10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

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 incorporation or organization)	(I.R.S. employer identification no.)
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.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	NWFL	The Nasdaq Stock Market LLC

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

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

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

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

Class	Outstanding as of August 1, 2019
Common stock, par value $0.10 per share	6,292,106

NORWOOD FINANCIAL CORP.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2019

		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		33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		47
Item 4.	Controls and Procedures		49
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings		49
Item 1A.	Risk Factors		49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 3.	Defaults Upon Senior Securities		50
Item 4.	Mine Safety Disclosures		50
Item 5.	Other Information		50
Item 6.	Exhibits		50
Signatures			52

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)

	June 30,			December 31,
	2019			2018
ASSETS
Cash and due from banks	$	14,207		$	18,039
Interest-bearing deposits with banks		4,265			309
Cash and cash equivalents		18,472			18,348
Securities available for sale, at fair value		238,083			243,277
Loans receivable		887,673			850,182
Less: Allowance for loan losses		8,228			8,452
Net loans receivable		879,445			841,730
Regulatory stock, at cost		3,155			3,926
Bank premises and equipment, net		13,880			13,846
Bank owned life insurance		38,340			37,932
Accrued interest receivable		3,979			3,776
Foreclosed real estate owned		1,677			1,115
Goodwill		11,331			11,331
Other intangibles		280			336
Other assets		13,886			8,942
TOTAL ASSETS	$	1,222,528		$	1,184,559
LIABILITIES
Deposits:
Non-interest bearing demand	$	221,764		$	201,457
Interest-bearing		759,460			745,323
Total deposits		981,224			946,780
Short-term borrowings		48,094			53,046
Other borrowings		44,024			52,284
Accrued interest payable		3,008			1,806
Other liabilities		14,695			8,358
TOTAL LIABILITIES		1,091,045			1,062,274
STOCKHOLDERS’ EQUITY
Preferred stock, no par value per share, authorized 5,000,000 shares		—			—
Common stock, $0.10 par value per share, authorized: 2019: 20,000,000 shares, 2018: 10,000,000 shares issued: 2019: 6,304,413 shares, 2018: 6,295,113 shares		630			630
Surplus		48,741			48,322
Retained earnings		82,127			78,434
Treasury stock at cost: 2019: 13,807 shares, 2018: 2,470 shares		(455	)		(81	)
Accumulated other comprehensive income (loss)		440			(5,020	)
TOTAL STOCKHOLDERS’ EQUITY		131,483			122,285
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,222,528		$	1,184,559

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					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
INTEREST INCOME
Loans receivable, including fees	$	10,328		$	8,857	$	20,298	$	17,344
Securities		1,435			1,536		2,876		3,060
Other		51			43		66		61
Total interest income		11,814			10,436		23,240		20,465
INTEREST EXPENSE
Deposits		1,839			1,052		3,568		2,082
Short-term borrowings		85			38		209		90
Other borrowings		278			131		581		271
Total interest expense		2,202			1,221		4,358		2,443
NET INTEREST INCOME		9,612			9,215		18,882		18,022
PROVISION FOR LOAN LOSSES		300			425		750		975
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		9,312			8,790		18,132		17,047
OTHER INCOME
Service charges and fees		1,052			1,101		2,083		2,082
Income from fiduciary activities		145			175		287		311
Net realized gains on sales of securities		64			58		64		200
Gain on sale of loans, net		67			—		110		—
Earnings and proceeds on bank owned life insurance		207			279		408		552
Other		106			161		249		323
Total other income		1,641			1,774		3,201		3,468
OTHER EXPENSES
Salaries and employee benefits		3,599			3,406		7,248		6,868
Occupancy, furniture & equipment, net		940			857		1,864		1,749
Data processing and related operations		472			340		920		658
Taxes, other than income		179			153		340		327
Professional fees		226			229		476		459
Federal Deposit Insurance Corporation insurance		84			86		155		178
Foreclosed real estate		(10	)		114		13		95
Amortization of intangibles		27			33		56		68
Other		1,268			1,135		2,361		2,198
Total other expenses		6,785			6,353		13,433		12,600
INCOME BEFORE INCOME TAXES		4,168			4,211		7,900		7,915
INCOME TAX EXPENSE		646			698		1,188		1,273
NET INCOME	$	3,522		$	3,513	$	6,712	$	6,642
BASIC EARNINGS PER SHARE	$	0.56		$	0.57	$	1.07	$	1.07
DILUTED EARNINGS PER SHARE	$	0.56		$	0.56	$	1.06	$	1.06

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
	June 30,
	2019			2018
Net income	$	3,522		$	3,513
Other comprehensive income (loss):
Investment securities available for sale:
Unrealized holding gain (loss)		3,250			(840	)
Tax effect		(682	)		177
Reclassification of investment securities gains recognized in net income		(64	)		(58	)
Tax effect		13			12
Other comprehensive income (loss)		2,517			(709	)
Comprehensive Income	$	6,039		$	2,804
	Six Months Ended
	June 30,
	2019			2018
Net income	$	6,712		$	6,642
Other comprehensive income (loss):
Investment securities available for sale:
Unrealized holding gain (loss)		6,975			(5,330	)
Tax effect		(1,464	)		1,119
Reclassification of investment securities gains recognized in net income		(64	)		(200	)
Tax effect		13			42
Other comprehensive income (loss)		5,460			(4,369	)
Comprehensive Income	$	12,172		$	2,273

See accompanying notes to the unaudited consolidated financial statements.

5

NORWOOD FINANCIAL CORP.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Six Months Ended June 30, 2019 and 2018

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

																Accumulated
																Other
	Common Stock						Retained			Treasury Stock						Comprehensive
	Shares		Amount		Surplus		Earnings			Shares			Amount			Income (Loss)			Total
Balance, December 31, 2018		6,295,113	$	630	$	48,322	$	78,434			2,470		$	(81	)	$	(5,020	)	$	122,285
Net Income		—		—		—		6,712			—			—			—			6,712
Other comprehensive income		—		—		—		—			—			—			5,460			5,460
Cash dividends declared ($0.48 per share)		—		—		—		(3,019	)		—			—			—			(3,019	)
Compensation expense related to restricted stock		—		—		145		—			—			—			—			145
Acquisition of treasury stock		—		—		—		—			11,337			(374	)		—			(374	)
Stock options exercised		9,300		—		170		—			—			—			—			170
Compensation expense related to stock options		—		—		104		—			—			—			—			104
Balance, June 30, 2019		6,304,413	$	630	$	48,741	$	82,127			13,807		$	(455	)	$	440		$	131,483
																Accumulated
																Other
	Common Stock						Retained			Treasury Stock						Comprehensive
	Shares		Amount		Surplus		Earnings			Shares			Amount			Loss			Total
Balance, December 31, 2017		6,256,063	$	626	$	47,431	$	70,426			2,608		$	(77	)	$	(2,667	)	$	115,739
Net Income		—		—		—		6,642			—			—			—			6,642
Other comprehensive loss		—		—		—		—			—			—			(4,369	)		(4,369	)
Cash dividends declared ($0.44 per share)		—		—		—		(2,753	)		—			—			—			(2,753	)
Compensation expense related to restricted stock		—		—		102		—			—			—			—			102
Acquisition of treasury stock		—		—		—		—			5,446			(179	)		—			(179	)
Stock options exercised		10,325		1		164		—			(2,325	)		68			—			233
Compensation expense related to stock options		—		—		118		—			—			—			—			118
Balance, June 30, 2018		6,266,388	$	627	$	47,815	$	74,315			5,729		$	(188	)	$	(7,036	)	$	115,533

See accompanying notes to the unaudited consolidated financial statements.

6

NORWOOD FINANCIAL CORP.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Three Months Ended June 30, 2019 and 2018

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

															Accumulated
															Other
	Common Stock						Retained			Treasury Stock					Comprehensive
	Shares		Amount		Surplus		Earnings			Shares		Amount			Income (Loss)			Total
Balance, March 31, 2019		6,301,263	$	630	$	48,559	$	80,115			13,807	$	(455	)	$	(2,077	)	$	126,772
Net Income		—		—		—		3,522			—		—			—			3,522
Other comprehensive income		—		—		—		—			—		—			2,517			2,517
Cash dividends declared ($0.24 per share)		—		—		—		(1,510	)		—		—			—			(1,510	)
Compensation expense related to restricted stock		—		—		73		—			—		—			—			73
Acquisition of treasury stock		—		—		—		—			—		—			—			—
Stock options exercised		3,150		—		57		—			—		—			—			57
Compensation expense related to stock options		—		—		52		—			—		—			—			52
Balance, June 30, 2019		6,304,413	$	630	$	48,741	$	82,127			13,807	$	(455	)	$	440		$	131,483
															Accumulated
															Other
	Common Stock						Retained			Treasury Stock					Comprehensive
	Shares		Amount		Surplus		Earnings			Shares		Amount			Loss			Total
Balance, March 31, 2018		6,257,563	$	626	$	47,548	$	72,179			5,729	$	(188	)	$	(6,327	)	$	113,838
Net Income		—		—		—		3,513			—		—			—			3,513
Other comprehensive loss		—		—		—		—			—		—			(709	)		(709	)
Cash dividends declared ($0.22 per share)		—		—		—		(1,377	)		—		—			—			(1,377	)
Compensation expense related to restricted stock		—		—		51		—			—		—			—			51
Acquisition of treasury stock		—		—		—		—			—		—			—			—
Stock options exercised		8,825		1		157		—			—		—			—			158
Compensation expense related to stock options		—		—		59		—			—		—			—			59
Balance, June 30, 2018		6,266,388	$	627	$	47,815	$	74,315			5,729	$	(188	)	$	(7,036	)	$	115,533

See accompanying notes to the unaudited consolidated financial statements.

7

NORWOOD FINANCIAL CORP.

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)
	Six Months Ended June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	6,712		$	6,642
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		750			975
Depreciation		487			437
Amortization of intangible assets		56			68
Deferred income taxes		(25	)		(202	)
Net amortization of securities premiums and discounts		732			885
Net realized gain on sales of securities		(64	)		(200	)
Earnings and proceeds on life insurance policies		(408	)		(552	)
(Gain) loss on sales and write-downs of fixed assets and foreclosed real estate owned, net		(65	)		9
Net gain on sale of loans		(110	)		—
Mortgage loans originated for sale		(2,191	)		—
Proceeds from sale of loans originated for sale		2,255			—
Compensation expense related to stock options		104			118
Compensation expense related to restricted stock		145			102
(Increase) decrease in accrued interest receivable		(203	)		44
Increase in accrued interest payable		1,202			27
Other, net		234			853
Net cash provided by operating activities		9,611			9,206
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales		3,626			14,583
Proceeds from maturities and principal reductions on mortgage-backed securities		12,877			15,151
Purchases		(5,066	)		(14,269	)
Purchase of regulatory stock		(1,666	)		(1,158	)
Redemption of regulatory stock		2,437			2,350
Net increase in loans		(39,398	)		(40,393	)
Purchase of premises and equipment		(757	)		(467	)
Proceeds from sales of foreclosed real estate owned		205			467
Proceeds from sales of bank premises and equipment		246			—
Net cash used in investing activities		(27,496	)		(23,736	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		34,444			21,505
Net (decrease) increase in short-term borrowings		(4,952	)		795
Repayments of other borrowings		(8,260	)		(5,662	)
Stock options exercised		170			233
Acquisition of treasury stock		(374	)		(179	)
Cash dividends paid		(3,019	)		(2,752	)
Net cash provided by financing activities		18,009			13,940
Increase (decrease) in cash and cash equivalents		124			(590	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		18,348			16,697
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	18,472		$	16,107

8

NORWOOD FINANCIAL CORP.

Consolidated Statements of Cash Flows (Unaudited) (continued)

(dollars in thousands)
	Six Months Ended June 30,
	2019		2018
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest on deposits and borrowings	$	3,156	$	2,416
Income taxes paid, net of refunds	$	862	$	1,097
Supplemental Schedule of Noncash Investing Activities:
Transfers of loans to foreclosed real estate and repossession of other assets	$	1,003	$	333
Dividends payable	$	1,510	$	1,377

See accompanying notes to the unaudited consolidated financial statements.

9

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., 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 consolidated financial position and results of operations of the Company. The operating results for the three month and six month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any other future interim period.

2. Revenue Recognition

Management has determined that the primary sources of revenue emanating from interest income on loans and investments along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans, commitment fees, and fees from financial guarantees are not within the scope of ASC 606. As a result, no changes were made during the period related to those sources of revenue.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30:

	Three months ended
(dollars in thousands)	June 30,
Noninterest Income	2019		2018
In-scope of Topic 606:
Service charges on deposit accounts	$	66	$	64
ATM fees		91		95
Overdraft fees		343		381
Safe deposit box rental		23		23
Loan related service fees		94		155
Debit card fees		371		338
Fiduciary activities		145		174
Commissions on mutual funds and annuities		26		60
Other income		120		137
Noninterest Income (in-scope of Topic 606)		1,279		1,427
Out-of-scope of Topic 606:
Net realized gains on sales of securities		64		58
Loan servicing fees		24		10
Gains on sales of loans		67		—
Earnings on and proceeds from bank-owned life insurance		207		279
Noninterest Income (out-of-scope of Topic 606)		362		347
Total Noninterest Income	$	1,641	$	1,774

10

	Six months ended
(dollars in thousands)	June 30,
Noninterest Income	2019		2018
In-scope of Topic 606:
Service charges on deposit accounts	$	133	$	129
ATM fees		181		191
Overdraft fees		694		765
Safe deposit box rental		49		53
Loan related service fees		223		235
Debit card fees		697		633
Fiduciary activities		287		311
Commissions on mutual funds and annuities		81		103
Other income		235		276
Noninterest Income (in-scope of Topic 606)		2,580		2,696
Out-of-scope of Topic 606:
Net realized gains on sales of securities		64		200
Loan servicing fees		39		20
Gains on sales of loans		110		—
Earnings on and proceeds from bank-owned life insurance		408		552
Noninterest Income (out-of-scope of Topic 606)		621		772
Total Noninterest Income	$	3,201	$	3,468

3. 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 restricted stock, 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						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Weighted average shares outstanding		6,290			6,256			6,292			6,256
Less: Unvested restricted shares		(35	)		(31	)		(35	)		(31	)
Basic EPS weighted average shares outstanding		6,255			6,225			6,257			6,225
Basic EPS weighted average shares outstanding		6,255			6,225			6,257			6,225
Add: Dilutive effect of stock options and restricted shares		60			50			62			51
Diluted EPS weighted average shares outstanding		6,315			6,275			6,319			6,276

11

For the three and six month periods ending June 30, 2019, there were no stock options that would be anti-dilutive to the earnings per share calculations based upon the closing price of Norwood common stock of $34.81 per share on June 30, 2019.

For the three and six month periods ending June 30, 2018, there were no stock options that would be anti-dilutive to the earnings per share calculations based upon the closing price of Norwood common stock of $36.02 per share on June 30, 2018.

4. Stock-Based Compensation

No awards were granted during the six-month period ending June 30, 2019. As of June 30, 2019, there was $104,000 of total unrecognized compensation cost related to non-vested options granted in 2018 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2019. Compensation costs related to stock options amounted to $104,000 and $118,000 during the six-month periods ended June 30, 2019 and 2018, respectively.

A summary of the Company’s stock option activity for the six-month period ended June 30, 2019 is as follows:

				Weighted
				Average Exercise		Weighted Average			Aggregate
				Price		Remaining			Intrinsic Value
	Options			Per Share		Contractual Term			($000)
Outstanding at January 1, 2019		208,700		$	22.54		5.9	Yrs.	$	2,183
Granted		—			—		—			—
Exercised		(9,300	)		18.31		4.1	Yrs.		119
Forfeited		—			—		—			—
Outstanding at June 30, 2019		199,400		$	22.74		5.5	Yrs.	$	2,407
Exercisable at June 30, 2019		170,500		$	21.11		4.8	Yrs.	$	2,335

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 market price was $34.81 per share as of June 30, 2019 and $33.00 per share as of December 31, 2018.

A summary of the Company’s restricted stock activity for the six-month periods ended June 30, 2019 and 2018 is as follows:

	2019				2018
			Weighted-Average				Weighted-Average
	Number of		Grant Date		Number of		Grant Date
	Restricted Stock		Fair Value		Restricted Stock		Fair Value
Non-vested, January 1,		34,615	$	27.82		30,415	$	24.46
Granted		—		—		—		—
Vested		—		—		—		—
Forfeited		—		—		—		—
Non-vested, June 30,		34,615	$	27.82		30,415	$	24.46

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The expected future compensation expense relating to the 34,615 shares of non-vested restricted stock outstanding as of June 30, 2019 is $818,000. This cost will be recognized over the remaining vesting period of 4.5 years. Compensation costs related to restricted stock amounted to $145,000 and $102,000 during the six-month periods ended June 30, 2019 and 2018, respectively.

5. Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive loss (in thousands) by component net of tax for the three months and six months ended June 30, 2019 and 2018:

	Unrealized gains (losses) on available for sale securities (a)
Balance as of March 31, 2019	$	(2,077	)
Other comprehensive income before reclassification		2,568
Amount reclassified from accumulated other comprehensive loss		(51	)
Total other comprehensive income		2,517
Balance as of June 30, 2019	$	440
	Unrealized gains (losses) on available for sale securities (a)
Balance as of March 31, 2018	$	(6,327	)
Other comprehensive loss before reclassification		(663	)
Amount reclassified from accumulated other comprehensive loss		(46	)
Total other comprehensive loss		(709	)
Balance as of June 30, 2018	$	(7,036	)
	Unrealized gains (losses) on available for sale securities (a)
Balance as of December 31, 2018	$	(5,020	)
Other comprehensive income before reclassification		5,511
Amount reclassified from accumulated other comprehensive loss		(51	)
Total other comprehensive income		5,460
Balance as of June 30, 2019	$	440
	Unrealized gains (losses) on available for sale securities (a)
Balance as of December 31, 2017	$	(2,667	)
Other comprehensive loss before reclassification		(4,211	)
Amount reclassified from accumulated other comprehensive loss		(158	)
Total other comprehensive loss		(4,369	)
Balance as of June 30, 2018	$	(7,036	)

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

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The following table presents significant amounts reclassified out of each component of accumulated other comprehensive loss (in thousands) for the three months and six months ended June 30, 2019 and 2018:

Details about other comprehensive income	Amount Reclassified From Accumulated Other Comprehensive Income (Loss) (a)						Affected Line Item in Consolidated Statements of Income
	Three months ended June 30,
	2019			2018
Unrealized gains on available for sale securities	$	64		$	58		Net realized gains on sales of securities
		(13	)		(12	)	Income tax expense
	$	51		$	46
	Six months ended
	June 30,
	2019			2018
Unrealized gains on available for sale securities	$	64		$	200		Net realized gains on sales of securities
		(13	)		(42	)	Income tax expense
	$	51		$	158

(a) Amounts in parentheses indicate debits to net income

6. 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)	June 30,
	2019		2018
Commitments to grant loans	$	49,936	$	43,280
Unfunded commitments under lines of credit		71,859		72,359
Standby letters of credit		4,305		5,733
	$	126,100	$	121,372

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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 June 30, 2019 for guarantees under standby letters of credit issued is not material.

7. Securities

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

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
Available for Sale:
States and political subdivisions	$	92,821	$	1,186	$	(72	)	$	93,935
Corporate obligations		8,812		17		(24	)		8,805
Mortgage-backed securities-government sponsored entities		136,572		292		(1,521	)		135,343
Total debt securities	$	238,205	$	1,495	$	(1,617	)	$	238,083
	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
Available for Sale:
States and political subdivisions	$	99,218	$	385	$	(1,990	)	$	97,613
Corporate obligations		8,896		—		(256	)		8,640
Mortgage-backed securities-government sponsored entities		142,197		25		(5,198	)		137,024
Total debt securities	$	250,311	$	410	$	(7,444	)	$	243,277

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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):

	June 30, 2019
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
States and political subdivisions	$	402	$	—		$	21,268	$	(72	)	$	21,670	$	(72	)
Corporate obligations		—		—			5,194		(24	)		5,194		(24	)
Mortgage-backed securities-government sponsored entities		3,497		(11	)		95,971		(1,510	)		99,468		(1,521	)
	$	3,899	$	(11	)	$	122,433	$	(1,606	)	$	126,332	$	(1,617	)
	December 31, 2018
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
States and political subdivisions	$	19,140	$	(390	)	$	56,740	$	(1,600	)	$	75,880	$	(1,990	)
Corporate obligations		2,045		(21	)		6,595		(235	)		8,640		(256	)
Mortgage-backed securities-government sponsored entities		8,444		(22	)		122,950		(5,176	)		131,394		(5,198	)
	$	29,629	$	(433	)	$	186,285	$	(7,011	)	$	215,914	$	(7,444	)

At June 30, 2019, the Company had three debt securities in an unrealized loss position in the less than twelve months category and 114 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 2019. 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 June 30, 2019 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	$	2,957	$	2,960
Due after one year through five years		21,142		21,144
Due after five years through ten years		44,101		44,298
Due after ten years		33,433		34,338
		101,633		102,740
Mortgage-backed securities-government sponsored entities		136,572		135,343
	$	238,205	$	238,083

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

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2019		2018		2019		2018
Gross realized gains	$	64	$	58	$	64	$	200
Gross realized losses		—		—		—		—
Net realized gain	$	64	$	58	$	64	$	200
Proceeds from sales of securities	$	3,299	$	3,822	$	3,626	$	14,583

Securities with a carrying value of $196,986,000 and $219,244,000 at June 30, 2019 and 2018, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.    

8. 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 (dollars in thousands):

	June 30, 2019					December 31, 2018
Real Estate Loans:
Residential	$	230,405		26.0	%	$	235,523		27.7	%
Commercial		381,915		43.0			374,790		44.1
Construction		19,784		2.2			17,445		2.0
Commercial, financial and agricultural		120,732		13.6			110,542		13.0
Consumer loans to individuals		134,968		15.2			112,002		13.2
Total loans		887,804		100.0	%		850,302		100.0	%
Deferred fees, net		(131	)				(120	)
Total loans receivable		887,673					850,182
Allowance for loan losses		(8,228	)				(8,452	)
Net loans receivable	$	879,445				$	841,730

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

	June 30, 2019		December 31, 2018
Outstanding Balance	$	965	$	1,055
Carrying Amount	$	822	$	886

As a result of the acquisition of Delaware Bancshares, Inc. (“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

17

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.

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 June 30, 2019 and December 31, 2018, foreclosed real estate owned totaled $1,677,000 and $1,115,000, respectively. During the six months ended June 30, 2019, the Company acquired three properties via deed-in-lieu transactions which have subsequently been sold, and foreclosed on one commercial property with a carrying value of $608,000. The Company also disposed of two properties that were previously transferred to foreclosed real estate owned with a carrying value of $46,000 through the sale of the properties. As of June 30, 2019, the Company has initiated formal foreclosure proceedings on three properties classified as consumer residential mortgages with an aggregate carrying value of $306,000.

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
	(In thousands)
June 30, 2019
Individually evaluated for impairment	$	—	$	752	$	—	$	—	$	—	$	752
Loans acquired with deteriorated credit quality		583		239		—		—		—		822
Collectively evaluated for impairment		229,822		380,924		19,784		120,732		134,968		886,230
Total Loans	$	230,405	$	381,915	$	19,784	$	120,732	$	134,968	$	887,804

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	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
	(In thousands)
December 31, 2018
Individually evaluated for impairment	$	—	$	1,319	$	—	$	—	$	—	$	1,319
Loans acquired with deteriorated credit quality		630		256		—		—		—		886
Collectively evaluated for impairment		234,893		373,215		17,445		110,542		112,002		848,097
Total Loans	$	235,523	$	374,790	$	17,445	$	110,542	$	112,002	$	850,302

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable.

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
	(in thousands)
June 30, 2019
With no related allowance recorded:
Real Estate Loans:
Commercial	$	752	$	1,338	$	—
Subtotal		752		1,338		—
Total:
Real Estate Loans:
Commercial		752		1,338		—
Total Impaired Loans	$	752	$	1,338	$	—
			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
	(in thousands)
December 31, 2018
With no related allowance recorded:
Real Estate Loans:
Commercial	$	1,319	$	1,747	$	—
Subtotal		1,319		1,747		—
Total:
Real Estate Loans:
Commercial		1,319		1,747		—
Total Impaired Loans	$	1,319	$	1,747	$	—

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The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the three-month periods ended June 30, 2019 and 2018, respectively (in thousands):

	Average Recorded				Interest Income
	Investment				Recognized
	2019		2018		2019		2018
Real Estate Loans:
Residential	$	—	$	23	$	—	$	—
Commercial		601		1,202		24		16
Total	$	601	$	1,225	$	24	$	16

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the six-month periods ended June 30, 2019 and 2018, respectively (in thousands):

	Average Recorded				Interest Income
	Investment				Recognized
	2019		2018		2019		2018
Real Estate Loans:
Residential	$	—	$	23	$	—	$	—
Commercial		840		1,194		24		30
Total	$	840	$	1,217	$	24	$	30

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 June 30, 2019 and December 31, 2018, troubled debt restructured loans totaled $104,000 and $1.1 million, respectively, with no specific reserve. For the six-month period ended June 30, 2019, there were no new loans identified as troubled debt restructurings. During 2019, the Company recognized a charge-off of $451,000 on a loan that was previously identified as a troubled debt restructuring. The loan was transferred to foreclosed real estate during the first quarter of 2019 with a carrying value of $608,000.

For the six-month period ended June 30, 2018, there were no new loans identified as troubled debt restructurings nor did the Company recognize any write-down on loans that were previously identified as a troubled debt restructuring.

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.

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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 nonperformance, 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 $1,500,000 and over to assign or re-affirm risk ratings. Loans in the Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of June 30, 2019 and December 31, 2018 (in thousands):

			Special				Doubtful
	Pass		Mention		Substandard		or Loss		Total
June 30, 2019
Commercial real estate loans	$	365,739	$	12,629	$	3,547	$	—	$	381,915
Commercial loans		120,445		59		228		—		120,732
Total	$	486,184	$	12,688	$	3,775	$	—	$	502,647

			Special				Doubtful
	Pass		Mention		Substandard		or Loss		Total
December 31, 2018
Commercial real estate loans	$	360,838	$	7,918	$	6,034	$	—	$	374,790
Commercial loans		109,966		82		494		—		110,542
Total	$	470,804	$	8,000	$	6,528	$	—	$	485,332

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 June 30, 2019 and December 31, 2018 (in thousands):

	Performing		Nonperforming		Total
June 30, 2019
Residential real estate loans	$	229,831	$	574	$	230,405
Construction		19,784		—		19,784
Consumer loans		134,968		—		134,968
Total	$	384,583	$	574	$	385,157
	Performing		Nonperforming		Total
December 31, 2018
Residential real estate loans	$	234,725	$	798	$	235,523
Construction		17,445		—		17,445
Consumer loans		112,002		—		112,002
Total	$	364,172	$	798	$	364,970

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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 June 30, 2019 and December 31, 2018 (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
June 30, 2019
Real Estate loans
Residential	$	229,382	$	377	$	72	$	—	$	574	$	1,023	$	230,405
Commercial		380,828		271		64		—		752		1,087		381,915
Construction		19,784		—		—		—		—		—		19,784
Commercial loans		120,646		57		—		—		29		86		120,732
Consumer loans		134,811		157		—		—		—		157		134,968
Total	$	885,451	$	862	$	136	$	—	$	1,355	$	2,353	$	887,804
December 31, 2018
Real Estate loans
Residential	$	234,201	$	373	$	151	$	—	$	798	$	1,322	$	235,523
Commercial		372,617		1,043		788		—		342		2,173		374,790
Construction		17,445		—		—		—		—		—		17,445
Commercial loans		110,191		320		31		—		—		351		110,542
Consumer loans		111,796		171		35		—		—		206		112,002
Total	$	846,250	$	1,907	$	1,005	$	—	$	1,140	$	4,052	$	850,302

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.

As of June 30, 2019, the allocation of the allowance pertaining to commercial real estate loans is $761,000 lower than the allocation as of December 31, 2018. This decrease is due primarily to a reduction in the historical factor which decreased from 0.42% as of December 31, 2018 to 0.29% at June 30, 2019. Also contributing to the reduced reserve balance is a decrease in the qualitative factor related to the annualized growth rate.

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, 2018	$	1,328		$	5,455		$	93	$	712		$	864		$	8,452
Charge Offs		(75	)		(615	)		—		(234	)		(135	)		(1,059	)
Recoveries		15			14			—		21			35			85
Provision for loan losses		179			(160	)		19		397			315			750
Ending balance, June 30, 2019	$	1,447		$	4,694		$	112	$	896		$	1,079		$	8,228
Ending balance individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—
Ending balance collectively evaluated for impairment	$	1,447		$	4,694		$	112	$	896		$	1,079		$	8,228

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(In thousands)	Residential Real Estate			Commercial Real Estate			Construction		Commercial			Consumer			Total
Beginning balance, March 31, 2019	$	1,455		$	4,947		$	108	$	811		$	1,028		$	8,349
Charge Offs		(10	)		(146	)		—		(233	)		(72	)		(461	)
Recoveries		4			4			—		11			21			40
Provision for loan losses		(2	)		(111	)		4		307			102			300
Ending balance, June 30, 2019	$	1,447		$	4,694		$	112	$	896		$	1,079		$	8,228

(In thousands)	Residential Real Estate			Commercial Real Estate			Construction		Commercial			Consumer			Total
Beginning balance, December 31, 2017	$	1,272		$	5,265		$	90	$	463		$	544		$	7,634
Charge Offs		(75	)		(134	)		—		(5	)		(117	)		(331	)
Recoveries		2			31			—		—			15			48
Provision for loan losses		256			85			38		232			364			975
Ending balance, June 30, 2018	$	1,455		$	5,247		$	128	$	690		$	806		$	8,326
Ending balance individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—
Ending balance collectively evaluated for impairment	$	1,455		$	5,247		$	128	$	690		$	806		$	8,326

(In thousands)	Residential Real Estate			Commercial Real Estate			Construction		Commercial			Consumer			Total
Beginning balance, March 31, 2018	$	1,525		$	5,129		$	120	$	638		$	687		$	8,099
Charge Offs		(24	)		(134	)		—		(5	)		(69	)		(232	)
Recoveries		1			25			—		—			8			34
Provision for loan losses		(47	)		227			8		57			180			425
Ending balance, June 30, 2018	$	1,455		$	5,247		$	128	$	690		$	806		$	8,326

The Company’s primary business activity as of June 30, 2019 was with customers located in northeastern Pennsylvania and the New York counties of Delaware and Sullivan. 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 June 30, 2019, the Company considered its concentration of credit risk to be acceptable. The highest concentrations are in commercial rentals with $75.9 million of loans outstanding, or 8.6% of total loans outstanding, and the hospitality/lodging industry with loans outstanding of $67.5 million, or 7.6% of loans outstanding. During 2019, the Company did not recognize any charge offs in the named concentrations.

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9. Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In accordance with fair value accounting guidance, the Company measures, records, and reports various types of assets and liabilities at fair value on either a recurring or non-recurring basis in the Consolidated Financial Statements. Those assets and liabilities are presented in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis”. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 14 of the Company’s 2018 Form 10-K. In accordance with ASU 2016-01, the fair value of loans, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit and nonperformance risk. Loans are considered a Level 3 classification.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2019 and December 31, 2018 are as follows:

	Fair Value Measurement Using
	Reporting Date
	Total		Level 1		Level 2		Level 3
Description	(In thousands)
June 30, 2019
Available for Sale:
States and political subdivisions	$	93,935	$	—	$	93,935	$	—
Corporate obligations		8,805		—		8,805		—
Mortgage-backed securities-government sponsored entities		135,343		—		135,343		—
Total	$	238,083	$	—	$	238,083	$	—

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	Total		Level 1		Level 2		Level 3
Description	(In thousands)
December 31, 2018
Available for Sale:
States and political subdivisions	$	97,613	$	—	$	97,613	$	—
Corporate obligations		8,640		—		8,640		—
Mortgage-backed securities-government sponsored entities		137,024		—		137,024		—
Total	$	243,277	$	—	$	243,277	$	—

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.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2019 and December 31, 2018 are as follows:

(In thousands)			Fair Value Measurement Using Reporting Date
Description	Total		Level 1		Level 2		Level 3
June 30, 2019
Impaired Loans	$	752	$	—	$	—	$	752
Foreclosed Real Estate Owned		1,677		—		—		1,677
December 31, 2018
Impaired Loans	$	1,319	$	—	$	—	$	1,319
Foreclosed Real Estate Owned		1,115		—		—		1,115

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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 June 30, 2019, the fair value investment in impaired loans totaled $752,000 which included five loan relationships that 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 June 30, 2019, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $587,000 over the life of the loans.

As of December 31, 2018, the fair value investment in impaired loans totaled $1,319,000 which included six loans 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, 2018, the Company had recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $428,000 over the life of the loans.

Foreclosed real estate owned (carried at fair value):

Real estate properties acquired through, or by deed 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.

The following table presents additional quantitative information about assets measured at fair value on a non-recurring 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)
June 30, 2019
Impaired loans	$	647		Appraisal of collateral(1)		Appraisal adjustments(2)		10.00-57.58% (14.53%	)
Impaired loans	$	105		Present value of future cash flows		Loan discount rate		4.00% (4.00%	)
Foreclosed real estate owned	$	1,677		Appraisal of collateral(1)		Liquidation Expenses(2)		7.00-10.00% (8.08%	)

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	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques		Unobservable Input		Range (Weighted Average)
December 31, 2018
Impaired loans	$	232		Appraisal of collateral(1)		Appraisal adjustments(2)		10.00-81.54% (56.06%	)
Impaired loans	$	1,087		Present value of future cash flows		Loan discount rate		4.00-6.00% (5.80%	)
Foreclosed real estate owned	$	1,115		Appraisal of collateral(1)		Liquidation Expenses(2)		7.00-85.71% (7.80%	)

(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.

Assets and Liabilities Not Required to be Measured or Reported at Fair Value

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 June 30, 2019 and December 31, 2018.

Loans receivable (carried at cost):

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

Mortgage servicing rights (generally carried at cost)

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

Deposit liabilities (carried at cost):

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

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 fair value that is deemed to represent the transfer price if the liability were assumed by a third party.

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The estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at June 30, 2019 and December 31, 2018. (In thousands)

	Fair Value Measurements at June 30, 2019
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	18,472	$	18,472	$	18,472	$	—	$	—
Loans receivable, net		879,445		893,855		—		—		893,855
Mortgage servicing rights		183		223		—		—		223
Regulatory stock (1)		3,155		3,155		3,155		—		—
Bank owned life insurance (1)		38,340		38,340		38,340		—		—
Accrued interest receivable (1)		3,979		3,979		3,979		—		—
Financial liabilities:
Deposits		981,224		984,342		627,151		—		357,191
Short-term borrowings (1)		48,094		48,094		48,094		—		—
Other borrowings		44,024		44,305		—		—		44,305
Accrued interest payable (1)		3,008		3,008		3,008		—		—
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		—		—		—		—		—

	Fair Value Measurements at December 31, 2018
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	18,348	$	18,348	$	18,348	$	—	$	—
Loans receivable, net		841,730		840,134		—		—		840,134
Mortgage servicing rights		178		220		—		—		220
Regulatory stock (1)		3,926		3,926		3,926		—		—
Bank owned life insurance (1)		37,932		37,932		37,932		—		—
Accrued interest receivable (1)		3,776		3,776		3,776		—		—
Financial liabilities:
Deposits		946,780		945,773		601,604		—		344,169
Short-term borrowings (1)		53,046		53,046		53,046		—		—
Other borrowings		52,284		52,043		—		—		52,043
Accrued interest payable (1)		1,806		1,806		1,806		—		—
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		—		—		—		—		—

(1) This financial instrument is carried at cost, which approximates the fair value of the instrument.

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10. New and Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements    

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. ASU 2016-02 was effective for the Company on January 1, 2019. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842)—Targeted Improvements,” which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842)- Narrow-Scope Improvements for Lessors,” which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. Upon adoption of ASU 2016-02, ASU 2018-11 and ASU 2018-20 on January 1, 2019, we recorded recognized a right-of-use assets and related lease liabilities totaling $5.3 million each, which are recorded in other assets and other liabilities, respectively.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, 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. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill

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impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In February 2017, the FASB issued ASU 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), and Health and Welfare Benefit Plans (Topic 965). This Update relates primarily to the reporting by an employee benefit plan for its interest in a master trust, which is a trust for which a regulated financial institution serves as a trustee or custodian and in which assets of more than one plan sponsored by a single employer or by a group of employers under common control are held. For each master trust in which a plan holds an interest, the amendments in this Update require a plan’s interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. The amendments in this Update remove the requirement to disclose the percentage interest in the master trust for plans with divided interests and require that all plans disclose the dollar amount of their interest in each of those general types of investments, which supplements the existing requirement to disclose the master trusts balances in each general type of investments. There are also increased disclosure requirements for investments in master trusts. The amendments in this Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. This Update is not expected to have a significant impact on the Company’s financial statements.

ASU 2018-04, Investments – Debt Securities (Topic 320) and Regulated Operations (Topic 980) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273, ASU 2018-04 supersedes various SEC paragraphs and adds an SEC paragraph pursuant to the issuance of Staff Accounting Bulletin No. 117.

In May 2018, the FASB issued ASU 2018-06, Codification Improvements to Topic 942, Financial Services – Depository and Lending, which supersedes outdated guidance related to the Office of the Comptroller of the Currency (OCC)’s Banking Circular 202, Accounting for Net Deferred Tax Charges (Circular 202), because that guidance has been rescinded by the OCC and no longer is relevant.

In August 2018, the FASB issued ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. This Update is intended to improve financial reporting for insurance companies that issue long-duration contracts, such as life insurance, disability income, long-term care, and annuities, by requiring updated assumptions for liability measurement, standardizing the liability discount rate, simplifying and improving the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts by requiring those benefits to be measured at fair value instead of using two different measurement models, simplifying the amortization of deferred acquisition costs, and increasing transparency by improving the effectiveness of disclosures. This Update is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.

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In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits (Topic 715-20). This Update amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The Update eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The Update also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This Update is effective for public business entities for fiscal years ending after December 15, 2020, and must be applied on a retrospective basis. For all other entities, this Update is effective for fiscal years ending after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). This Update addresses customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This Update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The amendments in this Update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815). The amendments in this Update permit use of the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (LIBOR) swap rate, the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate. For entities that have not already adopted Update 2017-12, the amendments in this Update are required to be adopted concurrently with the amendments in Update 2017-12. For public business entities that already have adopted the amendments in Update 2017-12, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities that already have adopted the amendments in Update 2017-12, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted in any interim period upon issuance of this Update if an entity already has adopted Update 2017-12. This Update is not expected to have a significant impact on the Company’s financial statements.

In October, 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810), which made improvements in 1) applying the variable interest entity (VIE) guidance to private companies under common control and 2) considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. Under the amendments in this Update, a private company may elect not to apply VIE guidance to legal entities under common control (including common control leasing arrangements) if both the parent and the legal entity being evaluated for consolidation are not public business entities. In addition, indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. For entities other than private companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this Update are effective for a private company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

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In November, 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), which made the following targeted improvements to generally accepted accounting principles (GAAP) for collaborative arrangements (1) clarified that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account, (2) add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606, and (3) require that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. Topic 326, Financial Instruments – Credit Losses amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other public business entities, the effective date is for fiscal years beginning after December 15, 2020, and for all other entities, the effective date is for fiscal years beginning after December 15, 2021. Topic 815, Derivatives and Hedging amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. For entities that have adopted the amendments in Update 2017-12, the effective date is as of the beginning of the first annual period beginning after the issuance of this Update. Topic 825, Financial Instruments amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

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

Forward-Looking Statements

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

• 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

• soundness of other financial institutions

• interest rate risks

• potential liquidity risk

• deposits acquired through competitive bidding

• availability of capital

• regional economic factors

• loss of senior officers

• comparatively low legal lending limits

• risks of new capital requirements

• potential impact of Tax Cuts and Jobs Act

• limited market for the Company’s stock

• restrictions on ability to pay dividends

• common stock may lose value

• insider ownership

• issuing additional shares may dilute ownership

• competitive environment

• certain anti-takeover provisions

• extensive and complex governmental regulation and associated cost

• 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, 2018 (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 other-than-temporary impairment on securities and the determination of goodwill impairment. 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.

The fair value of financial instruments is based upon quoted market prices, when available. For those instances where a quoted price is not available, fair values are based upon observable market based parameters as well as unobservable parameters. Any such valuation is applied consistently over time.

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 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 whether 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 all unrealized losses on securities at June 30, 2019 and December 31, 2018 represent temporary impairment of the securities, related to changes in interest rates.

In connection with acquisitions, the Company recorded goodwill in the amount of $11.3 million, representing the excess of amounts paid over the fair value of net assets of the institutions acquired in purchase transactions, at its fair value at the date of acquisition. Goodwill is tested and deemed impaired when the carrying value of goodwill exceeds its implied fair value. The value of the goodwill can change in the future. We expect the value of the goodwill to decrease if there is a significant decrease in the franchise value of the 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 June 30, 2019 were $1.223 billion compared to $1.185 billion as of December 31, 2018. The increase reflects growth in loans which were funded by an increase in deposits and cash flows from securities.

34

Securities

The fair value of securities available for sale as of June 30, 2019 was $238.1 million compared to $243.3 million as of December 31, 2018. The decrease in the securities portfolio is the result of sales, calls, maturities and principal reductions of securities. The fair value of the portfolio also increased $6.9 million due to a reduction in unrealized losses on securities related to the decrease in interest rates during the first six months of 2019.

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

	June 30, 2019					December 31, 2018
(dollars in thousands)	Amount		% of portfolio			Amount		% of portfolio
States and political subdivisions	$	93,935		39.5	%	$	97,613		40.1	%
Corporate obligations		8,805		3.7			8,640		3.6
Mortgage-backed securities-government sponsored entities		135,343		56.8			137,024		56.3
Total	$	238,083		100.0	%	$	243,277		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 $887.7 million at June 30, 2019 compared to $850.2 million as of December 31, 2018. The increase in loans receivable includes a $20.2 million increase in retail loans and a $17.3 million increase in commercial loans.

The allowance for loan losses totaled $8,228,000 as of June 30, 2019 and represented 0.93% of total loans outstanding, compared to $8,452,000, or 0.99% of total loans, at December 31, 2018. The Company had net charge-offs for the six months ended June 30, 2019 of $974,000 compared to $283,000 in the corresponding period in 2018. The increase in charge-offs was due to one large commercial loan relationship which was written down by $336,000 during the second quarter of 2019, and one commercial real estate credit which was written down by $451,000 and subsequently transferred to foreclosed real estate during the first quarter of 2019. The Company’s management 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, and loan growth. Management considers the allowance adequate at June 30, 2019 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 June 30, 2019, non-performing loans totaled $1,355,000, or 0.15% of total loans compared to $1,140,000, or 0.13%, of total loans at December 31, 2018. At June 30, 2019, non-performing assets totaled $3,032,000, or 0.25%, of total assets compared to $2,255,000, or 0.19%, of total assets at December 31, 2018.

35

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

(dollars in thousands)	June 30, 2019			December 31, 2018
Loans accounted for on a non-accrual basis:
Real Estate
Residential	$	574		$	798
Commercial		752			342
Construction		—			—
Commercial, financial and agricultural		29			—
Consumer loans to individuals		—			—
Total non-accrual loans *		1,355			1,140
Accruing loans which are contractually past due 90 days or more		—			—
Total non-performing loans		1,355			1,140
Foreclosed real estate		1,677			1,115
Total non-performing assets	$	3,032		$	2,255
Allowance for loans losses	$	8,228		$	8,452
Coverage of non-performing loans		607.23	%		741.40	%
Non-performing loans to total loans		0.15	%		0.13	%
Non-performing loans to total assets		0.11	%		0.10	%
Non-performing assets to total assets		0.25	%		0.19	%

* Includes non-accrual TDRs of $104,000 as of June 30, 2019 and $110,000 on December 31, 2018. There were no accruing TDRs on June 30, 2019 and $977,000 of accruing TDRs as of December 31, 2018.

Deposits

During the six-month period ending June 30, 2019, total deposits increased $34.4 million due primarily to a $29.3 million increase in demand deposits which reflects seasonal activity in municipal account relationships. All other deposits decreased $5.1 million, net.

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

(dollars in thousands)	June 30, 2019		December 31, 2018
Non-interest bearing demand	$	221,764	$	201,457
Interest-bearing demand		97,955		88,917
Money market deposit accounts		135,948		137,636
Savings		171,483		173,593
Time deposits <$100,000		148,370		145,343
Time deposits >$100,000		205,704		199,834
Total	$	981,224	$	946,780

36

Borrowings

Other borrowings as of June 30, 2019 totaled $44.0 million compared to $52.3 million as of December 31, 2018. Short-term borrowings, which consist of securities sold under agreements to repurchase and overnight borrowings from the FHLB, decreased $5.0 million due to a $15.6 million reduction in overnight borrowings which was partially offset by a $10.6 million increase in repurchase agreements.

Other borrowings consisted of the following:

(dollars in thousands)
	June 30, 2019		December 31, 2018
Notes with the FHLB:
Amortizing fixed rate borrowing due January 2019 at 1.393%	$	—	$	423
Term fixed rate borrowing due August 2019 at 1.606%		10,000		10,000
Amortizing fixed rate borrowing due June 2020 at 1.490%		2,060		3,079
Amortizing fixed rate borrowing due July 2020 at 2.77%		5,485		7,962
Amortizing fixed rate borrowing due December 2020 at 1.706%		1,545		2,051
Amortizing fixed rate borrowing due December 2020 at 3.06%		3,779		5,000
Amortizing fixed rate borrowing due March 2022 at 1.748%		2,445		2,877
Amortizing fixed rate borrowing due October 2022 at 1.88%		5,417		6,200
Amortizing fixed rate borrowing due October 2023 at 3.24%		8,758		9,692
Amortizing fixed rate borrowing due December 2023 at 3.22%		4,535		5,000
	$	44,024	$	52,284

Stockholders’ Equity and Capital Ratios

As of June 30, 2019, stockholders’ equity totaled $131.5 million, compared to $122.3 million as of December 31, 2018.    The net change in stockholders’ equity included $6.7 million of net income that was partially offset by $3.0 million of dividends declared. In addition, total equity increased $5.5 million due to an increase in the fair value of securities in the available for sale portfolio, net of tax. 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 (loss) could materially fluctuate for each interim and year-end period.

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

	June 30, 2019			December 31, 2018
Tier 1 Capital
(To average assets)		9.80	%		9.82	%
Tier 1 Capital
(To risk-weighted assets)		12.87	%		13.04	%
Common Equity Tier 1 Capital
(To risk-weighted assets)		12.87	%		13.04	%
Total Capital
(To risk-weighted assets)		13.76	%		14.00	%

37

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 was phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement became effective. The Company and the Bank are in compliance with their respective new capital requirements, including the capital conservation buffer, as of June 30, 2019.

Liquidity

As of June 30, 2019, the Company had cash and cash equivalents of $18.5 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 $238.1 million which could be used for liquidity needs. This totals $256.6 million of liquidity and represents 21.0% of total assets compared to $261.6 million and 22.1% of total assets as of December 31, 2018. The Company also monitors other liquidity measures, all of which were within the Company’s policy guidelines as of June 30, 2019 and December 31, 2018. 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, 2020. There were no borrowings under this line as of June 30, 2019 and December 31, 2018.

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 June 30, 2019 and December 31, 2018.

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 June 30, 2019 and December 31, 2018.

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank was approximately $412,989,000 as of June 30, 2019, of which $44,024,000 and $67,873,000 was outstanding at June 30, 2019 and December 31, 2018, respectively. Additionally, as of June 30, 2019, the Bank had secured Letters of Credit from the Federal Home Loan Bank in the amount of $43.0 million as collateral for specific municipal deposits. These Letters of Credit reduce the availability under the maximum borrowing capacity. There was $45.0 million outstanding in the form of Letters of Credit as of December 31, 2018.    Advances and Letters of Credit from the Federal Home Loan Bank are secured by qualifying assets of the Bank.

38

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 21%. 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 40 and 44. 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.

39

Results of Operations

NORWOOD FINANCIAL CORP.

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis,	Three Months Ended June 30,
dollars in thousands)	2019									2018
	Average Balance (2)			Interest (1)			Average Rate (3)			Average Balance (2)			Interest (1)			Average Rate (3)
Assets
Interest-earning assets:
Interest-bearing deposits with banks	$	8,495		$	51			2.40	%	$	9,488		$	43			1.81	%
Securities available for sale:
Taxable		154,010			873			2.27			169,851			912			2.15
Tax-exempt (1)		93,285			711			3.05			103,189			790			3.06
Total securities available for sale (1)		247,295			1,584			2.56			273,040			1,702			2.49
Loans receivable (1) (4) (5)		876,118			10,445			4.77			788,026			8,960			4.55
Total interest-earning assets		1,131,908			12,080			4.27			1,070,554			10,705			4.00
Non-interest earning assets:
Cash and due from banks		14,416									14,534
Allowance for loan losses		(8,460	)								(8,287	)
Other assets		80,751									67,442
Total non-interest earning assets		86,707									73,689
Total Assets	$	1,218,615								$	1,144,243
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and money market	$	233,460		$	166			0.28		$	242,552		$	113			0.19
Savings		174,650			27			0.06			185,039			23			0.05
Time		360,722			1,646			1.83			317,294			916			1.15
Total interest-bearing deposits		768,832			1,839			0.96			744,885			1,052			0.56
Short-term borrowings		45,218			85			0.75			33,772			38			0.45
Other borrowings		46,006			278			2.42			31,541			131			1.66
Total interest-bearing liabilities		860,056			2,202			1.02			810,198			1,221			0.60
Non-interest bearing liabilities:
Demand deposits		213,329									209,743
Other liabilities		16,015									9,260
Total non-interest bearing liabilities		229,344									219,003
Stockholders’ equity		129,215									115,042
Total Liabilities and Stockholders’ Equity	$	1,218,615								$	1,144,243
Net interest income/spread (tax equivalent basis)					9,878			3.24	%					9,484			3.40	%
Tax-equivalent basis adjustment					(266	)								(269	)
Net interest income				$	9,612								$	9,215
Net interest margin (tax equivalent basis)								3.49	%								3.54	%

(1) Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 21%.

(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.

40

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 June 30, 2019 Compared to Three months ended June 30, 2018 Variance due to
	Volume			Rate			Net
	(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks	$	(6	)	$	14		$	8
Securities available for sale:
Taxable		(87	)		48			(39	)
Tax-exempt securities		(77	)		(2	)		(79	)
Total securities		(164	)		46			(118	)
Loans receivable		1,018			467			1,485
Total interest-earning assets		848			527			1,375
Interest-bearing liabilities:
Interest-bearing demand and money market		(5	)		58			53
Savings		(1	)		5			4
Time		178			552			730
Total interest-bearing deposits		172			615			787
Short-term borrowings		18			29			47
Other borrowings		73			74			147
Total interest-bearing liabilities		263			718			981
Net interest income (tax-equivalent basis)	$	585		$	(191	)	$	394

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.

41

Comparison of Operating Results for the Three Months Ended June 30, 2019 to June 30, 2018

General

For the three months ended June 30, 2019, net income totaled $3,522,000 compared to $3,513,000 earned in the similar period in 2018. The increase in net income for the three months ended June 30, 2019 was due primarily to a $397,000 improvement in net interest income. Earnings per share for the current period were $0.56 per share for basic shares and fully diluted shares compared to $0.57 per share for basic shares and $0.56 per share for fully diluted shares for the three months ended June 30, 2018. The resulting annualized return on average assets and annualized return on average equity for the three months ended June 30, 2019 were 1.16% and 10.93%, respectively, compared to 1.23% and 12.25%, respectively, for the similar period in 2018.

The following table sets forth changes in net income:

(dollars in thousands)	Three months ended
	June 30, 2019 to June 30, 2018
Net income three months ended June 30, 2018	$	3,513
Change due to:
Net interest income		397
Provision for loan losses		125
Net gains on sales		73
Other income		(206	)
Salaries and employee benefits		(193	)
Occupancy, furniture and equipment		(83	)
Data processing and related operations		(132	)
Foreclosed real estate		124
All other expenses		(148	)
Income tax expense		52
Net income three months ended June 30, 2019	$	3,522

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the three months ended June 30, 2019 totaled $9,878,000 which was $394,000 higher than the comparable period in 2018. The increase in net interest income was due primarily to a $1,485,000 increase in interest income (fte) on loans. Tax-equivalent interest income was negatively impacted by a $118,000 decrease in securities income. The fte net interest spread and net interest margin were 3.24% and 3.49%, respectively, for the three months ended June 30, 2019 compared to 3.40% and 3.54%, respectively, for the similar period in 2018. The decrease in the net interest spread and margin reflects the increased cost of funding.

Interest income (fte) totaled $12,080,000 with a yield on average earning assets of 4.27% compared to $10,705,000 and 4.00% for the 2018 period. Average loans increased $88.1 million over the comparable period of last year, while average securities decreased $25.7 million as portfolio runoff was utilized to fund loan growth. Average earning assets totaled $1.132 billion for the three months ended June 30, 2019, an increase of $61.4 million over the average for the similar period in 2018.    

Interest expense for the three months ended June 30, 2019 totaled $2,202,000 at an average cost of 1.02% compared to $1,221,000 and 0.60% for the similar period in 2018. The increase in average cost reflects

42

the rising rates on borrowed funds and certificates of deposit. The average cost of time deposits, which is the most significant component of funding, increased to 1.83% from 1.15% for the similar period in the prior year.

Provision for Loan Losses

The Company’s provision for loan losses for the three months ended June 30, 2019 was $300,000 compared to $425,000 for the three months ended June 30, 2018. 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 $421,000 for the quarter ended June 30, 2019 compared to $198,000 for the similar period in 2018. The increase in charge-offs was due to one commercial credit which was written down by $336,000 in the current period. At June 30, 2019, the allowance for loan losses represented 0.93% of loans receivable and 607% of non-performing loans.

Other Income

Other income totaled $1,641,000 for the three months ended June 30, 2019 compared to $1,774,000 for the similar period in 2018. The decrease was due primarily to a $72,000 reduction in earnings and proceeds on bank-owned life insurance policies and a $61,000 reduction in loan related service fees included in service charges and fees. All other items included in other income were unchanged on a net basis.

Other Expense

Other expense for the three months ended June 30, 2019 totaled $6,785,000 which was $432,000 higher than the same period of 2018 due primarily to a $193,000 increase in salaries and benefits expenses and a $132,000 increase in data processing costs. All other operating expenses increased $107,000, net.

Income Tax Expense

Income tax expense totaled $646,000 for an effective tax rate of 15.5% for the period ending June 30, 2019 compared to $698,000 for an effective tax rate of 16.6% for the similar period in 2018.

43

Results of Operations

NORWOOD FINANCIAL CORP.

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis, dollars in thousands)	Six Months Ended June 30,
	2019									2018
	Average Balance (2)			Interest (1)			Average Rate (3)			Average Balance (2)			Interest (1)			Average Rate (3)
Assets
Interest-earning assets:
Interest bearing deposits with banks	$	5,459		$	66			2.42	%	$	6,984		$	61			1.75	%
Securities available for sale:
Taxable		155,111			1,747			2.25			170,181			1,779			2.09
Tax-exempt (1)		94,080			1,429			3.04			105,886			1,622			3.06
Total securities available for sale (1)		249,191			3,176			2.55			276,067			3,401			2.46
Loans receivable (1) (4) (5)		866,829			20,529			4.74			777,810			17,548			4.51
Total interest-earning assets		1,121,479			23,771			4.24			1,060,861			21,010			3.96
Non-interest earning assets:
Cash and due from banks		14,221									14,159
Allowance for loan losses		(8,537	)								(8,083	)
Other assets		77,847									68,204
Total non-interest earning assets		83,531									74,280
Total Assets	$	1,205,010								$	1,135,141
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and money market	$	229,658		$	313			0.27		$	239,011		$	225			0.19
Savings		173,762			51			0.06			179,281			44			0.05
Time		359,949			3,204			1.78			321,132			1,813			1.13
Total interest-bearing deposits		763,369			3,568			0.93			739,424			2,082			0.56
Short-term borrowings		45,308			209			0.92			33,369			90			0.54
Other borrowings		47,961			581			2.42			32,943			271			1.65
Total interest-bearing liabilities		856,638			4,358			1.02			805,736			2,443			0.61
Non-interest bearing liabilities:
Demand deposits		206,837									205,289
Other liabilities		14,542									8,936
Total non-interest bearing liabilities		221,379									214,225
Stockholders’ equity		126,993									115,180
Total Liabilities and Stockholders’ Equity	$	1,205,010								$	1,135,141
Net interest income/spread (tax equivalent basis)					19,413			3.22	%					18,567			3.35	%
Tax-equivalent basis adjustment					(531	)								(545	)
Net interest income				$	18,882								$	18,022
Net interest margin (tax equivalent basis)								3.46	%								3.50	%

(1) Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 21%.

(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.

44

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) Six months ended June 30, 2019 Compared to Six months ended June 30, 2018 Variance due to
	Volume			Rate			Net
	(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks	$	(16	)	$	21		$	5
Securities available for sale:
Taxable		(162	)		130			(32	)
Tax-exempt securities		(184	)		(9	)		(193	)
Total securities		(346	)		121			(225	)
Loans receivable		2,024			957			2,981
Total interest-earning assets		1,662			1,099			2,761
Interest-bearing liabilities:
Interest-bearing demand and money market		(12	)		100			88
Savings		(2	)		9			7
Time		317			1,074			1,391
Total interest-bearing deposits		303			1,183			1,486
Short-term borrowings		46			73			119
Other borrowings		154			156			310
Total interest-bearing liabilities		503			1,412			1,915
Net interest income (tax-equivalent basis)	$	1,159		$	(313	)	$	846

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.

45

Comparison of Operating Results for the Six Months Ended June 30, 2019 to June 30, 2018

General

For the six months ended June 30, 2019, net income totaled $6,712,000 compared to $6,642,000 earned in the similar period in 2018. The increase in net income for the six months ended June 30, 2019 was due primarily to an $860,000 improvement in net interest income. Earnings per share for the current period were $1.07 per share for basic shares and $1.06 for fully diluted shares compared to $1.07 per share for basic shares and $1.06 per share for fully diluted shares for the six months ended June 30, 2018. The resulting annualized return on average assets and annualized return on average equity for the six months ended June 30, 2019 were 1.12% and 10.66%, respectively, compared to 1.18% and 11.63%, respectively, for the similar period in 2018.

The following table sets forth changes in net income:

(dollars in thousands)	Six months ended
	June 30, 2019 to June 30, 2018
Net income six months ended June 30, 2018	$	6,642
Change due to:
Net interest income		860
Provision for loan losses		225
Net gains on sales		(26	)
Other income		(241	)
Salaries and employee benefits		(380	)
Occupancy, furniture and equipment		(115	)
Data processing and related operations		(262	)
Foreclosed real estate		82
All other expenses		(158	)
Income tax expense		85
Net income six months ended June 30, 2019	$	6,712

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the six months ended June 30, 2019 totaled $19,413,000 which was $846,000 higher than the comparable period in 2018. The increase in net interest income was due primarily to a $2,981,000 increase in interest income (fte) on loans. Tax-equivalent interest income was negatively impacted by a $225,000 decrease in securities income. The fte net interest spread and net interest margin were 3.22% and 3.46%, respectively, for the six months ended June 30, 2019 compared to 3.35% and 3.50%, respectively, for the similar period in 2018. The decrease in the net interest spread and margin reflects the increased cost of funding.

Interest income (fte) totaled $23,771,000 with a yield on average earning assets of 4.24% compared to $21,010,000 and 3.96% for the 2018 period. Average loans increased $89.0 million over the comparable period of last year, while average securities decreased $26.9 million as portfolio runoff was utilized to fund loan growth. Average earning assets totaled $1.121 billion for the six months ended June 30, 2019, an increase of $60.6 million over the average for the similar period in 2018.    

46

Interest expense for the six months ended June 30, 2019 totaled $4,358,000 at an average cost of 1.02% compared to $2,443,000 and 0.61% for the similar period in 2018. The increase in average cost reflects the rising rates on borrowed funds and certificates of deposit. The average cost of time deposits, which is the most significant component of funding, increased to 1.78% from 1.13% for the similar period in the prior year.

Provision for Loan Losses

The Company’s provision for loan losses for the six months ended June 30, 2019 was $750,000 compared to $975,000 for the six months ended June 30, 2018. 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 $974,000 for the six months ended June 30, 2019 compared to $283,000 for the similar period in 2018. The increase in charge-offs was due primarily to two commercial credits which were written down by $787,000 in the aggregate during the 2019 period. At June 30, 2019, the allowance for loan losses represented 0.93% of loans receivable and 607% of non-performing loans.

Other Income

Other income totaled $3,201,000 for the six months ended June 30, 2019 compared to $3,468,000 for the similar period in 2018. The decrease was due primarily to a $144,000 decrease in earnings and proceeds on bank-owned life insurance policies and a $135,000 decline in net gains realized on sales of securities. All other items included in other income increased $12,000, net.

Other Expense

Other expense for the six months ended June 30, 2019 totaled $13,433,000 which was $833,000 higher than the same period of 2018 due primarily to a $380,000 increase in salaries and benefits expenses and a $262,000 increase in data processing costs. All other operating expenses increased $191,000, net.

Income Tax Expense

Income tax expense totaled $1,188,000 for an effective tax rate of 15.0% for the period ending June 30, 2019 compared to $1,273,000 for an effective tax rate of 16.1% for the similar period in 2018.

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 June 30, 2019, the level of net interest income at risk in a rising or declining 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 10% of net interest income for a ± 200 basis point shift in interest rates.

47

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

As of June 30, 2019, the Company had a negative 90-day interest sensitivity gap of $19.0 million or (1.6)% of total assets, compared to the $18.7 million negative gap, or (1.6)% of total assets, as of December 31, 2018. Rate-sensitive assets repricing within 90 days increased $11.7 million due primarily to a $5.2 million increase in loans and a $4.0 million increase in overnight liquidity. Rate-sensitive liabilities repricing within 90 days increased $12.0 million since year end due to a $14.7 million increase in time deposits repricing. A negative gap means that rate-sensitive liabilities are greater than rate-sensitive assets at the time interval. This would indicate that in a rising rate environment, the cost of interest-bearing liabilities could increase faster than the yield on interest-earning assets 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 an independently prepared non-maturity deposit study for Wayne Bank which addressed the various deposit types and their pricing sensitivity to movements in market interest rates. The process involved analyzing correlations between product rates and market rates over a ten-year period. The Company believes the study provides pertinent data to support the assumptions used in modeling non-maturity deposits.

June 30, 2019

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	$	4,265		$	—		$	—		$	—		$	4,265
Securities		9,411			29,699			68,427			130,546			238,083
Loans Receivable		140,425			176,210			290,650			280,388			887,673
Total RSA	$	154,101		$	205,909		$	359,077		$	410,934		$	1,130,021
Non-maturity interest-bearing deposits	$	60,264		$	60,286		$	158,551		$	126,285		$	405,386
Time Deposits		88,336			132,492			96,976			36,270			354,074
Borrowings		24,498			28,460			34,315			4,845			92,118
Total RSL	$	173,098		$	221,238		$	289,842		$	167,400		$	851,578
Interest Sensitivity Gap	$	(18,997	)	$	(15,329	)	$	69,235		$	243,534		$	278,443
Cumulative Gap		(18,997	)		(34,326	)		34,909			278,443
RSA/RSL-cumulative		89.0	%		91.3	%		105.1	%		132.7	%
December 31, 2018
Interest Sensitivity Gap	$	(18,749	)	$	(60,791	)	$	18,852		$	303,804		$	243,116
Cumulative Gap		(18,749	)		(79,540	)		(60,688	)		243,116
RSA/RSL-cumulative		88.4	%		79.8	%		91.1	%		128.6	%

48

Item 4. Controls and Procedures

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

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

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

There have been no material changes in the risk factors affecting the Company that were identified in Item 1A of Part 1 of the Company’s Form 10-K for the year ended December  31, 2018.

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

(a) Unregistered Sales of Equity Securities. Not Applicable.

(b) Use of Proceeds. Not Applicable

(c) Issuer Purchases of Equity Securities. Set forth below is information regarding the Company’s stock repurchases during the quarter ended June 30, 2019.

	Issuer Purchases of Equity Securities
	Total Number of Shares (or Units) Purchased		Average Price Paid Per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs *		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1 – 30, 2019		—	$	—		—		129,500
May 1 – 31, 2019		—		—		—		129,500
June 1 – 30, 2019		—		—		—		129,500
Total		—	$	—		—		129,500

* On March 19, 2008, the Registrant announced its intention to repurchase up to 5% of its outstanding common stock (approximately 226,050 split-adjusted shares) in the open market. On November 10, 2011, the Registrant announced that the Company had increased the number of shares which may be repurchased under its open-market program to 5% of its currently outstanding shares, or approximately 270,600 split-adjusted shares. There is no expiration date for this plan.

49

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits

No.	Description
3(i)	Amended and Restated 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. (3)
10.1	Employment Agreement with Lewis J. Critelli (4)
10.2	Change in Control Severance Agreement with William S. Lance(4)
10.3	Change in Control Severance Agreement with Robert J. Mancuso(5)
10.4	Salary Continuation Agreement between the Bank and William W. Davis, Jr. (6)
10.5	Amended and Restated Salary Continuation Agreement, dated September 1, 2017, between the Bank and Lewis J. Critelli (7)
10.6	Salary Continuation Agreement between the Bank and John H. Sanders (8)
10.7	2006 Stock Option Plan (9)
10.8	First and Second Amendments to Salary Continuation Agreement with William W. Davis, Jr. (10)
10.9	First and Second Amendments to Salary Continuation Agreement with John H. Sanders (10)
10.10	Change In Control Severance Agreement with James F. Burke(11)
10.11	2014 Equity Incentive Plan, as amended(12)
10.12	Addendum to Change in Control Severance Agreement with William S. Lance (13)
10.13	Salary Continuation Agreement, dated September 1, 2017, between Wayne Bank and William S. Lance (7)
10.14	Salary Continuation Agreement, dated September 1, 2017, between Wayne Bank and Robert J. Mancuso (7)
10.15	Salary Continuation Agreement, dated September  1, 2017, between Wayne Bank and James F. Burke (7)
10.16	Change-In-Control Severance Agreement, dated January  16, 2018, by and among Norwood Financial Corp., Wayne Bank, and John F. Carmody(14)
10.17	Addendum, dated January  16, 2018, to Change-In-Control Severance Agreement, dated March 2, 2010, by and among Norwood Financial Corp., Wayne Bank and William S. Lance(14)
10.18	Addendum, dated January  16, 2018, to Change-In-Control Severance Agreement, dated January 3, 2013, by and among Norwood Financial Corp., Wayne Bank and Robert J. Mancuso(14)
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 consisting of the following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Changes in Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.

50

(1) Incorporated by reference into this document from Exhibit 3(i) to the Registrant’s Form 10-Q filed with the Commission on May 9, 2019

(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 herein by reference into this document from the identically numbered Exhibits to the Registrant’s Form 10, Registration Statement initially filed in paper with the Commission on April 29, 1996, Registration No. 0-28364

(4) 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.

(5) Incorporated by reference into this document from Exhibit 10.4 to the Registrant’s Form 10-K filed with the Commission on March 14, 2013, File No. 0-28364.

(6) Incorporated by reference to Exhibit 10.6 to the Registrant’s Form 10-K filed with the Commission on March 23, 2000.

(7) Incorporated by reference from the exhibits to the Current Report on Form 8-K filed with the Commission on September 5, 2017.

(8) Incorporated herein by reference to Exhibit 10.11 to the Registrant’s Form 10-K filed with the Commission on March 22, 2004.

(9) 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.

(10) Incorporated herein by reference from Exhibits 10.1 and 10.5 to the Registrant’s Current Report on Form 8-K filed on April 4, 2006.

(11) Incorporated by reference from Exhibit 10.13 to the Registrant’s Form 10-Q filed with the Commission on November 7, 2013.

(12) Incorporated by reference to Exhibit 10.1 to Post-Effective No. 1 to the Registrant’s Registration Statement on Form S-8 (File No. 333-195643) filed with the Commission on May 4, 2018.

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

(14) Incorporated by reference into this document from the exhibits to the Registrant’s Current Report on Form 8-K filed with the Commission on January 16, 2018

51

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NORWOOD FINANCIAL CORP.
Date: August 8, 2019	By:	/s/ Lewis J. Critelli
		Lewis J. Critelli
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 8, 2019	By:	/s/ William S. Lance
		William S. Lance
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

52

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: August 8, 2019	/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: August 8, 2019	/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 June 30, 2019 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

August 8, 2019

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 01, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Entity Registrant Name	NORWOOD FINANCIAL CORP
Entity Central Index Key	0001013272
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		6,292,106
Entity Interactive Data Current	Yes

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 14,207	$ 18,039
Interest-bearing deposits with banks	4,265	309
Cash and cash equivalents	18,472	18,348
Securities available for sale, at fair value	238,083	243,277
Loans receivable	887,673	850,182
Less: Allowance for loan losses	8,228	8,452
Net loans receivable	879,445	841,730
Regulatory stock, at cost	3,155	3,926
Bank premises and equipment, net	13,880	13,846
Bank owned life insurance	38,340	37,932
Accrued interest receivable	3,979	3,776
Foreclosed real estate owned	1,677	1,115
Goodwill	11,331	11,331
Other intangibles	280	336
Other assets	13,886	8,942
TOTAL ASSETS	1,222,528	1,184,559
LIABILITIES
Deposits: Non-interest bearing demand	221,764	201,457
Deposits: Interest-bearing demand	759,460	745,323
Total deposits	981,224	946,780
Short-term borrowings	48,094	53,046
Other borrowings	44,024	52,284
Accrued interest payable	3,008	1,806
Other liabilities	14,695	8,358
TOTAL LIABILITIES	1,091,045	1,062,274
STOCKHOLDERS' EQUITY
Preferred stock, no par value per share, authorized 5,000,000 shares
Common stock, $0.10 par value per share, authorized: 2019: 20,000,000 shares, 2018: 10,000,000 shares issued: 2019: 6,304,413 shares, 2018: 6,295,113 shares	630	630
Surplus	48,741	48,322
Retained earnings	82,127	78,434
Treasury stock at cost: 2019: 13,807 shares, 2018: 2,470 shares	(455)	(81)
Accumulated other comprehensive income (loss)	440	(5,020)
TOTAL STOCKHOLDERS' EQUITY	131,483	122,285
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 1,222,528	$ 1,184,559

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Consolidated Balance Sheets [Abstract]
Preferred Stock, No Par Value
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Common Stock, Par Value Per Share	$ 0.10	$ 0.10
Common Stock, Shares Authorized	20,000,000	10,000,000
Common Stock, Shares, Issued	6,304,413	6,295,113
Treasury Stock, Shares	13,807	2,470

XML

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
INTEREST INCOME
Loans receivable, including fees	$ 10,328	$ 8,857	$ 20,298	$ 17,344
Securities	1,435	1,536	2,876	3,060
Other	51	43	66	61
Total Interest Income	11,814	10,436	23,240	20,465
INTEREST EXPENSE
Deposits	1,839	1,052	3,568	2,082
Short-term borrowings	85	38	209	90
Other borrowings	278	131	581	271
Total interest expense	2,202	1,221	4,358	2,443
NET INTEREST INCOME	9,612	9,215	18,882	18,022
PROVISION FOR LOAN LOSSES	300	425	750	975
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	9,312	8,790	18,132	17,047
OTHER INCOME
Other Income	1,279	1,427	2,580	2,696
Net realized gains on sales of securities	64	58	64	200
Gain on sale of loans, net	67		110
Earnings and proceeds on bank owned life insurance	207	279	408	552
Other	106	161	249	323
Total Other Income	1,641	1,774	3,201	3,468
OTHER EXPENSES
Salaries and employee benefits	3,599	3,406	7,248	6,868
Occupancy, furniture & equipment, net	940	857	1,864	1,749
Data processing and related operations	472	340	920	658
Taxes, other than income	179	153	340	327
Professional fees	226	229	476	459
Federal Deposit Insurance Corporation insurance	84	86	155	178
Foreclosed real estate	(10)	114	13	95
Amortization of intangibles	27	33	56	68
Other	1,268	1,135	2,361	2,198
Total other expenses	6,785	6,353	13,433	12,600
INCOME BEFORE INCOME TAXES	4,168	4,211	7,900	7,915
INCOME TAX EXPENSE	646	698	1,188	1,273
NET INCOME	$ 3,522	$ 3,513	$ 6,712	$ 6,642
BASIC EARNINGS PER SHARE	$ 0.56	$ 0.57	$ 1.07	$ 1.07
DILUTED EARNINGS PER SHARE	$ 0.56	$ 0.56	$ 1.06	$ 1.06
Service Charges And Fees [Member]
OTHER INCOME
Other Income	$ 1,052	$ 1,101	$ 2,083	$ 2,082
Income From Fiduciary Activities [Member]
OTHER INCOME
Other Income	$ 145	$ 175	$ 287	$ 311

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 3,522	$ 3,513	$ 6,712	$ 6,642
Investment securities available for sale:
Unrealized holding gain (loss)	3,250	(840)	6,975	(5,330)
Tax effect	(682)	177	(1,464)	1,119
Reclassification of investment securities gains recognized in net income	(64)	(58)	(64)	(200)
Tax effect	13	12	13	42
Other comprehensive income (loss)	2,517	(709)	5,460	(4,369)
Comprehensive Income	$ 6,039	$ 2,804	$ 12,172	$ 2,273

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 (Loss) [Member]	Total
Beginning balance at Dec. 31, 2017	$ 626	$ 47,431	$ 70,426	$ (77)	$ (2,667)	$ 115,739
Beginning balance, shares at Dec. 31, 2017	6,256,063			2,608
Net income			6,642			6,642
Other comprehensive income (loss)					(4,369)	(4,369)
Cash dividends declared			(2,753)			(2,753)
Compensation expense related to restricted stock		102				102
Acquisition of treasury stock				$ (179)		(179)
Acquisition of treasury stock, shares				5,446
Stock options exercised	$ 1	164		$ 68		233
Stock options exercised, shares	10,325			2,325
Compensation expense related to stock options		118				118
Ending balance, shares at Jun. 30, 2018	6,266,388			5,729
Ending balance at Jun. 30, 2018	$ 627	47,815	74,315	$ (188)	(7,036)	115,533
Beginning balance at Mar. 31, 2018	$ 626	47,548	72,179	$ (188)	(6,327)	113,838
Beginning balance, shares at Mar. 31, 2018	6,257,563			5,729
Net income			3,513			3,513
Other comprehensive income (loss)					(709)	(709)
Cash dividends declared			(1,377)			(1,377)
Compensation expense related to restricted stock		51				51
Acquisition of treasury stock
Stock options exercised	$ 1	157				158
Stock options exercised, shares	8,825
Compensation expense related to stock options		59				59
Ending balance, shares at Jun. 30, 2018	6,266,388			5,729
Ending balance at Jun. 30, 2018	$ 627	47,815	74,315	$ (188)	(7,036)	115,533
Beginning balance at Dec. 31, 2018	$ 630	48,322	78,434	$ (81)	(5,020)	122,285
Beginning balance, shares at Dec. 31, 2018	6,295,113			2,470
Net income			6,712			6,712
Other comprehensive income (loss)					5,460	5,460
Cash dividends declared			(3,019)			(3,019)
Compensation expense related to restricted stock		145				145
Acquisition of treasury stock				$ (374)		(374)
Acquisition of treasury stock, shares				11,337
Stock options exercised		170				$ 170
Stock options exercised, shares	9,300					9,300
Compensation expense related to stock options		104				$ 104
Ending balance, shares at Jun. 30, 2019	6,304,413			13,807
Ending balance at Jun. 30, 2019	$ 630	48,741	82,127	$ (455)	440	131,483
Beginning balance at Mar. 31, 2019	$ 630	48,559	80,115	$ (455)	(2,077)	126,772
Beginning balance, shares at Mar. 31, 2019	6,301,263			13,807
Net income			3,522			3,522
Other comprehensive income (loss)					2,517	2,517
Cash dividends declared			(1,510)			(1,510)
Compensation expense related to restricted stock		73				73
Acquisition of treasury stock
Stock options exercised		57				57
Stock options exercised, shares	3,150
Compensation expense related to stock options		52				52
Ending balance, shares at Jun. 30, 2019	6,304,413			13,807
Ending balance at Jun. 30, 2019	$ 630	$ 48,741	$ 82,127	$ (455)	$ 440	$ 131,483

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Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Consolidated Statements of Changes in Stockholders' Equity [Abstract]
Cash dividends declared	$ 0.24	$ 0.22	$ 0.48	$ 0.44

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 6,712	$ 6,642
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	750	975
Depreciation	487	437
Amortization of intangible assets	56	68
Deferred income taxes	(25)	(202)
Net amortization of securities premiums and discounts	732	885
Net realized gain on sales of securities	(64)	(200)
Earnings and proceeds on life insurance policies	(408)	(552)
(Gain) loss on sales and write-downs of fixed assets and foreclosed real estate owned, net	(65)	9
Net gain on sale of loans	(110)	0
Mortgage loans originated for sale	(2,191)	0
Proceeds from sale of loans originated for sale	2,255	0
Compensation expense related to stock options	104	118
Compensation expense related to restricted stock	145	102
(Increase) decrease in accrued interest receivable	(203)	44
Increase in accrued interest payable	1,202	27
Other, net	234	853
Net cash provided by operating activities	9,611	9,206
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales	3,626	14,583
Proceeds from maturities and principal reductions on mortgage-backed securities	12,877	15,151
Purchases	(5,066)	(14,269)
Purchase of regulatory stock	(1,666)	(1,158)
Redemption of regulatory stock	2,437	2,350
Net increase in loans	(39,398)	(40,393)
Purchase of premises and equipment	(757)	(467)
Proceeds from sales of foreclosed real estate owned	205	467
Proceeds from sales of bank premises and equipment	246	0
Net cash used in investing activities	(27,496)	(23,736)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	34,444	21,505
Net (decrease) increase in short-term borrowings	(4,952)	795
Repayments of other borrowings	(8,260)	(5,662)
Stock options exercised	170	233
Acquisition of treasury stock	(374)	(179)
Cash dividends paid	(3,019)	(2,752)
Net cash provided by financing activities	18,009	13,940
Increase (decrease) in cash and cash equivalents	124	(590)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	18,348	16,697
CASH AND CASH EQUIVALENTS, END OF PERIOD	18,472	16,107
Supplemental Disclosures of Cash Flow Information
Interest on deposits and borrowings	3,156	2,416
Income taxes paid, net of refunds	862	1,097
Supplemental Schedule of Noncash Investing Activities:
Transfers of loans to foreclosed real estate and repossession of other assets	1,003	333
Dividends payable	$ 1,510	$ 1,377

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Basis of Presentation

6 Months Ended

Jun. 30, 2019

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., 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 consolidated financial position and results of operations of the Company.  The operating results for the three month and six month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any other future interim period.

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Revenue Recognition

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

Revenue Recognition

2.Revenue Recognition

Management has determined that the primary sources of revenue emanating from interest income on loans and investments along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans, commitment fees, and fees from financial guarantees are not within the scope of ASC 606.  As a result, no changes were made during the period related to those sources of revenue.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30:

		Three months ended
		June 30,
(dollars in thousands)
Noninterest Income		2019		2018
In-scope of Topic 606:
Service charges on deposit accounts	$	66	$	64
ATM fees		91		95
Overdraft fees		343		381
Safe deposit box rental		23		23
Loan related service fees		94		155
Debit card fees		371		338
Fiduciary activities		145		174
Commissions on mutual funds and annuities		26		60
Other income		120		137
Noninterest Income (in-scope of Topic 606)		1,279		1,427
Out-of-scope of Topic 606:
Net realized gains on sales of securities		64		58
Loan servicing fees		24		10
Gains on sales of loans		67		-
Earnings on and proceeds from bank-owned life insurance		207		279
Noninterest Income (out-of-scope of Topic 606)		362		347
Total Noninterest Income	$	1,641	$	1,774

		Six months ended
		June 30,
(dollars in thousands)
Noninterest Income		2019		2018
In-scope of Topic 606:
Service charges on deposit accounts	$	133	$	129
ATM fees		181		191
Overdraft fees		694		765
Safe deposit box rental		49		53
Loan related service fees		223		235
Debit card fees		697		633
Fiduciary activities		287		311
Commissions on mutual funds and annuities		81		103
Other income		235		276
Noninterest Income (in-scope of Topic 606)		2,580		2,696
Out-of-scope of Topic 606:
Net realized gains on sales of securities		64		200
Loan servicing fees		39		20
Gains on sales of loans		110		-
Earnings on and proceeds from bank-owned life insurance		408		552
Noninterest Income (out-of-scope of Topic 606)		621		772
Total Noninterest Income	$	3,201	$	3,468

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Earnings Per Share

6 Months Ended

Jun. 30, 2019

Earning Per Share [Abstract]

Earnings Per Share

3.         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 restricted stock, 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		Six Months Ended
	June 30,		June 30,
	2019	2018	2019	2018
Weighted average shares outstanding	6,290	6,256	6,292	6,256
Less: Unvested restricted shares	(35)	(31)	(35)	(31)
Basic EPS weighted average shares outstanding	6,255	6,225	6,257	6,225
Basic EPS weighted average shares outstanding	6,255	6,225	6,257	6,225
Add:  Dilutive effect of stock options and restricted shares	60	50	62	51
Diluted EPS weighted average shares outstanding	6,315	6,275	6,319	6,276

For the three and six month periods ending June 30, 2019, there were no stock options that would be anti-dilutive to the earnings per share calculations based upon the closing price of Norwood common stock of $34.81 per share on June 30, 2019.

For the three and six month periods ending June 30, 2018, there were no stock options that would be anti-dilutive to the earnings per share calculations based upon the closing price of Norwood common stock of $36.02 per share on June 30, 2018.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Stock Based Compensation [Abstract]

Stock-Based Compensation

4.         Stock-Based Compensation

No awards were granted during the six-month period ending June 30, 2019. As of June 30, 2019, there was $104,000 of total unrecognized compensation cost related to non-vested options granted in 2018 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2019. Compensation costs related to stock options amounted to $104,000 and $118,000 during the six-month periods ended June 30, 2019 and 2018, respectively.

A summary of the Company’s stock option activity for the six-month period ended June 30, 2019 is as follows:

		Weighted
		Average Exercise		Weighted Average		Aggregate
		Price		Remaining		Intrinsic Value
	Options	Per Share		Contractual Term		($000)
Outstanding at January 1, 2019	208,700	$	22.54	5.9	Yrs.	$	2,183
Granted	-		-	-			-
Exercised	(9,300)		18.31	4.1	Yrs.		119
Forfeited	-		-	-			-
Outstanding at June 30, 2019	199,400	$	22.74	5.5	Yrs.	$	2,407
Exercisable at June 30, 2019	170,500	$	21.11	4.8	Yrs.	$	2,335

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 market price was $34.81 per share as of June 30, 2019 and $33.00 per share as of December 31, 2018.

A summary of the Company’s restricted stock activity for the six-month periods ended June 30, 2019 and 2018 is as follows:

	2019			2018
			Weighted-Average			Weighted-Average
	Number of		Grant Date	Number of		Grant Date
	Restricted Stock		Fair Value	Restricted Stock		Fair Value
Non-vested, January 1,	34,615	$	27.82	30,415	$	24.46
Granted	-		-	-		-
Vested	-		-	-		-
Forfeited	-		-	-		-
Non-vested, June 30,	34,615	$	27.82	30,415	$	24.46

The expected future compensation expense relating to the34,615shares of non-vested restricted stock outstanding as of June 30, 2019 is $818,000.  This cost will be recognized over the remaining vesting period of 4.5 years.  Compensation costs related to restricted stock amounted to $145,000 and $102,000 during the six-month periods ended June 30, 2019 and 2018, respectively.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2019

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

5.         Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive loss (in thousands) by component net of tax for the three months and six months ended June 30, 2019 and 2018:

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of March 31, 2019	$	(2,077)
Other comprehensive income before reclassification		2,568
Amount reclassified from accumulated other comprehensive loss		(51)
Total other comprehensive income		2,517
Balance as of June 30, 2019	$	440
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  March 31, 2018	$	(6,327)
Other comprehensive loss before reclassification		(663)
Amount reclassified from accumulated other comprehensive loss		(46)
Total other comprehensive loss		(709)
Balance as of June 30, 2018	$	(7,036)

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  December 31, 2018	$	(5,020)
Other comprehensive income before reclassification		5,511
Amount reclassified from accumulated other comprehensive loss		(51)
Total other comprehensive income		5,460
Balance as of June 30, 2019	$	440
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  December 31, 2017	$	(2,667)
Other comprehensive loss before reclassification		(4,211)
Amount reclassified from accumulated other comprehensive loss		(158)
Total other comprehensive loss		(4,369)
Balance as of June 30, 2018	$	(7,036)

(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 loss (in thousands) for the three months and six months ended June 30, 2019 and 2018:

	Amount Reclassified
	From Accumulated				Affected Line Item in
	Other				Consolidated
	Comprehensive				Statements
Details about other comprehensive income	Income (Loss) (a)				of Income
		Three months ended
		June 30,
		2019		2018
Unrealized gains on available for sale securities	$	64	$	58	Net realized gains on sales of securities
		(13)		(12)	Income tax expense
	$	51	$	46
		Six months ended
		June 30,
		2019		2018
Unrealized gains on available for sale securities	$	64	$	200	Net realized gains on sales of securities
		(13)		(42)	Income tax expense
	$	51	$	158

(a)  Amounts in parentheses indicate debits to net income

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Off-Balance Sheet Financial Instruments and Gurantees

6 Months Ended

Jun. 30, 2019

Off-Balance Sheet Financial Instruments and Gurantees [Abstract]

Off-Balance Sheet Financial Instruments and Gurantees

6.         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)	June 30,
	2019		2018
Commitments to grant loans	$	49,936	$	43,280
Unfunded commitments under lines of credit		71,859		72,359
Standby letters of credit		4,305		5,733
	$	126,100	$	121,372

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 June 30, 2019 for guarantees under standby letters of credit issued is not material.

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Securities

6 Months Ended

Jun. 30, 2019

Securities [Abstract]

Securities

7.         Securities

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

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
States and political subdivisions	$	92,821	$	1,186	$	(72)	$	93,935
Corporate obligations		8,812		17		(24)		8,805
Mortgage-backed securities-
government sponsored entities		136,572		292		(1,521)		135,343
Total debt securities	$	238,205	$	1,495	$	(1,617)	$	238,083

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
States and political subdivisions	$	99,218	$	385	$	(1,990)	$	97,613
Corporate obligations		8,896		-		(256)		8,640
Mortgage-backed securities-government
sponsored entities		142,197		25		(5,198)		137,024
Total debt securities	$	250,311	$	410	$	(7,444)	$	243,277

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):

	June 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
States and political subdivisions	$	402	$	-	$	21,268	$	(72)	$	21,670	$	(72)
Corporate obligations		-		-		5,194		(24)		5,194		(24)
Mortgage-backed securities-government sponsored entities		3,497		(11)		95,971		(1,510)		99,468		(1,521)
	$	3,899	$	(11)	$	122,433	$	(1,606)	$	126,332	$	(1,617)

	December 31, 2018
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
States and political subdivisions	$	19,140	$	(390)	$	56,740	$	(1,600)	$	75,880	$	(1,990)
Corporate obligations		2,045		(21)		6,595		(235)		8,640		(256)
Mortgage-backed securities-government sponsored entities		8,444		(22)		122,950		(5,176)		131,394		(5,198)
	$	29,629	$	(433)	$	186,285	$	(7,011)	$	215,914	$	(7,444)

At June 30, 2019, the Company had three debt securities in an unrealized loss position in the less than twelve months category and 114 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 2019.  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 June 30, 2019 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	$	2,957	$	2,960
Due after one year through five years		21,142		21,144
Due after five years through ten years		44,101		44,298
Due after ten years		33,433		34,338
		101,633		102,740
Mortgage-backed securities-government sponsored entities		136,572		135,343
	$	238,205	$	238,083

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

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2019		2018		2019		2018
Gross realized gains	$	64	$	58	$	64	$	200
Gross realized losses		-		-		-		-
Net realized gain	$	64	$	58	$	64	$	200
Proceeds from sales of securities	$	3,299	$	3,822	$	3,626	$	14,583

Securities with a carrying value of $196,986,000 and $219,244,000 at June 30, 2019 and 2018, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.  

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Loans Receivable and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2019

Loans Receivable and Allowance for Loan Losses [Abstract]

Loans Receivable and Allowance for Loan Losses

8.        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 (dollars in thousands):

	June 30, 2019				December 31, 2018
Real Estate Loans:
Residential	$	230,405	26.0	%	$	235,523	27.7	%
Commercial		381,915	43.0			374,790	44.1
Construction		19,784	2.2			17,445	2.0
Commercial, financial and agricultural		120,732	13.6			110,542	13.0
Consumer loans to individuals		134,968	15.2			112,002	13.2
Total loans		887,804	100.0	%		850,302	100.0	%
Deferred fees, net		(131)				(120)
Total loans receivable		887,673				850,182
Allowance for loan losses		(8,228)				(8,452)
Net loans receivable	$	879,445			$	841,730

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

	June 30, 2019		December 31, 2018
Outstanding Balance	$	965	$	1,055
Carrying Amount	$	822	$	886

As a result of the acquisition of Delaware Bancshares, Inc. (“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. 

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 June 30, 2019 and December 31, 2018, foreclosed real estate owned totaled $1,677,000 and $1,115,000, respectively.  During the six months ended June 30, 2019, the Company acquired three properties via deed-in-lieu transactions which have subsequently been sold, and foreclosed on one commercial property with a carrying value of $608,000.  The Company also disposed of two properties that were previously transferred to foreclosed real estate owned with a carrying value of $46,000 through the sale of the properties.  As of June 30, 2019, the Company has initiated formal foreclosure proceedings on three properties classified as consumer residential mortgages with an aggregate carrying value of $306,000.

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
June 30, 2019	(In thousands)
Individually evaluated for impairment	$	-	$	752	$	-	$	-	$	-	$	752
Loans acquired with deteriorated credit quality		583		239		-		-		-		822
Collectively evaluated for impairment		229,822		380,924		19,784		120,732		134,968		886,230
Total Loans	$	230,405	$	381,915	$	19,784	$	120,732	$	134,968	$	887,804

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
	(In thousands)
December 31, 2018
Individually evaluated for impairment	$	-	$	1,319	$	-	$	-	$	-	$	1,319
Loans acquired with deteriorated credit quality		630		256		-		-		-		886
Collectively evaluated for impairment		234,893		373,215		17,445		110,542		112,002		848,097
Total Loans	$	235,523	$	374,790	$	17,445	$	110,542	$	112,002	$	850,302

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable. 

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
June 30, 2019				(in thousands)
With no related allowance recorded:
Real Estate Loans:
Commercial	$	752	$	1,338	$	-
Subtotal		752		1,338		-
Total:
Real Estate Loans:
Commercial		752		1,338		-
Total Impaired Loans	$	752	$	1,338	$	-

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2018				(in thousands)
With no related allowance recorded:
Real Estate Loans:
Commercial	$	1,319	$	1,747	$	-
Subtotal		1,319		1,747		-
Total:
Real Estate Loans:
Commercial		1,319		1,747		-
Total Impaired Loans	$	1,319	$	1,747	$	-

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the three-month periods ended June 30, 2019 and 2018, respectively (in thousands):

	Average Recorded				Interest Income
	Investment				Recognized
	2019		2018		2019		2018
Real Estate Loans:
Residential	$	-	$	23	$	-	$	-
Commercial		601		1,202		24		16
Total	$	601	$	1,225	$	24	$	16

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the six-month periods ended June 30, 2019 and 2018, respectively (in thousands):

	Average Recorded				Interest Income
	Investment				Recognized
	2019		2018		2019		2018
Real Estate Loans:
Residential	$	-	$	23	$	-	$	-
Commercial		840		1,194		24		30
Total	$	840	$	1,217	$	24	$	30

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 June 30, 2019 and December 31, 2018, troubled debt restructured loans totaled $104,000 and $1.1 million, respectively, with no specific reserve.  For the six-month period ended June 30, 2019, there were no new loans identified as troubled debt restructurings.  During 2019, the Company recognized a charge-off of $451,000 on a loan that was previously identified as a troubled debt restructuring.  The loan was transferred to foreclosed real estate during the first quarter of 2019 with a carrying value of $608,000.

For the six-month period ended June 30, 2018, there were no new loans identified as troubled debt restructurings nor did the Company recognize any write-down on loans that were previously identified as a troubled debt restructuring.

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 nonperformance, 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 $1,500,000 and over to assign or re-affirm risk ratings.  Loans in the Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of  June 30, 2019 and December 31, 2018 (in thousands):

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
June 30, 2019
Commercial real estate loans	$	365,739	$	12,629	$	3,547	$	-	$	381,915
Commercial loans		120,445		59		228		-		120,732
Total	$	486,184	$	12,688	$	3,775	$	-	$	502,647

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
December 31, 2018
Commercial real estate loans	$	360,838	$	7,918	$	6,034	$	-	$	374,790
Commercial loans		109,966		82		494		-		110,542
Total	$	470,804	$	8,000	$	6,528	$	-	$	485,332

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 June 30, 2019 and December 31, 2018 (in thousands):

	Performing		Nonperforming		Total
June 30, 2019
Residential real estate loans	$	229,831	$	574	$	230,405
Construction		19,784		-		19,784
Consumer loans		134,968		-		134,968
Total	$	384,583	$	574	$	385,157

	Performing		Nonperforming		Total
December 31, 2018
Residential real estate loans	$	234,725	$	798	$	235,523
Construction		17,445		-		17,445
Consumer loans		112,002		-		112,002
Total	$	364,172	$	798	$	364,970

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 June 30, 2019 and December 31, 2018 (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
June 30, 2019
Real Estate loans
Residential	$	229,382	$	377	$	72	$	-	$	574	$	1,023	$	230,405
Commercial		380,828		271		64		-		752		1,087		381,915
Construction		19,784		-		-		-		-		-		19,784
Commercial  loans		120,646		57		-		-		29		86		120,732
Consumer  loans		134,811		157		-		-		-		157		134,968
Total	$	885,451	$	862	$	136	$	-	$	1,355	$	2,353	$	887,804

	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, 2018
Real Estate loans
Residential	$	234,201	$	373	$	151	$	-	$	798	$	1,322	$	235,523
Commercial		372,617		1,043		788		-		342		2,173		374,790
Construction		17,445		-		-		-		-		-		17,445
Commercial  loans		110,191		320		31		-		-		351		110,542
Consumer  loans		111,796		171		35		-		-		206		112,002
Total	$	846,250	$	1,907	$	1,005	$	-	$	1,140	$	4,052	$	850,302

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. 

As of June 30, 2019, the allocation of the allowance pertaining to commercial real estate loans is $761,000 lower than the allocation as of December 31, 2018.  This decrease is due primarily to a reduction in the historical factor which decreased from 0.42% as of December 31, 2018 to 0.29% at June 30, 2019.  Also contributing to the reduced reserve balance is a decrease in the qualitative factor related to the annualized growth rate.

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, 2018	$	1,328	$	5,455	$	93	$	712	$	864	$	8,452
Charge Offs		(75)		(615)		-		(234)		(135)		(1,059)
Recoveries		15		14		-		21		35		85
Provision for loan losses		179		(160)		19		397		315		750
Ending balance, June 30, 2019	$	1,447	$	4,694	$	112	$	896	$	1,079	$	8,228
Ending balance individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-
Ending balance collectively evaluated for impairment	$	1,447	$	4,694	$	112	$	896	$	1,079	$	8,228
(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, March 31, 2019	$	1,455	$	4,947	$	108	$	811	$	1,028	$	8,349
Charge Offs		(10)		(146)		-		(233)		(72)		(461)
Recoveries		4		4		-		11		21		40
Provision for loan losses		(2)		(111)		4		307		102		300
Ending balance, June 30, 2019	$	1,447	$	4,694	$	112	$	896	$	1,079	$	8,228

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2017	$	1,272	$	5,265	$	90	$	463	$	544	$	7,634
Charge Offs		(75)		(134)		-		(5)		(117)		(331)
Recoveries		2		31		-		-		15		48
Provision for loan losses		256		85		38		232		364		975
Ending balance, June 30, 2018	$	1,455	$	5,247	$	128	$	690	$	806	$	8,326
Ending balance individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-
Ending balance collectively evaluated for impairment	$	1,455	$	5,247	$	128	$	690	$	806	$	8,326
(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, March 31, 2018	$	1,525	$	5,129	$	120	$	638	$	687	$	8,099
Charge Offs		(24)		(134)		-		(5)		(69)		(232)
Recoveries		1		25		-		-		8		34
Provision for loan losses		(47)		227		8		57		180		425
Ending balance, June 30, 2018	$	1,455	$	5,247	$	128	$	690	$	806	$	8,326

The Company’s primary business activity as of June 30, 2019 was with customers located in northeastern Pennsylvania and the New York counties of Delaware and Sullivan.  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 June 30, 2019, the Company considered its concentration of credit risk to be acceptable.  The highest concentrations are in commercial rentals with $75.9 million of loans outstanding, or 8.6% of total loans outstanding, and the hospitality/lodging industry with loans outstanding of $67.5 million, or 7.6% of loans outstanding.  During 2019, the Company did not recognize any charge offs in the named concentrations.

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Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2019

Fair Value of Assets and Liabilities [Abstract]

Fair Value of Assets and Liabilities

9.         Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  In accordance with fair value accounting guidance, the Company measures, records, and reports various types of assets and liabilities at fair value on either a recurring or non-recurring basis in the Consolidated Financial Statements.  Those assets and liabilities are presented in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis”.  There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 14 of the Company’s 2018 Form 10-K.  In accordance with ASU 2016-01, the fair value of loans, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses.  The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit and nonperformance risk.  Loans are considered a Level 3 classification.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2019 and December 31, 2018 are as follows:

	Fair Value Measurement Using
	Reporting Date
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
June 30, 2019
Available for Sale:
States and political subdivisions	$	93,935	$	-	$	93,935	$	-
Corporate obligations		8,805		-		8,805		-
Mortgage-backed securities-government
sponsored entities		135,343		-		135,343		-
Total	$	238,083	$	-	$	238,083	$	-
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
December 31, 2018
Available for Sale:
States and political subdivisions	$	97,613	$	-	$	97,613	$	-
Corporate obligations		8,640		-		8,640		-
Mortgage-backed securities-government
sponsored entities		137,024		-		137,024		-
Total	$	243,277	$	-	$	243,277	$	-

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.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2019 and December 31, 2018 are as follows:

			Fair Value Measurement Using Reporting Date
(In thousands)
Description	Total		Level 1		Level 2		Level 3
June 30, 2019
Impaired Loans	$	752	$	-	$	-	$	752
Foreclosed Real Estate Owned		1,677		-		-		1,677
December 31, 2018
Impaired Loans	$	1,319	$	-	$	-	$	1,319
Foreclosed Real Estate Owned		1,115		-		-		1,115

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 June 30, 2019, the fair value investment in impaired loans totaled $752,000 which included five loan relationships that 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 June 30, 2019, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $587,000 over the life of the loans.

As of December 31, 2018, the fair value investment in impaired loans totaled $1,319,000 which included six loans 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, 2018, the Company had recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $428,000 over the life of the loans.

Foreclosed real estate owned (carried at fair value):

Real estate properties acquired through, or by deed 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.

The following table presents additional quantitative information about assets measured at fair value on a non-recurring 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)
June 30, 2019
Impaired loans	$	647	Appraisal of collateral(1)	Appraisal adjustments(2)	10.00-57.58%  (14.53%)
Impaired loans	$	105	Present value of future cash flows	Loan discount rate	4.00%  (4.00%)
Foreclosed real estate owned	$	1,677	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00-10.00%  (8.08%)

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2018
Impaired loans	$	232	Appraisal of collateral(1)	Appraisal adjustments(2)	10.00-81.54%  (56.06%)
Impaired loans	$	1,087	Present value of future cash flows	Loan discount rate	4.00-6.00%  (5.80%)
Foreclosed real estate owned	$	1,115	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00-85.71%  (7.80%)

(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.

Assets and Liabilities Not Required to be Measured or Reported at Fair Value

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 June 30, 2019 and December 31, 2018.

Loans receivable (carried at cost):

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

Mortgage servicing rights (generally carried at cost)

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

Deposit liabilities (carried at cost):

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

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 fair value that is deemed to represent the transfer price if the liability were assumed by a third party.

The estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at June 30, 2019 and December 31, 2018. (In thousands)

	Fair Value Measurements at June 30, 2019
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	18,472	$	18,472	$	18,472	$	-	$	-
Loans receivable, net		879,445		893,855		-		-		893,855
Mortgage servicing rights		183		223		-		-		223
Regulatory stock (1)		3,155		3,155		3,155		-		-
Bank owned life insurance (1)		38,340		38,340		38,340		-		-
Accrued interest receivable (1)		3,979		3,979		3,979		-		-
Financial liabilities:
Deposits		981,224		984,342		627,151		-		357,191
Short-term borrowings (1)		48,094		48,094		48,094		-		-
Other borrowings		44,024		44,305		-		-		44,305
Accrued interest payable (1)		3,008		3,008		3,008		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2018
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	18,348	$	18,348	$	18,348	$	-	$	-
Loans receivable, net		841,730		840,134		-		-		840,134
Mortgage servicing rights		178		220		-		-		220
Regulatory stock (1)		3,926		3,926		3,926		-		-
Bank owned life insurance (1)		37,932		37,932		37,932		-		-
Accrued interest receivable (1)		3,776		3,776		3,776		-		-
Financial liabilities:
Deposits		946,780		945,773		601,604		-		344,169
Short-term borrowings (1)		53,046		53,046		53,046		-		-
Other borrowings		52,284		52,043		-		-		52,043
Accrued interest payable (1)		1,806		1,806		1,806		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

(1) This financial instrument is carried at cost, which approximates the fair value of the instrument.

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New and Recently Adopted Accounting Pronouncements

6 Months Ended

Jun. 30, 2019

New and Recently Adopted Accounting Pronouncements [Abstract]

New and Recently Adopted Accounting Pronouncements

10. New and Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements  

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. ASU 2016-02 was effective for the Company on January 1, 2019. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) - Targeted Improvements,” which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842)- Narrow-Scope Improvements for Lessors,” which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. Upon adoption of ASU 2016-02, ASU 2018-11 and ASU 2018-20 on January 1, 2019, we recorded recognized a right-of-use assets and related lease liabilities totaling $5.3 million each, which are recorded in other assets and other liabilities, respectively.

New Accounting Pronouncements Not Yet Adopted

 In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, 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. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In February 2017, the FASB issued ASU 2017-06,  Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), and Health and Welfare Benefit Plans (Topic 965).  This Update relates primarily to the reporting by an employee benefit plan for its interest in a master trust, which is a trust for which a regulated financial institution serves as a trustee or custodian and in which assets of more than one plan sponsored by a single employer or by a group of employers under common control are held. For each master trust in which a plan holds an interest, the amendments in this Update require a plan’s interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. The amendments in this Update remove the requirement to disclose the percentage interest in the master trust for plans with divided interests and require that all plans disclose the dollar amount of their interest in each of those general types of investments, which supplements the existing requirement to disclose the master trusts balances in each general type of investments. There are also increased disclosure requirements for investments in master trusts. The amendments in this Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. This Update is not expected to have a significant impact on the Company’s financial statements.

ASU 2018-04, Investments – Debt Securities (Topic 320) and Regulated Operations (Topic 980) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273, ASU 2018-04 supersedes various SEC paragraphs and adds an SEC paragraph pursuant to the issuance of Staff Accounting Bulletin No. 117.

In May 2018, the FASB issued ASU 2018-06, Codification Improvements to Topic 942, Financial Services – Depository and Lending, which supersedes outdated guidance related to the Office of the Comptroller of the Currency (OCC)’s Banking Circular 202, Accounting for Net Deferred Tax Charges (Circular 202), because that guidance has been rescinded by the OCC and no longer is relevant.

In August 2018, the FASB issued ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. This Update is intended to improve financial reporting for insurance companies that issue long-duration contracts, such as life insurance, disability income, long-term care, and annuities, by requiring updated assumptions for liability measurement, standardizing the liability discount rate, simplifying and improving the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts by requiring those benefits to be measured at fair value instead of using two different measurement models, simplifying the amortization of deferred acquisition costs, and increasing transparency by improving the effectiveness of disclosures. This Update is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits (Topic 715-20). This Update amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The Update eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The Update also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This Update is effective for public business entities for fiscal years ending after December 15, 2020, and must be applied on a retrospective basis. For all other entities, this Update is effective for fiscal years ending after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). This Update addresses customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This Update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The amendments in this Update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815). The amendments in this Update permit use of the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (LIBOR) swap rate, the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate. For entities that have not already adopted Update 2017-12, the amendments in this Update are required to be adopted concurrently with the amendments in Update 2017-12. For public business entities that already have adopted the amendments in Update 2017-12, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities that already have adopted the amendments in Update 2017-12, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted in any interim period upon issuance of this Update if an entity already has adopted Update 2017-12. This Update is not expected to have a significant impact on the Company’s financial statements.

In October, 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810), which made improvements in 1) applying the variable interest entity (VIE) guidance to private companies under common control and 2) considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. Under the amendments in this Update, a private company may elect not to apply VIE guidance to legal entities under common control (including common control leasing arrangements) if both the parent and the legal entity being evaluated for consolidation are not public business entities. In addition, indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. For entities other than private companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this Update are effective for a private company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In November, 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), which made the following targeted improvements to generally accepted accounting principles (GAAP) for collaborative arrangements (1) clarified that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account, (2) add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606  (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606, and (3) require that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. Topic 326, Financial Instruments – Credit Losses amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other public business entities, the effective date is for fiscal years beginning after December 15, 2020, and for all other entities, the effective date is for fiscal years beginning after December 15, 2021. Topic 815, Derivatives and Hedging amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. For entities that have adopted the amendments in Update 2017-12, the effective date is as of the beginning of the first annual period beginning after the issuance of this Update. Topic 825, Financial Instruments amendmentsare effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

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Basis of Presentation (Policy)

6 Months Ended

Jun. 30, 2019

Basis of Presentation [Abstract]

Basis of Presentation

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., 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 consolidated financial position and results of operations of the Company.  The operating results for the three month and six month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any other future interim period.

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Revenue Recognition (Policy)

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

Revenue Recognition

Management has determined that the primary sources of revenue emanating from interest income on loans and investments along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans, commitment fees, and fees from financial guarantees are not within the scope of ASC 606.  As a result, no changes were made during the period related to those sources of revenue.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30:

		Three months ended
		June 30,
(dollars in thousands)
Noninterest Income		2019		2018
In-scope of Topic 606:
Service charges on deposit accounts	$	66	$	64
ATM fees		91		95
Overdraft fees		343		381
Safe deposit box rental		23		23
Loan related service fees		94		155
Debit card fees		371		338
Fiduciary activities		145		174
Commissions on mutual funds and annuities		26		60
Other income		120		137
Noninterest Income (in-scope of Topic 606)		1,279		1,427
Out-of-scope of Topic 606:
Net realized gains on sales of securities		64		58
Loan servicing fees		24		10
Gains on sales of loans		67		-
Earnings on and proceeds from bank-owned life insurance		207		279
Noninterest Income (out-of-scope of Topic 606)		362		347
Total Noninterest Income	$	1,641	$	1,774

		Six months ended
		June 30,
(dollars in thousands)
Noninterest Income		2019		2018
In-scope of Topic 606:
Service charges on deposit accounts	$	133	$	129
ATM fees		181		191
Overdraft fees		694		765
Safe deposit box rental		49		53
Loan related service fees		223		235
Debit card fees		697		633
Fiduciary activities		287		311
Commissions on mutual funds and annuities		81		103
Other income		235		276
Noninterest Income (in-scope of Topic 606)		2,580		2,696
Out-of-scope of Topic 606:
Net realized gains on sales of securities		64		200
Loan servicing fees		39		20
Gains on sales of loans		110		-
Earnings on and proceeds from bank-owned life insurance		408		552
Noninterest Income (out-of-scope of Topic 606)		621		772
Total Noninterest Income	$	3,201	$	3,468

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Earnings Per Share (Policy)

6 Months Ended

Jun. 30, 2019

Earning Per Share [Abstract]

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 restricted stock, and are determined using the treasury stock method.

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Loans Receivable and Allowance for Loan Losses (Policy)

6 Months Ended

Jun. 30, 2019

Loans Receivable and Allowance for Loan Losses [Abstract]

Loans Receivable

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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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

Noninterest Income

		Three months ended
		June 30,
(dollars in thousands)
Noninterest Income		2019		2018
In-scope of Topic 606:
Service charges on deposit accounts	$	66	$	64
ATM fees		91		95
Overdraft fees		343		381
Safe deposit box rental		23		23
Loan related service fees		94		155
Debit card fees		371		338
Fiduciary activities		145		174
Commissions on mutual funds and annuities		26		60
Other income		120		137
Noninterest Income (in-scope of Topic 606)		1,279		1,427
Out-of-scope of Topic 606:
Net realized gains on sales of securities		64		58
Loan servicing fees		24		10
Gains on sales of loans		67		-
Earnings on and proceeds from bank-owned life insurance		207		279
Noninterest Income (out-of-scope of Topic 606)		362		347
Total Noninterest Income	$	1,641	$	1,774

		Six months ended
		June 30,
(dollars in thousands)
Noninterest Income		2019		2018
In-scope of Topic 606:
Service charges on deposit accounts	$	133	$	129
ATM fees		181		191
Overdraft fees		694		765
Safe deposit box rental		49		53
Loan related service fees		223		235
Debit card fees		697		633
Fiduciary activities		287		311
Commissions on mutual funds and annuities		81		103
Other income		235		276
Noninterest Income (in-scope of Topic 606)		2,580		2,696
Out-of-scope of Topic 606:
Net realized gains on sales of securities		64		200
Loan servicing fees		39		20
Gains on sales of loans		110		-
Earnings on and proceeds from bank-owned life insurance		408		552
Noninterest Income (out-of-scope of Topic 606)		621		772
Total Noninterest Income	$	3,201	$	3,468

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earning Per Share [Abstract]

Schedule Of Weighted Average Shares Outstanding Used In The Computations Of Basic And Diluted Earnings Per Share

(in thousands)	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2019	2018	2019	2018
Weighted average shares outstanding	6,290	6,256	6,292	6,256
Less: Unvested restricted shares	(35)	(31)	(35)	(31)
Basic EPS weighted average shares outstanding	6,255	6,225	6,257	6,225
Basic EPS weighted average shares outstanding	6,255	6,225	6,257	6,225
Add:  Dilutive effect of stock options and restricted shares	60	50	62	51
Diluted EPS weighted average shares outstanding	6,315	6,275	6,319	6,276

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Stock Based Compensation [Abstract]

Summary of Stock Option Activity

		Weighted
		Average Exercise		Weighted Average		Aggregate
		Price		Remaining		Intrinsic Value
	Options	Per Share		Contractual Term		($000)
Outstanding at January 1, 2019	208,700	$	22.54	5.9	Yrs.	$	2,183
Granted	-		-	-			-
Exercised	(9,300)		18.31	4.1	Yrs.		119
Forfeited	-		-	-			-
Outstanding at June 30, 2019	199,400	$	22.74	5.5	Yrs.	$	2,407
Exercisable at June 30, 2019	170,500	$	21.11	4.8	Yrs.	$	2,335

Summary of Restricted Stock Activity

	2019			2018
			Weighted-Average			Weighted-Average
	Number of		Grant Date	Number of		Grant Date
	Restricted Stock		Fair Value	Restricted Stock		Fair Value
Non-vested, January 1,	34,615	$	27.82	30,415	$	24.46
Granted	-		-	-		-
Vested	-		-	-		-
Forfeited	-		-	-		-
Non-vested, June 30,	34,615	$	27.82	30,415	$	24.46

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2019

Accumulated Other Comprehensive Income (Loss) [Abstract]

Summary of Changes In Accumulated Other Comprehensive Income (Loss)

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of March 31, 2019	$	(2,077)
Other comprehensive income before reclassification		2,568
Amount reclassified from accumulated other comprehensive loss		(51)
Total other comprehensive income		2,517
Balance as of June 30, 2019	$	440
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  March 31, 2018	$	(6,327)
Other comprehensive loss before reclassification		(663)
Amount reclassified from accumulated other comprehensive loss		(46)
Total other comprehensive loss		(709)
Balance as of June 30, 2018	$	(7,036)

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  December 31, 2018	$	(5,020)
Other comprehensive income before reclassification		5,511
Amount reclassified from accumulated other comprehensive loss		(51)
Total other comprehensive income		5,460
Balance as of June 30, 2019	$	440
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of  December 31, 2017	$	(2,667)
Other comprehensive loss before reclassification		(4,211)
Amount reclassified from accumulated other comprehensive loss		(158)
Total other comprehensive loss		(4,369)
Balance as of June 30, 2018	$	(7,036)

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

Significant Amounts Reclassified Out of Each Component of Accumulated Other Comprehensive Income (Loss)

	Amount Reclassified
	From Accumulated				Affected Line Item in
	Other				Consolidated
	Comprehensive				Statements
Details about other comprehensive income	Income (Loss) (a)				of Income
		Three months ended
		June 30,
		2019		2018
Unrealized gains on available for sale securities	$	64	$	58	Net realized gains on sales of securities
		(13)		(12)	Income tax expense
	$	51	$	46
		Six months ended
		June 30,
		2019		2018
Unrealized gains on available for sale securities	$	64	$	200	Net realized gains on sales of securities
		(13)		(42)	Income tax expense
	$	51	$	158

(a)  Amounts in parentheses indicate debits to net income

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Off-Balance Sheet Financial Instruments and Gurantees (Tables)

6 Months Ended

Jun. 30, 2019

Off-Balance Sheet Financial Instruments and Gurantees [Abstract]

Schedule of Fair Value, Off-balance Sheet Risks

(in thousands)	June 30,
	2019		2018
Commitments to grant loans	$	49,936	$	43,280
Unfunded commitments under lines of credit		71,859		72,359
Standby letters of credit		4,305		5,733
	$	126,100	$	121,372

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Securities (Tables)

6 Months Ended

Jun. 30, 2019

Securities [Abstract]

Schedule of Amortized Cost Gross Unrealized Gains and Losses, and Fair Values of Securities

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
States and political subdivisions	$	92,821	$	1,186	$	(72)	$	93,935
Corporate obligations		8,812		17		(24)		8,805
Mortgage-backed securities-
government sponsored entities		136,572		292		(1,521)		135,343
Total debt securities	$	238,205	$	1,495	$	(1,617)	$	238,083

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for Sale:
States and political subdivisions	$	99,218	$	385	$	(1,990)	$	97,613
Corporate obligations		8,896		-		(256)		8,640
Mortgage-backed securities-government
sponsored entities		142,197		25		(5,198)		137,024
Total debt securities	$	250,311	$	410	$	(7,444)	$	243,277

Schedule of Investments' Gross Unrealized Losses and Fair Value Aggregated by Security Type and Length of Time that Individual Securities have been in a Continous Unrealized Loss Position

	June 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
States and political subdivisions	$	402	$	-	$	21,268	$	(72)	$	21,670	$	(72)
Corporate obligations		-		-		5,194		(24)		5,194		(24)
Mortgage-backed securities-government sponsored entities		3,497		(11)		95,971		(1,510)		99,468		(1,521)
	$	3,899	$	(11)	$	122,433	$	(1,606)	$	126,332	$	(1,617)

	December 31, 2018
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
States and political subdivisions	$	19,140	$	(390)	$	56,740	$	(1,600)	$	75,880	$	(1,990)
Corporate obligations		2,045		(21)		6,595		(235)		8,640		(256)
Mortgage-backed securities-government sponsored entities		8,444		(22)		122,950		(5,176)		131,394		(5,198)
	$	29,629	$	(433)	$	186,285	$	(7,011)	$	215,914	$	(7,444)

Schedule of Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

	Available for Sale
	Amortized Cost		Fair Value
		(In Thousands)
Due in one year or less	$	2,957	$	2,960
Due after one year through five years		21,142		21,144
Due after five years through ten years		44,101		44,298
Due after ten years		33,433		34,338
		101,633		102,740
Mortgage-backed securities-government sponsored entities		136,572		135,343
	$	238,205	$	238,083

Gross Realized Gains and Losses on Sales of Securities Available-for-Sale

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2019		2018		2019		2018
Gross realized gains	$	64	$	58	$	64	$	200
Gross realized losses		-		-		-		-
Net realized gain	$	64	$	58	$	64	$	200
Proceeds from sales of securities	$	3,299	$	3,822	$	3,626	$	14,583

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Loans Receivable and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2019

Loans Receivable and Allowance for Loan Losses [Abstract]

Composition of the Loan Portfolio

	June 30, 2019				December 31, 2018
Real Estate Loans:
Residential	$	230,405	26.0	%	$	235,523	27.7	%
Commercial		381,915	43.0			374,790	44.1
Construction		19,784	2.2			17,445	2.0
Commercial, financial and agricultural		120,732	13.6			110,542	13.0
Consumer loans to individuals		134,968	15.2			112,002	13.2
Total loans		887,804	100.0	%		850,302	100.0	%
Deferred fees, net		(131)				(120)
Total loans receivable		887,673				850,182
Allowance for loan losses		(8,228)				(8,452)
Net loans receivable	$	879,445			$	841,730

Information Regarding Loans Acquired and Accounted for in Accordance With ASC 310-30

	June 30, 2019		December 31, 2018
Outstanding Balance	$	965	$	1,055
Carrying Amount	$	822	$	886

Summary of Amount of Loans in Each Category that were Individually and Collectively Evaluated for Impairment

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
June 30, 2019	(In thousands)
Individually evaluated for impairment	$	-	$	752	$	-	$	-	$	-	$	752
Loans acquired with deteriorated credit quality		583		239		-		-		-		822
Collectively evaluated for impairment		229,822		380,924		19,784		120,732		134,968		886,230
Total Loans	$	230,405	$	381,915	$	19,784	$	120,732	$	134,968	$	887,804

	Real Estate Loans
							Commercial		Consumer
	Residential		Commercial		Construction		Loans		Loans		Total
	(In thousands)
December 31, 2018
Individually evaluated for impairment	$	-	$	1,319	$	-	$	-	$	-	$	1,319
Loans acquired with deteriorated credit quality		630		256		-		-		-		886
Collectively evaluated for impairment		234,893		373,215		17,445		110,542		112,002		848,097
Total Loans	$	235,523	$	374,790	$	17,445	$	110,542	$	112,002	$	850,302

Impaired Loans and Related Interest Income by Loan Portfolio Class

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable. 

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
June 30, 2019				(in thousands)
With no related allowance recorded:
Real Estate Loans:
Commercial	$	752	$	1,338	$	-
Subtotal		752		1,338		-
Total:
Real Estate Loans:
Commercial		752		1,338		-
Total Impaired Loans	$	752	$	1,338	$	-

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2018				(in thousands)
With no related allowance recorded:
Real Estate Loans:
Commercial	$	1,319	$	1,747	$	-
Subtotal		1,319		1,747		-
Total:
Real Estate Loans:
Commercial		1,319		1,747		-
Total Impaired Loans	$	1,319	$	1,747	$	-

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the three-month periods ended June 30, 2019 and 2018, respectively (in thousands):

	Average Recorded				Interest Income
	Investment				Recognized
	2019		2018		2019		2018
Real Estate Loans:
Residential	$	-	$	23	$	-	$	-
Commercial		601		1,202		24		16
Total	$	601	$	1,225	$	24	$	16

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the six-month periods ended June 30, 2019 and 2018, respectively (in thousands):

	Average Recorded				Interest Income
	Investment				Recognized
	2019		2018		2019		2018
Real Estate Loans:
Residential	$	-	$	23	$	-	$	-
Commercial		840		1,194		24		30
Total	$	840	$	1,217	$	24	$	30

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
June 30, 2019
Commercial real estate loans	$	365,739	$	12,629	$	3,547	$	-	$	381,915
Commercial loans		120,445		59		228		-		120,732
Total	$	486,184	$	12,688	$	3,775	$	-	$	502,647

			Special					Doubtful
	Pass		Mention		Substandard		or Loss		Total
December 31, 2018
Commercial real estate loans	$	360,838	$	7,918	$	6,034	$	-	$	374,790
Commercial loans		109,966		82		494		-		110,542
Total	$	470,804	$	8,000	$	6,528	$	-	$	485,332

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 June 30, 2019 and December 31, 2018 (in thousands):

	Performing		Nonperforming		Total
June 30, 2019
Residential real estate loans	$	229,831	$	574	$	230,405
Construction		19,784		-		19,784
Consumer loans		134,968		-		134,968
Total	$	384,583	$	574	$	385,157

	Performing		Nonperforming		Total
December 31, 2018
Residential real estate loans	$	234,725	$	798	$	235,523
Construction		17,445		-		17,445
Consumer loans		112,002		-		112,002
Total	$	364,172	$	798	$	364,970

Loan Portfolio Summarized by the Past Due Status

	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
June 30, 2019
Real Estate loans
Residential	$	229,382	$	377	$	72	$	-	$	574	$	1,023	$	230,405
Commercial		380,828		271		64		-		752		1,087		381,915
Construction		19,784		-		-		-		-		-		19,784
Commercial  loans		120,646		57		-		-		29		86		120,732
Consumer  loans		134,811		157		-		-		-		157		134,968
Total	$	885,451	$	862	$	136	$	-	$	1,355	$	2,353	$	887,804

	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, 2018
Real Estate loans
Residential	$	234,201	$	373	$	151	$	-	$	798	$	1,322	$	235,523
Commercial		372,617		1,043		788		-		342		2,173		374,790
Construction		17,445		-		-		-		-		-		17,445
Commercial  loans		110,191		320		31		-		-		351		110,542
Consumer  loans		111,796		171		35		-		-		206		112,002
Total	$	846,250	$	1,907	$	1,005	$	-	$	1,140	$	4,052	$	850,302

Allowance for Loan Losses and Recorded Investment in Financing Receivables

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2018	$	1,328	$	5,455	$	93	$	712	$	864	$	8,452
Charge Offs		(75)		(615)		-		(234)		(135)		(1,059)
Recoveries		15		14		-		21		35		85
Provision for loan losses		179		(160)		19		397		315		750
Ending balance, June 30, 2019	$	1,447	$	4,694	$	112	$	896	$	1,079	$	8,228
Ending balance individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-
Ending balance collectively evaluated for impairment	$	1,447	$	4,694	$	112	$	896	$	1,079	$	8,228
(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, March 31, 2019	$	1,455	$	4,947	$	108	$	811	$	1,028	$	8,349
Charge Offs		(10)		(146)		-		(233)		(72)		(461)
Recoveries		4		4		-		11		21		40
Provision for loan losses		(2)		(111)		4		307		102		300
Ending balance, June 30, 2019	$	1,447	$	4,694	$	112	$	896	$	1,079	$	8,228

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Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value of Assets and Liabilities [Abstract]

Fair Value, Assets Measured on Recurring Basis

	Fair Value Measurement Using
	Reporting Date
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
June 30, 2019
Available for Sale:
States and political subdivisions	$	93,935	$	-	$	93,935	$	-
Corporate obligations		8,805		-		8,805		-
Mortgage-backed securities-government
sponsored entities		135,343		-		135,343		-
Total	$	238,083	$	-	$	238,083	$	-
Description	Total		Level 1		Level 2		Level 3
	(In thousands)
December 31, 2018
Available for Sale:
States and political subdivisions	$	97,613	$	-	$	97,613	$	-
Corporate obligations		8,640		-		8,640		-
Mortgage-backed securities-government
sponsored entities		137,024		-		137,024		-
Total	$	243,277	$	-	$	243,277	$	-

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis

			Fair Value Measurement Using Reporting Date
(In thousands)
Description	Total		Level 1		Level 2		Level 3
June 30, 2019
Impaired Loans	$	752	$	-	$	-	$	752
Foreclosed Real Estate Owned		1,677		-		-		1,677
December 31, 2018
Impaired Loans	$	1,319	$	-	$	-	$	1,319
Foreclosed Real Estate Owned		1,115		-		-		1,115

Additional Qualitative Information about Level 3 Assets

		Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
June 30, 2019
Impaired loans	$	647	Appraisal of collateral(1)	Appraisal adjustments(2)	10.00-57.58%  (14.53%)
Impaired loans	$	105	Present value of future cash flows	Loan discount rate	4.00%  (4.00%)
Foreclosed real estate owned	$	1,677	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00-10.00%  (8.08%)

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2018
Impaired loans	$	232	Appraisal of collateral(1)	Appraisal adjustments(2)	10.00-81.54%  (56.06%)
Impaired loans	$	1,087	Present value of future cash flows	Loan discount rate	4.00-6.00%  (5.80%)
Foreclosed real estate owned	$	1,115	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00-85.71%  (7.80%)

(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

	Fair Value Measurements at June 30, 2019
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	18,472	$	18,472	$	18,472	$	-	$	-
Loans receivable, net		879,445		893,855		-		-		893,855
Mortgage servicing rights		183		223		-		-		223
Regulatory stock (1)		3,155		3,155		3,155		-		-
Bank owned life insurance (1)		38,340		38,340		38,340		-		-
Accrued interest receivable (1)		3,979		3,979		3,979		-		-
Financial liabilities:
Deposits		981,224		984,342		627,151		-		357,191
Short-term borrowings (1)		48,094		48,094		48,094		-		-
Other borrowings		44,024		44,305		-		-		44,305
Accrued interest payable (1)		3,008		3,008		3,008		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2018
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	18,348	$	18,348	$	18,348	$	-	$	-
Loans receivable, net		841,730		840,134		-		-		840,134
Mortgage servicing rights		178		220		-		-		220
Regulatory stock (1)		3,926		3,926		3,926		-		-
Bank owned life insurance (1)		37,932		37,932		37,932		-		-
Accrued interest receivable (1)		3,776		3,776		3,776		-		-
Financial liabilities:
Deposits		946,780		945,773		601,604		-		344,169
Short-term borrowings (1)		53,046		53,046		53,046		-		-
Other borrowings		52,284		52,043		-		-		52,043
Accrued interest payable (1)		1,806		1,806		1,806		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and outstanding letters of credit		-		-		-		-		-

(1) This financial instrument is carried at cost, which approximates the fair value of the instrument.

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Revenue Recognition (Noninterest Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Noninterest Income (in scope of Topic 606)	$ 1,279	$ 1,427	$ 2,580	$ 2,696
Net realized gains on sales of securities	64	58	64	200
Loan servicing fees	24	10	39	20
Gain on sales of loans	67		110
Earnings on and proceeds from bank-owned life insurance	207	279	408	552
Noninterest Income (out-of-scope of Topic 606)	362	347	621	772
Total Other Income	1,641	1,774	3,201	3,468
Service Charges On Deposit Accounts [Member]
Noninterest Income (in scope of Topic 606)	66	64	133	129
ATM Fees [Member]
Noninterest Income (in scope of Topic 606)	91	95	181	191
Overdraft Fees [Member]
Noninterest Income (in scope of Topic 606)	343	381	694	765
Safe Deposit Box Rental [Member]
Noninterest Income (in scope of Topic 606)	23	23	49	53
Loan Related Service Fees [Member]
Noninterest Income (in scope of Topic 606)	94	155	223	235
Debit Card [Member]
Noninterest Income (in scope of Topic 606)	371	338	697	633
Fiduciary Activities [Member]
Noninterest Income (in scope of Topic 606)	145	174	287	311
Commissions On Mutual Funds And Annuities [Member]
Noninterest Income (in scope of Topic 606)	26	60	81	103
Other Income [Member]
Noninterest Income (in scope of Topic 606)	$ 120	$ 137	$ 235	$ 276

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Earnings Per Share (Narrative) (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Earning Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	0	0	0
Share price	$ 34.81	$ 36.02	$ 34.81	$ 36.02	$ 33.00

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Earnings Per Share (Schedule of Weighted Average Shares Outstanding Used in the Computations of Basic and Diluted Earnings Per Share) (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earning Per Share [Abstract]
Weighted average shares outstanding	6,290	6,256	6,292	6,256
Less: Unvested restricted shares	(35)	(31)	(35)	(31)
Basic EPS weighted average shares outstanding	6,255	6,225	6,257	6,225
Add: Dilutive effect of stock options and restricted shares	60	50	62	51
Diluted EPS weighted average shares outstanding	6,315	6,275	6,319	6,276

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Stock-Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Granted	0
Compensation expense related to stock options	$ 104	$ 118
Share price	$ 34.81	$ 36.02	$ 33.00
Non-vested stock outstanding	34,615	30,415	34,615	30,415
Future compensation expense of non-vested restricted stock outstanding	$ 818
Compensation expense related to restricted stock	145	$ 102
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	145	$ 102
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	$ 104

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Stock-Based Compensation (Summary of Stock Option Activity) (Details) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) $ / shares shares
Stock Based Compensation [Abstract]
Options, beginning of year | shares	208,700
Options, Granted | shares	0
Options, Exercised | shares	(9,300)
Options, Forfeited | shares	0
Options, end of year | shares	199,400	208,700
Options, Exercisable, end of period | shares	170,500
Weighted Average Exercise Price Per Share, Outstanding, beginning of period | $ / shares	$ 22.54
Weighted Average Exercise Price Per Share, Granted | $ / shares
Weighted Average Exercise Price Per Share, Exercised | $ / shares	18.31
Weighted Average Exercise Price Per Share, Forfeited | $ / shares	0.00
Weighted Average Exercise Price Per Share, Outstanding, end of period | $ / shares	22.74	$ 22.54
Weighted Average Exercise Price Per Share, Exercisable, end of period | $ / shares	$ 21.11
Weighted Average Remaining Contractual Term, Outstanding	5 years 6 months	5 years 10 months 24 days
Weighted Average Remaining Contractual Term, Exercised During Period	4 years 1 month 6 days
Weighted Average Remaining Contractual Term, Exercisable at End of Period	4 years 9 months 18 days
Aggregate Intrinsic Value, Outstanding, beginning of period | $	$ 2,183
Aggregate Intrinsic Value, Granted in Period | $	0
Aggregate Intrinsic Value, Exercised in Period | $	119
Aggregate Intrinsic Value, Forfeited in Period | $	0
Aggregate Intrinsic Value, Outstanding, end of period | $	2,407	$ 2,183
Aggregate Intrinsic Value, Exercisable at end of period | $	$ 2,335

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Stock-Based Compensation (Summary of Restricted Stock Activity) (Details) - $ / shares	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Stock Based Compensation [Abstract]
Restricted stock Non-vested, beginning balance	34,615	30,415
Restricted stock, granted	0	0
Restricted stock, vested	0	0
Restricted stock, forfeited	0	0
Restricted stock Non-vested, ending balance	34,615	30,415
Restricted stock Non-vested, weighted-average grant date fair value, beginning balance	$ 27.82	$ 24.46
Restricted stock, granted, weighted-average grant date fair value	0.00	0.00
Restricted stock, vested, weighted-average grant date fair value	0.00	0.00
Restricted stock, forfeited, weighted-average grant date fair value	0.00	0.00
Restricted stock Non-vested, weighted-average grant date fair value, ending balance	$ 27.82	$ 24.46

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Accumulated Other Comprehensive Income (Loss) (Summary Of Changes In Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance			$ (5,020)
Other comprehensive income (loss)	$ 2,517	$ (709)	5,460	$ (4,369)
Ending balance	440		440
Unrealized gains (losses) on available for sale securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(2,077)	(6,327)	(5,020)	(2,667)
Other comprehensive income (loss) before reclassification	2,568	(663)	5,511	(4,211)
Other comprehensive income (loss)	2,517	(709)	5,460	(4,369)
Ending balance	440	(7,036)	440	(7,036)
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss)	2,517	(709)	5,460	(4,369)
Amount Reclassified From Accumulated Other Comprehensive Income (Loss) [Member] | Unrealized gains (losses) on available for sale securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Amount reclassified from accumulated other comprehensive loss	$ (51)	$ (46)	$ (51)	$ (158)

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Accumulated Other Comprehensive Income (Loss) (Significant Amounts Reclassified Out Of Each Component Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of securities	$ 64	$ 58	$ 64	$ 200
Income tax expense	(646)	(698)	(1,188)	(1,273)
NET INCOME	3,522	3,513	6,712	6,642
Amount Reclassified From Accumulated Other Comprehensive Income (Loss) [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	(13)	(12)	(13)	(42)
NET INCOME	51	46	51	158
Amount Reclassified From Accumulated Other Comprehensive Income (Loss) [Member] | Unrealized gains (losses) on available for sale securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of securities	$ 64	$ 58	$ 64	$ 200

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Off-Balance Sheet Financial Instruments and Gurantees (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Loss Contingencies [Line Items]
Financial instrument commitments	$ 126,100	$ 121,372
Commitments to grant loans [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	49,936	43,280
Unfunded commitments under lines of credit [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	71,859	72,359
Standby letters of credit [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	$ 4,305	$ 5,733

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Securities (Narrative) (Details)	6 Months Ended
	Jun. 30, 2019 USD ($) security
Securities [Abstract]
Debt securities in unrealized loss position in the less than twelve months category	3
Debt securities in unrealized loss position in the twelve months or more category	114
Impairment of investments | $	$ 0

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Securities (Schedule of Amortized Cost Gross Unrealized Gains and Losses, and Fair Values of Securities) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018
Schedule of Investments [Line Items]
Available for Sale, Gross Unrealized Gains	$ 0	$ 0
Available for Sale, Gross Unrealized Losses	0	0
Available for Sale, Fair Value	238,083	243,277
Pledged Financial Instruments, Not Separately Reported, Securities	196,986		$ 219,244
Total Debt Securities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	238,205	250,311
Available for Sale, Gross Unrealized Gains	1,495	410
Available for Sale, Gross Unrealized Losses	(1,617)	(7,444)
Available for Sale, Fair Value	238,083	243,277
States and Political Subdivisions [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	92,821	99,218
Available for Sale, Gross Unrealized Gains	1,186	385
Available for Sale, Gross Unrealized Losses	(72)	(1,990)
Available for Sale, Fair Value	93,935	97,613
Corporate Obligations [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	8,812	8,896
Available for Sale, Gross Unrealized Gains	17	0
Available for Sale, Gross Unrealized Losses	(24)	(256)
Available for Sale, Fair Value	8,805	8,640
Mortgage-backed Securities-Government Sponsored Entities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost	136,572	142,197
Available for Sale, Gross Unrealized Gains	292	25
Available for Sale, Gross Unrealized Losses	(1,521)	(5,198)
Available for Sale, Fair Value	$ 135,343	$ 137,024

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Securities (Schedule of Investments' Gross Unrealized Losses and Fair Value Aggregated by Security Type and Length of Time that Individual Securities have been in a Continuous Unrealized Loss Position) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	$ 3,899	$ 29,629
Less than 12 Months, Unrealized Losses	(11)	(433)
12 Months or More, Fair Value	122,433	186,285
12 Months or More, Unrealized Losses	(1,606)	(7,011)
Total, Fair Value	126,332	215,914
Total, Unrealized Losses	(1,617)	(7,444)
States and Political Subdivisions [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	402	19,140
Less than 12 Months, Unrealized Losses		(390)
12 Months or More, Fair Value	21,268	56,740
12 Months or More, Unrealized Losses	(72)	(1,600)
Total, Fair Value	21,670	75,880
Total, Unrealized Losses	(72)	(1,990)
Corporate Obligations [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	0	2,045
Less than 12 Months, Unrealized Losses	0	(21)
12 Months or More, Fair Value	5,194	6,595
12 Months or More, Unrealized Losses	(24)	(235)
Total, Fair Value	5,194	8,640
Total, Unrealized Losses	(24)	(256)
Mortgage-backed Securities-Government Sponsored Entities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	3,497	8,444
Less than 12 Months, Unrealized Losses	(11)	(22)
12 Months or More, Fair Value	95,971	122,950
12 Months or More, Unrealized Losses	(1,510)	(5,176)
Total, Fair Value	99,468	131,394
Total, Unrealized Losses	$ (1,521)	$ (5,198)

XML

Securities (Schedule of Amortized Cost and Fair Value Of Debt Securities by Contractual Maturity) (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Securities [Abstract]
Available for Sale, Amortized Cost, Due in one year or less	$ 2,957
Available for Sale, Amortized Cost, Due after one year through five years	21,142
Available for Sale, Amortized Cost, Due after five years through ten years	44,101
Available for Sale, Amortized Cost, Due after ten years	33,433
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Amortized Cost Basis, Total	101,633
Available for Sale, Amortized Cost, Mortgage-backed securities- government sponsored agencies	136,572
Available for Sale, Amortized Cost, Total	238,205
Available for Sale, Fair Value, Due in one year or less	2,960
Available for Sale, Fair Value, Due after one year through five years	21,144
Available for Sale, Fair Value, Due after five years through ten years	44,298
Available for Sale, Fair Value, Due after ten years	34,338
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Total	102,740
Available for Sale, Fair Value, Mortgage-backed securities- government sponsored agencies	135,343
Available for Sale, Fair Value, Total	$ 238,083

XML

Securities (Gross Realized Gains and Losses on Sales of Securities Available-for-Sale) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Securities [Abstract]
Gross realized gains	$ 64	$ 58	$ 64	$ 200
Gross realized losses	0	0	0	0
Net realized gain	64	58	64	200
Proceeds from sale of securities	$ 3,299	$ 3,822	$ 3,626	$ 14,583

XML

Loans Receivable and Allowance for Loan Losses (Narrative) (Details)	6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) property loan	Jun. 30, 2018 USD ($) loan	Dec. 31, 2018 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Acquired Loans with Specific Evidence of Deterioration in Credit Quality, Outstanding Balance	$ 965,000		$ 1,055,000
Real Estate Acquired Through Foreclosure	$ 1,677,000		1,115,000
Number Of Properties Acquired Through Foreclosure | property	1
Loans and Leases Receivable, Gross	$ 887,804,000		$ 850,302,000
Historical loss factor	0.29%		0.42%
Proceeds from Sale of Foreclosed Assets	$ 205,000	$ 467,000
Multiple Properties [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real Estate Acquired Through Foreclosure	$ 46,000
Number Of Properties Disposed By Sale | property	2
Commercial Rentals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 75,900,000
Commercial Rentals [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration Risk, Percentage	8.60%
Hospitality Lodging Industry [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 67,500,000
Hospitality Lodging Industry [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration Risk, Percentage	7.60%
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number Of Properties Under Foreclosure Proceedings | property	3
Mortgage Loans in Process of Foreclosure, Amount	$ 306,000
Loans and Leases Receivable, Gross	230,405,000		$ 235,523,000
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	381,915,000		374,790,000
Allowance for Loan and Lease Losses, Real Estate			761,000
Troubled Debt Restructured Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, Related Allowance	$ 0		0
New Loans Identified as Troubled Debt Restructurings, Number of Loans | loan	0	0
Real Estate Acquired Through Foreclosure	$ 608,000
Financing Receivable, Troubled Debt Restructuring	104,000,000,000		$ 1,100,000
Proceeds from Sale of Foreclosed Assets	451,000
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	1,397,000
Assets, Fair Value Adjustment	499,000
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Annual Loan Review threshold, amount	$ 1,500,000

XML

Loans Receivable and Allowance for Loan Losses (Composition of the Loan Portfolio) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 887,804		$ 850,302
Deferred fees, net	(131)		(120)
Total loans receivable	887,673		850,182
Allowance for loan losses	(8,228)	$ (8,349)	(8,452)	$ (8,326)	$ (8,099)	$ (7,634)
Net loans receivable	$ 879,445		$ 841,730
Percent of Loans	100.00%		100.00%
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 230,405		$ 235,523
Allowance for loan losses	$ (1,447)	(1,455)	$ (1,328)	(1,455)	(1,525)	(1,272)
Percent of Loans	26.00%		27.70%
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 381,915		$ 374,790
Allowance for loan losses	$ (4,694)	(4,947)	$ (5,455)	(5,247)	(5,129)	(5,265)
Percent of Loans	43.00%		44.10%
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 19,784		$ 17,445
Allowance for loan losses	$ (112)	(108)	$ (93)	(128)	(120)	(90)
Percent of Loans	2.20%		2.00%
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 120,732		$ 110,542
Allowance for loan losses	$ (896)	(811)	$ (712)	(690)	(638)	(463)
Percent of Loans	13.60%		13.00%
Consumer Loans To Individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 134,968		$ 112,002
Allowance for loan losses	$ (1,079)	$ (1,028)	$ (864)	$ (806)	$ (687)	$ (544)
Percent of Loans	15.20%		13.20%

XML

Loans Receivable and Allowance for Loan Losses (Information Regarding Loans Acquired and Accounted for in Accordance with ASC 310-30) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Loans Receivable and Allowance for Loan Losses [Abstract]
Outstanding Balance	$ 965	$ 1,055
Carrying Amount	$ 822	$ 886

XML

Loans Receivable and Allowance for Loan Losses (Summary of Amount of Loans in Each Category that were Individually and Collectively Evaluated for Impairment) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 752	$ 1,319
Loans acquired with deteriorated credit quality	822	886
Collectively evaluated for impairment	886,230	848,097
Total Loans	887,804	850,302
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	0	0
Loans acquired with deteriorated credit quality	583	630
Collectively evaluated for impairment	229,822	234,893
Total Loans	230,405	235,523
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	752	1,319
Loans acquired with deteriorated credit quality	239	256
Collectively evaluated for impairment	380,924	373,215
Total Loans	381,915	374,790
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	19,784	17,445
Total Loans	19,784	17,445
Commercial [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	120,732	110,542
Total Loans	120,732	110,542
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	134,968	112,002
Total Loans	$ 134,968	$ 112,002

XML

Loans Receivable and Allowance for Loan Losses (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	$ 601	$ 1,225	$ 840	$ 1,217
Interest Income Recognized, Total	24	16	24	30
Impaired Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	752		752		$ 1,319
Impaired Financing Receivable, with Related Allowance, Recorded Investment	752		752		1,319
Unpaid Principal Balance, With no related allowance recorded	1,338		1,338		1,747
Unpaid Principal Balance, With an allowance recorded	1,338		1,338		1,747
Associated Allowance	0		0		0
Residential Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	0	23	0	23
Interest Income Recognized, Total	0	0	0	0
Commercial Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	601	1,202	840	1,194
Interest Income Recognized, Total	24	$ 16	24	$ 30
Commercial Real Estate Loans [Member] | Impaired Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	752		752		1,319
Impaired Financing Receivable, with Related Allowance, Recorded Investment	752		752		1,319
Unpaid Principal Balance, With no related allowance recorded	1,338		1,338		1,747
Unpaid Principal Balance, With an allowance recorded	1,338		1,338		1,747
Associated Allowance	$ 0		$ 0		$ 0

XML

Loans Receivable and Allowance for Loan Losses (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	$ 385,157	$ 364,970
Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	502,647	485,332
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	486,184	470,804
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	12,688	8,000
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	3,775	6,528
Doubtful Or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	0	0
Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	384,583	364,172
Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	574	798
Commercial Real Estate Loans [Member] | Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	381,915	374,790
Commercial Real Estate Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	365,739	360,838
Commercial Real Estate Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	12,629	7,918
Commercial Real Estate Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	3,547	6,034
Commercial Real Estate Loans [Member] | Doubtful Or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	0	0
Commercial [Member] | Total Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	120,732	110,542
Commercial [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	120,445	109,966
Commercial [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	59	82
Commercial [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	228	494
Commercial [Member] | Doubtful Or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	0	0
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	230,405	235,523
Residential Real Estate Loans [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	229,831	234,725
Residential Real Estate Loans [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	574	798
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	19,784	17,445
Construction Real Estate Loans [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	19,784	17,445
Construction Real Estate Loans [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	0	0
Consumer Loans To Individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	134,968	112,002
Consumer Loans To Individuals [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	134,968	112,002
Consumer Loans To Individuals [Member] | Nonperforming [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	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Past Due [Line Items]
Current	$ 885,451	$ 846,250
Non-Accrual	1,355	1,140
Total Past Due and Non-Accrual	2,353	4,052
Total Loans	887,804	850,302
Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	862	1,907
Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	136	1,005
Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	0
Residential Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Current	229,382	234,201
Non-Accrual	574	798
Total Past Due and Non-Accrual	1,023	1,322
Total Loans	230,405	235,523
Residential Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	377	373
Residential Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	72	151
Residential Real Estate Loans [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	0
Commercial Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Current	380,828	372,617
Non-Accrual	752	342
Total Past Due and Non-Accrual	1,087	2,173
Total Loans	381,915	374,790
Commercial Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	271	1,043
Commercial Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	64	788
Commercial Real Estate Loans [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	0
Construction Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Current	19,784	17,445
Non-Accrual	0	0
Total Past Due and Non-Accrual	0	0
Total Loans	19,784	17,445
Construction Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	0
Construction Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	0
Construction Real Estate Loans [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	0
Commercial [Member]
Financing Receivable, Past Due [Line Items]
Current	120,646	110,191
Non-Accrual	29	0
Total Past Due and Non-Accrual	86	351
Total Loans	120,732	110,542
Commercial [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	57	320
Commercial [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	31
Commercial [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	0
Consumer Loans To Individuals [Member]
Financing Receivable, Past Due [Line Items]
Current	134,811	111,796
Non-Accrual	0	0
Total Past Due and Non-Accrual	157	206
Total Loans	134,968	112,002
Consumer Loans To Individuals [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	157	171
Consumer Loans To Individuals [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Past Due	0	35
Consumer Loans To Individuals [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, 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		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	$ 8,349	$ 8,099	$ 8,452	$ 7,634
Charge Offs	(461)	(232)	(1,059)	(331)
Recoveries	40	34	85	48
Provision for loan losses	300	425	750	975
Ending balance,	8,228	8,326	8,228	8,326
Ending balance individually evaluated for impairment	0		0
Ending balance collectively evaluated for impairment	8,228	8,326	8,228	8,326
Residential Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	1,455	1,525	1,328	1,272
Charge Offs	(10)	(24)	(75)	(75)
Recoveries	4	1	15	2
Provision for loan losses	(2)	(47)	179	256
Ending balance,	1,447	1,455	1,447	1,455
Ending balance individually evaluated for impairment	0		0
Ending balance collectively evaluated for impairment	1,447	1,455	1,447	1,455
Commercial Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	4,947	5,129	5,455	5,265
Charge Offs	(146)	(134)	(615)	(134)
Recoveries	4	25	14	31
Provision for loan losses	(111)	227	(160)	85
Ending balance,	4,694	5,247	4,694	5,247
Ending balance individually evaluated for impairment	0		0
Ending balance collectively evaluated for impairment	4,694	5,247	4,694	5,247
Construction Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	108	120	93	90
Charge Offs	0	0	0	0
Recoveries	0	0	0	0
Provision for loan losses	4	8	19	38
Ending balance,	112	128	112	128
Ending balance individually evaluated for impairment	0	0	0	0
Ending balance collectively evaluated for impairment	112	128	112	128
Commercial [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	811	638	712	463
Charge Offs	(233)	(5)	(234)	(5)
Recoveries	11	0	21	0
Provision for loan losses	307	57	397	232
Ending balance,	896	690	896	690
Ending balance individually evaluated for impairment	0	0	0	0
Ending balance collectively evaluated for impairment	896	690	896	690
Consumer Loans To Individuals [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	1,028	687	864	544
Charge Offs	(72)	(69)	(135)	(117)
Recoveries	21	8	35	15
Provision for loan losses	102	180	315	364
Ending balance,	1,079	806	1,079	806
Ending balance individually evaluated for impairment	0		0
Ending balance collectively evaluated for impairment	$ 1,079	$ 806	$ 1,079	$ 806

XML

Fair Value of Assets and Liabilities (Narrative) (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) loan	Dec. 31, 2018 USD ($) loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of impaired loans not requiring a valuation allowance | loan		6
Impaired Loans, Cumulative Charge-Offs | $	$ 587	$ 428
Number of impaired loans requiring a valuation allowance | loan	5
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value | $	$ 752	$ 1,319

XML

Fair Value of Assets and Liabilities (Fair Value, Assets Measured on Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 238,083	$ 243,277
Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	238,083	243,277
Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	238,083	243,277
States and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	93,935	97,613
States and Political Subdivisions [Member] | Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	93,935	97,613
States and Political Subdivisions [Member] | Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	93,935	97,613
Corporate Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	8,805	8,640
Corporate Obligations [Member] | Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	8,805	8,640
Corporate Obligations [Member] | Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	8,805	8,640
Mortgage-backed Securities-Government Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	135,343	137,024
Mortgage-backed Securities-Government Sponsored Entities [Member] | Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	135,343	137,024
Mortgage-backed Securities-Government Sponsored Entities [Member] | Significant Other Observable Inputs (Level 2) [Member] | Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 135,343	$ 137,024

XML

Fair Value of Assets and Liabilities (Fair Value, Assets and Liabilities Measured on Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 752	$ 1,319
Fair Value, Nonrecurring [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	752	1,319
Fair Value, Nonrecurring [Member] | 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	0	0
Fair Value, Nonrecurring [Member] | 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	0	0
Fair Value, Nonrecurring [Member] | 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	752	1,319
Fair Value, Nonrecurring [Member] | Foreclosed Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	1,677	1,115
Fair Value, Nonrecurring [Member] | 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	0	0
Fair Value, Nonrecurring [Member] | 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	0	0
Fair Value, Nonrecurring [Member] | 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	$ 1,677	$ 1,115

XML

Fair Value of Assets and Liabilities (Additional Qualitative Information about Level 3 Assets) (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 752,000	$ 1,319,000
Impaired Loans [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	647,000	232,000
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	$ 105,000	$ 1,087,000
Impaired Loans [Member] | Present value of future cash flows [Member] | Measurement Input, Discount Rate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Servicing Asset, Measurement Input	0.04
Impaired Loans [Member] | Minimum [Member] | Appraisal of collateral [Member] | Measurement Input, Appraised Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Servicing Asset, Measurement Input	0.1	0.1
Impaired Loans [Member] | Minimum [Member] | Present value of future cash flows [Member] | Measurement Input, Discount Rate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Servicing Asset, Measurement Input		0.04
Impaired Loans [Member] | Maximum [Member] | Appraisal of collateral [Member] | Measurement Input, Appraised Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Servicing Asset, Measurement Input	0.5758	0.8154
Impaired Loans [Member] | Maximum [Member] | Present value of future cash flows [Member] | Measurement Input, Discount Rate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Servicing Asset, Measurement Input		0.06
Impaired Loans [Member] | Weighted Average [Member] | Appraisal of collateral [Member] | Measurement Input, Appraised Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Servicing Asset, Measurement Input	0.1453	0.5606
Impaired Loans [Member] | Weighted Average [Member] | Present value of future cash flows [Member] | Measurement Input, Discount Rate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Servicing Asset, Measurement Input	0.04	0.058
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	$ 1,677,000	$ 1,115,000
Foreclosed Real Estate Owned [Member] | Minimum [Member] | Appraisal of collateral [Member] | Measurement Input, Cost to Sell [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned, Measurement Input	0.07	0.07
Foreclosed Real Estate Owned [Member] | Maximum [Member] | Appraisal of collateral [Member] | Measurement Input, Cost to Sell [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned, Measurement Input	0.1000	0.8571
Foreclosed Real Estate Owned [Member] | Weighted Average [Member] | Appraisal of collateral [Member] | Measurement Input, Cost to Sell [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned, Measurement Input	0.0808	0.078

XML

Fair Value of Assets and Liabilities (Fair Value, by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Cash and cash equivalents, Fair Value Disclosure	$ 18,472	$ 18,348
Financial assets: Loans receivable, net, Fair Value Disclosure	893,855	840,134
Financial assets: Mortgage servicing rights, Fair Value Disclosure	223	220
Financial assets: Regulatory stock, Fair Value Disclosure	3,155	3,926
Financial assets: Bank owned life insurance, Fair Value Disclosure	38,340	37,932
Financial assets: Accrued interest receivable, Fair Value Disclosure	3,979	3,776
Financial liabilities: Deposits, Fair Value Disclosure	984,342	945,773
Financial liabilities: Short-term borrowings, Fair Value Disclosure	48,094	53,046
Financial liabilities: Other borrowings, Fair Value Disclosure	44,305	52,043
Financial liabilities: Accrued interest payable, Fair Value Disclosure	3,008	1,806
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	18,472	18,348	$ 16,107	$ 16,697
Financial assets: Loans receivable, net	879,445	841,730
Financial assets: Mortgage servicing rights	183	178
Financial assets: Regulatory stock	3,155	3,926
Financial assets: Bank owned life insurance	38,340	37,932
Financial assets: Accrued interest receivable	3,979	3,776
Financial liabilities: Deposits	981,224	946,780
Financial liabilities: Short-term borrowings	48,094	53,046
Financial liabilities: Other borrowings	44,024	52,284
Financial liabilities: Accrued interest payable	3,008	1,806
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	18,472	18,348
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	3,155	3,926
Financial assets: Bank owned life insurance, Fair Value Disclosure	38,340	37,932
Financial assets: Accrued interest receivable, Fair Value Disclosure	3,979	3,776
Financial liabilities: Deposits, Fair Value Disclosure	627,151	601,604
Financial liabilities: Short-term borrowings, Fair Value Disclosure	48,094	53,046
Financial liabilities: Other borrowings, Fair Value Disclosure	0	0
Financial liabilities: Accrued interest payable, Fair Value Disclosure	3,008	1,806
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: 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 Disclosure	0	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: Loans receivable, net, Fair Value Disclosure	893,855	840,134
Financial assets: Mortgage servicing rights, Fair Value Disclosure	223	220
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	357,191	344,169
Financial liabilities: Short-term borrowings, Fair Value Disclosure	0	0
Financial liabilities: Other borrowings, Fair Value Disclosure	44,305	52,043
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

XML

New and Recently Adopted Accounting Pronouncements (Details) - Accounting Standards Update 2016-02 [Member] $ in Millions	Dec. 31, 2018 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating Lease, Right-of-Use Asset	$ 5.3
Finance Lease, Liability	$ 5.3