $.10 par value per share, authorized 10,000,000 shares, issued 2016: 4,156,273 shares, 2015: 3,724,668 shares	416	373
Surplus	47,576	35,351
Retained earnings	66,210	65,412
Treasury stock at cost: 2016: 32,797 shares, 2015: 23,311 shares	(908)	(626)
Accumulated other comprehensive income	2,406	488
Total Stockholders' Equity	115,700	100,998
Total Liabilities and Stockholders' Equity	$ 1,125,057	$ 750,505

XML

Consolidated Balance Sheets (parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Consolidated Balance Sheets [Abstract]
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	4,156,273	3,724,668
Treasury Stock, Shares	32,797	23,311

XML

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
INTEREST INCOME
Loans receivable, including fees	$ 7,267	$ 5,958	$ 19,752	$ 17,943
Securities	1,239	911	3,008	2,884
Other	22	3	28	15
Total interest income	8,528	6,872	22,788	20,842
INTEREST EXPENSE
Deposits	677	611	1,838	1,833
Short-term borrowings	65	19	142	47
Other borrowings	216	189	669	553
Total interest expense	958	819	2,649	2,433
Net Interest Income	7,570	6,053	20,139	18,409
Provision for loan losses	450	720	1,600	1,760
Net interest income after provision for loan losses	7,120	5,333	18,539	16,649
OTHER INCOME
Service charges and fees	829	592	2,000	1,776
Income from fiduciary activities	126	126	342	341
Net realized gains on sales of securities	0	63	269	508
Gains on sale of loans and servicing rights, net	0	16	54	56
Earnings and proceeds on bank owned life insurance	283	167	616	497
Other	161	107	408	305
Total other income	1,399	1,071	3,689	3,483
OTHER EXPENSES
Salaries and employee benefits	3,070	2,175	7,620	6,383
Occupancy, furniture & equipment, net	755	473	1,736	1,571
Data processing	423	247	949	682
Taxes, other than income	205	175	535	525
Professional fees	185	140	516	447
Federal Deposit Insurance Corporation insurance	170	119	402	278
Foreclosed real estate owned	119	47	582	436
Amortization of intangibles	34	24	81	80
Merger related	1,659	0	1,664	0
Other	1,059	670	2,471	2,023
Total other expenses	7,679	4,070	16,556	12,425
Income before Income Taxes	840	2,334	5,672	7,707
Income tax expense	228	557	1,307	1,926
Net Income	$ 612	$ 1,777	$ 4,365	$ 5,781
EARNINGS PER SHARE
BASIC EARNINGS PER SHARE	$ 0.15	$ 0.48	$ 1.16	$ 1.57
DILUTED EARNINGS PER SHARE	$ 0.15	$ 0.48	$ 1.15	$ 1.57

XML

Consolidated Statement of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Consolidated Statement of Comprehensive Income [Abstract]
Net Income	$ 612	$ 1,777	$ 4,365	$ 5,781
Other comprehensive income (loss):
Investment securities available for sale: Unrealized holding gain (loss)	(653)	1,938	3,176	890
Investment securities available for sale: Tax effect	221	(654)	(1,080)	(296)
Reclassification of gains recognized in net income	0	(63)	(269)	(508)
Reclassification of gains recognized in net income: Tax effect	0	22	91	173
Total other comprehensive income (loss)	(432)	1,243	1,918	259
Comprehensive Income	$ 180	$ 3,020	$ 6,283	$ 6,040

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income [Member]	Total
Beginning balance at Dec. 31, 2015	$ 373	$ 35,351	$ 65,412	$ (626)	$ 488	$ 100,998
Common Stock, Beginning Balance at Dec. 31, 2015	3,724,668			23,311
Net Income			4,365			4,365
Other comprehensive income					1,918	1,918
Cash dividends declared ($.93 per share)			(3,567)			(3,567)
Compensation expense related to restricted stock		67				67
Acquisition of treasury stock				$ (447)		(447)
Acquisition of treasury stock, shares				15,538
Stock options exercised		(5)		$ 165		$ 160
Stock options exercised, shares				(6,052)		(6,052)
Tax benefit of stock options		3				$ 3
Compensation expense related to stock options		53				53
Delaware Bancshares acquisition	$ 43	12,107				12,150
Delaware Bancshares acquisition, shares	431,605
Common Stock, Ending Balance at Sep. 30, 2016	4,156,273			32,797
Ending balance at Sep. 30, 2016	$ 416	47,576	66,210	$ (908)	2,406	115,700
Net Income						612
Other comprehensive income						(432)
Common Stock, Ending Balance at Sep. 30, 2016	4,156,273			32,797
Ending balance at Sep. 30, 2016	$ 416	47,576	66,210	$ (908)	2,406	115,700
Common Stock, Ending Balance at Sep. 30, 2016	4,156,273			32,797
Ending balance at Sep. 30, 2016	$ 416	$ 47,576	$ 66,210	$ (908)	$ 2,406	$ 115,700

XML

Consolidated Statements of Changes in Stockholders' Equity (parenthetical)	9 Months Ended
	Sep. 30, 2016 $ / shares
Consolidated Statements of Changes in Stockholders' Equity [Abstract]
Cash dividends declared	$ 0.93

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 4,365	$ 5,781
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,600	1,760
Depreciation	484	414
Amortization of intangible assets	81	80
Deferred income taxes	155	184
Net amortization of securities premiums and discounts	1,039	711
Net realized gain on sales of securities	(269)	(508)
Earnings and proceeds on bank owned life insurance	(616)	(497)
Loss on sales of fixed assets and foreclosed real estate owned	2	271
Gain on sale of mortgage loans	(54)	(56)
Mortgage loans originated for sale	(1,685)	(2,605)
Proceeds from sale of mortgage loans originated for sale	1,739	2,661
Compensation expense related to stock options	53	49
Compensation expense related to restricted stock	67	49
Decrease (increase) in accrued interest receivable and other assets	1,894	(609)
(Decrease) increase in accrued interest payable and other liabilities	(920)	531
Net cash provided by operating activities	7,935	8,216
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale: Proceeds from sales	101,804	28,850
Securities available for sale: Proceeds from maturities and principal reductions on mortgage-backed securities	18,083	19,408
Securities available for sale: Purchases	(80,538)	(44,987)
Purchase of regulatory stock	(2,675)	(1,830)
Redemption of regulatory stock	4,015	1,056
Net increase in loans	(35,325)	(44,592)
Proceeds from bank-owned life insurance	205	0
Purchase of bank-owned life insurance	(2,000)	0
Purchase of premises and equipment	(337)	(184)
Proceeds from sales of fixed assets and foreclosed real estate owned	387	2,378
Acquisition, net of cash and cash equivalents acquired	11,112	0
Net cash provided by (used in) investing activities	14,731	(39,901)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	44,072	11,409
Net (decrease) increase in short-term borrowings	(21,456)	15,851
Repayments of other borrowings	(18,439)	(9,038)
Proceeds from other borrowings	0	16,000
Stock options exercised	160	310
Tax benefit of stock options exercised	3	14
Purchase of treasury stock	(447)	(135)
Cash dividends paid	(3,436)	(3,386)
Net cash provided by financing activities	457	31,025
Increase (decrease) in cash and cash equivalents	23,123	(660)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	10,010	12,376
CASH AND CASH EQUIVALENTS, END OF PERIOD	33,133	11,716
Supplemental Disclosure of Cash Flow Information
Cash payments for: Interest on deposits and borrowings	2,566	2,403
Cash payments for: Income taxes paid, net of refunds	1,135	1,881
Supplemental Schedule of Noncash Investing Activities
Transfers of loans to foreclosed real estate and repossession of other assets	2,953	290
Cash dividends declared	3,567	$ 1,142
Merger with Delaware Bancshares, Inc.
Noncash assets acquired: Securities available for sale	208,488
Noncash assets acquired: Regulatory stock	279
Noncash assets acquired: Loans	116,674
Noncash assets acquired: Premises and equipment, net	7,292
Noncash assets acquired: Accrued interest receivable	1,626
Noncash assets acquired: Bank-owned life insurance	14,762
Noncash assets acquired: Core deposit intangibles	449
Noncash assets acquired: Deferred tax assets	3,034
Noncash assets acquired: Other assets	2,934
Noncash assets acquired: Goodwill	1,964
Total Noncash assets acquired	357,502
Liabilities assumed:
Time deposits	71,342
Deposits other than time deposits	255,921
Borrowings	21,232
Accrued interest payable	95
Other liabilities	7,873
Total Liabilities assumed	356,463
Net Noncash Assets Acquired	1,039
Cash Acquired	$ 14,977

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Basis of Presentation

9 Months Ended

Sep. 30, 2016

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, Inc.   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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 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, 2015.

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Earnings Per Share

9 Months Ended

Sep. 30, 2016

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 reflect 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. 

(in thousands)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Weighted average shares outstanding	3,978	3,683	3,790	3,681
Less: Unvested restricted shares	(14)	(9)	(14)	(9)
Basic EPS weighted average shares outstanding	3,964	3,674	3,776	3,672
Basic EPS weighted average shares outstanding	3,964	3,683	3,776	3,681
Add:  Dilutive effect of stock options	9	9	9	10
Diluted EPS weighted average shares outstanding	3,973	3,692	3,785	3,691

Stock options with a strike price of $29.08 which had no intrinsic value, because their effect would be anti-dilutive and therefore would not be included in the diluted EPS calculation, were 11,000 as of September 30, 2016 based upon the closing price of Norwood common stock of $29.07 per share on September 30, 2016.  At September 30, 2015, there were 12,000 anti-dilutive shares based on Norwood's closing price of $29.00 per share.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2016

Stock-Based Compensation [Abstract]

Stock-Based Compensation

3.         Stock-Based Compensation

No awards were granted during the nine-month period ending September 30, 2016. As of September 30, 2016, there was $18,000 of total unrecognized compensation cost related to non-vested options granted in 2015 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2016. Compensation costs related to stock options amounted to $53,000 and $49,000 during the nine-month periods ended September 30, 2016 and 2015, respectively.

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, 2016	194,521	$	26.91	5.2	Yrs.	$	363
Granted	-		-	-			-
Exercised	(6,052)		26.37	4.1			-
Forfeited	(16,019)		27.71	0.5			-
Outstanding at September 30, 2016	172,450	$	26.85	4.9	Yrs.	$	383
Exercisable at September 30, 2016	157,950	$	26.70	4.5	Yrs.	$	375

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 $29.07 as of September 30, 2016 and $28.75 as of December 31, 2015.

A summary of the Company’s restricted stock activity and related information for the nine-month period ended September 30, 2016 is as follows:

			Weighted-Average
	Number of		Grant Date
	Restricted Stock		Fair Value
Outstanding, January 1,	13,810	$	28.82
Granted	-		-
Vested	-		-
Forfeited	-		-
Non-vested at September 30,	13,810	$	28.82

The expected future compensation expense relating to the 13,810 shares of non-vested restricted stock outstanding as of September 30, 2016 is $331,000.  This cost will be recognized over the remaining vesting period of 4.25 years.  Compensation costs related to restricted stock amounted to $67,000 and $41,000 during the nine-month periods ended September 30, 2016 and 2015, respectively.

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Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2016

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, 2016 and 2015:

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  June 30, 2016	$	2,838
Other comprehensive loss before reclassification		(432)
Amount reclassified from accumulated other comprehensive income		-
Total other comprehensive loss		(432)
Balance as of September 30, 2016	$	2,406
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  June 30, 2015	$	(522)
Other comprehensive income before reclassification		1,284
Amount reclassified from accumulated other comprehensive income		(41)
Total other comprehensive income		1,243
Balance as of September 30, 2015	$	721
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2015	$	488
Other comprehensive income before reclassification		2,096
Amount reclassified from accumulated other comprehensive income		(178)
Total other comprehensive income		1,918
Balance as of September 30, 2016	$	2,406
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  December 31, 2014	$	462
Other comprehensive income before reclassification		594
Amount reclassified from accumulated other comprehensive income		(335)
Total other comprehensive income		259
Balance as of September 30, 2015	$	721

(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 (in thousands) for the three months and nine months ended September 30, 2016 and 2015:

	Amount Reclassified
	From Accumulated				Affected Line Item in
	Other				Consolidated
	Comprehensive				Statements
Details about other comprehensive income	Income (a)				of Income
		Three months ended
		September 30,
		2016		2015
Unrealized gains on available for sale securities	$	-	$	63	Net realized gains on sales of securities
		-		(22)	Income tax expense
	$	-	$	41
		Nine months ended
		September 30,
		2016		2015
Unrealized gains on available for sale securities	$	269	$	508	Net realized gains on sales of securities
		(91)		(173)	Income tax expense
	$	178	$	335

(a)  Amounts in parentheses indicate debits to net income

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Off-Balance Sheet Financial Instruments and Guarantees

9 Months Ended

Sep. 30, 2016

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,
	2016		2015
Commitments to grant loans	$	21,764	$	21,279
Unfunded commitments under lines of credit		62,599		51,489
Standby letters of credit		5,642		5,504
	$	90,005	$	78,272

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, 2016 for guarantees under standby letters of credit issued is not material.

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Securities

9 Months Ended

Sep. 30, 2016

Securities [Abstract]

Securities

6.         Securities

The amortized cost, gross unrealized gains and losses, and fair value of securities were as follows:

	September 30, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Treasury securities	$	2,006	$	-	$	(2)	$	2,004
U.S. Government agencies		2,001		-		-		2,001
States and political subdivisions		127,694		3,050		(172)		130,572
Corporate obligations		10,301		101		(17)		10,385
Mortgage-backed securities-
government sponsored entities		164,158		845		(223)		164,780
Total debt securities		306,160		3,996		(414)		309,742
Equity securities-financial services		320		64		-		384
	$	306,480	$	4,060	$	(414)	$	310,126

	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Government agencies	$	9,275	$	2	$	(108)	$	9,169
States and political subdivisions		59,120		1,747		(112)		60,755
Corporate obligations		4,933		45		(4)		4,974
Mortgage-backed securities-government
sponsored entities		64,491		23		(945)		63,569
Total debt securities		137,819		1,817		(1,169)		138,467
Equity securities-financial services		292		92		-		384
	$	138,111	$	1,909	$	(1,169)	$	138,851

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, 2016
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	2,004	$	(2)	$	-	$	-	$	2,004	$	(2)
States and political subdivisions		33,918		(170)		210		(2)		34,128		(172)
Corporate obligations		3,312		(17)		-		-		3,312		(17)
Mortgage-backed securities-government sponsored entities		49,341		(156)		9,885		(67)		59,226		(223)
	$	88,575	$	(345)	$	10,095	$	(69)	$	98,670	$	(414)

	December 31, 2015
	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	$	6,058	$	(71)	$	2,109	$	(37)	$	8,167	$	(108)
States and political subdivisions		9,086		(99)		1,417		(13)		10,503		(112)
Corporate obligations		2,221		(4)		-		-		2,221		(4)
Mortgage-backed securities-government sponsored entities		40,300		(432)		16,595		(513)		56,895		(945)
	$	57,665	$	(606)	$	20,121	$	(563)	$	77,786	$	(1,169)

At September 30, 2016, the Company has 76 debt securities in an unrealized loss position in the less than twelve months category and 11 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 2016.  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, 2016 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
	Amortized Cost		Fair Value
		(In Thousands)
Due in one year or less	$	983	$	991
Due after one year through five years		20,978		21,097
Due after five years through ten years		53,744		54,044
Due after ten years		66,297		68,830
Mortgage-backed securities-government sponsored agencies		164,158		164,780
	$	306,160	$	309,742

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,
	2016		2015		2016		2015
Gross realized gains	$	-	$	63	$	269	$	508
Gross realized losses		-		-		-		-
Net realized gain	$	-	$	63	$	269	$	508
Proceeds from sales of securities	$	70,028	$	5,466	$	101,804	$	28,850

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Loans Receivable and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2016

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, 2016				December 31, 2015
Real Estate Loans:
Residential	$	237,897	33.7	%	$	161,820	28.9	%
Commercial		315,270	44.6			279,123	49.8
Construction		20,056	2.8			18,987	3.4
Commercial, financial and agricultural		85,145	12.1			71,090	12.7
Consumer loans to individuals		48,225	6.8			29,231	5.2
Total loans		706,593	100.0	%		560,251	100.0	%
Deferred fees, net		(394)				(326)
Total loans receivable		706,199				559,925
Allowance for loan losses		(6,164)				(7,298)
Net loans receivable	$	700,035			$	552,627

The following table presents the components of the purchase accounting adjustments related to the purchased impaired loans acquired:

(In Thousands)
Contractually required principal and interest	$	2,621
Non-accretable discount		(1,014)
Expected cash flows		1,607
Accretable discount		(239)
Estimated fair value	$	1,368

Changes in the amortizable yield for purchased credit-impaired loans were as follows for the nine month periods ended September 30:

	2016		2015
Balance at beginning of period	$	-	$	8
Additions		239		-
Accretion		(12)		(1)
Reclassification and other		-		-
Balance at end of period	$	227	$	7

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

	September 30, 2016		December 31, 2015
Outstanding Balance	$	1,855	$	498
Carrying Amount	$	1,368	$	498

As a result of the acquisition of Delaware, the Company added $1,397,000 of loans that were accounted for in accordance with ASC 310-30.  Based on a review of the loans acquired by senior lending management, which included an analysis of credit deterioration of the loans since origination, the Company recorded a specific credit fair value adjustment of $499,000.  For loans that were acquired with specific evidence of deterioration in credit quality, loan losses will be accounted for through a reduction of the specific reserve and will not impact the allowance for loan losses until actual losses exceed the allotted reserves.  For loans acquired without a deterioration of credit quality, losses incurred will result in adjustments to the allowance for loan losses through the allowance for loan loss adequacy calculation.  As of September 30, 2016, the outstanding balance of ASC 310-30 loans acquired from Delaware was $1,410,000 and the carrying value was $911,000, while one loan with an outstanding balance and carrying value of $445,000 remained from a prior acquisition.

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 probable 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.

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate owned on the Consolidated Balance Sheets.  As of September 30, 2016 and December 31, 2015, foreclosed real estate owned totaled $5,386,000 and $2,847,000, respectively.  As of September 30, 2016, included within foreclosed real estate owned is $306,000 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end.  As of September 30, 2016, the Company has initiated formal foreclosure proceedings on $222,000 of consumer residential mortgages.

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, 2016	(In thousands)
Individually evaluated for impairment	$	24	$	2,791	$	-	$	-	$	-	$	2,815
Loans acquired with deteriorated credit quality		797		571		-		-		-		1,368
Collectively evaluated for impairment		237,076		311,908		20,056		85,145		48,225		702,410
Total Loans	$	237,897	$	315,270	$	20,056	$	85,145	$	48,225	$	706,593

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
	(In thousands)
December 31, 2015
Individually evaluated for impairment	$	28	$	8,660	$	-	$	43	$	-	$	8,731
Loans acquired with deteriorated credit quality		140		358		-		-		-		498
Collectively evaluated for impairment		161,652		270,105		18,987		71,047		29,231		551,022
Total Loans	$	161,820	$	279,123	$	18,987	$	71,090	$	29,231	$	560,251

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
	Recorded		Principal		Associated
	Investment		Balance		Allowance
September 30, 2016				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	1,003	$	1,189	$	-
Commercial		3,349		4,267		-
Subtotal		4,352		5,456		-
With an allowance recorded:
Real Estate Loans
Commercial		74		1,020		15
Subtotal		74		1,020		15
Total:
Real Estate Loans
Residential		1,003		1,189		-
Commercial		3,423		5,287		15
Total Impaired Loans	$	4,426	$	6,476	$	15

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2015				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	168	$	173	$	-
Commercial		2,644		4,610		-
Commercial, financial and agriculture		43		43		-
Subtotal		2,855		4,826		-
With an allowance recorded:
Real Estate Loans
Commercial		6,373		6,446		1,613
Subtotal		6,373		6,446		1,613
Total:
Real Estate Loans
Residential		168		173		-
Commercial		9,017		11,056		1,613
Commercial, financial and agriculture		43		43		-
Total Impaired Loans	$	9,228	$	11,272	$	1,613

The following information for impaired loans is presented (in thousands) for the nine months ended September 30, 2016 and 2015:

	Average Recorded				Interest Income
	Investment				Recognized
	2016		2015		2016		2015
Real Estate Loans:
Residential	$	372	$	236	$	3	$	3
Commercial		3,249		10,477		90		510
Total	$	3,621	$	10,713	$	93	$	513

The following information for impaired loans is presented (in thousands) for the three months ended September 30, 2016 and 2015:

	Average Recorded				Interest Income
	Investment				Recognized
	2016		2015		2016		2015
Real Estate Loans:
Residential	$	579	$	249	$	1	$	1
Commercial		3,253		10,294		33		45
Total	$	3,832	$	10,543	$	34	$	46

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, 2016, troubled debt restructured loans totaled $1.6 million and resulted in specific reserves of $15,000.  As of December 31, 2015, troubled debt restructured loans totaled $6.8 million and resulted in specific reserves of $1,613,000.  For the period ended September 30, 2016, there were no new loans identified as troubled debt restructurings.  During 2016, the Company has recognized write-downs of $2,519,000 on loans that were previously identified as troubled debt restructurings.

For the period ended September 30, 2015, there were no new loans identified as troubled debt restructurings. During the 2015 period, the Company recognized write-downs in the amount of $439,000 on three loans previously identified as troubled debt restructures with a carrying value of $2.5 million as of September 30, 2015.

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 $1,000,000 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, 2016 and December 31, 2015 (in thousands):

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
September 30, 2016
Commercial real estate loans	$	306,177	$	4,442	$	4,651	$	-	$	315,270
Commercial loans		85,087		35		23		-		85,145
Total	$	391,264	$	4,477	$	4,674	$	-	$	400,415

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
December 31, 2015
Commercial real estate loans	$	267,892	$	1,837	$	9,394	$	-	$	279,123
Commercial loans		71,047		-		43		-		71,090
Total	$	338,939	$	1,837	$	9,437	$	-	$	350,213

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, 2016 and December 31, 2015 (in thousands):

	Performing		Nonperforming		Total
September 30, 2016
Residential real estate loans	$	236,711	$	1,186	$	237,897
Construction		20,028		28		20,056
Consumer loans		48,225		-		48,225
Total	$	304,964	$	1,214	$	306,178

	Performing		Nonperforming		Total
December 31, 2015
Residential real estate loans	$	161,380	$	440	$	161,820
Construction		18,987		-		18,987
Consumer loans		29,231		-		29,231
Total	$	209,598	$	440	$	210,038

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, 2016 and December 31, 2015 (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, 2016
Real Estate loans
Residential	$	234,857	$	1,548	$	306	$	-	$	1,186	$	3,040	$	237,897
Commercial		313,916		198		131		49		976		1,354		315,270
Construction		20,028		-		-		-		28		28		20,056
Commercial  loans		85,083		62		-		-		-		62		85,145
Consumer  loans		48,118		96		11		-		-		107		48,225
Total	$	702,002	$	1,904	$	448	$	49	$	2,190	$	4,591	$	706,593

	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, 2015
Real Estate loans
Residential	$	160,683	$	646	$	51	$	-	$	440	$	1,137	$	161,820
Commercial		272,125		310		39		-		6,649		6,998		279,123
Construction		18,959		28		-		-		-		28		18,987
Commercial  loans		71,043		4		-		-		43		47		71,090
Consumer  loans		29,179		41		11		-		-		52		29,231
Total	$	551,989	$	1,029	$	101	$	-	$	7,132	$	8,262	$	560,251

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for loan losses.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off  against the allowance.  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, 2015	$	1,069	$	5,506	$	90	$	397	$	236	$	7,298
Charge Offs		(32)		(2,670)		-		(15)		(71)		(2,788)
Recoveries		4		11		-		-		39		54
Provision for loan losses		15		1,516		(12)		(46)		127		1,600
Ending balance, September 30, 2016	$	1,056	$	4,363	$	78	$	336	$	331	$	6,164
Ending balance individually evaluated for impairment	$	-	$	15	$	-	$	-	$	-	$	15
Ending balance collectively evaluated for impairment	$	1,056	$	4,348	$	78	$	336	$	331	$	6,149

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2016	$	976	$	4,191	$	59	$	293	$	279	$	5,798
Charge Offs		(15)		(28)		-		(15)		(41)		(99)
Recoveries		2		9		-		-		4		15
Provision for loan losses		93		191		19		58		89		450
Ending balance, September 30, 2016	$	1,056	$	4,363	$	78	$	336	$	331	$	6,164

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2014	$	1,323	$	3,890	$	222	$	256	$	184	$	5,875
Charge Offs		(159)		(1,692)		-		-		(59)		(1,910)
Recoveries		4		-		-		-		18		22
Provision for loan losses		(181)		1,980		(137)		28		70		1,760
Ending balance, September 30, 2015	$	987	$	4,178	$	85	$	284	$	213	$	5,747
Ending balance individually evaluated for impairment	$	-	$	389	$	-	$	-	$	-	$	389
Ending balance collectively evaluated for impairment	$	987	$	3,789	$	85	$	284	$	213	$	5,358

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2015	$	1,085	$	4,152	$	97	$	405	$	208	$	5,947
Charge Offs		(46)		(865)		-		-		(16)		(927)
Recoveries		-		-		-		-		7		7
Provision for loan losses		(52)		891		(12)		(121)		14		720
Ending balance, September 30, 2015	$	987	$	4,178	$	85	$	284	$	213	$	5,747

The Company’s primary business activity as of December 31, 2015 was with customers located in northeastern Pennsylvania. As of September 30, 2016, the Company has added the New York counties of Delaware and Sullivan to its market as a result of the acquisition of Delaware Bancshares, Inc.  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, 2016, the Company considered its concentration of credit risk to be acceptable.  The highest concentrations are in commercial rentals with $64.8 million of loans outstanding, or 9.2% of total loans outstanding, and the hospitality/lodging industry with loans outstanding of $51.6 million, or 7.3% of loans outstanding.  During 2016, the Company recognized a write down of $3,000 in the named concentrations.

Gross realized gains and gross realized losses on sales of residential mortgage loans were $54,000 and $0, respectively, in the first nine months of 2016 compared to $56,000 and $0, respectively, in the same period in 2015.  The proceeds from the sales of residential mortgage loans totaled $1.7 million and $2.7 million for the nine months ended September 30, 2016 and 2015, respectively.

There were no sales of residential mortgage loans during the three months ended September 30, 2016. Gross realized gains and gross realized losses on sales of residential mortgage loans were $16,000 and $0, respectively, in the same period in 2015.  The proceeds from the sales of residential mortgage loans totaled  $818,000 for the three months ended September 30, 2015.

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Fair Values Measurements

9 Months Ended

Sep. 30, 2016

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, 2016 and December 31, 2015 are as follows:

	Fair Value Measurement Using
	Reporting Date
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
September 30, 2016
Available for Sale:
U.S. Treasury securities	$	2,004	$	-	$	2,004	$	-
U.S. Government agencies		2,001		-		2,001		-
States and political subdivisions		130,572		-		130,572		-
Corporate obligations		10,385		-		10,385		-
Mortgage-backed securities-government
sponsored agencies		164,780		-		164,780		-
Equity securities-financial services		384		384		-		-
Total	$	310,126	$	384	$	309,742	$	-
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
December 31, 2015
Available for Sale:
U.S. Government agencies	$	9,169	$	-	$	9,169	$	-
States and political subdivisions		60,755		-		60,755		-
Corporate obligations		4,974		-		4,974		-
Mortgage-backed securities-government
sponsored agencies		63,569		-		63,569		-
Equity securities-financial services		384		384		-		-
Total	$	138,851	$	384	$	138,467	$	-

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, 2016 and December 31, 2015 are as follows:

			Fair Value Measurement Reporting Date using Reporting Date
(In thousands)
Description	Total		Level 1		Level 2		Level 3
September 30, 2016
Impaired Loans	$	4,411	$	-	$	-	$	4,411
Foreclosed Real Estate Owned		5,386		-		-		5,386
December 31, 2015
Impaired Loans	$	7,615	$	-	$	-	$	7,615
Foreclosed Real Estate Owned		2,847		-		-		2,847

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
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
September 30, 2016
Impaired loans	$	2,847	Appraisal of collateral(1)	Appraisal adjustments(2)	0 - 10%  (9.50%)
Impaired loans	$	1,564	Present value of future cash flows	Loan discount rate	4 - 6.75%  (5.46%)
Foreclosed real estate owned	$	5,386	Appraisal of collateral(1)	Liquidation Expenses(2)	0 - 10%  (9.90%)

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2015
Impaired loans	$	2,574	Appraisal of collateral(1)	Appraisal adjustments(2)	10%  (10%)
Impaired loans	$	5,041	Present value of future cash flows	Loan discount rate	4-7%  (5.61%)
Foreclosed real estate owned	$	2,847	Appraisal of collateral(1)	Liquidation Expenses(2)	10%  (10%)

(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, 2016 and December 31, 2015.

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.

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.

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.

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.

As of September 30, 2016, the fair value investment in impaired loans totaled $4,411,000 which included  one loan for $74,000 for which a valuation allowance of $15,000 had been provided based on the estimated value of the collateral, and twenty-four loans for $4,352,000 which did not require a valuation allowance since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan.  As of September 30, 2016, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $1,806,000 over the life of the loans.

As of December 31, 2015, the fair value investment in impaired loans totaled $7,615,000 which included three loans for $6,373,000 for which a valuation allowance of $1,613,000 had been provided based on the estimated value of the collateral or the present value of estimated cash flows, and seventeen loans for $2,855,000 which did not require a valuation allowance since the estimated realizable value of the collateral exceeded the recorded investment in the loan.  As of December 31, 2015, the Company had recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $2,044,000 over the life of the loans.

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.

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.

Regulatory stock (carried at cost):

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 regulatory 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 except certificates of deposit which are at fair value):

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, 2016 and December 31, 2015. (In thousands)

	Fair Value Measurements at September 30, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	33,133	$	33,133	$	33,133	$	-	$	-
Securities		310,126		310,126		384		309,742		-
Loans receivable, net		700,035		715,469		-		-		715,469
Mortgage servicing rights		244		260		-		-		260
Regulatory stock		2,351		2,351		2,351		-		-
Bank owned life insurance		35,889		35,889		35,889		-		-
Accrued interest receivable		3,541		3,541		3,541		-		-
Financial liabilities:
Deposits		922,244		922,394		275,564		-		646,830
Short-term borrowings		33,156		33,156		33,156		-		-
Other borrowings		42,542		42,712		-		-		42,712
Accrued interest payable		1,040		1,040		1,040		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	10,010	$	10,010	$	10,010	$	-	$	-
Securities		138,851		138,851		384		138,467		-
Loans receivable, net		552,627		559,416		-		-		559,416
Mortgage servicing rights		261		291		-		-		291
Regulatory stock		3,412		3,412		3,412		-		-
Bank owned life insurance		18,820		18,820		18,820		-		-
Accrued interest receivable		2,363		2,363		2,363		-		-
Financial liabilities:
Deposits		550,909		551,175		354,162		-		197,013
Short-term borrowings		53,235		53,235		53,235		-		-
Other borrowings		41,126		41,260		-		-		41,260
Accrued interest payable		957		957		957		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of  credit		-		-		-		-		-

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New and Recently Adopted Accounting Pronouncements

9 Months Ended

Sep. 30, 2016

New and Recently Adopted Accounting Pronouncements [Abstract]

New and Recently Adopted Accounting Pronouncements

9. New and Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). The Update’s core principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This Update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contract with Customers  (Topic 606). The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year.  Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.  The Company is evaluating the effect of adopting this new accounting Update.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  This Update applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation, and disclosure of financial instruments.  Among other things, this Update (a) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (b) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (d) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (f) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (g) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (h) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.  For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  For all other entities, including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet.  A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.  A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise.  For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis.  For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years.  For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020.  The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period.  The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718). The amendments in this Update affect all entities that issue share-based payment awards to their employees. The standards in this Update provide simplification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as with equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. In addition to those simplifications, the amendments eliminate the guidance in Topic 718 that was indefinitely deferred shortly after the issuance of FASB Statement No. 123 (revised 2004), Share-Based Payment. This should not result in a change in practice because the guidance that is being superseded was never effective. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after    December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.  The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset.  The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.  The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which addresses eight specific cash flow issues with the objective of reducing diversity in practice.  Among these include recognizing cash payments for debt prepayment or debt extinguishment as cash outflows for financing activities; cash proceeds received from the settlement of insurance claims should be classified on the basis of the related insurance coverage; and cash proceeds received from the settlement of bank-owned life insurance policies should be classified as cash inflows from investing activities while the cash payments for premiums on bank-owned policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities.  The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s statement of cash flows.

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Acquisition of Delaware Bancshares, Inc.

9 Months Ended

Sep. 30, 2016

Acquisition of Delaware Bancshares, Inc. [Abstract]

Acquisition of Delaware Bancshares, Inc.

10. Acquisition of Delaware Bancshares, Inc.

 On July 31, 2016, Norwood Financial Corp. (the “Company”) completed its acquisition of Delaware Bancshares, Inc. (“Delaware”)  pursuant to the terms of the Agreement and Plan of Merger, dated March 10, 2016, by and among the Company, Wayne Bank, Delaware and The National Bank of Delaware County (the “Merger Agreement”).  As of June 30, 2016, Delaware had on a consolidated basis total assets of $378.3 million, total deposits of $327.5 million and total shareholders’ equity of $24.1 million.

Pursuant to the terms of the Merger Agreement, Delaware was merged with and into the Company, with the Company as the surviving corporation of the merger (the “Merger”).  At the effective time of the Merger, each outstanding share of the common stock of Delaware was converted into, at the election of the holder but subject to the limitations and allocation and proration provisions set forth in the Merger Agreement, either $16.68 in cash or 0.6221 of a share of the common stock, par value $0.10 per share (the “Common Stock”) of the Company.  In the aggregate, the merger consideration paid to Delaware shareholders consisted of approximately $3,859,000 in cash and 431,605 shares of Norwood common stock.  Immediately following the Merger, The National Bank of Delaware County (“NBDC”) was merged with and into Wayne Bank, a wholly-owned subsidiary of the Company, with Wayne Bank as the surviving entity.

In connection with the Merger, the Company assumed the obligations of Delaware under the Indenture, dated as of October 31, 2007, by and between Delaware, as issuer, and Wells Fargo Bank, National Association, as trustee (the “Indenture”) and Delaware’s Junior Subordinated Debt Securities, due January 1, 2038 (the “Debt Securities”) issued thereunder.  The Debt Securities were issued by Delaware in connection with a private placement completed on October 31, 2007 of $8.0 million of trust preferred securities issued through the Delaware Bancshares Capital Trust I (the “Trust”).  The trust preferred securities require quarterly distributions and bear interest at a variable rate equal to LIBOR plus 2.4% per annum.  The trust preferred securities mature on January 1, 2038 and are redeemable, in whole or in part, without penalty, on or after January 1, 2013 and on any January 1, April 1, July 1 or October 1 thereafter.  The Company redeemed the securities on October 3, 2016.

The proceeds from the initial sale of the trust preferred securities on October 31, 2007 were used by the Trust to purchase the Debt Securities.  The Debt Securities bear interest at a variable rate which resets quarterly at LIBOR plus 2.4%, and are redeemable, in whole or in part, without penalty, at the option of the Company, beginning on January 1, 2013 and on any January 1, April 1, July 1 or October 1 thereafter.  The interest payments on the Debt Securities made by the Company will be used to pay the quarterly distributions payable by the Trust to the holders of the trust preferred securities.  The Company redeemed the securities on October 3, 2016.

The acquired assets and assumed liabilities were measured at estimated fair values.  Management made significant estimates and exercised significant judgment in accounting for the acquisition.  Management measured loan fair values based on loan file reviews, appraised collateral values, expected cash flows, and historical loss factors of NBDC.  The Company also recorded an identifiable intangible asset representing the core deposit base of NBDCbased on management’s evaluation of the cost of such deposits relative to alternative funding sources.  Management used significant estimates including the average lives of depository accounts, future interest rate levels, and the cost of servicing various depository products.  Management used market quotations to determine the fair value of investment securities.

The business combination resulted in the acquisition of loans with and without evidence of credit quality deterioration.  NBDC loans were deemed impaired at the acquisition date if the Company did not expect to receive all contractually required cash flows due to concerns about credit quality.  Such loans were fair valued and the difference between contractually required payments at the acquisition date and cash flows expected to be collected was recorded as a non-accretable difference.  At the acquisition date, the Company recorded $1,410,000 of purchased credit-impaired loans subject to a non-accretable difference of $260,000.  The method of measuring carrying value of purchased loans differs from loans originated by the Company (originated loans), and as such, the Company identifies purchased loans and purchased loans with a credit quality discount and originated loans at amortized cost.

NBDC’s loans without evidence of credit deterioration were fair valued by discounting both expected principal and interest cash flows using an observable discount rate for similar instruments that a market participant would consider in determining fair value.  Additionally, consideration was given to management’s best estimates of default rates and payment speeds.  At acquisition, NBDC’s loan portfolio without evidence of deterioration totaled $111,307,000 and was recorded at a fair value of $109,693,000.

The following table summarizes the purchase of Delaware Bancshares, Inc. as of July 31, 2016:

(In Thousands, Except Per Share Data)

Purchase Price Consideration in Common Stock
Delaware Bancshares, Inc. common shares settled for stock	694,114
Exchange Ratio	0.6221
Norwood Financial Corp. shares issued	431,605
Value assigned to Norwood Financial Corp. common share	$28.15
Purchase price assigned to Delaware Bancshares, Inc. common shares exchanged for Norwood Financial Corp.		$12,150
Purchase Price Consideration – Cash for Common Stock
Delaware Bancshares, Inc. shares exchanged for cash	231,385
Purchase price paid to each Delaware Bancshares, Inc. common shares exchanged for cash	$16.68
Purchase price assigned to Delaware Bancshares, Inc. common shares exchanged for cash		$3,860
Purchase price consideration-Cash in Lieu of Fractional Shares		6
Total Purchase Price		$16,016
Net Assets Acquired:
Delaware Bancshares, Inc. shareholders’ equity	19,357
Delaware Bancshares, Inc. goodwill and intangibles	(7,640)
Total tangible equity	11,717
Adjustments to reflect assets acquired at fair value:
Investments	219
Loans
Interest rate	1,486
General credit	(1,614)
Specific credit- non-amortizing	(260)
Specific credit – amortizing	(239)
Core deposit intangible	449
Deferred loan fees	(296)
Premises and equipment	3,053
Allowance for loan and lease losses	1,651
Deferred tax assets	(1,417)
Other	(445)
Adjustments to reflect liabilities acquired at fair value:
Time deposits	(252)
		14,052
Goodwill resulting from merger		$1,964

The following condensed statement reflects the values assigned to Delaware Bancshares, Inc. net assets as of acquisition date:

(In Thousands)

Total purchase price		$16,016
Net assets acquired:
Cash	$14,977
Securities available for sale	208,488
Loans	116,674
Premises and equipment, net	7,292
Regulatory stock	279
Accrued interest receivable	1,626
Bank-owned life insurance	14,762
Core deposit intangible	449
Deferred tax assets	3,034
Other assets	2,934
Time deposits	(71,342)
Deposits other than time deposits	(255,921)
Borrowings	(21,232)
Accrued interest payable	(95)
Other liabilities	(7,873)
		14,052
Goodwill resulting from Delaware Bancshares, Inc.
Merger		$1,964

The Company recorded goodwill and other intangibles associated with the purchase of Delaware Bancshares, Inc. totaling $1,964,000.  Goodwill is not amortized, but is periodically evaluated for impairment.  The Company did not recognize any impairment during the nine months ended September 30, 2016.  The carrying amount of the goodwill at September 30, 2016 related to the Delaware acquisition was $1,964,000.

Identifiable intangibles are amortized to their estimated residual values over the expected useful lives.  Such lives are also periodically reassessed to determine if any amortization period adjustments are required.  During the nine months ended September 30, 2016, no such adjustments were recorded.  The identifiable intangible assets consist of a core deposit intangible which is being amortized on an accelerated basis over the useful life of such assets.  The gross carrying amount of the core deposit intangible at September 30, 2016 was $449,000 with $14,000 accumulated amortization as of that date.

As of September 30, 2016, the current year and estimated future amortization expense for the core deposit intangible is:

(In thousands)

2016	$	13
2017		30
2018		30
2019		30
2020		30
After five years		316
	$	449

Results of operations for Delaware Bancshares, Inc. prior to the acquisition date are not included in the Consolidated Statement of Income for the three and nine month period ended September 30, 2016.  Due to the significant amount of fair value adjustments, historical results of Delaware Bancshares, Inc. are not relevant to the Company’s results of operations.  Therefore, no pro forma information is presented.

The following table presents financial information regarding the former Delaware Bancshares, Inc. operations included in our Consolidated Statement of Income from the date of acquisition through September 30, 2016 under the column “Actual from acquisition date through September 30, 2016”.  In addition, the following table presents unaudited pro forma information as if the acquisition of Delaware Bancshares, Inc. had occurred on January 1, 2016 under the “Pro Forma” columns.  The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results.  Furthermore, the unaudited pro-forma information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings as a result of the integration and consolidation of the acquisition.  Merger and acquisition integration costs and amortization of fair value adjustments are included in the numbers below.

	Actual From Acquisition Date	Pro Forma Nine Months Ended September 30
(In Thousands, Except Per Share Data)	Through September 30, 2016	2016	2015
Net interest income	$1,560	$25,377	$26,340
Non-interest income	357	4,715	5,179
Net income	300	1,243	6,050
Pro forma earnings per share:
Basic	$0.08	$0.33	$1.60
Diluted	$0.08	$0.33	$1.60

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Basis of Presentation (Policy)

9 Months Ended

Sep. 30, 2016

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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any other future interim period.

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Earnings Per Share (Policy)

9 Months Ended

Sep. 30, 2016

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 reflect 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.

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Loans Receivable and Allowance for Loan Losses (Policy)

9 Months Ended

Sep. 30, 2016

Loans Receivable and Allowance for Loan Losses [Abstract]

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

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 probable 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.

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New and Recently Adopted Accounting Pronouncements (Policy)

9 Months Ended

Sep. 30, 2016

New and Recently Adopted Accounting Pronouncements [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). The Update’s core principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This Update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contract with Customers  (Topic 606). The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year.  Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.  The Company is evaluating the effect of adopting this new accounting Update.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities.  This Update applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation, and disclosure of financial instruments.  Among other things, this Update (a) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (b) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (d) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (f) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (g) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (h) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.  For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  For all other entities, including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet.  A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.  A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise.  For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis.  For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years.  For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020.  The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period.  The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718). The amendments in this Update affect all entities that issue share-based payment awards to their employees. The standards in this Update provide simplification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as with equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. In addition to those simplifications, the amendments eliminate the guidance in Topic 718 that was indefinitely deferred shortly after the issuance of FASB Statement No. 123 (revised 2004), Share-Based Payment. This should not result in a change in practice because the guidance that is being superseded was never effective. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after    December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.  The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset.  The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.  The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which addresses eight specific cash flow issues with the objective of reducing diversity in practice.  Among these include recognizing cash payments for debt prepayment or debt extinguishment as cash outflows for financing activities; cash proceeds received from the settlement of insurance claims should be classified on the basis of the related insurance coverage; and cash proceeds received from the settlement of bank-owned life insurance policies should be classified as cash inflows from investing activities while the cash payments for premiums on bank-owned policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities.  The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s statement of cash flows.

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Schedule of Weighted Average Number of Shares [Table Text Block]

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Weighted average shares outstanding	3,978	3,683	3,790	3,681
Less: Unvested restricted shares	(14)	(9)	(14)	(9)
Basic EPS weighted average shares outstanding	3,964	3,674	3,776	3,672
Basic EPS weighted average shares outstanding	3,964	3,683	3,776	3,681
Add:  Dilutive effect of stock options	9	9	9	10
Diluted EPS weighted average shares outstanding	3,973	3,692	3,785	3,691

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Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2016

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, 2016	194,521	$	26.91	5.2	Yrs.	$	363
Granted	-		-	-			-
Exercised	(6,052)		26.37	4.1			-
Forfeited	(16,019)		27.71	0.5			-
Outstanding at September 30, 2016	172,450	$	26.85	4.9	Yrs.	$	383
Exercisable at September 30, 2016	157,950	$	26.70	4.5	Yrs.	$	375

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

			Weighted-Average
	Number of		Grant Date
	Restricted Stock		Fair Value
Outstanding, January 1,	13,810	$	28.82
Granted	-		-
Vested	-		-
Forfeited	-		-
Non-vested at September 30,	13,810	$	28.82

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Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2016

Accumulated Other Comprehensive Income [Abstract]

Components of Accumulated Other Comprehensive Income [Table Text Block]

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  June 30, 2016	$	2,838
Other comprehensive loss before reclassification		(432)
Amount reclassified from accumulated other comprehensive income		-
Total other comprehensive loss		(432)
Balance as of September 30, 2016	$	2,406
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  June 30, 2015	$	(522)
Other comprehensive income before reclassification		1,284
Amount reclassified from accumulated other comprehensive income		(41)
Total other comprehensive income		1,243
Balance as of September 30, 2015	$	721
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2015	$	488
Other comprehensive income before reclassification		2,096
Amount reclassified from accumulated other comprehensive income		(178)
Total other comprehensive income		1,918
Balance as of September 30, 2016	$	2,406
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  December 31, 2014	$	462
Other comprehensive income before reclassification		594
Amount reclassified from accumulated other comprehensive income		(335)
Total other comprehensive income		259
Balance as of September 30, 2015	$	721

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

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

	Amount Reclassified
	From Accumulated				Affected Line Item in
	Other				Consolidated
	Comprehensive				Statements
Details about other comprehensive income	Income (a)				of Income
		Three months ended
		September 30,
		2016		2015
Unrealized gains on available for sale securities	$	-	$	63	Net realized gains on sales of securities
		-		(22)	Income tax expense
	$	-	$	41
		Nine months ended
		September 30,
		2016		2015
Unrealized gains on available for sale securities	$	269	$	508	Net realized gains on sales of securities
		(91)		(173)	Income tax expense
	$	178	$	335

(a)  Amounts in parentheses indicate debits to net income

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Off-Balance Sheet Financial Instruments and Guarantees (Tables)

9 Months Ended

Sep. 30, 2016

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,
	2016		2015
Commitments to grant loans	$	21,764	$	21,279
Unfunded commitments under lines of credit		62,599		51,489
Standby letters of credit		5,642		5,504
	$	90,005	$	78,272

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Securities (Tables)

9 Months Ended

Sep. 30, 2016

Securities [Abstract]

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

	September 30, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Treasury securities	$	2,006	$	-	$	(2)	$	2,004
U.S. Government agencies		2,001		-		-		2,001
States and political subdivisions		127,694		3,050		(172)		130,572
Corporate obligations		10,301		101		(17)		10,385
Mortgage-backed securities-
government sponsored entities		164,158		845		(223)		164,780
Total debt securities		306,160		3,996		(414)		309,742
Equity securities-financial services		320		64		-		384
	$	306,480	$	4,060	$	(414)	$	310,126

	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
U.S. Government agencies	$	9,275	$	2	$	(108)	$	9,169
States and political subdivisions		59,120		1,747		(112)		60,755
Corporate obligations		4,933		45		(4)		4,974
Mortgage-backed securities-government
sponsored entities		64,491		23		(945)		63,569
Total debt securities		137,819		1,817		(1,169)		138,467
Equity securities-financial services		292		92		-		384
	$	138,111	$	1,909	$	(1,169)	$	138,851

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

	September 30, 2016
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	2,004	$	(2)	$	-	$	-	$	2,004	$	(2)
States and political subdivisions		33,918		(170)		210		(2)		34,128		(172)
Corporate obligations		3,312		(17)		-		-		3,312		(17)
Mortgage-backed securities-government sponsored entities		49,341		(156)		9,885		(67)		59,226		(223)
	$	88,575	$	(345)	$	10,095	$	(69)	$	98,670	$	(414)

	December 31, 2015
	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	$	6,058	$	(71)	$	2,109	$	(37)	$	8,167	$	(108)
States and political subdivisions		9,086		(99)		1,417		(13)		10,503		(112)
Corporate obligations		2,221		(4)		-		-		2,221		(4)
Mortgage-backed securities-government sponsored entities		40,300		(432)		16,595		(513)		56,895		(945)
	$	57,665	$	(606)	$	20,121	$	(563)	$	77,786	$	(1,169)

Securities by Contractual Maturity [Table Text Block]

	Available for Sale
	Amortized Cost		Fair Value
		(In Thousands)
Due in one year or less	$	983	$	991
Due after one year through five years		20,978		21,097
Due after five years through ten years		53,744		54,044
Due after ten years		66,297		68,830
Mortgage-backed securities-government sponsored agencies		164,158		164,780
	$	306,160	$	309,742

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,
	2016		2015		2016		2015
Gross realized gains	$	-	$	63	$	269	$	508
Gross realized losses		-		-		-		-
Net realized gain	$	-	$	63	$	269	$	508
Proceeds from sales of securities	$	70,028	$	5,466	$	101,804	$	28,850

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Loans Receivable and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2016

Loans Receivable and Allowance for Loan Losses [Abstract]

Composition of Loans Receivable [Table Text Block]

	Types of loans
	(dollars in thousands)
	September 30, 2016				December 31, 2015
Real Estate Loans:
Residential	$	237,897	33.7	%	$	161,820	28.9	%
Commercial		315,270	44.6			279,123	49.8
Construction		20,056	2.8			18,987	3.4
Commercial, financial and agricultural		85,145	12.1			71,090	12.7
Consumer loans to individuals		48,225	6.8			29,231	5.2
Total loans		706,593	100.0	%		560,251	100.0	%
Deferred fees, net		(394)				(326)
Total loans receivable		706,199				559,925
Allowance for loan losses		(6,164)				(7,298)
Net loans receivable	$	700,035			$	552,627

Components of purchase accounting adjustments related to purchased impaired loans acquired [Table Text Block]

(In Thousands)
Contractually required principal and interest	$	2,621
Non-accretable discount		(1,014)
Expected cash flows		1,607
Accretable discount		(239)
Estimated fair value	$	1,368

Changes in amortizable yield for purchased credit-impaired loans [Table Text Block]

	2016		2015
Balance at beginning of period	$	-	$	8
Additions		239		-
Accretion		(12)		(1)
Reclassification and other		-		-
Balance at end of period	$	227	$	7

Additional Information Regarding Loans Acquired and Accounted for in Accordance with ASC 310-30 [Table Text Block]

	September 30, 2016		December 31, 2015
Outstanding Balance	$	1,855	$	498
Carrying Amount	$	1,368	$	498

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, 2016	(In thousands)
Individually evaluated for impairment	$	24	$	2,791	$	-	$	-	$	-	$	2,815
Loans acquired with deteriorated credit quality		797		571		-		-		-		1,368
Collectively evaluated for impairment		237,076		311,908		20,056		85,145		48,225		702,410
Total Loans	$	237,897	$	315,270	$	20,056	$	85,145	$	48,225	$	706,593

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
	(In thousands)
December 31, 2015
Individually evaluated for impairment	$	28	$	8,660	$	-	$	43	$	-	$	8,731
Loans acquired with deteriorated credit quality		140		358		-		-		-		498
Collectively evaluated for impairment		161,652		270,105		18,987		71,047		29,231		551,022
Total Loans	$	161,820	$	279,123	$	18,987	$	71,090	$	29,231	$	560,251

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
	Recorded		Principal		Associated
	Investment		Balance		Allowance
September 30, 2016				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	1,003	$	1,189	$	-
Commercial		3,349		4,267		-
Subtotal		4,352		5,456		-
With an allowance recorded:
Real Estate Loans
Commercial		74		1,020		15
Subtotal		74		1,020		15
Total:
Real Estate Loans
Residential		1,003		1,189		-
Commercial		3,423		5,287		15
Total Impaired Loans	$	4,426	$	6,476	$	15

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2015				(in thousands)
With no related allowance recorded:
Real Estate Loans
Residential	$	168	$	173	$	-
Commercial		2,644		4,610		-
Commercial, financial and agriculture		43		43		-
Subtotal		2,855		4,826		-
With an allowance recorded:
Real Estate Loans
Commercial		6,373		6,446		1,613
Subtotal		6,373		6,446		1,613
Total:
Real Estate Loans
Residential		168		173		-
Commercial		9,017		11,056		1,613
Commercial, financial and agriculture		43		43		-
Total Impaired Loans	$	9,228	$	11,272	$	1,613

The following information for impaired loans is presented (in thousands) for the nine months ended September 30, 2016 and 2015:

	Average Recorded				Interest Income
	Investment				Recognized
	2016		2015		2016		2015
Real Estate Loans:
Residential	$	372	$	236	$	3	$	3
Commercial		3,249		10,477		90		510
Total	$	3,621	$	10,713	$	93	$	513

The following information for impaired loans is presented (in thousands) for the three months ended September 30, 2016 and 2015:

	Average Recorded				Interest Income
	Investment				Recognized
	2016		2015		2016		2015
Real Estate Loans:
Residential	$	579	$	249	$	1	$	1
Commercial		3,253		10,294		33		45
Total	$	3,832	$	10,543	$	34	$	46

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

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
September 30, 2016
Commercial real estate loans	$	306,177	$	4,442	$	4,651	$	-	$	315,270
Commercial loans		85,087		35		23		-		85,145
Total	$	391,264	$	4,477	$	4,674	$	-	$	400,415

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
December 31, 2015
Commercial real estate loans	$	267,892	$	1,837	$	9,394	$	-	$	279,123
Commercial loans		71,047		-		43		-		71,090
Total	$	338,939	$	1,837	$	9,437	$	-	$	350,213

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, 2016 and December 31, 2015 (in thousands):

	Performing		Nonperforming		Total
September 30, 2016
Residential real estate loans	$	236,711	$	1,186	$	237,897
Construction		20,028		28		20,056
Consumer loans		48,225		-		48,225
Total	$	304,964	$	1,214	$	306,178

	Performing		Nonperforming		Total
December 31, 2015
Residential real estate loans	$	161,380	$	440	$	161,820
Construction		18,987		-		18,987
Consumer loans		29,231		-		29,231
Total	$	209,598	$	440	$	210,038

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, 2016
Real Estate loans
Residential	$	234,857	$	1,548	$	306	$	-	$	1,186	$	3,040	$	237,897
Commercial		313,916		198		131		49		976		1,354		315,270
Construction		20,028		-		-		-		28		28		20,056
Commercial  loans		85,083		62		-		-		-		62		85,145
Consumer  loans		48,118		96		11		-		-		107		48,225
Total	$	702,002	$	1,904	$	448	$	49	$	2,190	$	4,591	$	706,593

	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, 2015
Real Estate loans
Residential	$	160,683	$	646	$	51	$	-	$	440	$	1,137	$	161,820
Commercial		272,125		310		39		-		6,649		6,998		279,123
Construction		18,959		28		-		-		-		28		18,987
Commercial  loans		71,043		4		-		-		43		47		71,090
Consumer  loans		29,179		41		11		-		-		52		29,231
Total	$	551,989	$	1,029	$	101	$	-	$	7,132	$	8,262	$	560,251

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

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for loan losses.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off  against the allowance.  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, 2015	$	1,069	$	5,506	$	90	$	397	$	236	$	7,298
Charge Offs		(32)		(2,670)		-		(15)		(71)		(2,788)
Recoveries		4		11		-		-		39		54
Provision for loan losses		15		1,516		(12)		(46)		127		1,600
Ending balance, September 30, 2016	$	1,056	$	4,363	$	78	$	336	$	331	$	6,164
Ending balance individually evaluated for impairment	$	-	$	15	$	-	$	-	$	-	$	15
Ending balance collectively evaluated for impairment	$	1,056	$	4,348	$	78	$	336	$	331	$	6,149

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2016	$	976	$	4,191	$	59	$	293	$	279	$	5,798
Charge Offs		(15)		(28)		-		(15)		(41)		(99)
Recoveries		2		9		-		-		4		15
Provision for loan losses		93		191		19		58		89		450
Ending balance, September 30, 2016	$	1,056	$	4,363	$	78	$	336	$	331	$	6,164

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2014	$	1,323	$	3,890	$	222	$	256	$	184	$	5,875
Charge Offs		(159)		(1,692)		-		-		(59)		(1,910)
Recoveries		4		-		-		-		18		22
Provision for loan losses		(181)		1,980		(137)		28		70		1,760
Ending balance, September 30, 2015	$	987	$	4,178	$	85	$	284	$	213	$	5,747
Ending balance individually evaluated for impairment	$	-	$	389	$	-	$	-	$	-	$	389
Ending balance collectively evaluated for impairment	$	987	$	3,789	$	85	$	284	$	213	$	5,358

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, June 30, 2015	$	1,085	$	4,152	$	97	$	405	$	208	$	5,947
Charge Offs		(46)		(865)		-		-		(16)		(927)
Recoveries		-		-		-		-		7		7
Provision for loan losses		(52)		891		(12)		(121)		14		720
Ending balance, September 30, 2015	$	987	$	4,178	$	85	$	284	$	213	$	5,747

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

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, 2016
Available for Sale:
U.S. Treasury securities	$	2,004	$	-	$	2,004	$	-
U.S. Government agencies		2,001		-		2,001		-
States and political subdivisions		130,572		-		130,572		-
Corporate obligations		10,385		-		10,385		-
Mortgage-backed securities-government
sponsored agencies		164,780		-		164,780		-
Equity securities-financial services		384		384		-		-
Total	$	310,126	$	384	$	309,742	$	-
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
December 31, 2015
Available for Sale:
U.S. Government agencies	$	9,169	$	-	$	9,169	$	-
States and political subdivisions		60,755		-		60,755		-
Corporate obligations		4,974		-		4,974		-
Mortgage-backed securities-government
sponsored agencies		63,569		-		63,569		-
Equity securities-financial services		384		384		-		-
Total	$	138,851	$	384	$	138,467	$	-

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

			Fair Value Measurement Reporting Date using Reporting Date
(In thousands)
Description	Total		Level 1		Level 2		Level 3
September 30, 2016
Impaired Loans	$	4,411	$	-	$	-	$	4,411
Foreclosed Real Estate Owned		5,386		-		-		5,386
December 31, 2015
Impaired Loans	$	7,615	$	-	$	-	$	7,615
Foreclosed Real Estate Owned		2,847		-		-		2,847

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

		Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
September 30, 2016
Impaired loans	$	2,847	Appraisal of collateral(1)	Appraisal adjustments(2)	0 - 10%  (9.50%)
Impaired loans	$	1,564	Present value of future cash flows	Loan discount rate	4 - 6.75%  (5.46%)
Foreclosed real estate owned	$	5,386	Appraisal of collateral(1)	Liquidation Expenses(2)	0 - 10%  (9.90%)

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2015
Impaired loans	$	2,574	Appraisal of collateral(1)	Appraisal adjustments(2)	10%  (10%)
Impaired loans	$	5,041	Present value of future cash flows	Loan discount rate	4-7%  (5.61%)
Foreclosed real estate owned	$	2,847	Appraisal of collateral(1)	Liquidation Expenses(2)	10%  (10%)

(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, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	33,133	$	33,133	$	33,133	$	-	$	-
Securities		310,126		310,126		384		309,742		-
Loans receivable, net		700,035		715,469		-		-		715,469
Mortgage servicing rights		244		260		-		-		260
Regulatory stock		2,351		2,351		2,351		-		-
Bank owned life insurance		35,889		35,889		35,889		-		-
Accrued interest receivable		3,541		3,541		3,541		-		-
Financial liabilities:
Deposits		922,244		922,394		275,564		-		646,830
Short-term borrowings		33,156		33,156		33,156		-		-
Other borrowings		42,542		42,712		-		-		42,712
Accrued interest payable		1,040		1,040		1,040		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	10,010	$	10,010	$	10,010	$	-	$	-
Securities		138,851		138,851		384		138,467		-
Loans receivable, net		552,627		559,416		-		-		559,416
Mortgage servicing rights		261		291		-		-		291
Regulatory stock		3,412		3,412		3,412		-		-
Bank owned life insurance		18,820		18,820		18,820		-		-
Accrued interest receivable		2,363		2,363		2,363		-		-
Financial liabilities:
Deposits		550,909		551,175		354,162		-		197,013
Short-term borrowings		53,235		53,235		53,235		-		-
Other borrowings		41,126		41,260		-		-		41,260
Accrued interest payable		957		957		957		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of  credit		-		-		-		-		-

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Acquisition of Delaware Bancshares, Inc. (Tables)

9 Months Ended

Sep. 30, 2016

Acquisition of Delaware Bancshares, Inc. [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Purchase Price Consideration in Common Stock
Delaware Bancshares, Inc. common shares settled for stock	694,114
Exchange Ratio	0.6221
Norwood Financial Corp. shares issued	431,605
Value assigned to Norwood Financial Corp. common share	$28.15
Purchase price assigned to Delaware Bancshares, Inc. common shares exchanged for Norwood Financial Corp.		$12,150
Purchase Price Consideration – Cash for Common Stock
Delaware Bancshares, Inc. shares exchanged for cash	231,385
Purchase price paid to each Delaware Bancshares, Inc. common shares exchanged for cash	$16.68
Purchase price assigned to Delaware Bancshares, Inc. common shares exchanged for cash		$3,860
Purchase price consideration-Cash in Lieu of Fractional Shares		6
Total Purchase Price		$16,016
Net Assets Acquired:
Delaware Bancshares, Inc. shareholders’ equity	19,357
Delaware Bancshares, Inc. goodwill and intangibles	(7,640)
Total tangible equity	11,717
Adjustments to reflect assets acquired at fair value:
Investments	219
Loans
Interest rate	1,486
General credit	(1,614)
Specific credit- non-amortizing	(260)
Specific credit – amortizing	(239)
Core deposit intangible	449
Deferred loan fees	(296)
Premises and equipment	3,053
Allowance for loan and lease losses	1,651
Deferred tax assets	(1,417)
Other	(445)
Adjustments to reflect liabilities acquired at fair value:
Time deposits	(252)
		14,052
Goodwill resulting from merger		$1,964

The following condensed statement reflects the values assigned to Delaware Bancshares, Inc. net assets as of acquisition date:

(In Thousands)

Total purchase price		$16,016
Net assets acquired:
Cash	$14,977
Securities available for sale	208,488
Loans	116,674
Premises and equipment, net	7,292
Regulatory stock	279
Accrued interest receivable	1,626
Bank-owned life insurance	14,762
Core deposit intangible	449
Deferred tax assets	3,034
Other assets	2,934
Time deposits	(71,342)
Deposits other than time deposits	(255,921)
Borrowings	(21,232)
Accrued interest payable	(95)
Other liabilities	(7,873)
		14,052
Goodwill resulting from Delaware Bancshares, Inc.
Merger		$1,964

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

2016	$	13
2017		30
2018		30
2019		30
2020		30
After five years		316
	$	449

Business Acquisition, Pro Forma Information [Table Text Block]

	Actual From Acquisition Date	Pro Forma Nine Months Ended September 30
(In Thousands, Except Per Share Data)	Through September 30, 2016	2016	2015
Net interest income	$1,560	$25,377	$26,340
Non-interest income	357	4,715	5,179
Net income	300	1,243	6,050
Pro forma earnings per share:
Basic	$0.08	$0.33	$1.60
Diluted	$0.08	$0.33	$1.60

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Earnings Per Share (Narrative) (Details) - $ / shares	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Earnings Per Share [Abstract]
Stock options strike price, upper range limit	$ 29.08
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	11,000	12,000
Share price	$ 29.07	$ 29.00	$ 28.75

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Earnings Per Share (Basic and Diluted Earnings Per Share) (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Earnings Per Share [Abstract]
Weighted average shares outstanding	3,978	3,683	3,790	3,681
Less: Unvested restricted shares	(14)	(9)	(14)	(9)
Basic EPS weighted average shares outstanding	3,964	3,674	3,776	3,672
Add: Dilutive effect of stock options	9	9	9	10
Diluted EPS weighted average shares outstanding	3,973	3,692	3,785	3,691

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Stock Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Granted	0
Compensation expense related to stock options	$ 53	$ 49
Share price	$ 29.07	$ 29.00	$ 28.75
Future compensation expense of non-vested restricted stock outstanding	$ 331
Non-vested restricted stock recognition period	4 years 3 months
Compensation expense related to restricted stock	$ 67	$ 49
Norwood Financial Corp 2014 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to non-vested options granted	$ 18

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Stock Based Compensation (Summary of Stock Option Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Stock-Based Compensation [Abstract]
Options, Outstanding, beginning of period	194,521
Options, Granted	0
Options, Exercised	(6,052)
Options, Forfeited	(16,019)
Options, Outstanding, end of period	172,450	194,521
Options, Exercisable, end of period	157,950
Weighted Average Exercise Price Per Share, Outstanding, beginning of period	$ 26.91
Weighted Average Exercise Price Per Share, Granted
Weighted Average Exercise Price Per Share, Exercised	26.37
Weighted Average Exercise Price Per Share, Forfeited	27.71
Weighted Average Exercise Price Per Share, Outstanding, end of period	26.85	$ 26.91
Weighted Average Exercise Price Per Share, Exercisable, end of period	$ 26.70
Weighted Average Remaining Contractual Term, Outstanding	4 years 10 months 24 days	5 years 2 months 12 days
Weighted Average Remaining Contractual Term, Exercised During Period	4 years 1 month 6 days
Weighted Average Remaining Contractual Term, Forfeited During Period	6 months
Weighted Average Remaining Contractual Term, Exercisable at End of Period	4 years 6 months
Aggregate Intrinsic Value, Outstanding, beginning of period	$ 363
Aggregate Intrinsic Value, Granted in Period	0
Aggregate Intrinsic Value, Exercised in Period	0
Aggregate Intrinsic Value, Forfeited in Period	0
Aggregate Intrinsic Value, Outstanding, end of period	383	$ 363
Aggregate Intrinsic Value, Exercisable at end of period	$ 375

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Stock Based Compensation (Restricted Stock Rollforward) (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Restricted stock outstanding, beginning balance	13,810
Restricted stock, granted	0
Restricted stock, vested	0
Restricted stock, forfeited	0
Restricted stock outstanding, ending balance	13,810
Restricted stock outstanding, weighted-average grant date fair value, beginning balance	$ 28.82
Restricted stock, granted, weighted-average grant date fair value
Restricted stock, vested, weighted-average grant date fair value
Restricted stock, forfeited, weighted-average grant date fair value
Restricted stock outstanding, weighted-average grant date fair value, ending balance	$ 28.82
Restricted Stock [Member]
Compensation cost	$ 67	$ 41

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Accumulated Other Comprehensive Income (Components of Accumulated Other Comprehensive Income and Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Beginning balance				$ 488
Total other comprehensive income (loss)		$ (432)	$ 1,243	1,918	$ 259
Ending balance		2,406		2,406
Unrealized gains on available for sale securities [Member]
Beginning balance	[1]	2,838	(522)	488	462
Other comprehensive income (loss) before reclassification	[1]	(432)	1,284	2,096	594
Amount reclassified from accumulated other comprehensive income	[1]	0	(41)	(178)	(335)
Total other comprehensive income (loss)	[1]	(432)	(1,243)	(1,918)	259
Ending balance	[1]	$ 2,406	$ 721	$ 2,406	$ 721

[1] All amounts are net of tax. Amounts in parentheses indicate debits.

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Accumulated Other Comprehensive Income (Items Reclassified Out of Each Component of OCI) (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of securities		$ 0	$ 63	$ 269	$ 508
Income tax expense		(228)	(557)	(1,307)	(1,926)
Net Income		612	1,777	4,365	5,781
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	[1]	0	(22)	(91)	(173)
Net Income	[1]	0	41	178	335
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized gains on available for sale securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of securities	[1]	$ 0	$ 63	$ 269	$ 508

[1] Amounts in parentheses indicate debits to net income

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Off-Balance Sheet Financial Instruments and Guarantees (Table) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Sep. 30, 2015
Loss Contingencies [Line Items]
Financial instrument commitments	$ 90,005	$ 78,272
Commitments to grant loans [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	21,764	21,279
Unfunded commitments under lines of credit [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	62,599	51,489
Standby letters of credit [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	$ 5,642	$ 5,504

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Securities (Amortized Cost and Fair Values of Securities) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	$ 306,480	$ 138,111
Available-for-sale Securities, Gross Unrealized Gains	4,060	1,909
Available for Sale, Gross Unrealized Losses	(414)	(1,169)
Available for Sale, Fair Value	310,126	138,851
Total Debt Securities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	306,160	137,819
Available-for-sale Securities, Gross Unrealized Gains	3,996	1,817
Available for Sale, Gross Unrealized Losses	(414)	(1,169)
Available for Sale, Fair Value	309,742	138,467
US Treasury Securities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	2,006
Available-for-sale Securities, Gross Unrealized Gains	0
Available for Sale, Gross Unrealized Losses	(2)
Available for Sale, Fair Value	2,004
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	2,001	9,275
Available-for-sale Securities, Gross Unrealized Gains	0	2
Available for Sale, Gross Unrealized Losses	0	(108)
Available for Sale, Fair Value	2,001	9,169
States and political subdivisions [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	127,694	59,120
Available-for-sale Securities, Gross Unrealized Gains	3,050	1,747
Available for Sale, Gross Unrealized Losses	(172)	(112)
Available for Sale, Fair Value	130,572	60,755
Corporate obligations [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	10,301	4,933
Available-for-sale Securities, Gross Unrealized Gains	101	45
Available for Sale, Gross Unrealized Losses	(17)	(4)
Available for Sale, Fair Value	10,385	4,974
Mortgage-backed securities-government sponsored entities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	164,158	64,491
Available-for-sale Securities, Gross Unrealized Gains	845	23
Available for Sale, Gross Unrealized Losses	(223)	(945)
Available for Sale, Fair Value	164,780	63,569
Equity securities-financial services [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	320	292
Available-for-sale Securities, Gross Unrealized Gains	64	92
Available for Sale, Gross Unrealized Losses	0	0
Available for Sale, Fair Value	$ 384	$ 384

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Securities (Investments' Gross Unrealized Losses and Fair Value) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2016 USD ($) security	Sep. 30, 2015 USD ($)
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	$ 88,575	$ 57,665
Less than 12 Months, Unrealized Losses	(345)	(606)
12 Months or More, Fair Value	10,095	20,121
12 Months or More, Unrealized Losses	(69)	(563)
Total, Fair Value	98,670	77,786
Total, Unrealized Losses	$ (414)	(1,169)
Debt securities in unrealized loss position in the less than twelve months category | security	76
Debt securities in unrealized loss position in the twelve months or more category | security	11
Impairment of investments	$ 0
US Treasury Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	2,004
Less than 12 Months, Unrealized Losses	(2)
12 Months or More, Fair Value	0
12 Months or More, Unrealized Losses	0
Total, Fair Value	2,004
Total, Unrealized Losses	(2)
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value		6,058
Less than 12 Months, Unrealized Losses		(71)
12 Months or More, Fair Value		2,109
12 Months or More, Unrealized Losses		(37)
Total, Fair Value		8,167
Total, Unrealized Losses		(108)
States and political subdivisions [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	33,918	9,086
Less than 12 Months, Unrealized Losses	(170)	(99)
12 Months or More, Fair Value	210	1,417
12 Months or More, Unrealized Losses	(2)	(13)
Total, Fair Value	34,128	10,503
Total, Unrealized Losses	(172)	(112)
Corporate obligations [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	3,312	2,221
Less than 12 Months, Unrealized Losses	(17)	(4)
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Losses	0	0
Total, Fair Value	3,312	2,221
Total, Unrealized Losses	(17)	(4)
Mortgage-backed securities-government sponsored entities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	49,341	40,300
Less than 12 Months, Unrealized Losses	(156)	(432)
12 Months or More, Fair Value	9,885	16,595
12 Months or More, Unrealized Losses	(67)	(513)
Total, Fair Value	59,226	56,895
Total, Unrealized Losses	$ (223)	$ (945)

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Securities (Securities by Contractual Maturity) (Details) $ in Thousands	Sep. 30, 2016 USD ($)
Securities [Abstract]
Available for Sale, Amortized Cost, Due in one year or less	$ 983
Available for Sale, Amortized Cost, Due after one year through five years	20,978
Available for Sale, Amortized Cost, Due after five years through ten years	53,744
Available for Sale, Amortized Cost, Due after ten years	66,297
Available for Sale, Amortized Cost, Mortgage-backed securities- government sponsored agencies	164,158
Available for Sale, Amortized Cost, Total	306,160
Available for Sale, Fair Value, Due in one year or less	991
Available for Sale, Fair Value, Due after one year through five years	21,097
Available for Sale, Fair Value, Due after five years through ten years	54,044
Available for Sale, Fair Value, Due after ten years	68,830
Available for Sale, Fair Value, Mortgage-backed securities- government sponsored agencies	164,780
Available for Sale, Fair Value, Total	$ 309,742

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Securities (Gross Realized Gains and Losses on Sales of Securities Available-for-Sale) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Securities [Abstract]
Gross realized gains	$ 0	$ 63	$ 269	$ 508
Gross realized losses	0	0	0	0
Net realized gain	0	63	269	508
Proceeds from sale of securities	$ 70,028	$ 5,466	$ 101,804	$ 28,850

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Loans Receivable and Allowance for Loan Losses (Composition of Loans Receivable) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 706,593		$ 560,251
Deferred fees, net	(394)		(326)
Total loans receivable	706,199		559,925
Allowance for loan losses	(6,164)	$ (5,798)	(7,298)	$ (5,747)	$ (5,947)	$ (5,875)
Net loans receivable	$ 700,035		$ 552,627
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	$ 237,897		$ 161,820
Allowance for loan losses	$ (1,056)	(976)	$ (1,069)	(987)	(1,085)	(1,323)
Percent of Loans	33.70%		28.90%
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 315,270		$ 279,123
Allowance for loan losses	$ (4,363)	(4,191)	$ (5,506)	(4,178)	(4,152)	(3,890)
Percent of Loans	44.60%		49.80%
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 20,056		$ 18,987
Allowance for loan losses	$ (78)	(59)	$ (90)	(85)	(97)	(222)
Percent of Loans	2.80%		3.40%
Commercial, financial and agricultural loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 85,145		$ 71,090
Allowance for loan losses	$ (336)	(293)	$ (397)	(284)	(405)	(256)
Percent of Loans	12.10%		12.70%
Consumer loans to individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 48,225		$ 29,231
Allowance for loan losses	$ (331)	$ (279)	$ (236)	$ (213)	$ (208)	$ (184)
Percent of Loans	6.80%		5.20%

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Loans Receivable and Allowance for Loan Losses (Components of Purchase Accounting Adjustments) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Loans Receivable and Allowance for Loan Losses [Abstract]
Contractually required principal and interest	$ 2,621
Non-accretable discount	(1,014)
Expected cash flows	1,607
Accretable discount	(239)
Estimated fair value	$ 1,368	$ 498

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Loans Receivable and Allowance for Loan Losses (Changes in Amortizable Yield) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Loans Receivable and Allowance for Loan Losses [Abstract]
Balance at beginning of period	$ 0	$ 8
Additions to amortizable yield for acquired impaired loans	239	0
Accretion of amortizable yield of acquired impaired loans	(12)	(1)
Reclassification and other adjustments to amortizable yield of acquired impaired loans	0	0
Balance at end of period	$ 227	$ 7

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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	Sep. 30, 2016	Dec. 31, 2015
Loans Receivable and Allowance for Loan Losses [Abstract]
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Outstanding Balance	$ 1,855	$ 498
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Carrying Amount	$ 1,368	$ 498

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Loans Receivable and Allowance for Loan Losses (Loans Individually and Collectively Evaluated for Impairment) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 2,815	$ 8,731
Loans acquired with deteriorated credit quality	1,368	498
Collectively evaluated for impairment	702,410	551,022
Total Loans	706,593	560,251
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	24	28
Loans acquired with deteriorated credit quality	797	140
Collectively evaluated for impairment	237,076	161,652
Total Loans	237,897	161,820
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	2,791	8,660
Loans acquired with deteriorated credit quality	571	358
Collectively evaluated for impairment	311,908	270,105
Total Loans	315,270	279,123
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	0	0
Loans acquired with deteriorated credit quality	0	0
Collectively evaluated for impairment	20,056	18,987
Total Loans	20,056	18,987
Commercial, financial and agricultural loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	0	43
Loans acquired with deteriorated credit quality	0	0
Collectively evaluated for impairment	85,145	71,047
Total Loans	85,145	71,090
Consumer loans to individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	0	0
Loans acquired with deteriorated credit quality	0	0
Collectively evaluated for impairment	48,225	29,231
Total Loans	$ 48,225	$ 29,231

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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	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 4,352		$ 4,352		$ 2,855
Impaired Financing Receivable, with Related Allowance, Recorded Investment	74		74		6,373
Impaired Financing Receivable, Recorded Investment	4,426		4,426		9,228
Unpaid Principal Balance, With no related allowance recorded	5,456		5,456		4,826
Unpaid Principal Balance, With an allowance recorded	1,020		1,020		6,446
Unpaid Principal Balance, Total	6,476		6,476		11,272
Associated Allowance	15		15		1,613
Average Recorded Investment, Total	3,832	$ 10,543	3,621	$ 10,713
Interest Income Recognized, Total	34	46	93	513
Residential Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,003		1,003		168
Impaired Financing Receivable, Recorded Investment	1,003		1,003		168
Unpaid Principal Balance, With no related allowance recorded	1,189		1,189		173
Unpaid Principal Balance, Total	1,189		1,189		173
Associated Allowance	0		0		0
Average Recorded Investment, Total	579	249	372	236
Interest Income Recognized, Total	1	1	3	3
Commercial Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	3,349		3,349		2,644
Impaired Financing Receivable, with Related Allowance, Recorded Investment	74		74		6,373
Impaired Financing Receivable, Recorded Investment	3,423		3,423		9,017
Unpaid Principal Balance, With no related allowance recorded	4,267		4,267		4,610
Unpaid Principal Balance, With an allowance recorded	1,020		1,020		6,446
Unpaid Principal Balance, Total	5,287		5,287		11,056
Associated Allowance	15		15		1,613
Average Recorded Investment, Total	3,253	10,294	3,249	10,477
Interest Income Recognized, Total	$ 33	$ 45	$ 90	$ 510
Commercial, financial and agricultural loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment					43
Impaired Financing Receivable, Recorded Investment					43
Unpaid Principal Balance, With no related allowance recorded					43
Unpaid Principal Balance, Total					43
Associated Allowance					$ 0

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Loans Receivable and Allowance for Loan Losses (Troubled Debt Restructurings) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2016 USD ($) loan	Sep. 30, 2015 USD ($) loan	Dec. 31, 2015 USD ($)
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
New Loans Identified as Troubled Debt Restructurings, Number of Loans | loan		0
Impaired Financing Receivable, Related Allowance	$ 15		$ 1,613
Troubled Debt Restructured Loans [Member]
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Financing Receivable, Modifications, Subsequent Default, Number of Contracts | loan		3
Financing Receivable, Modifications, Subsequent Default, Recorded Investment		$ 2,500
New Loans Identified as Troubled Debt Restructurings, Number of Loans | loan	0
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	$ 2,519	$ 439
Financing Receivable, Modifications, Recorded Investment	1,600		6,800
Impaired Financing Receivable, Related Allowance	$ 15		$ 1,613

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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	Sep. 30, 2016	Dec. 31, 2015
Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	$ 400,415	$ 350,213
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	391,264	338,939
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	4,477	1,837
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	4,674	9,437
Doubtful or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	0	0
Total Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	306,178	210,038
Performing Financial Instruments [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	304,964	209,598
Nonperforming Financial Instruments [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	1,214	440
Commercial Real Estate Loans [Member] | Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	315,270	279,123
Commercial Real Estate Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	306,177	267,892
Commercial Real Estate Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	4,442	1,837
Commercial Real Estate Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	4,651	9,394
Commercial Real Estate Loans [Member] | Doubtful or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	0	0
Commercial, financial and agricultural loans [Member] | Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	85,145	71,090
Commercial, financial and agricultural loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	85,087	71,047
Commercial, financial and agricultural loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	35	0
Commercial, financial and agricultural loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	23	43
Commercial, financial and agricultural loans [Member] | Doubtful or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	0	0
Residential Real Estate Loans [Member] | Total Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	237,897	161,820
Residential Real Estate Loans [Member] | Performing Financial Instruments [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	236,711	161,380
Residential Real Estate Loans [Member] | Nonperforming Financial Instruments [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	1,186	440
Construction Real Estate Loans [Member] | Total Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	20,056	18,987
Construction Real Estate Loans [Member] | Performing Financial Instruments [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	20,028	18,987
Construction Real Estate Loans [Member] | Nonperforming Financial Instruments [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	28	0
Consumer loans to individuals [Member] | Total Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	48,225	29,231
Consumer loans to individuals [Member] | Performing Financial Instruments [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	48,225	29,231
Consumer loans to individuals [Member] | Nonperforming Financial Instruments [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	$ 0	$ 0

XML

Loans Receivable and Allowance for Loan Losses (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 702,002	$ 551,989
Non-Accrual	2,190	7,132
Total Past Due and Non-Accrual	4,591	8,262
Total Loans	706,593	560,251
Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,904	1,029
Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	448	101
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	49	0
Residential Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	234,857	160,683
Non-Accrual	1,186	440
Total Past Due and Non-Accrual	3,040	1,137
Total Loans	237,897	161,820
Residential Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,548	646
Residential Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	306	51
Residential Real Estate Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	0	0
Commercial Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	313,916	272,125
Non-Accrual	976	6,649
Total Past Due and Non-Accrual	1,354	6,998
Total Loans	315,270	279,123
Commercial Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	198	310
Commercial Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	131	39
Commercial Real Estate Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	49	0
Construction Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	20,028	18,959
Non-Accrual	28	0
Total Past Due and Non-Accrual	28	28
Total Loans	20,056	18,987
Construction Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	0	28
Construction Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	0	0
Construction Real Estate Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	0	0
Commercial, financial and agricultural loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	85,083	71,043
Non-Accrual	0	43
Total Past Due and Non-Accrual	62	47
Total Loans	85,145	71,090
Commercial, financial and agricultural loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	62	4
Commercial, financial and agricultural loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	0	0
Commercial, financial and agricultural loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	0	0
Consumer loans to individuals [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	48,118	29,179
Non-Accrual	0	0
Total Past Due and Non-Accrual	107	52
Total Loans	48,225	29,231
Consumer loans to individuals [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	96	41
Consumer loans to individuals [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	11	11
Consumer loans to individuals [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	$ 0	$ 0

XML

Loans Receivable and Allowance for Loan Losses (Allowance for Loan Losses and Recorded Investment in Financing Receivables) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance at beginning of period	$ 5,798	$ 5,947	$ 7,298	$ 5,875
Charge Offs	(99)	(927)	(2,788)	(1,910)
Recoveries	15	7	54	22
Provision for loan losses	450	720	1,600	1,760
Allowance at end of period	6,164	5,747	6,164	5,747
Ending balance individually evaluated for impairment	15	389	15	389
Ending balance collectively evaluated for impairment	6,149	5,358	6,149	5,358
Residential Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance at beginning of period	976	1,085	1,069	1,323
Charge Offs	(15)	(46)	(32)	(159)
Recoveries	2	0	4	4
Provision for loan losses	93	(52)	15	(181)
Allowance at end of period	1,056	987	1,056	987
Ending balance individually evaluated for impairment	0	0	0	0
Ending balance collectively evaluated for impairment	1,056	987	1,056	987
Commercial Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance at beginning of period	4,191	4,152	5,506	3,890
Charge Offs	(28)	(865)	(2,670)	(1,692)
Recoveries	9	0	11	0
Provision for loan losses	191	891	1,516	1,980
Allowance at end of period	4,363	4,178	4,363	4,178
Ending balance individually evaluated for impairment	15	389	15	389
Ending balance collectively evaluated for impairment	4,348	3,789	4,348	3,789
Construction Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance at beginning of period	59	97	90	222
Charge Offs	0	0	0	0
Recoveries	0	0	0	0
Provision for loan losses	19	(12)	(12)	(137)
Allowance at end of period	78	85	78	85
Ending balance individually evaluated for impairment	0	0	0	0
Ending balance collectively evaluated for impairment	78	85	78	85
Commercial, financial and agricultural loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance at beginning of period	293	405	397	256
Charge Offs	(15)	0	(15)	0
Recoveries	0	0	0	0
Provision for loan losses	58	(121)	(46)	28
Allowance at end of period	336	284	336	284
Ending balance individually evaluated for impairment	0	0	0	0
Ending balance collectively evaluated for impairment	336	284	336	284
Consumer loans to individuals [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance at beginning of period	279	208	236	184
Charge Offs	(41)	(16)	(71)	(59)
Recoveries	4	7	39	18
Provision for loan losses	89	14	127	70
Allowance at end of period	331	213	331	213
Ending balance individually evaluated for impairment	0	0	0	0
Ending balance collectively evaluated for impairment	$ 331	$ 213	$ 331	$ 213

XML

Loans Receivable and Allowance for Loan Losses (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Jul. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Outstanding Balance	$ 1,855,000		$ 1,855,000			$ 498,000
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Carrying Amount	1,368,000		1,368,000			498,000
Real Estate Acquired Through Foreclosure	5,386,000		5,386,000			2,847,000
Loans and Leases Receivable, Gross	706,593,000		706,593,000			560,251,000
Impaired Financing Receivable, Related Allowance	15,000		15,000			1,613,000
Write downs	99,000	$ 927,000	2,788,000	$ 1,910,000
Gross Realized Losses on Loans			0
Proceeds from Sale of Mortgage Loans Held-for-sale			1,739,000	2,661,000
Customer Concentration Risk [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Write downs			3,000
Commercial Rentals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	64,800,000		$ 64,800,000
Commercial Rentals [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration Risk, Percentage			9.20%
Hospitality Lodging Industry [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	51,600,000		$ 51,600,000
Hospitality Lodging Industry [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration Risk, Percentage			7.30%
Troubled Debt Restructured Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, Related Allowance	15,000		$ 15,000			1,613,000
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Carrying Amount	797,000		797,000			140,000
Real Estate Acquired Through Foreclosure	306,000		306,000
Mortgage Loans in Process of Foreclosure, Amount	222,000		222,000
Loans and Leases Receivable, Gross	237,897,000		237,897,000			161,820,000
Impaired Financing Receivable, Related Allowance	0		0			0
Write downs	15,000	46,000	32,000	159,000
Gross Realized Gains on Loans	0	16,000	54,000	56,000
Gross Realized Losses on Loans		0	0	0
Proceeds from Sale of Mortgage Loans Held-for-sale		818,000	1,700,000	2,700,000
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Carrying Amount	571,000		571,000			358,000
Loans and Leases Receivable, Gross	315,270,000		315,270,000			279,123,000
Impaired Financing Receivable, Related Allowance	15,000		15,000			$ 1,613,000
Write downs	28,000	$ 865,000	2,670,000	$ 1,692,000
Delaware Bancshares, Inc. Acquisition [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Outstanding Balance	1,410,000		1,410,000		$ 1,397,000
Assets, Fair Value Adjustment			499,000
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Carrying Amount	911,000		911,000
Prior acquisition [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Outstanding Balance	445,000		445,000
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Carrying Amount	$ 445,000		$ 445,000

XML

Fair Value Measurements (Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 310,126	$ 138,851
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	384	384
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	309,742	138,467
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
US Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	2,004
US Treasury Securities [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	0
US Treasury Securities [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	2,004
US Treasury Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	2,001	9,169
U.S. Government Agencies [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	0	0
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	2,001	9,169
U.S. Government Agencies [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
States and political subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	130,572	60,755
States and political subdivisions [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	0	0
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	130,572	60,755
States and political subdivisions [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Corporate obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	10,385	4,974
Corporate obligations [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	0	0
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	10,385	4,974
Corporate obligations [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Mortgage-backed securities-government sponsored entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	164,780	63,569
Mortgage-backed securities-government sponsored entities [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	0	0
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	164,780	63,569
Mortgage-backed securities-government sponsored entities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Equity securities-financial services [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	384	384
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	384	384
Equity securities-financial services [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	0	0
Equity securities-financial services [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 0	$ 0

XML

Fair Value Measurements (Fair Value, Assets and Liabilities Measured on Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 4,411	$ 7,615
Impaired Loans [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]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Impaired Loans [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
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	4,411	7,615
Foreclosed Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	5,386	2,847
Foreclosed Real Estate Owned [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]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Foreclosed Real Estate Owned [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
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	$ 5,386	$ 2,847

XML

Fair Value Measurements (Additional Qualitative Information about Level 3 Assets) (Details) $ in Thousands		9 Months Ended	12 Months Ended
		Sep. 30, 2016 USD ($) loan	Dec. 31, 2015 USD ($) loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of impaired loans requiring a valuation allowance | loan		1	3
Impaired Financing Receivable, with Related Allowance, Recorded Investment		$ 74	$ 6,373
Impaired Financing Receivable, Related Allowance		$ 15	$ 1,613
Number of impaired loans not requiring a valuation allowance | loan		24	17
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		$ 4,352	$ 2,855
Impaired Loans, Cumulative Charge-Offs		1,806	2,044
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		4,411	7,615
Impaired Loans [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 2,847	$ 2,574
Fair Value Measurements, Valuation Techniques	[1]	Appraisal of collateral(1)	Appraisal of collateral(1)
Fair Value Disclosure, Unobservable Input Range	[2]	Appraisal adjustments(2)	Appraisal adjustments(2)
Fair Value Inputs, Discount Rate			10.00%
Impaired Loans [Member] | Present value of future cash flows [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 1,564	$ 5,041
Fair Value Measurements, Valuation Techniques	[1]	Present value of future cash flows	Present value of future cash flows
Fair Value Disclosure, Unobservable Input Range	[2]	Loan discount rate	Loan discount rate
Impaired Loans [Member] | Minimum [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		0.00%
Impaired Loans [Member] | Minimum [Member] | Present value of future cash flows [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		4.00%	4.00%
Impaired Loans [Member] | Maximum [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		10.00%
Impaired Loans [Member] | Maximum [Member] | Present value of future cash flows [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		6.75%	7.00%
Impaired Loans [Member] | Weighted Average [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		9.50%	10.00%
Impaired Loans [Member] | Weighted Average [Member] | Present value of future cash flows [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		5.46%	5.61%
Foreclosed Real Estate Owned [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 5,386	$ 2,847
Fair Value Measurements, Valuation Techniques	[1]	Appraisal of collateral(1)	Appraisal of collateral(1)
Fair Value Disclosure, Unobservable Input Range	[2]	Liquidation Expenses(2)	Liquidation Expenses(2)
Fair Value Inputs, Discount Rate			10.00%
Foreclosed Real Estate Owned [Member] | Minimum [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		0.00%
Foreclosed Real Estate Owned [Member] | Maximum [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		10.00%
Foreclosed Real Estate Owned [Member] | Weighted Average [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		9.90%	10.00%

[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.

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Fair Value Measurements (Fair Value, by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Cash and cash equivalents, Fair Value Disclosure	$ 33,133	$ 10,010
Financial assets: Securities, Fair Value Disclosure	310,126	138,851
Financial assets: Loans receivable, net, Fair Value Disclosure	715,469	559,416
Financial assets: Mortgage servicing rights, Fair Value Disclosure	260	291
Financial assets: Regulatory stock, Fair Value Disclosure	2,351	3,412
Financial assets: Bank owned life insurance, Fair Value Disclosure	35,889	18,820
Financial assets: Accrued interest receivable, Fair Value Disclosure	3,541	2,363
Financial liabilities: Deposits, Fair Value Disclosure	922,394	551,175
Financial liabilities: Short-term borrowings, Fair Value Disclosure	33,156	53,235
Financial liabilities: Other borrowings, fair value	42,712
Financial liabilities: Other borrowings, Fair Value Disclosure		41,260
Financial liabilities: Accrued interest payable, Fair Value Disclosure	1,040	957
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit, Fair Value Disclosure	0	0
Financial assets: Cash and cash equivalents	33,133	10,010	$ 11,716	$ 12,376
Financial assets: Securities	310,126	138,851
Financial assets: Loans receivable, net	700,035	552,627
Financial assets: Mortgage servicing rights	244	261
Financial assets: Regulatory stock	2,351	3,412
Financial assets: Bank owned life insurance	35,889	18,820
Financial assets: Accrued interest receivable	3,541	2,363
Financial liabilities: Deposits	922,244	550,909
Financial liabilities: Short-term borrowings	33,156	53,235
Financial liabilities: Other borrowings	42,542
Financial liabilities: Other borrowings	34,294	41,126
Financial liabilities: Accrued interest payable	1,040	957
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit	0	0
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 cash equivalents, Fair Value Disclosure	33,133	10,010
Financial assets: Securities, Fair Value Disclosure	384	384
Financial assets: Loans receivable, net, Fair Value Disclosure	0	0
Financial assets: Mortgage servicing rights, Fair Value Disclosure	0	0
Financial assets: Regulatory stock, Fair Value Disclosure	2,351	3,412
Financial assets: Bank owned life insurance, Fair Value Disclosure	35,889	18,820
Financial assets: Accrued interest receivable, Fair Value Disclosure	3,541	2,363
Financial liabilities: Deposits, Fair Value Disclosure	275,564	354,162
Financial liabilities: Short-term borrowings, Fair Value Disclosure	33,156	53,235
Financial liabilities: Other borrowings, fair value	0
Financial liabilities: Other borrowings, Fair Value Disclosure		0
Financial liabilities: Accrued interest payable, Fair Value Disclosure	1,040	957
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit, Fair Value Disclosure	0	0
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Cash and cash equivalents, Fair Value Disclosure	0	0
Financial assets: Securities, Fair Value Disclosure	309,742	138,467
Financial assets: Loans receivable, net, Fair Value Disclosure	0	0
Financial assets: Mortgage servicing rights, Fair Value Disclosure	0	0
Financial assets: Regulatory stock, Fair Value Disclosure	0	0
Financial assets: Bank owned life insurance, Fair Value Disclosure	0	0
Financial assets: Accrued interest receivable, Fair Value Disclosure	0	0
Financial liabilities: Deposits, Fair Value Disclosure	0	0
Financial liabilities: Short-term borrowings, Fair Value Disclosure	0	0
Financial liabilities: Other borrowings, fair value	0
Financial liabilities: Other borrowings, Fair Value Disclosure		0
Financial liabilities: Accrued interest payable, Fair Value Disclosure	0	0
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit, Fair Value Disclosure	0	0
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Cash and cash equivalents, Fair Value Disclosure	0	0
Financial assets: Securities, Fair Value Disclosure	0	0
Financial assets: Loans receivable, net, Fair Value Disclosure	715,469	559,416
Financial assets: Mortgage servicing rights, Fair Value Disclosure	260	291
Financial assets: Regulatory stock, Fair Value Disclosure	0	0
Financial assets: Bank owned life insurance, Fair Value Disclosure	0	0
Financial assets: Accrued interest receivable, Fair Value Disclosure	0	0
Financial liabilities: Deposits, Fair Value Disclosure	646,830	197,013
Financial liabilities: Short-term borrowings, Fair Value Disclosure	0	0
Financial liabilities: Other borrowings, fair value	42,712
Financial liabilities: Other borrowings, Fair Value Disclosure		41,260
Financial liabilities: Accrued interest payable, Fair Value Disclosure	0	0
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit, Fair Value Disclosure	$ 0	$ 0

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Acquisition of Delaware Bancshares, Inc. (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands			9 Months Ended
	Jul. 31, 2016	Oct. 31, 2007	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Business Acquisition [Line Items]
Assets			$ 1,125,057		$ 750,505
Deposits, total			922,244		550,909
Stockholders' equity			115,700		100,998
Loans and Leases Receivable, Net Reported Amount			700,035		552,627
Loans Receivable, Fair Value Disclosure			715,469		559,416
Goodwill			11,679		$ 9,715
Finite-Lived Intangible Assets, Gross			449
Finite-Lived Intangible Assets, Accumulated Amortization			14
Delaware Bancshares, Inc. Acquisition [Member]
Business Acquisition [Line Items]
Stockholders' equity	$ 19,357
Payments to Acquire Businesses, Net of Cash Acquired	$ 3,859
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	431,605
Business Acquisition, Share Price	$ 16.68
Business Acquisition, shares exchanged	0.6221
Credit impaired loans acquired subject to a non-accretable difference	$ 1,410
Non-accretable difference for credit impaired loans acquired	260
Loans and Leases Receivable, Net Reported Amount			111,307
Loans Receivable, Fair Value Disclosure			109,693
Goodwill, Impairment Loss			0
Goodwill	$ 1,964		$ 1,964
Delaware Bancshares, Inc. Acquisition [Member] | Delaware Bancshares, Inc. [Member]
Business Acquisition [Line Items]
Assets				$ 378,300
Deposits, total				327,500
Stockholders' equity				$ 24,100
Proceeds from Issuance of Trust Preferred Securities		$ 8,000
Delaware Bancshares, Inc. Acquisition [Member] | Delaware Bancshares, Inc. [Member] | London Interbank Offered Rate (LIBOR) [Member]
Business Acquisition [Line Items]
Debt Instrument, Basis Spread on Variable Rate			2.40%

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Acquisition of Delaware Bancshares, Inc. (Tables) (Details) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
	Jul. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
Business Acquisition [Line Items]
Stock Issued During Period, Value, Acquisitions		$ 12,150
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest		115,700	$ 100,998
Goodwill resulting from Delaware Bancshares, Inc. Merger		11,679	$ 9,715
Delaware Bancshares, Inc. Acquisition [Member]
Business Acquisition [Line Items]
Acquiree shares settled for stock	694,114
Business Acquisition, shares exchanged	0.6221
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	431,605
Value assigned to acquirer common share, per share	$ 28.15
Stock Issued During Period, Value, Acquisitions	$ 12,150
Acquiree shares settled for cash	231,385
Business Acquisition, Share Price	$ 16.68
Purchase price assigned to acquiree shares	$ 3,860
Cash in lieu of fractional shares	6
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	19,357
Goodwill and intangible assets	(7,640)
Tangible equity	11,717
Adjustments to investments acquired to fair value	219
Adjustments to interest rates on loans acquired to fair value	1,486
Adjustments to general credit on loans acquired to fair value	(1,614)
Adjustments to specific credit - non-amortizing on loans acquired to fair value	(260)
Adjustments to specific credit - amortizing on loans acquired to fair value	(239)
Adjustments to core deposit intangibles acquired to fair value	449
Adjustments to deferred loan fees acquired to fair value	(296)
Adjustments to premises and equipment acquired to fair value	3,053
Adjustments to allowance for loan and lease losses acquired to fair value	1,651
Adjustments to deferred tax assets acquired to fair value	(1,417)
Adjustments to other assets acquired to fair value	445
Adjustments to time deposits acquired to fair value	(252)
Total purchase price	16,016
Net Assets Acquired: Cash	14,977
Net Assets Acquired: Securities available for sale	208,488
Net Assets Acquired: Loans	116,674
Net Assets Acquired: Premises & equipment, net	7,292
Net assets acquired: Regulatory stock	279
Net Assets Acquired: Accrued interest receivable	1,626
Net assets acquired: Bank-owned life insurance	14,762
Net Assets Acquired: Core deposit intangible	449
Net Assets Acquired: Deferred tax assets	3,034
Net Assets Acquired: Other assets	2,934
Net Assets Acquired: Time deposits	(71,342)
Net Assets Acquired: Deposits other than time deposits	(255,921)
Net Assets Acquired: Borrowings	(21,232)
Net Assets Acquired: Accrued interest payable	(95)
Net Assets Acquired: Other liabilities	(7,873)
Net Assets Acquired	14,052
Goodwill resulting from Delaware Bancshares, Inc. Merger	$ 1,964	$ 1,964

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Acquisition of Delaware Bancshares, Inc. (Future Amortization Expense) (Details) $ in Thousands	Sep. 30, 2016 USD ($)
Acquisition of Delaware Bancshares, Inc. [Abstract]
Finite-Lived Intangible Assets, Amortization Expense, Remainder of Fiscal Year	$ 13
Finite-Lived Intangible Assets, Amortization Expense, Year Two	30
Finite-Lived Intangible Assets, Amortization Expense, Year Three	30
Finite-Lived Intangible Assets, Amortization Expense, Year Four	30
Finite-Lived Intangible Assets, Amortization Expense, Year Five	30
Finite-Lived Intangible Assets, Amortization Expense, after Year Five	316
Amortization Expense for the Core Deposit Intangible, Total	$ 449

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Acquisition of Delaware Bancshares, Inc. (Proforma) (Details) - USD ($) $ / shares in Units, $ in Thousands	2 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Interest Income (Expense), Net		$ 7,570	$ 6,053	$ 20,139	$ 18,409
Noninterest Income		1,399	1,071	3,689	3,483
Net Income (Loss) Attributable to Parent		$ 612	$ 1,777	$ 4,365	$ 5,781
Earnings Per Share, Basic		$ 0.15	$ 0.48	$ 1.16	$ 1.57
Earnings Per Share, Diluted		$ 0.15	$ 0.48	$ 1.15	$ 1.57
Pro Forma [Member]
Interest Income (Expense), Net				$ 25,377	$ 26,340
Noninterest Income				4,715	5,179
Net Income (Loss) Attributable to Parent				$ 1,243	$ 6,050
Earnings Per Share, Basic				$ 0.33	$ 1.60
Earnings Per Share, Diluted				$ 0.33	$ 1.60
Delaware Bancshares, Inc. [Member] | Pro Forma [Member]
Interest Income (Expense), Net	$ 1,560
Noninterest Income	357
Net Income (Loss) Attributable to Parent	$ 300
Earnings Per Share, Basic	$ 0.08
Earnings Per Share, Diluted	$ 0.08