10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-K

____________________

(Mark One):

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

For the fiscal year ended December 31, 2022

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 No. 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

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, $.10 par value	NWFL	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

___________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☐  YES    ☒  NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ☐  YES    ☒  NO

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  YES    ☐  NO

Indicate by check mark whether the registrant has submitted electronically 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing price of the registrant’s Common Stock as of June 30, 2022, $24.26 per share, was $180.5 million based on 7,439,636 shares of Common Stock held by non-affiliates on that date. Solely for purposes of this calculation, shares held by directors, executive officers and greater than 10% stockholders are treated as shares held by affiliates.

As of March 1, 2023, there were 8,181,001 shares outstanding of the registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders. (Part III)

NORWOOD FINANCIAL CORP

ANNUAL REPORT ON FORM 10-K

Table of Contents

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Part I		Page
Item 1.	Business.	2
Item 1A.	Risk Factors.	8
Item 1B.	Unresolved Staff Comments.	8
Item 2.	Properties.	8
Item 3.	Legal Proceedings.	8
Item 4.	Mine Safety Disclosures.	8
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	8
Item 6.	Selected Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 7A.	Quantitative and Qualitative Disclosure about Market Risk.	25
Item 8.	Financial Statements and Supplementary Data.	27
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	71
Item 9A.	Controls and Procedures.	71
Item 9B.	Other Information.	71
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.	71
Part III
Item 10.	Directors, Executive Officers and Corporate Governance.	71
Item 11.	Executive Compensation.	71
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	71
Item 13.	Certain Relationships and Related Transactions and Director Independence.	72
Item 14.	Principal Accounting Fees and Services.	72
Part IV
Item 15.	Exhibits, Financial Statement Schedules.	72
Item 16.	Form 10-K Summary.	76
SIGNATURES		77

PART I

Forward Looking Statements

This Annual Report on Form 10-K contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;

statements regarding our business plans, prospects, growth and operating strategies;

statements regarding the quality of our loan and investment portfolios; and

estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.  We are under no duty to and do not take any obligation to update any forward-looking statements after the date of the Annual Report on Form 10-K.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

the COVID-19 pandemic may continue to adversely impact the local and national economy and our business and results of operations may continue to be adversely affected;

general economic conditions, either nationally or in our market areas, that are worse than expected;

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

our ability to access cost-effective funding;

fluctuations in real estate values and both residential and commercial real estate market conditions;

demand for loans and deposits in our market area;

our ability to implement changes in our business strategies;

competition among depository and other financial institutions;

inflation and changes in the interest rate environment that reduce our margins and yields, or reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets;

adverse changes in the securities markets;

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board;

our ability to manage market risk, credit risk and operational risk in the current economic conditions;

our ability to enter new markets successfully and capitalize on growth opportunities;

our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we have acquired or may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

changes in consumer demand, borrowing and savings habits

the ability of third-party providers to perform their obligations to us;

the ability of the U.S. Government to manage federal debt limits;

cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems;

technological changes that may be more difficult or expensive than expected;

changes in the financial condition, results of operations or future prospects of issuers of securities that we own; and

other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing products and services described elsewhere in this Annual Report on Form 10-K.

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Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Item 1. Business.

General

Norwood Financial Corp (the “Company”), a Pennsylvania corporation, was incorporated in 1995 to become the holding company for Wayne Bank (the “Bank”). The Company is a registered bank holding company subject to regulation and supervision by the Board of Governors of the Federal Reserve System (“Federal Reserve”). As of December 31, 2022, the Company had total consolidated assets of $2.047 billion, consolidated deposits of $1.728 billion, and consolidated stockholders’ equity of $167.1 million. The Company’s ratio of average equity to average assets was 8.87%, 10.04%, and 10.70% for fiscal years 2022, 2021 and 2020, respectively. The decrease in the 2022 level was due to the impact of rising interest rates and the related decrease in accumulated other comprehensive income.

Wayne Bank is a Pennsylvania chartered bank and trust company headquartered in Honesdale, Pennsylvania. The Bank was originally chartered on February 17, 1870, as Wayne County Savings Bank and changed its name to Wayne County Bank and Trust in December 1943. In September 1993, the Bank adopted the name Wayne Bank. The Bank’s deposits are currently insured to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”) and the Bank is a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh. The Bank is regulated and examined by the Pennsylvania Department of Banking and Securities (“Department”) and the FDIC. The Bank is an independent community bank with fourteen offices in Northeastern Pennsylvania and fifteen offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York.

The Bank offers a wide variety of personal and business credit services and trust and investment products and real estate settlement services to the consumers, businesses, nonprofit organizations, and municipalities in each of the communities that the Bank serves. The Bank primarily serves the northeastern Pennsylvania counties of Wayne, Pike, Monroe, Lackawanna and Luzerne and, to a much lesser extent, Susquehanna County in addition to the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates. In addition, the Bank operates automated teller machines at twenty-nine branch facilities plus one machine at an off-site location.

The Company’s main office is located at 717 Main Street, Honesdale, Pennsylvania and its main telephone number is (570) 253-1455. The Company maintains a website at waynebank.com. Information on our website should not be treated as part of this Annual Report on Form 10-K. The Company makes copies of its Securities and Exchange Commission (“SEC”) filings available free of charge as soon as reasonably practicable after they are filed, through a link on its website to the SEC’s website.

Completed Acquisitions

UpState New York Bancorp, Inc. On July 7, 2020, the Company completed the acquisition of UpState New York Bancorp, Inc. (“UpState”), and its wholly owned subsidiary, USNY Bank (“USNY Bank”). The acquisition was completed when UpState was merged with and into the Company, with the Company as the surviving corporation of the merger and USNY Bank was merged with and into Wayne Bank, with Wayne Bank as the surviving entity. At the time of completion of the acquisition, USNY Bank conducted its business from two Bank of the Finger Lakes offices in Geneva and Penn Yan, New York, and two Bank of Cooperstown offices in Cooperstown and Oneonta, New York.

In the merger, shareholders of UpState elected to receive for each share of UpState common stock they owned, either 0.9390 shares of the Company’s common stock or $33.33 in cash, or a combination of both. All shareholder elections were subject to the allocation and proration procedures set forth in the Merger Agreement which were intended to ensure that 90% of the shares of UpState would be exchanged for the Company’s common stock and 10% of the shares of UpState would be exchanged for cash. In addition, under the terms of the Merger Agreement, UpState shareholders received an additional $0.67 per share in cash for each share of UpState common stock held. In the aggregate, the merger consideration paid to UpState shareholders consisted of approximately $8,845,198 in cash and 1,865,738 shares of the Company’s common stock.

Delaware Bancshares, Inc. On July 31, 2016, the Company completed the acquisition of Delaware Bancshares, Inc. (“Delaware”) and its wholly owned subsidiary, The National Bank of Delaware County (“NBDC”). At the time of acquisition, Delaware had approximately $375.6 million in assets and 12 banking offices in Delaware and Sullivan Counties, New York. Pursuant to the terms of the Agreement and Plan of Merger, dated March 10, 2016, by and among the Company, Wayne Bank, Delaware and NBDC (the “Delaware Agreement”), Delaware was merged with and into the Company, with the Company as the surviving corporation of the merger (the “Merger”) and NBDC was merged with and into Wayne Bank immediately thereafter. At the effective time of the Merger, each outstanding share of the common stock of Delaware was converted, at the election of the holder but subject to the limitations and allocation and proration provisions set forth in the Delaware Agreement, into either $16.68 in cash or 0.6221 of a share of the Company’s

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common stock, par value $0.10 per share (the “Common Stock”). In the aggregate, the merger consideration paid to Delaware shareholders consisted of approximately $3,860,000 in cash and 431,605 shares of the Common Stock.

North Penn Bancorp, Inc.

On May 31, 2011, the Company completed the acquisition of North Penn Bancorp, Inc. (“North Penn”) and its wholly owned subsidiary, North Penn Bank. At the time of acquisition, North Penn had approximately $158.9 million in assets and four banking offices in Lackawanna and Monroe Counties, Pennsylvania. Pursuant to the terms of the Agreement and Plan of Merger by and among the Company, Wayne Bank, and North Penn, North Penn was merged with and into the Company, with the Company as the surviving corporation of the merger (the “Merger”) and North Penn Bank was merged with and into Wayne Bank immediately thereafter. At the effective time of the Merger, each outstanding share of the common stock of North Penn was converted, at the election of the holder but subject to the limitations and allocation and proration provisions set forth in the Merger Agreement, into either $19.12 in cash or 0.6829 of a share of the Company’s common stock, par value $0.10 per share (the “Common Stock”). In the aggregate, the merger consideration paid to North Penn shareholders consisted of approximately $10,648,000 in cash and 530,994 shares of the Common Stock.

Competition

The competition for deposit products comes from other insured financial institutions such as commercial banks, thrift institutions, credit unions, and multi-state regional banks in the Company’s market area of Wayne, Pike, Monroe, Lackawanna and Luzerne Counties, Pennsylvania and Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York as well as from on-line banks. Based on data compiled by the FDIC as of June 30, 2022 (the latest date for which such data is available), the Bank had the third largest share of FDIC-insured deposits in Wayne County with approximately 22.63%, the second largest share in Pike County with 17.83%, seventh largest share in Monroe County with 3.55%, the eleventh largest share in Lackawanna County with 1.04% and the seventeenth largest share in Luzerne County with 0.28%. At June 30, 2022, the Bank had the largest share of FDIC-insured deposits in Delaware County, New York, with 30.01% and the fifth largest share in Sullivan County, New York, with 7.95%. The Bank’s market share in Ontario, Otsego and Yates Counties were 3.82%, 16.32% and 12.60%, respectively. This data does not reflect deposits held by credit unions with which the Bank also competes. Deposit competition also includes a number of insurance products sold by local agents and investment products such as mutual funds and other securities sold by local and regional brokers. Loan competition varies depending upon market conditions and comes from other insured financial institutions such as commercial banks, thrift institutions, credit unions, multi-state regional banks, and mortgage bankers.

Personnel

As of December 31, 2022, the Bank had 274 full-time and two part-time employees. None of the Bank’s employees are represented by a collective bargaining group.

Trust Activities

The Bank operates a Wealth Management/Trust Department which provides estate planning, investment management and financial planning to customers for which it is generally compensated based on a percentage of assets under management. As of December 31, 2022, the Bank had $184.9 million of assets under management compared to $196.0 million as of December 31, 2021. The decrease reflects reduced market valuations during 2022, such as stock market performance which can affect the value of a customer’s investment portfolio.

Subsidiary Activities

The Bank, a Pennsylvania chartered bank, is the only wholly owned subsidiary of the Company. Norwood Investment Corp. (“NIC”), a Pennsylvania corporation incorporated in 1996 and a Pennsylvania licensed insurance agency, is a wholly owned subsidiary of the Bank. NIC’s business is annuity and mutual fund sales and discount brokerage activities primarily to customers of the Bank. The annuities, mutual funds and other investment products are not insured by the FDIC or any other government agency. They are not deposits, obligations of or guaranteed by any bank. Until February 16, 2018, securities were offered through Invest Financial, a registered broker/dealer. Effective February 16, 2018, the broker/dealer relationship transitioned to LPL Financial LLC (“LPL”) as a result of the sale of Invest to LPL in 2017. LPL is a registered broker/dealer and a member of FINRA and the SIPC. NIC generated gross revenues for the Company of $119,000 and $127,000 in 2022 and 2021, respectively, which is included in Other Income.

WCB Realty Corp., a Pennsylvania corporation, is a wholly owned real estate subsidiary of the Bank whose principal asset is the administrative offices of the Company, which also includes the Main Office of the Bank.

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WTRO Properties Inc., a Pennsylvania corporation, is a wholly owned real estate subsidiary of the Bank established to hold title to certain real estate upon which the Bank has foreclosed. As of December 31, 2022 and 2021, the outstanding balance of foreclosed properties on which WTRO held title totaled $346,000 and $1,742,000, respectively.

Regulation

Set forth below is a brief description of certain laws which relate to the regulation of the Company and the Bank. The description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.

Regulation of the Company

General. The Company, as a bank holding company registered under the Bank Holding Company Act of 1956, as amended (“BHCA”), is subject to regulation and supervision by the Federal Reserve. The Company is required to file periodic reports of its operations with, and is subject to examination by, the Federal Reserve. This regulation and oversight is generally intended to ensure that the Company limits its activities to those allowed by law and that it operates in a safe and sound manner without endangering the financial health of its subsidiary bank.

Under the BHCA, the Company generally must obtain the prior approval of the Federal Reserve before it may acquire control of another bank or bank holding company, merge or consolidate with another bank holding company, acquire all or substantially all of the assets of another bank or bank holding company, or acquire direct or indirect ownership or control of any voting shares of any bank or bank holding company if, after such acquisition, the Company would directly or indirectly own or control more than 5% of such shares.

Federal statutes impose restrictions on the ability of a bank holding company and its nonbank subsidiaries to obtain extensions of credit from its subsidiary bank, on the subsidiary bank’s investments in the stock or securities of the holding company, and on the subsidiary bank’s taking of the holding company’s stock or securities as collateral for loans to any borrower. A bank holding company and its subsidiaries are also prevented from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property, or furnishing of services by the subsidiary bank.

Source of Strength Doctrine. Under the Bank Holding Company Act, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. Under this source of strength doctrine, a bank holding company should stand ready to use available resources to provide adequate capital to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company’s failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve regulations, or both.

Non-Banking Activities. The business activities of the Company, as a bank holding company, are restricted by the BHCA. Under the BHCA and the Federal Reserve’s bank holding company regulations, a bank holding company generally may only engage in, or acquire or control voting securities or assets of a company engaged in, (1) banking or managing or controlling banks and other subsidiaries authorized under the BHCA and (2) any business activity the Federal Reserve has determined to be so closely related to banking or managing or controlling banks to be a proper incident thereto. These include any incidental activities necessary to carry on those activities, as well as a lengthy list of activities that the Federal Reserve has determined to be so closely related to the business of banking as to be a proper incident thereto.

In addition to the above authority, bank holding companies that qualify and elect to be treated as “financial holding companies” may engage in a broad range of additional activities that are (i) financial in nature or incidental to such financial activities or (ii) complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. These activities include securities underwriting and dealing, insurance agency and underwriting, and making merchant banking investments. The Company has not made an election to be deemed a financial holding company.

Regulatory Capital Requirements. The Federal Reserve has adopted regulatory capital rules pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the BHCA. The Federal Reserve’s capital rules are similar to those imposed on the Bank by the FDIC. See “Regulation of the Bank-Regulatory Capital Requirements.” The Federal Reserve’s Small Bank Holding Company Policy Statement, however, exempts from the regulatory capital requirements bank holding companies with less than $3.0 billion in consolidated assets that are not engaged in significant non-banking or off-balance sheet activities and that do not have a material amount of debt or equity securities registered with the SEC. As long as their bank subsidiaries are well capitalized, such bank holding companies need only maintain a pro forma debt to equity ratio of less than 1.0 in order to pay dividends and repurchase stock and to be eligible for expedited treatment on applications.

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Regulation of the Bank

General. As a Pennsylvania chartered, FDIC-insured commercial bank which is not a member of the Federal Reserve System, the Bank is subject to extensive regulation and examination by the Department and by the FDIC, which insures its deposits to the maximum extent permitted by law. The federal and state laws and regulations applicable to banks regulate, among other things, the scope of their business, their investments, the reserves required to be kept against deposits, the timing of the availability of deposited funds and the nature and amount of and collateral for certain loans. The laws and regulations governing the Bank generally have been promulgated to protect depositors and not for the purpose of protecting stockholders. This regulatory structure also gives the federal and state banking agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulation, whether by the Department, the FDIC or the United States Congress, could have a material impact on the Company, the Bank and their operations.

Pennsylvania Banking Law. The Pennsylvania Banking Code (“Banking Code”) contains detailed provisions governing the organization, location of offices, rights and responsibilities of directors, officers, and employees, as well as corporate powers, savings and investment operations and other aspects of the Bank and its affairs. The Banking Code delegates extensive rule-making power and administrative discretion to the Department so that the supervision and regulation of state-chartered banks may be flexible and readily responsive to changes in economic conditions and in savings and lending practices.

The Federal Deposit Insurance Act (“FDIA”), however, prohibits state-chartered banks from making new investments, loans, or becoming involved in activities as principal and equity investments which are not permitted for national banks unless (1) the FDIC determines the activity or investment does not pose a significant risk of loss to the Deposit Insurance Fund and (2) the bank meets all applicable capital requirements. Accordingly, the additional operating authority provided to the Bank by the Banking Code is significantly restricted by the FDIA.

Interstate Banking. Wayne Bank operates branches in Pennsylvania and New York. Under the federal Riegle-Neal Interstate Banking and Branching Efficiency Act (the “Riegle-Neal Act”), an insured state bank that establishes a branch in another state may conduct any activity at such branch that is permissible under the laws of its home state to the extent that such activity is permissible either for a bank chartered by the host state or for a branch of an out-of-state national bank in the host state. The laws of the host state, including laws regarding community reinvestment, consumer protection, fair lending and branching within the host state, apply to any branch of an out-of-state bank to the same extent as such laws apply to a branch of an out-of-state national bank. The Riegle-Neal Act prohibits out-of-state banks from using their interstate branches primarily for purposes of deposit production. If a federal banking regulator reasonably determines from available information that an out-of-state bank’s level of lending in a host state is less than half the loan-to-deposit ratio for all banks in the host state, the regulator may order the closure of the out-of-state branches or prohibit the opening of new branches in the host state unless the out-of-state bank has an acceptable plan or can give reasonable assurances that it will reasonably help meet the credit needs of the communities served in the host state.

Federal Deposit Insurance. The Bank’s deposits are insured to applicable limits by the FDIC. The general maximum deposit insurance amount is $250,000.

The Bank is subject to deposit insurance assessments established by the FDIC to maintain the DIF.  Under the FDIC’s risk-based assessment system, banks that are deemed to be less risky pay lower assessments. Assessment rates for small institutions (those with less than $10 billion in assets) are based on an institution’s weighted average CAMELS component ratings and certain financial ratios and are applied to the institution’s assessment base, which equals its average total assets minus its average tangible equity. 

In October 2022, the FDIC adopted a final rule that increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023. The increased assessment is expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline of September 30, 2028, consistent with the FDIC’s amended restoration plan. The FDIC assessment rates effective January 1, 2023 (which are subject to certain adjustments) range from 5 to 18 basis points for institutions with CAMELS composite ratings of 1 or 2, 8 to 32 basis points for those with a CAMELS composite score of 3, and 18 to 32 basis points for those with CAMELS composite scores of 4 or 5.

Regulatory Capital Requirements. The Bank is required to comply with applicable capital adequacy rules adopted by the FDIC and other federal bank regulatory agencies (the “Basel III Capital Rules”). The Basel III Capital Rules apply to all depository institutions as well as to all top-tier bank and savings and loan holding companies that are not subject to the Federal Reserve Small Bank Holding Company Policy Statement.

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Under the Basel III Capital Rules, banks are required to meet four minimum capital standards: (1) a “Tier 1” or “core” capital leverage ratio equal to at least 4% of total adjusted assets; (2) a common equity Tier 1 capital ratio equal to 4.5% of risk-weighted assets; (3) a Tier 1 risk-based ratio equal to 6% of risk-weighted assets; and (4) a total capital ratio equal to 8% of total risk-weighted assets. Common equity Tier 1 capital is defined as common stock instruments, retained earnings, any common equity Tier 1 minority interest and, unless the bank has made an “opt-out” election, accumulated other comprehensive income, net of goodwill and certain other intangible assets. Tier 1 or core capital is defined as common equity Tier 1 capital plus certain qualifying subordinated interests and grandfathered capital instruments. Total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items, which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, qualifying subordinated instruments and certain grandfathered capital instruments. An institution’s risk-based capital requirements are measured against risk-weighted assets, which equal the sum of each on-balance-sheet asset and the credit-equivalent amount of each off-balance-sheet item after being multiplied by an assigned risk weight. Risk weightings range from 0% for cash to 100% for property acquired through foreclosure, commercial loans, and certain other assets to 150% for exposures that are more than 90 days past due or are on nonaccrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property.

In addition to the above minimum requirements, the Basel III Capital Rules require banks and covered financial institution holding companies to maintain a capital conservation buffer of at least 2.5% of risk-weighted assets over and above the minimum risk-based capital requirements. Institutions that do not maintain the required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital buffer requirement effectively raises the minimum required risk-based capital ratios to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital on a fully phased-in basis.

In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors but also qualitative factors, and has the authority to establish higher capital requirements for individual institutions where necessary.

The Bank is also subject to minimum capital requirements imposed by the Department on Pennsylvania-chartered depository institutions. Under the Department’s capital requirements, a Pennsylvania bank or savings bank must maintain a minimum leverage ratio of Tier 1 capital (as defined under the FDIC’s capital regulations) to total assets of 4%. In addition, the Department has the supervisory discretion to require higher leverage ratio for any institutions based on the institution’s substandard performance in any of a number of areas. The Bank was in compliance with both the FDIC and the Pennsylvania capital requirements in effect as of December 31, 2022.

Prompt Corrective Regulatory Action. Under applicable federal statutes, the federal bank regulatory agencies are required to take “prompt corrective action” with respect to institutions that do not meet specified minimum capital requirements. For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under the FDIC’s prompt corrective action regulations, an institution is deemed to be “well capitalized” if it has a Total Risk-Based Capital Ratio of 10.0% or greater, a Tier 1 Risk-Based Capital Ratio of 8.0% or greater, a Common Equity Tier 1 risk-based capital ratio of 6.5% or better and a leverage ratio of 5.0% or greater.

An institution is “adequately capitalized” if it has a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, a Common Equity Tier 1 Capital Ratio of 4.5% or better and a Leverage Ratio of 4.0% or greater. An institution is “undercapitalized” if it has a Total Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based Capital ratio of less than 6.0%, a Common Equity Tier 1 ratio of less than 4.5% or a Leverage Ratio of less than 4.0%. An institution is deemed to be “significantly undercapitalized” if it has a Total Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, a Common Equity Tier 1 ratio of less than 3.0% or a Leverage Ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%

The prompt corrective action regulations provide for the imposition of a variety of requirements and limitations on institutions that fail to meet the above capital requirements. In particular, the FDIC may require any state non-member bank that is not “adequately capitalized” to take certain action to increase its capital ratios. If the non-member bank’s capital is significantly below the minimum required levels of capital or if it is unsuccessful in increasing its capital ratios, the bank’s activities may be restricted.

At December 31, 2022, the Bank qualified as “well capitalized” under the prompt corrective action rules.

Affiliate Transaction Restrictions. Federal laws strictly limit the ability of banks to engage in transactions with their affiliates, including their bank holding companies. In particular, loans by a subsidiary bank and its parent company or the nonbank subsidiaries of the bank holding company are limited to 10% of a bank subsidiary’s capital and surplus and, with respect to such parent company and all such nonbank subsidiaries, to an aggregate of 20% of the bank subsidiary’s capital and surplus. Further, loans and other extensions of credit generally are required to be secured by eligible collateral in specified amounts. Transactions with non-affiliates may be treated

6

as transactions with an affiliate to the extent that proceeds from the transaction are used to benefit the affiliate. Federal law also requires that all transactions between a bank and its affiliates be on terms at least as favorable to the bank as transactions with non-affiliates.

Loans to One Borrower. Under Pennsylvania law, commercial banks have, subject to certain exemptions, lending limits to one borrower in an amount equal to 15% of the institution’s capital accounts. An institution’s capital account includes the aggregate of all capital, surplus, undivided profits, capital securities and general reserves for loan losses. Pursuant to the national bank parity provisions of the Pennsylvania Banking Code, the Bank may also lend up to the maximum amounts permissible for national banks, which are allowed to make loans to one borrower of up to 25% of capital and surplus in certain circumstances. As of December 31, 2022, the Bank’s loans-to-one-borrower limitation was $31.2 million and the Bank was in compliance with such limitation.

Federal Home Loan Bank System. The Bank is a member of the FHLB of Pittsburgh, which is one of 11 regional FHLBs. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by member institutions and proceeds from the sale of consolidated obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the Board of Directors of the FHLB.

As a member, the Bank is required to purchase and maintain restricted stock in the FHLB of Pittsburgh in an amount equal to the greater of 1% of its aggregate unpaid residential mortgage loans, home purchase contracts or similar obligations at the beginning of each year or 5% of the Bank’s outstanding advances from the FHLB. At December 31, 2022, the Bank was in compliance with this requirement.

Restrictions on Dividends. The Pennsylvania Banking Code states, in part, that dividends may be declared and paid only out of accumulated net earnings and may not be declared or paid unless surplus (retained earnings) is at least equal to contributed capital. The Bank has not declared or paid any dividends which cause the Bank’s retained earnings to be reduced below the amount required. Finally, dividends may not be declared or paid if the Bank is in default in payment of any assessment due the FDIC.

The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. In addition, the Federal Reserve’s guidance states that a bank holding company should consult with its regional Federal Reserve Bank in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure. Finally, under the federal prompt corrective action regulations, the Federal Reserve may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.”

Community Reinvestment. All insured depository institutions have a responsibility under the Community Reinvestment Act of 1977 (the “CRA”) and federal regulations thereunder to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of the Bank, the FDIC is required to assess our record of meeting the credit needs of our entire community. The CRA requires the Bank’s record of compliance with the CRA to be taken into account in the evaluation of applications by the Bank or the Company for approval of an expansionary proposal, such as a merger or other acquisition of another bank or the opening of a new branch office. The Bank received a “satisfactory” CRA rating in its most recent CRA performance evaluation by the FDIC in May 2022.

In May 2022, the FDIC and the other federal bank regulatory agencies issued a joint proposal to modernize the regulations implementing the CRA, which would change both the process and substantive tests that the regulators use to assess the record of each bank in fulfilling its obligation to the community. The regulatory agencies stated that the proposal is intended to achieve the following objectives: (i) expand access to credit, investment and basic banking services in low- and moderate-income communities, (ii) adapt to changes in the banking industry, including internet and mobile banking, (iii) provide greater clarity, consistency and transparency in the application of the regulations and (iv) tailor performance standards to account for differences in bank size, business model, and local conditions. The Company will evaluate the impact of the proposal’s potential changes to the regulations implementing the CRA and their impact to our financial condition and/or results of operations, which cannot be predicted at this time.

Bank Secrecy Act / Anti-Money Laundering Laws. The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001 and the Anti-Money Laundering Act of 2020. These laws and regulations require the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of their customers. Violations of these requirements can result in substantial civil and criminal sanctions. In addition, provisions of the USA PATRIOT Act require the federal bank regulatory agencies to consider the effectiveness of a bank’s anti-money laundering activities when reviewing mergers and acquisitions.

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Incentive Compensation. The FDIC and the Federal Reserve review, as part of their regular, risk-focused examinations, the incentive compensation arrangements of banking organizations. These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. Deficiencies are incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

In 2010, the FDIC and the other federal bank regulatory agencies issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, is based upon the principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

In 2016, the U.S. financial regulators, including the FDIC, the Federal Reserve and the SEC, proposed revised rules on incentive-based payment arrangements at financial institutions having at least $1 billion in total assets. These proposed rules have not been finalized.

In October 2022, the SEC adopted a final rule directing national securities exchanges, including Nasdaq, to establish listing standards requiring listed companies to adopt policies providing for the recovery or “clawback” of excess incentive-based compensation earned by current or former executive officers during the three fiscal years preceding the date the listed company determines an accounting restatement is required. The SEC final rule will require us to adopt a clawback policy within 60 days after the Nasdaq listing standard becomes effective.

Item 1A. Risk Factors

Not applicable.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties.

The Bank operates from its main office located at 717 Main Street, Honesdale, Pennsylvania and twenty-eight additional branch offices in Northeastern Pennsylvania and upstate New York. The Bank’s total investment in office property and equipment is $37.8 million with a net book value of $17.9 million as of December 31, 2022. The Bank currently operates automated teller machines at all but one of its community office facilities, as well as one off-site ATM. The Bank leases seven of its locations.

Item 3. Legal Proceedings.

Neither the Company nor its subsidiaries are involved in any other pending legal proceedings, other than routine legal matters occurring in the ordinary course of business, which in the aggregate involve amounts which are believed by management to be immaterial to the consolidated financial condition or results of operations of the Company.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a)Market Information

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STOCK LISTING

Norwood Financial Corp stock is traded on the Nasdaq Global Market under the symbol NWFL. As of December 31, 2022, there were approximately 1,400 registered stockholders based on the records of our transfer agent.

The following firms are known to make a market in the Company’s stock:

Janney Montgomery Scott, LLC ‎Philadelphia, PA 19003 215-665-6566	RBC Capital Markets Philadelphia, PA 19103 888-848-4677
	Stifel Nicolaus St,. Louis, MO 63102 314-342-2000

The following table sets forth the price range and cash dividends declared per share regarding common stock for the periods indicated:

	Closing Price Range
	High		Low		Cash dividend
Year 2022					Declared per share
First Quarter	$	28.85	$	26.23	$	0.28
Second Quarter		29.00		23.44		0.28
Third Quarter		28.01		24.04		0.28
Fourth Quarter		34.25		26.58		0.29
Year 2021
First Quarter	$	28.96	$	23.75	$	0.26
Second Quarter		27.07		24.75		0.26
Third Quarter		26.31		24.64		0.26
Fourth Quarter		27.60		25.42		0.28

The book value of the common stock was $20.86 per share as of December 31, 2022 compared to $25.24 per share as of December 31, 2021. As of December 31, 2022, the closing stock price was $33.44 per share, compared to $25.99 as of December 31, 2021.

TRANSFER AGENT

Computershare provides Transfer Agent services for the Company. Stockholders who may have questions regarding their stock ownership should contact the Transfer Agent at 800-662-7232, by regular mail at P.O. Box 43006, Providence, RI 02940-3006, or by overnight delivery at 150 Royall St, Suite 101, Canton, MA 02021.

DIVIDEND CALENDAR

Dividends on the Company’s common stock, if approved by the Board of Directors, are customarily paid on or about February 1, May 1, August 1 and November 1.

AUTOMATIC DIVIDEND REINVESTMENT PLAN

The Plan, open to all shareholders, provides the opportunity to have dividends automatically reinvested into the Company’s common stock. Participants in the Plan may also elect to make cash contributions to purchase additional shares of common stock. Stockholders of the Company may contact the transfer agent for additional information.

(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 fourth quarter of the fiscal year ended December 31, 2022.

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	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
October 1 – 31, 2022	6,545	$	26.87	6,545	382,890
November 1 – 30, 2022	—		—	—	—
December 1 – 31, 2022	—		—	—	—
Total	6,545	$	26.87	6,545	382,890

*On March 19, 2008, the Company 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 Company announced that it 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. On March 30, 2021, the Company announced that it had increased the number of shares which may be repurchased under its open-market program to 5% of its currently outstanding shares, or approximately 400,000 split-adjusted shares.

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Item 6. Selected Financial Data.

For the years ended December 31,	2022	2021	2020	2019	2018
Net interest income	$68,397	$65,313	$50,476	$38,606	$36,839
Provision for loan losses	900	4,200	5,450	1,250	1,725
Other income	9,926	8,056	7,182	6,355	6,837
Net realized gains on sales of loans and securities	6	269	598	423	228
Other expenses	41,044	38,578	34,440	27,311	25,975
Income before income taxes	36,385	30,860	18,366	16,823	16,204
Income tax expense	7,152	5,945	3,286	2,608	2,553
NET INCOME	29,233	24,915	15,080	14,215	13,651
Net income per share-Basic	$3.59	$3.05	$2.09	$2.27	$2.19
-Diluted	$3.58	$3.04	$2.09	$2.25	$2.17
Cash dividends declared	$1.13	$1.06	$1.01	$0.97	$0.90
Dividend pay-out ratio	31.48%	34.75%	48.33%	42.73%	41.10%
Return on average assets	1.43%	1.24%	0.97%	1.18%	1.19%
Return on average equity	16.11%	12.35%	9.06%	10.83%	11.71%
BALANCES AT YEAR-END
Total assets	2,047,070	2,068,504	1,851,864	1,230,610	1,184,559
Loans receivable	1,473,945	1,354,931	1,410,732	924,581	850,182
Allowance for loan losses	16,999	16,442	13,150	8,509	8,452
Total deposits	1,727,727	1,756,793	1,535,385	957,529	946,780
Stockholders’ equity	167,085	205,262	194,785	137,428	122,285
Trust assets under management	184,855	195,958	168,085	170,685	151,224
Book value per share	$20.86	$25.24	$23.72	$21.67	$19.43
Tier 1 Capital to risk-adjusted assets	12.49%	12.49%	11.65%	13.08%	13.04%
Total Capital to risk-adjusted assets	13.58%	13.66%	12.62%	13.98%	14.00%
Allowance for loan losses to total loans	1.15%	1.21%	0.93%	0.92%	0.99%
Non-performing assets to total assets	0.07%	0.12%	0.24%	0.19%	0.19%

Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

Introduction

This Management’s Discussion and Analysis and related financial data are presented to assist in the understanding and evaluation of the financial condition and results of operations for the Company and the Bank, as of December 31, 2022 and 2021, and for the years ended December 31, 2022 and 2021. This section should be read in conjunction with the consolidated financial statements and related footnotes.

Critical Accounting Policies

Note 2 to the Company’s consolidated financial statements 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 determination of other-than-temporary impairment on securities, the determination of goodwill impairment and the fair value of financial instruments. Please refer to the discussion of the allowance for loan losses calculation under “Allowance for Loan Losses and Non-performing Assets” in the “Financial Condition” section.

The 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 it is more likely than not that all deferred tax assets will be realized.

In estimating other-than-temporary impairment losses on securities, the Company considers 1) the length of time and extent to which the fair value has been less than cost and 2) the financial condition of the issuer. The Company does not have the intent to sell these securities and it is more likely than not that it will not sell the securities before recovery of their cost basis. The Company believes that any unrealized losses at December 31, 2022 and 2021 represent temporary impairment of the securities.

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.

In connection with the acquisition of North Penn in 2011, we recorded goodwill in the amount of $9.7 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. In connection with the acquisition of Delaware in 2016, we recorded goodwill in the amount of $1.6 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. In connection with the acquisition of UpState in July 2020, we recorded goodwill in the amount of $17.9 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. Goodwill is tested annually and deemed impaired when the carrying value of goodwill exceeds its implied fair value.

FINANCIAL CONDITION

Total Assets

Total assets as of December 31, 2022 were $2.047 billion compared to $2.069 billion as of year-end 2021, a decrease of $21.4 million. The decrease in assets was primarily attributable to the $182.6 million decrease in interest-bearing deposits with banks.

Loans Receivable

As of December 31, 2022, loans receivable totaled $1.474 billion compared to $1.355 billion as of year-end 2021, an increase of $119.0 million due primarily to a $53.7 million increase in consumer loans. Commercial real estate loans increased $22.8 million, while residential mortgage loans increased $25.8 million during the year.

The Bank’s loan products include loans for personal and business use. Personal lending includes mortgage lending to finance principal residences and, to a lesser extent, second home dwellings. The Bank’s loan products include fixed-rate mortgage products with terms up to 30 years which may be sold in the secondary market through the Federal National Mortgage Association (“Fannie Mae”) or the FHLB, or held in the Bank’s portfolio to the extent consistent with our asset/liability management strategies. Fixed-rate home equity loans are originated on terms up to 180 months. Home equity lines of credit tied to the prime rate are also offered. The Bank also offers indirect dealer financing of automobiles (new and used), boats, and recreational vehicles through a limited network of dealers in Northeast Pennsylvania and the Southern Tier of New York. At December 31, 2022, there were $188.4 million of indirect loans in the portfolio. In connection with the acquisition of UpState in 2020, the Company acquired approximately $413.5 million in loans, including $37.3 million in residential real estate loans, $289.0 million in commercial real estate loans, $92.0 million in commercial, financial and agricultural loans, and $2.3 million in consumer loans. As of December 31, 2022, the approximate outstanding balance of these acquired loans was $233.3 million. In connection with the acquisition of Delaware, the Company acquired approximately $116.7 million in loans, including $68.7 million in residential real estate loans, $22.5 million in commercial real estate loans, $13.6 million in commercial, financial and agricultural loans, $6.5 million in consumer loans and $5.4 in construction loans. As of December 31, 2022, the approximate outstanding balance of these acquired loans was $30.7 million.

Commercial loans and commercial mortgages are provided to local small and mid-sized businesses at a variety of terms and rate structures. Commercial lending activities include lines of credit, revolving credit, term loans, mortgages, various forms of secured lending and a limited amount of letter of credit facilities. The rate structure may be fixed, immediately repricing tied to the prime rate or adjustable at set intervals. Also included in commercial loans are municipal finance lending in which the Bank has been active in recent years. Municipal lending includes both general obligations of local taxing authorities and revenue obligations of specific revenue

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producing projects such as sewer authorities and educational units. At December 31, 2022, the Bank had approximately $141.9 million in loans on commercial rentals, as well as $113.0 million of loans outstanding on residential rentals, which are its largest lending concentrations.

The Bank’s construction lending has primarily involved lending for commercial construction projects and for single-family residences. All loans for the construction of speculative sale homes have a loan-to-value ratio of not more than 80%. For both commercial and single-family projects, loan proceeds are disbursed during the construction phase according to a draw schedule based on the stage of completion. Construction projects are inspected by contracted inspectors or bank personnel. Construction loans are underwritten on the basis of the estimated value of the property as completed. For commercial projects, the Bank typically also provides the permanent financing after the construction period, as a commercial mortgage.

The Bank also, from time to time, originates loans secured by undeveloped land. Land loans granted to individuals have a term of up to five years. Land loans granted to developers may have an interest only period during development. The substantial majority of land loans have a loan-to-value ratio not exceeding 75%. The Bank has limited its exposure to land loans but may expand its lending on raw land, as market conditions allow, to qualified borrowers experienced in the development and sale of raw land.

Loans involving construction financing and loans on raw land have a higher level of risk than loans for the purchase of existing homes since collateral values, land values, development costs and construction costs can only be estimated at the time the loan is approved. The Bank has sought to minimize its risk in construction lending and in lending for the purchase of raw land by offering such financing primarily to builders and developers to whom the Bank has loaned funds in the past and to persons who have previous experience in such projects. The Bank also limits construction lending and loans on raw land to its market area, with which management is familiar.

Adjustable-rate loans decrease the risks associated with changes in interest rates by periodically repricing, but involve other risks because as interest rates increase, the underlying payments by the borrower increase, thus increasing the potential for payment default. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate may also be limited by the maximum periodic interest rate adjustment permitted in certain adjustable-rate mortgage loan documents, and, therefore is potentially limited in effectiveness during periods of rapidly rising interest rates. These risks have not had an adverse effect on the Bank.

The Bank’s adjustable-rate loan portfolio includes approximately $4.0 million in loan participations indexed to the London Interbank Offered Rate (“LIBOR”) which is expected to be phased out by June 30, 2023. On December 16, 2022, the Board of Governors of the Federal Reserve System (Board) adopted Regulation ZZ to implement the Adjustable Interest Rate (LIBOR) Act (the “Act”). The Act was approved by Congress on March 15, 2022, to address references to LIBOR in contracts that are governed by US law; will not mature before June 30, 2023; and most importantly, will lack fallback provisions providing for a clearly defined practical replacement for LIBOR. The final rule replaces references to LIBOR in such contracts with one of five Board-selected benchmark replacements based on the Secured Overnight Financing Rate (“SOFR”), which may include spread adjustments specified in the Act. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by US Treasury securities and published daily by the Federal Reserve Bank of New York. The final rule identifies Board-selected benchmark replacements for (1) derivative transactions, (2) Federal Housing Finance Agency (FHFA) regulated entity contracts, (3) Federal Family Education Loan Program (FFELP) asset-based securitizations (ABS), (4) consumer loans, and (5) all other LIBOR contracts for replacing the overnight and one-, three-, six-, and 12-month tenors of US dollar LIBOR in existing contracts that do not provide for use of a clearly defined or practical replacement benchmark rate. The Bank must rely on the lead bank to renegotiate the terms of loans in which the Bank has a participation. There can be no assurance that the lead bank will be able to successfully renegotiate the loans in which the Bank has participations or that the substitute reference rate will perform as satisfactorily as LIBOR.

Consumer lending, including indirect financing, provides benefits to the Bank’s asset/liability management program by reducing the Bank’s exposure to interest rate changes, due to their generally shorter terms. Such loans may entail additional credit risks compared to owner-occupied residential mortgage lending especially when unsecured or secured by collateral such as automobiles that depreciate rapidly.

Commercial lending including real-estate related loans entail significant additional risks when compared with residential real estate and consumer lending. For example, commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers. The payment experience on such loans typically is dependent on the successful operation of the project and these risks can be significantly impacted by the cash flow of the borrowers and market conditions for commercial office, retail, and warehouse space. In periods of decreasing cash flows, the commercial borrower may permit a lapse in general maintenance of the property causing the value of the underlying collateral to deteriorate. The liquidation of commercial property is often more costly and may involve more time to sell than residential real estate. The Bank offsets such factors with requiring more owner equity, a lower loan to value ratio and

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by obtaining the personal guaranties of the principals. In addition, a majority of the Bank’s commercial real estate portfolio is owner-occupied property.

Commercial loans and leases are considered to have a higher degree of credit risk than secured real estate lending. The repayment of unsecured commercial business loans is wholly dependent on the success of the borrower’s business, while secured commercial business loans may be secured by collateral that may not be readily marketable in the event of default. Municipal financing includes lending to local taxing authorities and revenue-producing projects. Such loans may constitute the general obligation of the taxing authority or may rely on a specific revenue source which is responsible for the repayment of the debt. General obligations are considered to carry a lower level of risk than other loan types since they are backed by the full faith and credit of the taxing authority. Revenue obligations are backed solely by revenues generated by the project financed and repayment may be affected by the success of the project.

Due to the type and nature of the collateral, consumer lending generally involves more credit risk when compared with residential real estate lending. Consumer lending collections are typically dependent on the borrower’s continuing financial stability, and thus, are more likely to be adversely affected by job loss, divorce, illness and personal bankruptcy. In most cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan balance. The remaining deficiency is usually turned over to a collection agency.

There are additional risks associated with indirect lending since we must rely on the dealer to provide accurate information to us and accurate disclosures to the borrowers. These loans are principally done on a non-recourse basis. We seek to mitigate these risks by only dealing with dealers with whom we have a long-standing relationship.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) prohibits lenders from making residential mortgages unless the lender makes a reasonable and good faith determination that the borrower has a reasonable ability to repay the mortgage loan according to its terms. A borrower may recover statutory damages equal to all finance charges and fees paid within three years of a violation of the ability-to-repay rule and may raise a violation as a defense to foreclosure at any time. As authorized by the Dodd-Frank Act, the Consumer Financial Protection Bureau (“CFPB”) has adopted regulations defining “qualified mortgages” that are presumed to comply with the Dodd-Frank Act’s ability-to-repay rules. Under the CFPB regulations, qualified mortgages must satisfy the following criteria: (i) no negative amortization, interest-only payments, balloon payments, or term greater than 30 years; (ii) no points or fees in excess of 3% of the loan amount for loans over $100,000; (iii) borrower’s income and assets are verified and documented; and (iv) the borrower’s debt-to-income ratio generally may not exceed 43%. Qualified mortgages are conclusively presumed to comply with the ability-to-pay rule unless the mortgage is a “higher cost” mortgage, in which case the presumption is rebuttable. Under the Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted in 2018, residential mortgages originated for portfolio by insured depository institutions, like the Bank, with less than $10 billion in total consolidated assets will be treated as qualified mortgages; provided that the mortgage terms do not include interest-only payments or negative amortization, total points and fees do not exceed 3% of the loan amount, prepayment penalties are not in excess of those permitted for qualified mortgages under Regulation Z and the lender has considered and documented the debt, income and financial resources of the borrower.

The Bank has established various lending limits for its officers and also maintains an Officer Loan Committee to approve higher loan amounts. The Officer Loan Committee is comprised of the President and Chief Executive Officer, Chief Lending Officer and other Bank officers. The Officer Loan Committee has the authority to approve all loans up to set limits based on the type of loan and the collateral. Requests in excess of these limits must be submitted to the Directors’ Loan Committee or Board of Directors for approval. Additionally, the President and Chief Executive Officer, and the Chief Lending Officer and other officers have the authority to approve secured and unsecured loans up to amounts approved by the Board of Directors and maintained in the Bank’s Loan Policy. Notwithstanding individual lending authority, certain loan policy exceptions must be submitted to the Officer Loan Committee for approval.

Hazard insurance coverage is required on all properties securing loans made by the Bank. Flood insurance is also required, when applicable.

Loan applicants are notified of the credit decision by letter. If the loan is approved, the loan commitment specifies the terms and conditions of the proposed loan including the amount, interest rate, amortization term, a brief description of the required collateral, and the required insurance coverage. The borrower must provide proof of fire, flood (if applicable) and casualty insurance on the property serving as collateral and title insurance, and these applicable insurances must be maintained during the full term of the loan.

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The following table sets forth maturities and interest rate sensitivity for selected categories of loans as of December 31, 2022. Scheduled repayments are reported in the maturity category in which payment is due. Demand loans, loans having no stated schedule of repayments and no stated maturity and overdrafts are reported as due in one year or less.

	One Year		After One to		After Five Years			After
	or Less		Five Years		Through 15 years			15 years		Total
	(dollars in thousands)
Real Estate:
Residential	$	43,237	$	110,343	$	103,805	$	41,428	$	298,813
Commercial		67,405		168,984		320,020		95,135		651,544
Agricultural		4,302		15,248		33,664		15,701		68,915
Construction		1,751		3,710		8,344		18,664		32,469
Commercial loans		71,893		85,748		29,311		305		187,257
Other agricultural loans		12,351		16,678		5,863		385		35,277
Consumer loans		76,632		113,088		10,162		267		200,149
Total	$	277,571	$	513,799	$	511,169	$	171,885	$	1,474,424
Loans with fixed rates	$	18,855	$	172,146	$	359,625	$	233,425	$	784,051
Loans with floating rates		213,340		412,610		63,416		1,007		690,373
Total	$	232,195	$	584,756	$	423,041	$	234,432	$	1,474,424

allowance for Loan Losses

The allowance for loan losses totaled $16,999,000 as of December 31, 2022 and represented 1.15% of total loans receivable compared to $16,442,000 and 1.21% of total loans as of year-end 2021. Net charge-offs for 2022 totaled $343,000 and represented 0.02% of average loans compared to $908,000 and 0.07% of average loans in 2021.

Management assesses the adequacy of the allowance for loan losses on a quarterly basis. The process includes a review of the risks inherent in the loan portfolio. It also includes an analysis of impaired loans and a historical review of losses. Other factors considered in the analysis include: concentrations of credit in specific industries in the commercial portfolio, the local and regional economic conditions, trends in delinquencies, internal risk rating classifications, total loan growth in the portfolio and fluctuations in large balance credits. For loans acquired, including those that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit discounts.

The Company has limited exposure to higher-risk loans. The Company does not originate option ARM products, interest only loans, sub-prime loans or loans with initial teaser rates in its residential real estate portfolio. As of December 31, 2022, the Company had $14,437,000 million of junior lien home equity loans. For the year ended December 31, 2022, there were $5,000 of charge-offs for this portfolio, with recoveries of $5,000 in 2022.

As of December 31, 2022, the Company considered its concentration of credit risk profile to be acceptable. The highest concentrations are in commercial rentals and the residential rentals categories.

At December 31, 2022, the recorded investment in impaired loans, not requiring an allowance for loan losses, was $413,000 (net of charge-offs against the allowance for loan losses of $0). The recorded investment in impaired loans, requiring an allowance for loan losses, was $50,000, (net of charge-offs against the allowance for loan losses of $0). At December 31, 2021, the recorded investment in impaired loans, not requiring an allowance for loan losses, was $157,000 (net of charge-offs of $0). The recorded investment in impaired loans, requiring an allowance for loan losses, was $1,517,000.

As a result of its analysis, after applying these factors, management considers the allowance as of December 31, 2022, adequate. However, there can be no assurance that the allowance for loan losses will be adequate to cover significant losses that might be incurred in the future.

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The following table sets forth information with respect to the Bank’s allowance for loan losses as of December 31, 2022 and 2021:

	As of December 31,
	2022			2021
	(dollars in thousands)
Total loans receivable, net of deferred fees	$	1,473,945		$	1,354,931
Allowance balance at beginning of period	$	16,442		$	13,150
Net (charge-offs) recoveries:
Real Estate-Residential		(42)			57
Real Estate-Commercial		62			(433)
Real Estate-Agricultural		—			—
Real Estate-Construction		—			—
Commercial loans		30			(124)
Other agricultural loans		—			(27)
Consumer		(393)			(381)
Total		(343)			(908)
Provision Expense		900			4,200
Allowance balance at end of period	$	16,999		$	16,442
Average loans receivable:
Real Estate-Residential	$	286,545		$	264,305
Real Estate-Commercial		635,207			595,854
Real Estate-Agricultural		65,937			64,295
Real Estate-Construction		24,472			21,793
Commercial loans		185,687			247,953
Other agricultural loans		36,352			40,215
Consumer		166,803			152,478
Total average loans outstanding	$	1,401,003		$	1,386,893
Net (charge-offs) recoveries as a percent of average loans outstanding
Real Estate-Residential		(0.01)	%		0.02	%
Real Estate-Commercial		0.01			(0.07)
Real Estate-Agricultural		-			-
Real Estate-Construction		-			-
Commercial loans		0.02			(0.05)
Other agricultural loans		-			(0.07)
Consumer		(0.24)			(0.25)
Total net charge-offs		0.02	%		(0.07)	%
Credit Quality Ratios:
As a percent of year-end loans, net of unearned income:
Allowance for loan losses		1.15%			1.21%
Nonaccrual loans		0.08%			0.05%
Nonperforming loans		0.08%			0.05%
Allowance for loan losses to nonaccrual loans		1527.31%			2557.08%
Allowance for loan losses to nonperforming loans		1527.31%			2240.05%

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The following table sets forth the allocation of the Bank’s allowance for loan losses by loan category and the percent of loans in each category to total loans at the date indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which credit losses may occur. The total allowance is available to absorb losses from any type of loan.

	As of December 31,
	2022				2021
			% of				% of
			Loans				Loans
			to Total				to Total
	Amount		Loans		Amount		Loans
	(dollars in thousands)
Real estate – residential	$	2,833	20.3	%	$	2,175	20.1	%
Real estate – commercial		8,293	44.2			10,878	46.4
Real estate – agricultural		259	4.7			—	4.6
Real estate – construction		409	2.2			133	1.6
Commercial		2,445	12.7			1,490	13.7
Other agricultural loans		124	2.4			—	2.8
Consumer		2,636	13.5			1,766	10.8
Total	$	16,999	100	%	$	16,442	100	%

As a result of the acquisition of UpState, the Company added $107.3 million of agricultural loans to the loan portfolio. These loans are included in the outstanding balance information, but do not require an allocation of the allowance for loan losses since they were recorded at fair value in accordance with ASC 310-20 and ASC 310-30.

Additional information about the allowance for loan losses at December 31, 2022 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 2 and Note 4 to the audited consolidated financial statements.

Non-Performing Assets

Non-performing assets consist of non-performing loans and real estate owned as a result of foreclosure, which is held for sale. Loans are placed on non-accrual status when management believes that a borrower’s financial condition is such that collection of interest is doubtful. Commercial and real estate related loans are generally placed on non-accrual when interest is 90 days delinquent. When loans are placed on non-accrual, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses.

As of December 31, 2022, non-performing loans totaled $1,113,000 and represented 0.08% of total loans compared to $734,000 or 0.05% as of December 31, 2021. The increase in the level of non-performing loans was due primarily to one credit relationship in the amount of $452,000 that was transferred to non-accrual status in the fourth quarter of 2022.

Foreclosed real estate owned totaled $346,000 as of December 31, 2022 and $1,742,000 as of December 31, 2021. During 2022, one property with a carrying value of $1,396,000 was disposed of through a sale. The Company recorded a gain of $427,000 on the sale of the property during the year ended December 31, 2022.

Securities

The securities portfolio consists of U.S. Treasury securities, U.S. Government agencies, mortgage-backed securities issued by government sponsored entities and municipal obligations. The Company classifies its investments into two categories: held to maturity (HTM) and available for sale (AFS). The Company does not have trading securities. Securities classified as HTM are those in which the Company has the ability and the intent to hold the security until contractual maturity. As of December 31, 2022, there were no securities carried in the HTM portfolio. Securities classified as AFS are eligible to be sold due to liquidity needs or interest rate risk management. These securities are adjusted to and carried at their fair value with any unrealized gains or losses recorded net of deferred income taxes, as an adjustment to capital and reported in the equity section of the Consolidated Balance Sheet as other comprehensive income. As of December 31, 2022, $418.9 million of securities were so classified and carried at their fair value, with unrealized losses, net of tax, of $57.9 million included in accumulated other comprehensive income as a component of stockholders’ equity. The Company considers its investment portfolio a source of earnings and liquidity. Investment securities may also be pledged to secure public deposits and customer repurchase agreements.

As of December 31, 2022, the average life of the portfolio was 7.3 years. The Company has maintained a relatively short average life in the portfolio in order to generate cash flow to support loan growth and maintain liquidity levels. Purchases for the year

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totaled $130.8 million, while maturities and principal reductions totaled $40.8 million and proceeds from sales were $5.1 million. The purchases were funded principally by cash flow generated from the portfolio and excess overnight liquidity.

The following table sets forth certain information regarding securities not carried at fair value through earnings, weighted average yields, and maturities of the Company’s securities portfolio as of December 31, 2022 and 2021. Yields on tax-exempt securities are stated on a fully taxable equivalent basis using a Federal tax rate of 21%. Actual maturities may differ from contractual maturities as certain instruments have call features which allow prepayment of obligations. Maturity on the mortgage-backed securities is based upon contractual terms, the average life may differ as a result of changes in cash flow.

					After One				After Five								Total Investment
	One Year or Less				Through Five Years				Through Ten Years				After Ten Years				Securities
	Carrying		Average		Carrying		Average		Carrying		Average		Carrying		Average		Carrying		Average
	Value		Yield		Value		Yield		Value		Yield		Value		Yield		Value		Yield
	(dollars in thousands)
U.S. Treasury securities	$	1,961	3.01	%	$	28,145	2.50	%	$	11,749	1.21	%	$	—	—	%	$	41,854	2.13	%
U.S. Government agencies		2,858	3.26			7,320	1.82			8,145	1.64							18,323	1.90
State and political subdivision		1,001	3.16			7,458	2.94			22,585	2.00			96,808	2.35			127,852	2.32
Corporate obligations		—	—			—	—			—	—			—	—			—	—
Mortgage-backed securities-government sponsored entities		—	—			228	1.40			18,956	2.39			211,713	1.81			230,898	1.85
Total Investment Securities	$	5,820	3.16	%	$	43,151	2.45	%	$	61,435	1.89	%	$	308,521	1.99	%	$	418,927	2.03	%

The portfolio had no adjustable-rate instruments as of December 31, 2022 and 2021. The portfolio contained no private label mortgage-backed securities, collateralized debt obligations (CDOs), or trust preferred securities, and no off-balance sheet derivatives were in use. As of December 31, 2022, the portfolio did not contain any step-up bonds. The mortgage-backed securities portfolio includes pass-through bonds and collateralized mortgage obligations (CMO’s) issued by Fannie Mae, Freddie Mac and the Government National Mortgage Association (GNMA).

The Company evaluates the securities in its portfolio for other-than-temporary-impairment (OTTI) as fair value declines below cost. In estimating OTTI, management considers (1) the length of time and the extent of the decline in fair value and (2) the financial condition and near-term prospects of the issuer. As of December 31, 2022, the Company held 343 investment securities in a loss position, which had a combined unrealized loss of $73.3 million. Management believes that these losses are principally due to changes in interest rates and represent temporary impairment as the Company does not have the intent to sell these securities and it is more likely than not that it will not have to sell the securities before recovery of their cost basis. No impairment charges were recognized in 2022 or 2021.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company uses fair value measurements to record fair value adjustments to certain financial instruments and determine fair value disclosures (see Note 16 of Notes to the Consolidated Financial Statements).

Approximately $420.4 million, which represents 20.5% of total assets at December 31, 2022, consisted of financial instruments recorded at fair value on a recurring basis. This amount consists entirely of the Company’s available for sale securities portfolio and interest rate derivatives. The Company uses valuation methodologies involving market-based or market-derived information, collectively Level 1 and 2 measurements, to measure fair value. There were no transfers into or out of Level 3 for any instruments for the years ended December 31, 2022 and 2021.

The Company utilizes a third party provider to perform valuations of the investments. Methods used to perform the valuations include: pricing models that vary based on asset class, available trade and bid information, actual transacted prices, and proprietary models for valuations of state and municipal obligations. In addition, the Company has a sample of fixed-income securities valued by another independent source. The Company does not adjust values received from its providers, unless it is evident that fair value measurement is not consistent with the Company’s policies.

The Company also utilizes a third party provider to provide 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

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parties, other than in a forced liquidation. The fair value of mortgage servicing rights as of December 31, 2022 and 2021 was $498,000 and $500,000, respectively.

DEPOSITS

The Bank provides a full range of deposit products to its retail and business customers. These include interest-bearing and noninterest bearing transaction accounts, statement savings and money market accounts. Certificate of deposit terms range up to five years for retail instruments. As of December 31, 2022, the Bank does not have any brokered deposits obtained through internet listing services, and no broker deposits which were secured through Cede & Co. The Bank participates in the Jumbo CD ($100,000 and over) markets with local municipalities and school districts which are typically priced on a competitive bid basis. Other services the Bank offers its customers include cash management, direct deposit, Remote Deposit Capture, mobile deposit capture, PopMoney® mobile payments and Automated Clearing House (ACH) activity. The Bank operates thirty automated teller machines and is affiliated with the MoneyPass® ATM network. Internet banking including bill-pay is offered through the website at www.waynebank.com. Other services, such as eStatements and mobile banking are available online.

The following table sets forth information regarding deposit categories of the Company.

	Years Ended December 31,
	2022				2021
	Average				Average
	Balance		Rate Paid		Balance		Rate Paid
	(dollars in thousands)
Noninterest-bearing demand	$	442,607	—	%	$	423,404	—	%
Interest-bearing demand		233,000	0.22			180,080	0.11
Money Market		306,518	0.32			295,626	0.23
Savings		298,933	0.08			265,981	0.06
Time		487,674	0.97			517,087	0.71
Total	$	1,768,732			$	1,682,178

As of December 31, 2022 and 2021, the total of uninsured deposits of the Company was $213,623,000 and $235,515,000, respectively. Total uninsured deposits is calculated based on regulatory reporting requirements and reflects the portion of any deposit of a customer at an insured depository institution that exceeds the applicable FDIC insurance coverage for that depositor at that institution and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regime.

As of December 31, 2022, the total of U.S. time deposits in excess of the Federal Deposit Insurance Corporation insurance limits were $213,623,000.

The following table indicates the amount of time deposits that are uninsured by time remaining until maturity as of December 31, 2022:

Amount

(in thousands)

Three months or less	$	46,123
Over 3 through 6 months		51,847
Over 6 months through 12 months		67,281
Over 12 months		48,372
	$	213,623

Total deposits as of December 31, 2022, were $1.728 billion, a decrease of $29.1 million from December 31, 2021. Non-maturity interest-bearing deposits increased $2.0 million in 2022, while non-interest bearing demand deposits decreased $6.1 million. Time deposits decreased $24.9 million during 2022.

Time deposits over $250,000, which consist principally of school district funds, other public funds and short-term deposits from large commercial customers with maturities generally less than one year, totaled $213.6 million as of December 31, 2022,

19

compared to $257.2 million at year-end 2021. These deposits are subject to competitive bid and the Company bases its bid on current interest rates, loan demand, investment portfolio structure and the relative cost of other funding sources.

As of December 31, 2022, non-interest bearing demand deposits totaled $434.5 million compared to $440.7 million at December 31, 2021. Cash management accounts in the form of securities sold under agreements to repurchase included in short-term borrowings, totaled $51.0 million at December 31, 2022 compared to $60.8 million as of December 31, 2021. These balances represent commercial and municipal customers’ funds invested in overnight securities. The Company considers these accounts as a source of core funding.

RESULTS OF OPERATIONS

Summary

Net income for the Company for the year ended December 31, 2022 was $29,233,000, which was $4,318,000 higher than the $24,915,000 earned in 2021. Earnings per share on a fully diluted basis were $3.58 for 2022 compared to $3.04 in 2021. The return on average assets for the year ended December 31, 2022, was 1.43%, and the return on average equity was 16.11%, compared to 1.24% and 12.35%, respectively, for the year ended December 31, 2021. Net interest income increased $3,084,000 for the year ended December 31, 2022, which offset a $2,430,000 increase in other expenses during the 2022 year. A $3,300,000 decrease in the provision for loan losses, and a $1,571,000 increase in other income during the year ended December 31, 2022, also contributed to the positive variance.

For the year ended December 31, 2022, fully taxable equivalent (“fte”) net interest income totaled $69,164,000, which was an increase of $3,064,000 from the year ended 2021 total. Average loans outstanding increased $14.1 million in 2022, which resulted in an increase in interest income (fte) of $657,000. Total average securities increased $160.1 million in 2022 as proceeds from deposit growth and overnight liquidity were used to fund new purchases, resulting in a $3.6 million increase in total interest income (fte) on securities. During the year ended December 31, 2022, average interest-bearing deposits increased $67.4 million, resulting in a $1.7 million increase in total interest expense on deposits. The cost of borrowed funds decreased $202,000 in 2022, compared to the prior year due primarily to a lower level of borrowings. During the year ended December 31, 2022, the resulting net interest spread (fte) decreased one basis point to 3.38%, as a nine basis point increase in the yield earned was offset by a 10 basis point increase in the cost of funds.

Total other income for the year ended December 31, 2022 was $9,932,000, compared to $8,361,000 in the prior year, an increase of $1,571,000. During the year ended December 31, 2022, gains on the sale of loans and investment securities decreased $263,000 in the aggregate, while gains on the sale of foreclosed real estate owned increased $391,000. Service charges and fees decreased $32,000 in 2022 compared to the 2021, while all other items of other income increased $1,475,000, net, in 2022. The increase in 2022 includes $1.1 million of earnings recognized due to the payoff of purchased impaired loans acquired at a discount.

During the year ended December 31 ,2022, other expenses were $41,044,000, compared to $38,614,000 for the same period in 2021, an increase of $2,430,000. Salaries and benefits costs increased $1,463,000 in 2022, while occupancy and equipment costs rose $145,000. All other operating expenses increased $822,000, net, in 2022. Income tax expense for the 2022 year totaled $7,152,000, which was an increase of $1,207,000 from the 2021 year ended. The effective tax rate in 2022 was 19.7% compared to 19.3% in 2021. The increase in the effective tax rate reflects the increased level of taxable income, which is taxed at the marginal rate of 21%.

20

The following table sets forth changes in net income (in thousands):

Net income 2021	$	24,915
Net interest income		3,084
Provision for loan losses		3,300
Net gains on sales of loans and securities		(263)
Net gains on sales of foreclosed real estate		391
Other income		1,443
Salaries and employee benefits		(1,463)
Occupancy, furniture and equipment		(145)
Date processing and related operations		(533)
Professional fees		(137)
Other expenses		(152)
Income tax expense		(1,207)
Net income 2022	$	29,233

NET INTEREST INCOME

Net interest income is the most significant source of revenue for the Company and represented 87.3% of total revenue for the year ended December 31, 2022. Net interest income (fte) totaled $69,164,000 for the year ended December 31, 2022 compared to $66,100,000 for 2021, an increase of $3,064,000. The resulting fte net interest spread and net interest margin were 3.38% and 3.53%, respectively, in 2022 compared to 3.39% and 3.50%, respectively, in 2021.

Interest income (fte) for the year ended December 31, 2022 totaled $76,433,000 compared to $71,857,000 in 2021. The fte yield on average earning assets was 3.90%, increasing nine basis points from the 3.81% reported last year. The tax-equivalent yield on total loans remained stable at 4.73% in 2022, while average loans outstanding increased $14.1 million, resulting in an increase in interest income (fte) from loans of $657,000. The yield on securities increased 13 basis points in 2022 due primarily to higher yields on new purchases. During the 2022 year ended, average securities outstanding increased $160.1 million, as cash flows from deposit growth was utilized to fund new purchases, and interest income (fte) from the portfolio increased $3.6 million from the 2021 year ended.

Interest expense was $7,269,000 in 2022, which resulted in an average cost of interest-bearing liabilities of 0.52% compared to total interest expense of $5,757,000 in 2021, with an average cost of 0.42%. Total interest-bearing deposits cost was 0.49% in 2022, which was an increase of 11 basis points over the 2021 year. The increase in cost was due primarily to time certificates of deposit that repriced to current market rates upon maturity, resulting in an increase in the interest rate paid from 0.71% in 2021 to 0.97% in 2022. Borrowing costs also increased in 2022, reflecting the higher interest rate environment.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $900,000 in 2022 compared to $4,200,000 in 2021. The decreased provision for loan losses recorded in 2022 reflects the removal of the qualitative factors specific to the COVID-19 pandemic. Qualitative factors specific to the pandemic that were developed in 2020 required a $2.3 million allocation to the required allowance for loan losses at December 31, 2021. Additionally, the quantitative factor related to historical loan losses decreased $670,000 compared to the 2021 level.

Management assesses the adequacy of the allowance for loan losses on a quarterly basis. The process includes a review of the risks inherent in the loan portfolio. It also includes an analysis of impaired loans and a historical review of losses. Other factors considered in the analysis include: concentrations of credit in specific industries in the commercial portfolio, the local and regional economic conditions, trends in delinquencies, internal risk rating classifications, total loan growth in the portfolio and fluctuations in large balance credits. For loans acquired, including those that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit discounts.

OTHER INCOME

Total other income was $9,932,000 for the year ended December 31, 2022, compared to $8,361,000 in 2021, an increase of $1,571,000. Debit card fees increased $267,000 in 2022, earnings and proceeds from bank-owned life insurance increased $146,000,

21

and gains on the sale of foreclosed real estate owned increased $391,000. During 2022, gains on the sale of loans and investment securities decreased $263,000 in the aggregate, while all other items of other income increased $1,027,000, net.

Other Income (dollars in thousands)

For the year ended December 31

	2022		2021
Service charges on deposit accounts	$	420	$	398
ATM Fees		452		443
Overdraft Fees		1,155		1,029
Safe deposit box rental		93		100
Loan related service fees		928		1,368
Debit card		2,495		2,228
Fiduciary activities		845		748
Commissions on mutual funds & annuities		118		127
Earnings on and proceeds from bank-owned life insurance		1,087		941
Other income		1,906		674
		9,499		8,056
Net realized gains on sales of securities		3		92
Gains on sales of loans		3		177
Gains on sales of foreclosed real estate owned		427		36
Total	$	9,932	$	8,361

OTHER EXPENSES

Other expenses totaled $41,044,000 for the year ended December 31, 2022, compared to $38,614,000 in the 2021 year. Salaries and employee benefits costs increased $1,463,000 in 2022, while occupancy and equipment costs increased $145,000. During the year ended December 31, 2022, all other operating expenses increased $822,000, net. The Company’s efficiency ratio, which measures total other expenses as a percentage of net interest income (fte) plus other income, was 51.9% in 2022 compared to 51.8% in 2021.

Other Expenses (dollars in thousands)

For the year ended December 31

	2022		2021
Salaries	$	13,791	$	12,944
Employee benefits		8,280		7,664
Occupancy		3,701		3,533
Furniture and equipment		1,266		1,289
Data processing and related operations		2,948		2,415
Federal Deposit Insurance Corporation insurance assessment		612		681
Advertising		516		473
Professional fees		1,719		1,582
Postage and telephone		959		993
Office supplies		483		443
Taxes, other than income		1,013		1,122
Foreclosed real estate		73		151
Amortization of intangible assets		101		123
Other		5,582		5,201
Total	$	41,044	$	38,614

INCOME TAXES

Income tax expense for the year ended December 31, 2022 totaled $7,152,000, which resulted in an effective tax rate of 19.7%, compared to $5,945,000 and 19.3% for 2021. The higher effective tax rate reflects the increase in taxable income.

22

CAPITAL AND DIVIDENDS

Total stockholders’ equity as of December 31, 2022, was $167.1 million, compared to $205.3 million as of December 31, 2021. Earnings retention, net of a $9.2 million reduction resulting from cash dividends declared, contributed to the increase. Fluctuations in interest rates during the year ended December 31, 2022, impacted the fair value of the Company’s Available-for-Sale securities, and contributed to $57.1 million decrease in capital as a reduction in accumulated other comprehensive income. As of December 31, 2022 the Company had a leverage capital ratio of 9.36%, a Tier 1 risk-based capital ratio and a common equity Tier 1 risk-based capital ratio of 12.49%, and a total risk-based capital ratio of 13.58%, compared to 8.51%, 12.49% and 13.66%, respectively, at December 31, 2021.

NON-GAAP FINANCIAL MEASURES

This Annual Report contains or references fully taxable-equivalent interest income and net interest income, which are non-GAAP financial measures. Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using a marginal tax rate of 21%. We believe the presentation of interest income and net interest income on a fully taxable-equivalent basis ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income to net interest income on a fully taxable-equivalent basis:

(dollars in thousands)	Years ended December 31,
	2022		2021
Net interest income	$	68,397	$	65,313
Taxable-equivalent basis adjustment
using a 21% marginal tax rate		767		787
Net interest income on a fully
taxable equivalent basis	$	69,164		66,100

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CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES

(Tax-Equivalent Basis, dollars in thousands)

Year Ended December 31	2022						2021
	Average				Average		Average				Average
	Balance		Interest		Rate		Balance		Interest		Rate
		(2)		(1)				(2)		(1)
ASSETS
Interest-earning assets:
Interest-bearing deposits with banks	$	77,496	$	602	0.78	%	$	175,854	$	266	0.15	%
Securities available for sale:
Taxable		405,374		7,262	1.79			261,912		4,055	1.55
Tax-exempt		78,224		2,265	2.90			61,610		1,889	3.06
Total securities available for sale		483,598		9,527	1.97			323,522		5,944	1.84
Loans receivable (3)(4)		1,401,003		66,304	4.73			1,386,893		65,647	4.73
Total interest-earning assets		1,962,097		76,433	3.90			1,886,269		71,857	3.81
Noninterest earning assets:
Cash and due from banks		24,560						23,828
Allowance for loan losses		(16,854)						(15,263)
Other assets		77,800						114,210
Total noninterest earning assets		85,506						122,775
TOTAL ASSETS	$	2,047,603					$	2,009,044
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing demand and money market	$	539,518		1,506	0.28		$	475,706		894	0.19
Savings		298,933		242	0.08			265,981		169	0.06
Time		487,674		4,723	0.97			517,087		3,694	0.71
Total interest-bearing deposits		1,326,125		6,471	0.49			1,258,774		4,757	0.38
Short-term borrowings		69,711		524	0.75			73,810		284	0.38
Other borrowings		11,045		274	2.48			36,196		716	1.98
Total interest-bearing liabilities		1,406,881		7,269	0.52			1,368,780		5,757	0.42
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		442,607						423,404
Other liabilities		16,616						15,179
Total noninterest-bearing liabilities		459,223						438,583
Stockholders’ equity		181,499						201,681
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,047,603					$	2,009,044
Net Interest Income/spread
(tax equivalent basis)				69,164	3.38	%				66,100	3.39	%
Tax-equivalent basis adjustment				(767)						(787)
Net Interest Income			$	68,397					$	65,313
Net interest margin
(tax equivalent basis)					3.53	%					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)Loan balances include non-accrual loans and are net of unearned income.

(4)Loan yields include the effect of amortization of purchased credit marks and deferred fees net of costs.

‎

24

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)
(dollars in thousands)	2022 compared to 2021
	Variance due to
	Volume		Rate		Net
INTEREST-EARNING ASSETS:
Interest-bearing deposits	$	(400)	$	736	$	336
Securities available for sale:
Taxable		2,325		882		3,207
Tax-exempt securities		498		(122)		376
Total securities available for sale		2,823		760		3,583
Loans receivable		657		—		657
Total interest-earning assets		3,080		1,496		4,576
INTEREST-BEARING LIABILITIES
Interest-bearing demand and money market		165		447		612
Savings		22		51		73
Time		(277)		1,306		1,029
Total interest-bearing deposits		(90)		1,804		1,714
Short-term borrowings		(30)		270		240
Other borrowings		(507)		65		(442)
Total interest-bearing liabilities		(627)		2,139		1,512
Net interest income (tax-equivalent basis)	$	3,707	$	(643)	$	3,064

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.

Item 7A. Quantitative and Qualitative Disclosure 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 the 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 should 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 December 31, 2022, the level of net interest income at risk in a ± 200 basis points increase was within the Company’s policy limit of a decline less than 10% of net interest income.

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

At December 31, 2022, the Bank had a negative 90-day interest sensitivity gap of $46.7 million or 2.3% of total assets. A negative gap indicates that the balance sheet has a higher level of rate-sensitive liabilities (RSL) than rate-sensitive assets (RSA) at the specific time interval. This would indicate that in an increasing rate environment, the cost of interest-bearing liabilities would increase faster than the yield on interest-earning assets in the 90-day period. The level of RSA and RSL for an interval is managed by ALCO strategies, including adjusting the average life of the investment portfolio through purchases and sales, pricing of deposit liabilities to attract long or short-term time deposits, utilizing borrowings to fund loan growth, loan pricing to encourage variable-rate products and evaluation of loan sales of long-term, fixed-rate mortgages.

25

The Company analyzes and measures the time periods in which RSA and RSL will mature or reprice in accordance with their contractual terms and assumptions. Management believes that the assumptions used are reasonable. The interest rate sensitivity of assets and liabilities could vary substantially if differing assumptions were used or if actual experience differs from the assumptions used in the analysis. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Interest rates may change at different rates changing the shape of the yield curve. The level of rates on the investment securities may also be affected by the spread relationship between different investments. Further, in the event of a significant change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed. Finally, the ability of borrowers to service their adjustable-rate debt may decrease in the event of an interest rate increase. It should be noted that the operating results of the Company are not subject to foreign currency exchange or commodity price risk.

The following table displays interest-sensitivity as of December 31, 2022 (dollars in thousands):

	3 Months			3-12						Over
	Or Less			Months			1-3 Years			3 Years			Total
Federal funds sold and
interest-bearing deposits	$	3,019		$	—		$	—		$	—		$	3,019
Securities		8,225			24,995			77,885			307,822			418,927
Loans Receivable		218,811			229,896			445,384			579,854			1,473,945
Total Rate Sensitive Assets (RSA)	$	230,055		$	254,891		$	523,269		$	887,676		$	1,895,891
Non-maturity interest-bearing deposits	$	123,533		$	119,994		$	318,673		$	227,228		$	789,428
Time Deposits		90,296			245,962			154,207			13,305			503,770
Borrowings		62,902			47,387			22,926			—			133,215
Total Rate Sensitive Liabilities (RSL)	$	276,731		$	413,343		$	495,806		$	240,533		$	1,426,413
Interest sensitivity gap	$	(46,676)		$	(158,452)		$	27,463		$	647,143		$	469,478
Cumulative gap		(46,676)			(205,128)			(177,665)			469,478
RSA/RSL-cumulative		83.1	%		70.3	%		85.0	%		138.5	%
As of December 31, 2021
Interest sensitivity gap	$	175,100		$	(170,159)		$	11,040		$	524,379		$	540,360
Cumulative gap		175,100			4,941			15,981			540,360
RSA/RSL-cumulative		170.5	%		100.7	%		101.4	%		138.4	%

Certain interest-bearing deposits with no stated maturity dates are included in the interest-sensitivity table above. The balances allocated to the respective time periods represent an estimate of the total outstanding balance that has the potential to migrate either through withdrawal or transfer to time deposits, thereby impacting the interest-sensitivity position of the Company. The estimates were derived from a non-maturity deposit study, which was prepared by an independent third party provider. The purpose of the study was to estimate the average lives of various deposit types and their pricing sensitivity to movements in market interest rates.

INFLATION

Substantially all of the Company's assets and liabilities relate to banking activities and are monetary. The consolidated financial statements and related financial data are presented following GAAP. GAAP currently requires the Company to measure the financial position and results of operations in terms of historical dollars, except for securities available for sale, impaired loans, and other real estate loans that are measured at fair value. Changes in the value of money due to rising inflation can cause purchasing power loss.

Management's opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. It should be noted that interest rates and inflation do affect each other but do not always move in correlation with each other. The Company's ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company's performance.

26

LIQUIDITY

Liquidity is the ability to fund customers’ borrowing needs and their deposit withdrawal requests while supporting asset growth. The Company’s primary sources of liquidity include deposit generation, asset maturities, cash flow from payments on loans and securities and access to borrowing from the Federal Home Loan Bank and other correspondent banks.

As of December 31, 2022, the Company had cash and cash equivalents of $31.9 million in the form of cash, due from banks, balances with the Federal Reserve Bank, and short-term deposits with other institutions. In addition, at December 31, 2022, the Company had total securities available for sale of $418.9 million, which could be used for liquidity needs. This totals $450.8 million and represents 22.0% of total assets as of December 31, 2022, compared to $613.5 million and 29.7% of total assets as of December 31, 2021. The Company also monitors other liquidity measures for compliance with Company policy guidelines. Based upon these measures, the Company believes its liquidity position is adequate.

The Company maintains established lines of credit with the Federal Home Loan Bank of Pittsburgh (FHLB), the Atlantic Community Bankers Bank (ACBB) and other correspondent banks, which support liquidity needs. The total available credit under all lines was $190.0 million, with $42.3 million outstanding at December 31, 2022 and $0 million outstanding at December 31, 2021. The maximum borrowing capacity from FHLB at December 31, 2022 was $655.3 million. As of December 31, 2022, the Company had $40.0 million in term borrowings from the FHLB, compared to $30.0 million at December 31, 2021. Outstanding Letters of Credit to secure public funds totaled $92.9 million and $127.9 million at December 31, 2022 and 2021, respectively.

Item 8. Financial Statements and Supplementary Data.

REPORT ON MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

TO THE STOCKHOLDERS OF NORWOOD FINANCIAL CORP

Management of Norwood Financial Corp and its subsidiary (Norwood) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Norwood’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Norwood’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Norwood; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of Norwood’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Norwood’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of Norwood’s internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria established in Internal Control – Integrated Framework as set forth by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based upon its assessment, management has concluded that, as of December 31, 2022, the Company’s internal control over financial reporting, including controls over the preparation of regulatory financial statements in accordance with all federal and state laws and regulations, is effective based on the criteria established in the Internal Control – Integrated Framework.

/s/ James O. Donnelly	/s/ William S. Lance
James O. Donnelly	William S. Lance
President and	Executive Vice President and
Chief Executive Officer	Chief Financial Officer

 
‎

27

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Norwood Financial Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Norwood Financial Corp. and subsidiaries (the “Company”) as of December 31, 2022 and 2021; the related consolidated statements of income, comprehensive (loss) income, changes in stockholders’ equity, and cash flows for the years then ended; and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent, with respect to the Company, in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involve our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter, in any way, our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

28

Allowance for Loan Losses (ALL) – Qualitative Factors

Description of the Matter

The Company’s loan portfolio totaled $1.47 billion as of December 31, 2022, and the associated ALL was $17 million. As discussed in Note 4 to the consolidated financial statements, determining the amount of the ALL requires significant judgment about the collectability of loans, which includes an assessment of quantitative factors such as historical loss experience within each risk category of loans and testing of certain commercial loans for impairment. Management applies additional qualitative adjustments to reflect the inherent losses that exist in the loan portfolio at the balance sheet date that are not reflected in the historical loss experience. Qualitative adjustments are made based upon changes in lending policies and practices, economic conditions, changes in the loan portfolio mix, trends in loan delinquencies and classified loans, collateral values, and concentrations of credit risk for the commercial loan portfolios.

Auditing the Company’s ALL involved a high degree of subjectivity due to the judgment involved in management’s determination and measurement of qualitative factor adjustments included in the estimate of the allowance for loan losses. 

How We Addressed the Matter in Our Audit 

We gained an understanding of the Company’s process for establishing the ALL, including the qualitative adjustments made to the ALL. We evaluated the design and tested the operating effectiveness of controls over the Company’s ALL process, which included, among others, management’s review and approval controls designed to assess the need and level of qualitative adjustments to the ALL, as well as the reliability of the data utilized to support management’s assessment. 

To test the qualitative adjustments, we evaluated the appropriateness of management’s methodology and assessed whether all relevant risks were reflected in the ALL and the need to consider qualitative adjustments.

Regarding the measurement of the qualitative adjustments, we evaluated the completeness, accuracy, and relevance of the data and inputs utilized in management’s estimate. We evaluated the inputs and data to the Company’s historical loan performance data and third-party macroeconomic data. Furthermore, we analyzed the changes in the components of the qualitative reserves relative to changes in external market factors, the Company’s loan portfolio, and asset quality trends, which included the evaluation of management’s ability to capture and assess relevant data from both external sources and internal reports on loan customers and the supporting documentation for substantiating revisions to qualitative factors.  

We also utilized internal credit review specialists to perform procedures on a sample of commercial loans to test the Company’s credit risk ratings by comparing key attributes used in the determination of the credit risk rating to supporting documentation such as borrowers’ financial statements, underlying collateral, financial health of the guarantor, and loan payment history. 

We have served as the Company’s auditor since 2009.

King of Prussia, Pennsylvania

March 17, 2023

29

CONSOLIDATED BALANCE SHEETS

	December 31,
	2022		2021
	(In Thousands, Except Share ‎and Per Share Data)
ASSETS
Cash and due from banks	$	28,847	$	21,073
Interest-bearing deposits with banks		3,019		185,608
Cash and cash equivalents		31,866		206,681
Securities available for sale		418,927		406,782
Loans receivable (net of allowance for loan losses 2022: $16,999; 2021: $16,442)		1,456,946		1,338,489
Regulatory stock, at cost		5,418		3,927
Premises and equipment, net		17,924		17,289
Bank owned life insurance		43,364		40,038
Accrued interest receivable		6,917		5,889
Foreclosed real estate owned		346		1,742
Deferred tax assets, net		23,549		8,791
Goodwill		29,266		29,266
Other intangibles		306		407
Other assets		12,241		9,203
Total Assets	$	2,047,070	$	2,068,504
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand	$	434,529	$	440,652
Interest-bearing demand		237,891		196,786
Money market deposit accounts		273,165		309,439
Savings		278,372		281,214
Time		503,770		528,702
Total Deposits		1,727,727		1,756,793
Short-term borrowings		93,215		60,822
Other borrowings		40,000		29,998
Accrued interest payable		2,653		1,203
Other liabilities		16,390		14,426
Total Liabilities		1,879,985		1,863,242
STOCKHOLDERS’ EQUITY
Preferred stock, no par value, authorized: 5,000,000 shares, issued: none		—		—
Common stock, $0.10 par value,
authorized: 20,000,000 shares
issued: 2022: 8,291,401 shares; 2021: 8,266,751 shares		829		827
Surplus		96,897		96,443
Retained earnings		130,020		110,015
Treasury stock at cost: 2022: 124,650 shares; 2021: 65,328 shares		(3,308)		(1,767)
Accumulated other comprehensive loss		(57,353)		(256)
Total Stockholders' Equity		167,085		205,262
Total Liabilities and Stockholders' Equity	$	2,047,070	$	2,068,504

See notes to consolidated financial statements.

30

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
	2022		2021
	(In Thousands, Except Share ‎and Per Share Data)
INTEREST INCOME
Loans receivable, including fees	$	66,013	$	65,257
Securities
Taxable		7,262		4,055
Tax exempt		1,789		1,492
Interest-bearing deposits with banks		602		266
Total Interest Income		75,666		71,070
INTEREST EXPENSE
Deposits		6,471		4,757
Short-term borrowings		524		284
Other borrowings		274		716
Total Interest Expense		7,269		5,757
Net Interest Income		68,397		65,313
PROVISION FOR LOAN LOSSES		900		4,200
Net Interest Income After
Provision for Loan Losses		67,497		61,113
OTHER INCOME
Service charges and fees		5,661		5,693
Income from fiduciary activities		845		748
Net realized gains on sales of securities		3		92
Net gain on sale of loans		3		177
Net gain on sale of foreclosed real estate owned		427		36
Earnings and proceeds on life insurance policies		1,087		941
Other		1,906		674
Total Other Income		9,932		8,361
OTHER EXPENSES
Salaries and employee benefits		22,071		20,608
Occupancy		3,701		3,533
Furniture and equipment		1,266		1,289
Data processing and related operations		2,948		2,415
Federal Deposit Insurance Corporation insurance assessment		612		681
Advertising		516		473
Professional fees		1,719		1,582
Postage and telephone		959		993
Taxes, other than income		1,013		1,122
Foreclosed real estate		73		151
Amortization of intangible assets		101		123
Other		6,065		5,644
Total Other Expenses		41,044		38,614
Income before Income Taxes		36,385		30,860
INCOME TAX EXPENSE		7,152		5,945
Net income	$	29,233	$	24,915
EARNINGS PER SHARE
BASIC	$	3.59	$	3.05
DILUTED	$	3.58	$	3.04

See notes to consolidated financial statements.

31

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

	Years Ended December 31,
(in thousands)	2022		2021
NET INCOME	$	29,233	$	24,915
Other comprehensive (loss) income:
Unrealized (loss) gain on pension liability		(784)		220
Tax Effect		165		(46)
Investment securities available for sale:
Unrealized holding loss		(71,488)		(6,931)
Tax Effect		15,012		1,455
Reclassification of gains from sale of securities		(3)		(92)
Tax Effect		1		19
Other comprehensive loss		(57,097)		(5,375)
COMPREHENSIVE (LOSS) INCOME	$	(27,864)	$	19,540

See notes to consolidated financial statements.

 
‎

32

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

		Years Ended December 31, 2022 and 2021
					(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
	(Dollars in Thousands, Except per Share Data)
BALANCE - DECEMBER 31, 2020		8,236,331	$	824		$	95,388	$	93,796		10,263	$	(342)	$	5,119	$	194,785
Net Income		—		—			—		24,915		—		—		—		24,915
Other comprehensive loss		—		—			—		—		—		—		(5,375)		(5,375)
Cash dividends declared ($1.06 per share)		—		—			—		(8,696)		—		—		—		(8,696)
Acquisition of treasury stock		—		—			—		—		56,162		(1,440)		—		(1,440)
Stock options exercised		22,420		2			392		—		—		—		—		394
Sale of treasury stock for ESOP		—		—			(5)		—		(4,997)		135		—		130
Compensation expense related to
stock options		—		—			214		—		—		—		—		214
Restricted stock awards		8,000		1			454		—		3,900		(120)		—		335
BALANCE - DECEMBER 31, 2021		8,266,751		827			96,443		110,015		65,328		(1,767)		(256)		205,262
Net Income		—		—			—		29,233		—		—		—		29,233
Other comprehensive loss		—		—			—		—		—		—		(57,097)		(57,097)
Cash dividends declared ($1.13 per share)		—		—			—		(9,228)		—		—		—		(9,228)
Acquisition of treasury stock		—		—			—		—		96,062		(2,515)		—		(2,515)
Stock options exercised		1,650		—			(212)		—		(32,775)		869		—		657
Sale of treasury stock for ESOP		—		—			27		—		(3,965)		105		—		132
Compensation expense related to
stock options		—		—			269		—		—		—		—		269
Restricted stock awards		23,000		2			370		—		—		—		—		372
BALANCE - DECEMBER 31, 2022		8,291,401	$	829		$	96,897	$	130,020		124,650	$	(3,308)	$	(57,353)	$	167,085

See notes to consolidated financial statements.
‎

33

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2022		2021
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	29,233	$	24,915
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		900		4,200
Depreciation		1,470		1,481
Amortization of intangible assets		101		123
Deferred income taxes		419		(383)
Net amortization of securities premiums and discounts		1,303		1,529
Net realized gains on sales of securities		(3)		(92)
Earnings and proceeds on life insurance policies		(1,087)		(941)
Gain (loss) on sales of fixed assets and foreclosed real estate owned		(379)		108
Net amortization of loan fees		(217)		(3,497)
Net gain on sale of loans		(3)		(177)
Mortgage loans originated for sale		(845)		(8,616)
Proceeds from sale of loans originated for sale		848		8,793
Compensation expense related to stock options		269		214
Compensation expense related to restricted stock		372		335
(Increase) decrease in accrued interest receivable		(1,028)		343
Increase (decrease) in accrued interest payable		1,450		(398)
Other, net		(2,069)		1,261
Net Cash Provided by Operating Activities		30,734		29,198
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales		5,113		11,366
Proceeds from maturities and principal reductions on mortgage-backed securities		40,780		68,218
Purchases		(130,828)		(268,242)
Purchase of regulatory stock		(6,366)		(4,201)
Redemption of regulatory stock		4,875		4,255
Net (increase) decrease in loans		(118,999)		57,938
Proceeds from bank-owned life insurance		761		511
Purchase of bank-owned life insurance		(3,000)		—
Purchase of premises and equipment		(2,153)		(1,258)
Proceeds from sales of foreclosed real estate owned		1,823		291
Proceeds from sales of bank premises and fixed assets		—		158
Net Cash Used for Investing Activities		(207,994)		(130,964)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits		(29,066)		221,151
Net increase (decrease) in short-term borrowings		32,393		(2,481)
Repayments of other borrowings		(29,998)		(12,461)
Proceeds from other borrowings		40,000		—
Stock options exercised		657		394
Sale of treasury stock for ESOP		132		130
Acquisition of treasury stock		(2,515)		(1,440)
Cash dividends paid		(9,158)		(8,539)
Net Cash Provided by Financing Activities		2,445		196,754
Net (Decrease) Increase in Cash and Cash Equivalents		(174,815)		94,988
CASH AND CASH EQUIVALENTS - BEGINNING		206,681		111,693
CASH AND CASH EQUIVALENTS - ENDING	$	31,866	$	206,681

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

	Years Ended December 31,
	2022		2021
	(In Thousands)
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest paid	$	5,819	$	6,155
Income taxes paid, net of refunds	$	6,891	$	5,330
Supplemental Schedule of Noncash Investing Activities
Transfers of loans to foreclosed real estate owned and repossession of other assets	$	776	$	1,740
Dividends payable	$	2,366	$	2,296

See notes to consolidated financial statements

 
‎

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF OPERATIONS

Norwood Financial Corp (Company) is a one bank holding company. Wayne Bank (Bank) is a wholly-owned subsidiary of the Company. The Bank is a state-chartered bank headquartered in Honesdale, Pennsylvania. The Company derives substantially all of its income from bank-related services which include interest earnings on commercial mortgages, residential real estate mortgages, commercial and consumer loans, as well as interest earnings on investment securities and fees from deposit services to its customers. The Company is subject to regulation and supervision by the Federal Reserve Board while the Bank is subject to regulation and supervision by the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking and Securities.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 determination of other-than-temporary impairment on securities, the determination of goodwill impairment and the fair value of financial instruments.

Significant Group Concentrations of Credit Risk

Most of the Company’s activities are with customers located within its markets in Northeastern Pennsylvania and the New York Counties of Delaware, Sullivan, Ontario, Otsego and Yates. Note 3 discusses the types of securities that the Company invests in. Note 4 discusses the types of lending that the Company engages in. The Company does not have any significant concentrations to any one industry or customer.

Concentrations of Credit Risk

The Bank operates primarily in Wayne, Pike, Lackawanna, Luzerne and Monroe Counties, Pennsylvania and Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York. Accordingly, the Bank has extended credit primarily to commercial entities and individuals in these areas whose ability to honor their contracts is influenced by the region’s economy. These customers are also the primary depositors of the Bank. The Bank is limited in extending credit by legal lending limits to any single borrower or group of related borrowers.

Securities

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Securities available for sale are carried at fair value. Unrealized gains and losses are reported in other comprehensive income, net of the related deferred tax effect. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using a method which approximates the interest method over the term of the security.

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

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

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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, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent of the Company to not sell the securities and it is more likely than not that it will not have to sell the securities before recovery of their cost basis.

Regulatory Stock

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

Management evaluates the regulatory stock for impairment. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB. Management considers the FHLB’s regulatory capital ratios, liquidity, and the fact that new shares of FHLB stock continue to change hands at the $100 par value. Management believes no impairment charge is necessary related to FHLB stock as of December 31, 2022.

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees. Interest income is accrued on the unpaid principal balance. Loan origination fees are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan.

The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Troubled Debt Restructurings

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

Loans Acquired

Loans acquired including loans that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable, are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. Loans are evaluated individually to determine if there is evidence of deterioration of credit quality since origination. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment or as a loss accrual or a valuation allowance. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining estimated life. Decreases in expected cash flows are recognized immediately as impairment. Any valuation allowances on these impaired loans reflect only losses incurred after the acquisition.

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For purchased loans acquired that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value. Loans may be aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit discounts. The remaining differences between the purchase price and the unpaid principal balance at the date of acquisition are recorded in interest income over the life of the loans.

Mortgage Servicing Rights

Servicing assets are recognized as separate assets when rights are acquired through purchase or through the sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon a third party appraisal. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance to the extent that fair value is less than the capitalized amount. The Company’s loan servicing assets at December 31, 2022 and 2021, respectively, were not impaired. Total servicing assets included in other assets as of December 31, 2022 and 2021, were $213,000 and $289,000, respectively.

Allowance for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are classified as substandard. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either 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 real estate loans for impairment disclosures, unless such loans were acquired with impairment or are the subject of a restructuring agreement.

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation expense is calculated principally on the straight-line method over the respective assets estimated useful lives as follows:

	Years
Buildings and improvements	10 - 40
Furniture and equipment	3 - 10

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Leases

The Company applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification. See Note 8 for related disclosures.

Transfers of Financial Assets

Transfers of financial assets, including loan and loan participation sales, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Foreclosed Real Estate

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value less cost to sell at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of its carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in other expenses.

Bank Owned Life Insurance

The Company invests in bank owned life insurance (BOLI) as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Bank on a select group of employees. The Company is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from the increase in cash surrender value of the policies or from death benefits realized is included in other income on the Consolidated Statements of Income.

Goodwill

In connection with three acquisitions the Company recorded goodwill in the amount of $29.3 million, representing the excess of amounts paid over the fair value of net assets of the institutions acquired. Goodwill is tested and deemed impaired when the carrying value of goodwill exceeds its implied fair value. The value of the goodwill can change in the future. We expect the value of the goodwill to decrease if there is a significant decrease in the franchise value of the Bank. If an impairment loss is determined in the future, we will reflect the loss as an expense for the period in which the impairment is determined, leading to a reduction of our net income for that period by the amount of the impairment loss. No impairment was recognized for the years ended December 31, 2022 and 2021.

Other Intangible Assets

At December 31, 2022, the Company had other intangible assets of $306,000, which is net of accumulated amortization of $1,448,000. These intangible assets will continue to be amortized using the sum-of-the-years digits method of amortization over ten years. At December 31, 2021, the Company had other intangible assets of $407,000, which was net of accumulated amortization of $1,347,000. Amortization expense related to other intangible assets was $101,000 and $123,000 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, the estimated future amortization expense for the core deposit intangible is as follows (in thousands):

2023	$	85
2024		69
2025		54
2026		38
2027		26
Thereafter		34
	$	306

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Income Taxes

Deferred income tax assets and liabilities are determined based on the differences between financial statement carrying amounts and the tax basis of existing assets and liabilities. These differences are measured at the enacted tax rates that will be in effect when these differences reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

The Company and its subsidiary file a consolidated federal income tax return. The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company analyzes each tax position taken in its tax returns and determines the likelihood that the position will be realized. Only tax positions that are “more-likely-than-not” to be realized can be recognized in an entity’s financial statements. For tax positions that do not meet this recognition threshold, an entity will record an unrecognized tax benefit for the difference between the position taken on the tax return and the amount recognized in the financial statements. The Company does not have any unrecognized tax benefits at December 31, 2022 or 2021, or during the years then ended. No unrecognized tax benefits are expected to arise within the next twelve months.

Advertising Costs

Advertising costs are expensed as incurred.

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 less any unvested restricted shares. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method. Treasury shares are not deemed outstanding for earnings per share calculations.

Employee Benefit Plans

The Company has a defined contributory profit-sharing plan which includes provisions of a 401(k) plan. The Company’s contributions are expensed as the cost is incurred.

The Company has several supplemental executive retirement plans. To fund the benefits under these plans, the Company is the owner of single premium life insurance policies on the participants.

The Company provides pension benefits to eligible employees. The Company’s funding policy is to contribute at least the minimum required contributions annually.

Interest Rate Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments.  

Stock Option Plans

The Company recognizes the value of share-based payment transactions as compensation costs in the financial statements over the period that an employee provides service in exchange for the award. The fair value of the share-based payments for stock options is estimated using the Black-Scholes option-pricing model. The Company used the modified-prospective transition method to record compensation expense. Under the modified-prospective method, companies are required to record compensation cost for new and

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modified awards over the related vesting period of such awards and record compensation cost prospectively for the unvested portion, at the date of adoption, of previously issued and outstanding awards over the remaining vesting period of such awards. No change to prior periods presented is permitted under the modified-prospective method.

Restricted Stock

The Company recognizes compensation cost related to restricted stock based on the market price of the stock at the grant date over the vesting 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 under the Company’s 2014 Equity Incentive Plan. The Company recognizes compensation expense for the fair value of the restricted stock on a straight-line basis over the requisite service period for the entire award.

Cash Flow Information

For the purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits with banks and federal funds sold.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, letters of credit and commitments to sell loans. Such financial instruments are recorded on the balance sheets when they become receivable or payable.

Trust Assets

Assets held by the Company in a fiduciary capacity for customers are not included in the financial statements since such items are not assets of the Company. Trust income is reported on the accrual method.

Treasury Stock

Common shares repurchased are recorded as treasury stock at cost.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and defined benefit pension obligations, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income as presented in the Consolidated Statement of Comprehensive Income.

Revenue Recognition

Under ASC Topic 606, management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment securities gains, loans servicing, gains on loans sold and earnings on bank-owned life insurance are not within the scope of this Topic.

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The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the year ended December 31:

(dollars in thousands)	2022		2021
Noninterest Income
In-scope of Topic 606:
Service charges on deposit accounts	$	419	$	398
ATM Fees		452		443
Overdraft Fees		1,155		1,029
Safe deposit box rental		93		100
Loan related service fees		849		1,238
Debit card		2,496		2,228
Fiduciary activities		845		748
Commissions on mutual funds & annuities		119		127
Gain on sales of other real estate owned		427		36
Other income		1,906		674
Noninterest Income (in-scope of Topic 606)		8,761		7,021
Out-of-scope of Topic 606:
Net realized gains on sales of securities		3		92
Loan servicing fees		78		130
Gain on sales of loans		3		177
Earnings on and proceeds from bank-owned life insurance		1,087		941
Noninterest Income (out-of-scope of Topic 606)		1,171		1,340
Total Noninterest Income	$	9,932	$	8,361

Segment Reporting

The Company acts as an independent community financial services provider and offers traditional banking related financial services to individual, business and government customers. Through its Community Office and automated teller machine network, the Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans; and the providing of safe deposit services. The Company also performs personal, corporate, pension and fiduciary services through its Trust Department.

Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial, retail, mortgage banking and trust operations of the Company. As such, discrete information is not available and segment reporting would not be meaningful.

Reclassification of Comparative Amounts

Certain comparative amounts for the prior year have been reclassified to conform to current-year classifications. Such reclassifications had no material effect on net income or stockholders’ equity.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This standard, along with several other subsequent codification updates, replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses that are expected to occur over the remaining life of a financial asset and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The new current expected credit losses model (“CECL”) will apply to the allowance for loan losses, available-for-sale and held-to-maturity debt securities, purchased financial assets with credit deterioration and certain off-balance sheet credit exposures.

Management has completed its implementation plan, segmentation and testing, and model validation. The implementation plan included drafting of additional controls and policies to govern data uploads to its third-party vendor, balancing and reconciling, testing

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and auditing of inputs, and review and decision-making surrounding segmentation, methodologies, qualitative factor adjustments, and reasonable and supportable forecasts and reversion techniques. Parallel runs were processed during 2022 and the results were consistent with management's expectations. The implementation plan is currently going through the Company's control structure and internal control testing is being performed.

As a result of adopting this standard, the Company expects the increase in its allowance effective January 1, 2023, to be in the range of $2.0 million to $2.5 million. In addition, the adoption of ASU No. 2016-13 will require the Company to gross up its previously purchased credit impaired loans through the allowance at January 1, 2023. As a result, the Company expects an increase in its allowance as of January 1, 2023, to be in the range of $2.2 million to $2.7 million. These estimates are subject to further refinements based on ongoing evaluations of our model, methodologies, and judgments, as well as prevailing economic conditions and forecasts as of the adoption date. The adoption of ASU 2016-13 is not expected to have a significant impact on our regulatory capital ratios.

At adoption, the Company did not have any securities classified as HTM debt securities. No allowance was recorded related to AFS debt securities at the date of adoption, January 1, 2023.

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 unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Update is effective for smaller reporting companies and all other entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the sunset (or expiration) date of Accounting Standards Codification (ASC) Topic 848 to December 31, 2024. This gives reporting entities two additional years to apply the accounting relief provided under ASC Topic 848 for matters related to reference rate reform. ASU 2022-06 is effective for all reporting entities immediately upon issuance and must be applied on a prospective basis. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848. ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (ASC 815): Fair Value Hedging - Portfolio Layer Method. ASC 815 currently permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in this Update allow non-prepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity

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to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby allowing consistent accounting for similar hedges. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

NOTE 3 - SECURITIES

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

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE FOR SALE:
U.S. Treasury securities	$	45,066	$	—	$	(3,212)	$	41,854
U.S. Government agencies		21,266		—		(2,943)		18,323
States and political subdivisions		157,524		2		(29,674)		127,852
Mortgage-backed securities-
government sponsored entities		268,400		—		(37,502)		230,898
Total debt securities	$	492,256	$	2	$	(73,331)	$	418,927

	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE FOR SALE:
U.S. Treasury securities	$	19,550	$	6	$	(205)	$	19,351
U.S. Government agencies		16,251		24		(264)		16,011
States and political subdivisions		145,107		2,155		(1,395)		145,867
Mortgage-backed securities-
government sponsored entities		227,712		766		(2,925)		225,553
Total debt securities	$	408,620	$	2,951	$	(4,789)	$	406,782

The following tables show the Company’s 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 (in thousands):

	December 31, 2022
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	25,733	$	(849)	$	16,121	$	(2,363)	$	41,854	$	(3,212)
U.S. Government agencies		8,321		(885)		10,002		(2,058)		18,323		(2,943)
States and political subdivisions		66,680		(11,194)		57,367		(18,480)		124,047		(29,674)
Mortgage-backed securities-government sponsored entities		102,361		(10,639)		128,537		(26,863)		230,898		(37,502)
	$	203,095	$	(23,567)	$	212,027	$	(49,764)	$	415,122	$	(73,331)

44

	December 31, 2021
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	18,361	$	(205)	$	—	$	—	$	18,361	$	(205)
U.S. Government agencies		7,912		(109)		3,843		(155)		11,755		(264)
States and political subdivisions		74,658		(1,395)		—		—		74,658		(1,395)
Mortgage-backed securities-government sponsored entities		170,647		(2,856)		2,919		(69)		173,566		(2,925)
	$	271,578	$	(4,565)	$	6,762	$	(224)	$	278,340	$	(4,789)

The Company has 203 debt securities in the less than twelve month category and 140 debt securities in the twelve months or more category as of December 31, 2022. In management’s opinion, the unrealized losses on securities reflect changes in interest rates subsequent to the acquisition of specific securities. No other-than-temporary-impairment charges were recorded in 2022. Management believes that all other unrealized losses represent temporary impairment of the securities, and it is more likely than not that it will not have to sell the securities before recovery of their cost basis.

The amortized cost and fair value of debt securities as of December 31, 2022 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.

	Amortized		Fair
	Cost		Value
		(In Thousands)
Due in one year or less	$	5,883	$	5,821
Due after one year through five years		43,272		40,981
Due after five years through ten years		54,146		44,419
Due after ten years		120,555		96,808
		223,856		188,029
Mortgage-backed securities - government sponsored entities		268,400		230,898
	$	492,256	$	418,927

Gross realized gains and gross realized losses on sales of securities available for sale were $14,000 and $11,000, respectively, in 2022, compared to $92,000 and $0, respectively, in 2021. The proceeds from the sales of securities totaled $5,113,000 and $11,366,000 for the years ended December 31, 2022 and 2021, respectively.

Securities with a carrying value of $378,472,000 and $339,769,000 at December 31, 2022 and 2021, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

45

NOTE 4 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Set forth below is selected data relating to the composition of the loan portfolio (in thousands):

	December 31, 2022				December 31, 2021
Real Estate:
Residential	$	298,813	20.3	%	$	273,040	20.1	%
Commercial		651,544	44.2			628,724	46.4
Agricultural		68,915	4.7			61,925	4.6
Construction		32,469	2.2			21,990	1.6
Commercial loans		187,257	12.7			186,031	13.7
Other agricultural loans		35,277	2.4			37,930	2.8
Consumer loans to individuals		200,149	13.5			146,400	10.8
Total loans		1,474,424	100.0	%		1,356,040	100.0	%
Deferred fees, net		(479)				(1,109)
Total loans receivable		1,473,945				1,354,931
Allowance for loan losses		(16,999)				(16,442)
Net loans receivable	$	1,456,946			$	1,338,489

During 2021 and 2020, the Company participated in the Paycheck Protection Program (“PPP”), administered directly by the United States Small Business Administration (“SBA”). The PPP provides loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during the COVID-19 emergency. As of December 31, 2022 and 2021, the Company had outstanding principal balances of $121,000 and $15,209,000, respectively, in PPP loans. The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. PPP loans are included in the Commercial loan category.

In accordance with the SBA terms and conditions on these PPP loans, the Company received approximately $0 and $2.9 million in fees associated with the processing of these loans in 2022 and 2021, respectively. Upon funding of the loans, these fees were deferred and are amortized over the life of the loan as an adjustment to yield in accordance with FASB ASC 310-20-25-2.

As a result of the acquisition of UpState, the Company added $15,410,000 of loans that were accounted for in accordance with ASC 310-30. Based on a review of the loans acquired by the Company’s 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 $6,937,000.  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.

Changes in the accretable yield for purchased credit-impaired loans were as follows for the twelve months ended December 31:

(In thousands)

	2022		2021
Balance at beginning of period	$	1,884	$	1,365
Additions		—		—
Accretion		(710)		(880)
Reclassification and other		653		1,399
Balance at end of period	$	1,827	$	1,884

46

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

	December 31, 2022		December 31, 2021
Outstanding Balance
	$	8,368	$	12,862
Carrying Amount
	$	6,290	$	8,304

Loans acquired with credit deterioration of $15,410,000 and accounted for in accordance with ASC 310-30 were individually evaluated to estimate credit losses and a net recovery amount for each loan. The net cash flows for each loan were then discounted to present value using a risk-adjusted market rate. The table below presents the components of the purchase accounting adjustments:

(In Thousands)	July 7, 2020
Contractually required principal and interest	$	15,410
Non-accretable discount		(5,213)
Expected cash flows		10,197
Accretable discount		(1,724)
Estimated fair value	$	8,473

There has been no allowance for loan losses recorded for acquired loans with specific evidence of deterioration in credit quality. As of December 31, 2022, for loans that were acquired prior to 2020 with or without specific evidence of deterioration in credit quality, adjustments to the allowance for loan losses have been accounted for through the allowance for loan loss adequacy calculation.

The Company maintains a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans. The 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. The Company does 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.

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

	Real Estate Loans
									Commercial			Other	Consumer
	Residential		Commercial			Agricultural	Construction		Loans			Agricultural	Loans		Total
	(In thousands)
December 31, 2022
Individually evaluated for impairment	$	—	$	402	$	—	$	—	$	61	$	—	$	—	$	463
Loans acquired with deteriorated credit quality		567		2,049		2,034		—		1,640		—		—		6,290
Collectively evaluated for impairment		298,246		649,093		66,881		32,469		185,556		35,277		200,149		1,467,671
Total Loans	$	298,813	$	651,544	$	68,915	$	32,469	$	187,257	$	35,277	$	200,149	$	1,474,424

47

	Real Estate Loans
									Commercial			Other	Consumer
	Residential		Commercial			Agricultural	Construction		Loans			Agricultural	Loans		Total
	(In thousands)
December 31, 2021
Individually evaluated for impairment	$	—	$	1,658	$	—	$	—	$	16	$	—	$	—	$	1,674
Loans acquired with deteriorated credit quality		784		3,285		1,918		—		198		2,119		—		8,304
Collectively evaluated for impairment		272,256		623,781		60,007		21,990		185,817		35,811		146,400		1,346,062
Total Loans	$	273,040	$	628,724	$	61,925	$	21,990	$	186,031	$	37,930	$	146,400	$	1,356,040

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

			Unpaid Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2022	(In thousands)
With no related allowance recorded:
Real Estate Loans
Commercial	$	402	$	402	$	—
Commercial loans		11		11		—
Subtotal		413		413		—
With an allowance recorded:
Commercial loans		50		50		50
Subtotal		50		50		50
Total:
Real Estate Loans
Commercial	$	402	$	402	$	—
Commercial loans		61		61		50
Total Impaired Loans	$	463	$	463	$	50

48

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2021	(In thousands)
With no related allowance recorded:
Real Estate Loans
Commercial	$	141	$	141	$	—
Commercial loans		16		16		—
Subtotal		157		157		—
With an allowance recorded:
Real Estate Loans
Commercial		1,517		1,517		272
Subtotal		1,517		1,517		272
Total:
Real Estate Loans
Residential						—
Commercial	$	1,658	$	1,658	$	272
Commercial loans		16		16		—
Total Impaired Loans	$	1,674	$	1,674	$	272

The following information for impaired loans is presented for the years ended December 31, 2022 and 2021:

	Average Recorded				Interest Income
	Investment				Recognized
	2022		2021		2022		2021
	(In thousands)
Total:
Real Estate Loans
Commercial	$	740	$	2,358	$	93	$	157
Commercial loans		24		18		—		7
Total Loans	$	764	$	2,376	$	93	$	164

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 December 31, 2022, there were no troubled debt restructured loans. During 2022, there were no new loan relationships identified as troubled debt restructurings. During 2022, there were no charge-offs on loans classified as troubled debt restructurings.

As of December 31, 2021, there were no troubled debt restructured loans. During 2021, there were no new loans relationships identified as troubled debt restructurings. During 2021, there were no charge-offs on loans classified as troubled debt restructurings.

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 December 31, 2022 and 2021, foreclosed real estate owned totaled $346,000 and $1,742,000, respectively. As of December 31, 2022, included within foreclosed real estate owned is one commercial property that was received via a deed in lieu. As of December 31, 2022, the Company has initiated formal foreclosure proceedings on four consumer residential mortgage loans with an outstanding balance of $223,000.

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. Loans greater than 90 days past due are considered Substandard unless full payment is expected. Any portion of a loan that has been charged off is placed in the Loss category.

49

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company 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 December 31, 2022 and December 31, 2021 (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
December 31, 2022
Commercial real estate loans	$	646,775	$	1,079	$	3,690	$	—	$	—	$	651,544
Real estate - agricultural		66,444		368		2,103		—		—		68,915
Commercial loans		186,966		184		107		—		—		187,257
Other agricultural loans		34,071		556		650		—		—		35,277
Total	$	934,256	$	2,187	$	6,550	$	—	$	—	$	942,993

			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
December 31, 2021
Commercial real estate loans	$	618,541	$	5,146	$	4,765	$	—	$	272	$	628,724
Real estate - agricultural		60,193		—		1,732		—		—		61,925
Commercial loans		185,729		199		103		—		—		186,031
Other agricultural loans		35,573		210		2,147		—		—		37,930
Total	$	900,036	$	5,555	$	8,747	$	-	$	272	$	914,610

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. Nonperforming loans include loans that have been placed on nonaccrual status and loans remaining in accrual status on which the contractual payment of principal and interest has become 90 days past due.

The following table presents the recorded investment in the loan classes based on payment activity as of December 31, 2022 and December 31, 2021 (in thousands):

	Performing		Nonperforming		Total
December 31, 2022
Residential real estate loans	$	298,327	$	486	$	298,813
Construction		32,469		—		32,469
Consumer loans to individuals		199,985		164		200,149
Total	$	530,781	$	650	$	531,431

	Performing		Nonperforming		Total
December 31, 2021
Residential real estate loans	$	272,571	$	469	$	273,040
Construction		21,990		—		21,990
Consumer loans to individuals		146,345		55		146,400
Total	$	440,906	$	524	$	441,430

50

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 December 31, 2022 and December 31, 2021 (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		Purchased Credit Impaired Loans		Total Loans
December 31, 2022
Real Estate loans
Residential	$	297,350	$	187	$	223	$	—	$	486	$	896	$	567	$	298,813
Commercial		648,688		405		—		—		402		807		2,049		651,544
Agricultural		66,751		130		—		—		—		130		2,034		68,915
Construction		32,469		—		—		—		—		—		-		32,469
Commercial loans		185,485		71		—		—		61		132		1,640		187,257
Other agricultural loans		35,277		—		—		—		—		—		—		35,277
Consumer loans		198,893		853		239		—		164		1,256		-		200,149
Total	$	1,464,913	$	1,646	$	462	$	—	$	1,113	$	3,221	$	6,290	$	1,474,424

	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		Purchased Credit Impaired Loans		Total Loans
December 31, 2021
Real Estate loans
Residential	$	271,622	$	155	$	10	$	—	$	469	$	634	$	784	$	273,040
Commercial		625,336		—		—		—		103		103		3,285		628,724
Agricultural		59,982		25		—		—		—		25		1,918		61,925
Construction		21,990		—		—		—		—		—		-		21,990
Commercial loans		185,801		3		13		91		16		32		198		186,031
Other agricultural loans		35,811		—		—		—		—		—		2,119		37,930
Consumer loans		145,986		248		111		—		55		414		-		146,400
Total	$	1,346,528	$	431	$	134	$	91	$	643	$	1,208	$	8,304	$	1,356,040

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

(In thousands)	Residential Real Estate		Commercial Real Estate		Agricultural		Construction		Commercial		Other Agricultural		Consumer		Total
Beginning balance, December 31, 2021	$	2,175	$	10,878	$	—	$	133	$	1,490	$	—	$	1,766	$	16,442
Charge Offs		(172)		(20)		—		—		(16)		—		(457)		(665)
Recoveries		130		82		—		—		46		—		64		322
Provision for loan losses		700		(2,647)		259		276		925		124		1,263		900
Ending balance, December 31, 2022	$	2,833	$	8,293	$	259	$	409	$	2,445	$	124	$	2,636	$	16,999
Ending balance individually evaluated ‎for impairment	$	—	$	—	$	—	$	—	$	50	$	—	$	—	$	50
Ending balance collectively evaluated ‎for impairment	$	2,833	$	8,293	$	259	$	409	$	2,395	$	124	$	2,636	$	16,949

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2020	$	1,960	$	8,004	$	150	$	1,360	$	1,676	$	13,150
Charge Offs		(17)		(452)		—		(200)		(480)		(1,149)
Recoveries		74		19		—		49		99		241
Provision for loan losses		158		3,307		(17)		281		471		4,200
Ending balance, December 31, 2021	$	2,175	$	10,878	$	133	$	1,490	$	1,766	$	16,442
Ending balance individually evaluated ‎for impairment	$	—	$	272	$	—	$	—	$	—	$	272
Ending balance collectively evaluated for impairment	$	2,175	$	10,606	$	133	$	1,490	$	1,766	$	16,170

During the period ended December 31, 2022, the allowance for loan losses increased from $16,442,000 to $16,999,000. This $557,000 increase in the required allowance was due primarily to a $2.4 million increase in the qualitative factor related to loan growth and a $445,000 increase in the qualitative factor related to large balance loans, which was partially offset by a $2.3 million decrease in the qualitative factor related to COVID-19.

During the period ended December 31, 2021, the allowance for loan losses increased from $13,150,000 to $16,442,000. This $3,292,000 increase in the required allowance was due primarily to a $1.5 million increase in the qualitative factor related to loan growth and a $1.4 million increase due to an increase in the qualitative factor related to large balance loans.

Interest income that would have been recorded on loans accounted for on a non-accrual basis under the original terms of the loans was $182,000 and $35,000 for 2022 and 2021, respectively.

As of December 31, 2022 and 2021, the Company considered its concentration of credit risk to be acceptable. As of December 31, 2022, the highest concentrations are in commercial rentals and the residential rentals category, with loans outstanding of $141.9 million, or 9.6% of loans outstanding, to commercial rentals, and $113.0 million, or 7.7% of loans outstanding, to residential rentals. There were no charge-offs on loans within these concentrations for the years ended December 31, 2022 and 2021, respectively.

52

During 2022, the Company sold residential mortgage loans totaling $845,000. During 2021, the Company sold residential mortgage loans totaling $8,616,000. Gross realized gains and gross realized losses on sales of residential mortgage loans were $3,000 and $0, respectively, in 2022 and $177,000 and $0, respectively, in 2021. The proceeds from the sales of residential mortgage loans totaled $848,000 and $8,793,000 for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021, the outstanding value of loans serviced for others totaled $60.0 million and $65.4 million, respectively.

NOTE 5 - PREMISES AND EQUIPMENT

Components of premises and equipment at December 31 are as follows:

	2022		2021
	(In Thousands)
Land and improvements	$	3,864	$	3,879
Buildings and improvements		23,444		21,846
Furniture and equipment		10,506		10,183
		37,814		35,908
Accumulated depreciation		(19,890)		(18,619)
	$	17,924	$	17,289

Depreciation expense totaled $1,470,000 and $1,481,000 for the years ended December 31, 2022 and 2021, respectively.
‎ 

NOTE 6 - DEPOSITS

Aggregate time deposits in denominations greater than $250,000 were $213,623,000 and $257,238,000 at December 31, 2022 and 2021, respectively.

At December 31, 2022, the scheduled maturities of time deposits are as follows (in thousands):

2023	$	336,258
2024		96,823
2025		57,384
2026		8,632
2027		4,673
	$	503,770

NOTE 7 – BORROWINGS

Short-term borrowings at December 31 consist of the following:

	2022		2021
	(In Thousands)
Securities sold under agreements to repurchase	$	50,951	$	60,822
Federal Home Loan Bank short-term borrowings		42,264		—
	$	93,215	$	60,822

The outstanding balances and related information of short-term borrowings are summarized as follows:

	Years Ended December 31,
	2022			2021
	(Dollars In Thousands)
Average balance during the year	$	69,711		$	73,810
Average interest rate during the year		0.75	%		0.39	%
Maximum month-end balance during the year	$	93,215		$	90,409
Weighted average interest rate at the end of the year		2.65	%		0.34	%

53

Securities sold under agreements to repurchase generally mature within one day to one year from the transaction date. Securities with an amortized cost and fair value of $63,737,000 and $54,562,000 at December 31, 2022 and $66,353,000 and $65,162,000 at December 31, 2021, respectively, were pledged as collateral for these agreements. The securities underlying the agreements were under the Company’s control.

The collateral pledged for repurchase agreements that are classified as secured borrowings is summarized as follows (in thousands):

	As of December 31, 2022
	Remaining Contractual Maturity of the Agreements
	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
Repurchase Agreements:
Mortgage-backed securities - government sponsored entities	$	54,562	$	—	$	—	$	—	$	54,562
Total liability recognized for repurchase agreements										50,951

	As of December 31, 2021
	Remaining Contractual Maturity of the Agreements
	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
Repurchase Agreements:
Mortgage-backed securities - government sponsored entities	$	65,162	$	—	$	—	$	—	$	65,162
Total liability recognized for repurchase agreements										60,822

The Company has a line of credit commitment available from the FHLB of Pittsburgh for borrowings of up to $150,000,000, which renews annually in June. At December 31, 2022, there was $42,264,000 of borrowings outstanding on this line. There were no borrowings outstanding on this line of credit at December 31, 2021. The Company has a line of credit commitment available from Atlantic Community Bankers Bank for $7,000,000, which expires on June 30, 2023. There were no borrowings under this line of credit at December 31, 2022 and 2021. The Company has a line of credit commitment available from PNC Bank for $16,000,000 at December 31, 2022. There were no borrowings under this line of credit at December 31, 2022 and December 31, 2021. The Company also has a line of credit commitment from Zions Bank for $17,000,000 at December 31, 2022. There were no borrowings under this line of credit at December 31, 2022 and December 31, 2021.

Other borrowings consisted of the following at December 31, 2022 and 2021:

	2022		2021
	(In Thousands)
Amortizing fixed rate borrowing due March 2022 at 1.75%	$	—	$	227
Amortizing fixed rate borrowing due August 2022 at 1.94%		—		1,364
Amortizing fixed rate borrowing due October 2022 at 1.88%		—		1,386
Amortizing fixed rate borrowing due October 2023 at 3.24%		—		3,856
Amortizing fixed rate borrowing due December 2023 at 3.22%		—		2,097
Fixed rate term borrowing due December 2023 at 1.95%		—		10,000
Amortizing fixed rate borrowing due December 2023 at 1.73%		—		5,190
Amortizing fixed rate borrowing due April 2024 at 0.91%		—		5,878
Amortizing fixed rate borrowing due December 2023 at 5.08%		40,000		—
	$	40,000	$	29,998

54

Contractual maturities and scheduled cash flows of other borrowings at December 31, 2022 are as follows (in thousands):

2023	$	40,000
	$	40,000

The Bank’s maximum borrowing capacity with the FHLB was $655,344,000 of which $82,264,000 was outstanding in the form of advances and $92,900,000 was outstanding in the form of letters of credit at December 31, 2022. Advances from the FHLB are secured by qualifying assets of the Bank.

NOTE 8 – OPERATING LEASES

The Company leases seven office locations under operating leases. Several assumptions and judgments were made when applying the requirements of Topic 842 to the Company’s existing lease commitments, including the allocation of consideration in the contracts between lease and nonlease components, determination of the lease term, and determination of the discount rate used in calculating the present value of the lease payments.

The Company has elected to account for the variable nonlease components, such as common area maintenance charges, utilities, real estate taxes, and insurance, separately from the lease component. Such variable nonlease components are reported in net occupancy expense on the Consolidated Statements of Income when paid. These variable nonlease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in other assets and other liabilities on the Consolidated Balance Sheets. The lease cost associated with the operating leases for the year ending December 31, 2022 and 2021, amounted to $609,000 and $587,000 respectively. The right-of-use asset associated with operating leases amounted to $4,109,000 and $4,511,000 at December 31, 2022 and 2021, respectively. The lease liability associated with operating leases amounted to $4,195,000 and $4,577,000 at December 31, 2022 and 2021, respectively.

Certain of the Company’s leases contain options to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the positive performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease. The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at December 31, 2022.

	Operating
Weighted-average remaining term		10.7 years
Weighted-average discount rate		2.71%

The following table presents the undiscounted cash flows due related to operating leases as of December 31, 2022, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:

Undiscounted cash flows due (in thousands)	Operating
2023	$	557
2024		544
2025		561
2026		504
2027		401
2028 and thereafter		2,414
Total undiscounted cash flows		4,981
Discount on cash flows		(786)
Total lease liabilities	$	4,195

Under Topic 842, the lessee can elect to not record on the Consolidated Balance Sheets a lease whose term is twelve months or less and does not include a purchase option that the lessee is reasonably certain to exercise. As of December 31, 2022, the Company had no leases that had a term of twelve months or less.

55

NOTE 9 – EMPLOYEE BENEFIT PLANS

The Company has a defined contributory profit-sharing plan which includes provisions of a 401(k) plan. The plan permits employees to make pre-tax contributions, not to exceed the limits set by the Internal Revenue Service. The amount of contributions to the plan, including matching contributions, is at the discretion of the Board of Directors. All employees over the age of 21 are eligible to participate in the plan and receive Company contributions after 90 days of employment. Eligible employees are able to contribute to the Plan at the beginning of the first quarterly period after their date of employment. Employee contributions vest immediately, and any Company contributions are fully vested after four years. The Company’s contributions are expensed as the cost is incurred, funded currently, and amounted to $1,310,000 and $1,135,000 for the years ended December 31, 2022 and 2021, respectively.

The Company has several non-qualified supplemental executive retirement plans for the benefit of certain executive officers and former officers. At December 31, 2022 and 2021, other liabilities include $3,518,000 and $3,481,000 accrued under the Plan. Compensation expense includes approximately $461,000 and $364,000 relating to the supplemental executive retirement plan for 2022 and 2021, respectively. To fund the benefits under this plan, the Company is the owner of single premium life insurance policies on participants in the non-qualified retirement plan. At December 31, 2022 and 2021, the cash value of these policies was $43,364,000 and $40,038,000, respectively.

The Company provides postretirement benefits in the form of split-dollar life arrangements to employees who meet the eligibility requirements. The net periodic postretirement benefit expense included in salaries and employee benefits was $101,000 and $153,000 for the years ended December 31, 2022 and 2021, respectively.

FASB authoritative guidance on accounting for deferred compensation and postretirement benefit aspects of endorsement split-dollar life insurance arrangements requires the recognition of a liability and related compensation expense for endorsement split-dollar life insurance that provides a benefit to an employee that extends to postretirement periods. The life insurance policies purchased for the purpose of providing such benefits do not effectively settle an entity’s obligation to the employee. Accordingly, the entity must recognize a liability and related compensation expense during the employee’s active service period based on the future cost of insurance to be incurred during the employee’s retirement. This expense is included in the SERP plan expense for 2022 and 2021 discussed above. If the entity has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the FASB authoritative guidance on employer’s accounting for postretirement benefits other than pensions. The accumulated postretirement benefit obligation was $1,731,000 and $1,630,000 at December 31, 2022 and 2021, respectively.

Certain key executives have change in control agreements with the Company. These agreements provide certain potential benefits in the event of termination of employment following a change in control.

The Company participates in the Pentegra Mulitemployer Defined Benefit Pension Plan (EIN 13-5645888 and Plan # 333) as a result of its acquisition of North Penn. As of December 31, 2022 and 2021, the Company’s Plan was 106.7% and 116.6% funded, respectively, and total contributions made are not more than 5% of the total contributions to the Plan. The Company’s expense related to the Plan was $11,000 in 2022 and $17,000 in 2021. During the plan years ending December 31, 2022 and 2021, the Company made contributions of $11,000 and $17,000, respectively.

As a result of its acquisition of Delaware, the Company is a member of the New York State Bankers Retirement System. Substantially all full-time employees who were former employees of Delaware are covered under this defined benefit pension plan (the “Delaware Plan”). The Company’s funding policy is to contribute at least the minimum required contribution annually. Pension cost is computed using the projected unit credit actuarial cost method. Effective December 31, 2012, the Delaware Plan was closed to new participants and accrued benefits were frozen.

56

The following table sets forth the projected benefit obligation and change in plan assets for the Delaware Plan at December 31:

(in Thousands)	2022		2021
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	(7,622)	$	(8,065)
Service cost		—		(51)
Interest cost		(216)		(206)
Actuarial (gain) loss		1,615		177
Benefits paid		476		523
Benefit obligation at end of year	$	(5,747)	$	(7,622)
Change in plan assets:
Fair value of plan assets at beginning of year	$	7,691	$	7,744
Actual return on plan assets		(1,933)		474
Benefits paid		(553)		(527)
Fair value of assets at end of year		5,205		7,691
Funded status at end of year	$	(542)	$	69

The Delaware Plan paid $476,000 and $523,000 in benefit payments in 2022 and 2021, respectively. Estimated benefit payments under the Delaware Plan are expected to be approximately $479,000, $463,000, $446,000, $449,000 and $439,000 for the next five years. Payments are expected to be approximately $2,081,000 in total for the five-year period ending December 31, 2032. The Company was not required to make any contributions to the Delaware Plan in 2022 or 2021. The increase in the projected discount rate from 2.93% to 5.44% decreased the projected benefit obligation for the year ended December 31, 2022 by approximately $1.6 million.

The accumulated benefit obligation for the Delaware Plan was $5,747,000 and $7,622,000 at December 31, 2022 and 2021, respectively.

The following table sets forth the amounts recognized in accumulated other comprehensive income for the years ended December 31 (in thousands):

	2022		2021
Transition asset	$	—	$	—
Prior service credit		—		—
(Loss) gain		(784)		220
Total	$	(784)	$	220

Net pension cost (income) included the following components (in thousands):

	2022		2021
Service cost benefits earned during the period	$	—	$	51
Interest cost on projected benefit obligation		216		206
Actual return on assets		(336)		(394)
Net amortization and deferral		(53)		(34)
Net periodic pension cost (income)	$	(173)	$	(171)

The weighted average assumptions used to determine the benefit obligation at December 31 are as follows:

	2022		2021
Discount rate	5.44	%	2.93	%

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The weighted average assumptions used to determine the net periodic pension cost at December 31 are as follows:

	2022		2021
Discount rate	5.44	%	2.63	%
Expected long-term return on plan assets	6.00	%	5.25	%
Rate of compensation increase	—	%	—	%

The expected long-term return on plan assets was determined based upon expected returns on individual asset types included in the asset portfolio.

The Delaware Plan’s weighted-average asset allocations at December 31, by asset category, are as follows:

	2022		2021
Cash equivalents	16.6	%	—	%
Equity securities	25.1	%	35.7	%
Fixed income securities	21.7	%	35.0	%
Other	36.6	%	29.3	%
	100.0	%	100.0	%

The New York Bankers Retirement System (“System”) overall investment strategy is to invest in a diversifiedportfolio while managing the variability between the assets and projected liabilities of underfunded pension plans. The System’s Board Members approved a migration (the “Migration”) of substantially all of the System’s assets toone fund, Commingled Pensions Trust Fund (LDI Diversified Balanced) of JPMorgan Chase Bank, N.A. (“JPMCBLDI Diversified Balanced Fund” or the “Fund”). The Fund is a collective investment fund managed by the Trustee under the Declaration of Trust. The Trustee is the Fund’s manager and makes day-to-day investment decisions for the Fund. The Fund is a group trust within the meaning of Internal Revenue Service Revenue Ruling 81-100, as amended. In reliance upon exemptions from the registration requirements of the federal securities laws, neither the Fund nor the Fund’s Units are registered with the Securities and Exchange Commission (“SEC”) or any state securities commission. Because the Fund is not subject to registration under federal or state securities laws, certain protections that might otherwise be provided to investors in registered funds are not available to investors in the Fund. However, as a bank-sponsored collective investment trust holding qualified retirement plan assets, the Fund is required to comply with applicable provisions of the Employee Retirement Income Security Act of

1974, as amended (“ERISA”), and the Trustee is subject to supervision and regulation by the Office of theComptroller of the Currency and the Department of Labor.

The Fund employs a liability driven investing (“LDI”) strategy for pension plans that are seeking a solution that is balanced between growth and hedging. The Bloomberg Barclays Long A U.S. Corporate Index, the Fund’s primary liability-performance benchmark, is used as a proxy for plan projected liabilities. The growth-oriented portion of the Fund invests in a mix of asset classes that the Fund’s Trustee believes will collectively maximize total risk-adjusted return through a combination of capital appreciation and income. This portion of the Fund will comprise between 35% and 90% of the portfolio and will invest directly or indirectly via underlying funds in a broad mix of global equity, credit, global fixed income, real estate and cash-plus strategies. The remaining portionof the Fund, between 10% and 65% of the portfolio, provides exposure to U.S. long duration fixed income and is used to minimize volatility relative to a plan’s projected liabilities. This portion of the Fund will invest directly or indirectly via underlying funds in investment grade corporate bonds and securities issued by the U.S. Treasury and its agencies or instrumentalities.

At December 31, 2022 and 2021, the portfolio was substantially managed by one investment firm who controlled approximately 96% and 100%, respectively, of the System’s assets. Also, at December 31, 2022 and 2021, approximately $7.0 million and $-0-, respectively, of System’s assets in the short-term investment fund (STIF)account had not yet been allocated to an investment manager, nor deployed for benefit payments or expenses.

At December 31, 2022 and 2021, the System had an investment concentration of approximately 96% and 100%, respectively, of its total portfolio in the JPMCB LDI Diversified Balanced Fund, a commingled pension trust fund. In accordance with ASC Subtopic 820-10, certain investments measured at net asset value per share (or its equivalents) are not required to be classified in the fair value hierarchy.

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NOTE 10 - INCOME TAXES

The components of the provision for federal income taxes are as follows:

	Years Ended December 31,
	2022		2021
	(In Thousands)
Current	$	6,733	$	6,328
Deferred		419		(383)
	$	7,152	$	5,945

Deferred income taxes reflect temporary differences in the recognition of revenue and expenses for tax reporting and financial statement purposes, principally because certain items, such as the allowance for loan losses and loan fees are recognized in different periods for financial reporting and tax return purposes. As of December 31, 2022, the Company had a $3,535,000 net operating loss carryforward that will begin to expire by December 31, 2037. A valuation allowance has not been established for deferred tax assets. Realization of the deferred tax assets is dependent on generating sufficient taxable income. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. Deferred tax assets are recorded in other assets.

Income tax expense of the Company is less than the amounts computed by applying statutory federal income tax rates to income before income taxes because of the following:

	Percentage of Income
	before Income Taxes
	Years Ended December 31,
	2022		2021
Tax at statutory rates	21.0	%	21.0	%
Tax exempt interest income, net of interest expense disallowance	(1.6)		(1.9)
Non-deductible merger related expenses	—		—
Earnings and proceeds on life insurance	(0.6)		(0.6)
Other	0.9		0.8
	19.7	%	19.3	%

The net deferred tax asset included in other assets in the accompanying Consolidated Balance Sheets includes the following amounts of deferred tax assets and liabilities:

	2022		2021
	(In Thousands)
Deferred tax assets:
Allowance for loan losses	$	3,985	$	3,855
Deferred compensation		834		817
Core deposit intangible		204		231
Pension liability		267		302
Foreclosed real estate valuation allowance		19		19
Net operating loss carryforward		829		913
Purchase price adjustment		1,779		2,487
Net unrealized loss on securities		15,399		386
Other		2,838		1,228
Total Deferred Tax Assets		26,154		10,238

Deferred tax liabilities:
Premises and equipment		1,085		1,004
Deferred loan fees		1,366		125
Net unrealized gain on pension liability		154		318
Total Deferred Tax Liabilities		2,605		1,447
Net Deferred Tax Asset	$	23,549	$	8,791

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The Company’s federal and state income tax returns for taxable years through 2019 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

NOTE 11 - REGULATORY MATTERS AND STOCKHOLDERS’ EQUITY

The Company and Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total, Tier 1 and Common Equity Tier 1 capital (as defined in the regulations) to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of December 31, 2022 and 2021, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2022, the most recent notification from the regulators has categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Company’s actual capital amounts and ratios are presented in the following table:

								To be Well Capitalized
								under Prompt
					For Capital Adequacy			Corrective Action
	Actual				Purposes			Provision
	Amount		Ratio		Amount	Ratio		Amount	Ratio
	(Dollars in Thousands)
As of December 31, 2022:
Total capital (to risk-weighted assets)	$	211,055	13.58	%	≥$124,303	≥8.00	%	≥$155,379	≥10.00	%
Tier 1 capital (to risk-weighted assets)		194,124	12.49		≥$93,228	≥6.00		≥$124,303	≥8.00
Common Equity Tier 1 capital (to risk-weighted assets)		194,124	12.49		≥$69,921	≥4.50		≥$100,997	≥6.50
Tier 1 capital (to average assets)		194,124	9.36		≥$82,934	≥4.00		≥$103,668	≥5.00

As of December 31, 2021:
Total capital (to risk-weighted assets)	$	191,469	13.66	%	≥$112,117	≥8.00	%	≥$140,146	≥10.00	%
Tier 1 capital (to risk-weighted assets)		175,027	12.49		≥84,087	≥6.00		≥112,117	≥8.00
Common Equity Tier 1 capital (to risk-weighted assets)		175,027	12.49		≥63,066	≥4.50		≥91,095	≥6.50
Tier 1 capital (to average assets)		175,027	8.51		≥82,243	≥4.00		≥102,804	≥5.00

The Bank’s ratios do not differ significantly from the Company’s ratios presented above.

The Company and the Bank are subject to regulatory capital rules which, among other things, impose a common equity Tier 1 minimum capital requirement of 4.50% of risk-weighted assets; set the minimum leverage ratio for all banking organizations at a uniform 4.00% of total assets; set the minimum Tier 1 capital to risk-based assets requirement at 6.00% of risk-weighted assets; and assign a risk-weight of 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 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 rule also limits a banking organization’s dividends, stock repurchases and other capital distributions, and certain discretionary bonus payments to executive officers, if the banking

60

organization does not hold a “capital conservation buffer” consisting of 2.50% of common equity Tier 1 capital to risk-weighted assets above regulatory minimum risk-based requirements. The Company and the Bank are in compliance with their respective new capital requirements, including the capital conservation buffer, as of December 31, 2022.

Pennsylvania banking regulations limit the ability of the Bank to pay dividends or make loans or advances to the Company. Dividends that may be paid in any calendar year are limited to the current year's net profits, combined with the retained net profits of the preceding two years. At December 31, 2022, dividends from the Bank available to be paid to the Company, without prior approval of the Bank's regulatory agency, totaled $52.7 million, subject to the Bank meeting or exceeding regulatory capital requirements. The Company's principal source of funds for dividend payments to shareholders is dividends received from the Bank.

NOTE 12 - STOCK BASED COMPENSATION

At the Annual Meeting held on April 22, 2014, the Company’s stockholders approved the Norwood Financial Corp 2014 Equity Incentive Plan. An aggregate of 375,000 shares of authorized but unissued Common Stock of the Company were reserved for future issuance under the Plan. This includes up to 60,000 shares for awards to outside directors. The Plan also authorized the Company to award restricted stock to officers and outside directors, limited to 63,000 shares of restricted stock awards for officers and 12,000 shares of restricted stock awards for outside directors. At the Annual Meeting held on April 24, 2018, the Company’s stockholders approved an amendment to the 2014 Equity Incentive Plan to ease certain restrictions on restricted stock awards to outside directors. As a result of this amendment, the number of shares available for restricted stock awards to officers was reduced by 300 shares to 62,700, while the number of shares available for restricted stock awards to outside directors was increased by 20,300 to 32,300 shares. At the Annual Meeting held on April 26, 2022, the Company’s stockholders approved an amendment to the 2014 Equity Incentive Plan to increase the number of shares available for awards. As a result of this amendment, the number of shares available for stock awards to officers was increased by 60,000 shares, including 40,000 shares for restricted stock awards, while the number of shares available for stock awards to outside directors was increased by 40,000 shares, including 30,000 shares for restricted stock awards. Under this plan, the Company has granted 357,966 shares, which included 229,866 options to employees, 10,400 options to directors, 74,125 shares of restricted stock to officers and 43,575 shares of restricted stock to directors. The restricted shares vest over five years. The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted stock under the company’s restricted stock plan. Management recognizes compensation expense for the fair value of restricted stock on a straight-line basis over the requisite service period for the entire award. As of December 31, 2022, there were 117,035 shares available for future awards under this plan, which includes 71,010 shares available for officer awards and 46,025 shares available for awards to outside directors. Included in these totals are 28,575 shares available for restricted stock awards to officers and 18,725 shares available for restricted stock awards to outside directors.

Total unrecognized compensation cost related to stock options was $382,000 as of December 31, 2022 and $269,000 as of December 31, 2021. Salaries and employee benefits expense includes $269,000 and $214,000 of compensation costs related to options for the years ended December 31, 2022 and 2021, respectively. Compensation costs related to restricted stock amounted to $372,000 and $335,000 for the years ended December 31, 2022 and 2021, respectively. The expected future compensation expense relating to non-vested restricted stock outstanding as of December 31, 2022 and 2021 was $1,294,000 and $953,000, respectively.

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:

	2022					2021
		Weighted					Weighted
		Average		Average			Average		Average
		Exercise		Intrinsic			Exercise		Intrinsic
	Options	Price		Value		Options	Price		Value
Outstanding, beginning of year	226,075	$	26.37			215,970	$	25.73
Granted	38,000		33.53			43,500		25.80
Exercised	(34,425)		19.08			(22,420)		17.59
Forfeited	(10,675)		27.56			(10,975)		29.48
Outstanding, end of year	218,975	$	26.70	$	1,100	226,075	$	26.37	$	520
Exercisable, end of year	180,975	$	27.68	$	1,100	182,575	$	26.50	$	511

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Exercise prices for options outstanding as of December 31, 2022 ranged from $17.93 to $36.02 per share. The weighted average remaining contractual life is 6.8 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	Years Ended December 31,
	2022		2021
Dividend yield		3.57%		3.55%
Expected life		10 years		10 years
Expected volatility		35.01%		34.69%
Risk-free interest rate		3.87%		1.51%
Weighted average fair value of options granted	$	10.06	$	6.49

The expected volatility is based on historical volatility. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

Proceeds from stock option exercises totaled $657,000 in 2022. Shares issued in connection with stock option exercises are issued from available treasury shares or from available authorized shares. During 2022, for the shares issued in connection with stock option exercises, 1,650 shares in total, all shares were issued from available authorized shares.

As of December 31, 2022, outstanding stock options consist of the following:

		Average				Average
	Options	Exercise		Remaining	Options	Exercise
	Outstanding	Price		Life, Years	Exercisable	Price
	11,125	$	17.93	1.0	11,125	$	17.93
	8,250		19.39	1.9	8,250		19.39
	9,375		19.03	2.9	9,375		19.03
	12,125		22.37	4.0	12,125		22.37
	25,250		32.81	5.0	25,250		32.81
	22,100		32.34	6.0	22,100		32.34
	22,500		36.02	7.0	22,500		36.02
	30,750		26.93	8.0	30,750		26.93
	1,000		26.35	8.3	1,000		26.35
	1,000		25.38	8.5	1,000		25.38
	37,500		25.80	9.0	37,500		25.80
	38,000		33.53	10.0	—		—
Total	218,975				180,975

A summary of the Company’s restricted stock activity and related information for the years ended December 31 is as follows:

	2022		2021
		Weighted-Average		Weighted-Average
	Number of	Grant Date	Number of	Grant Date
	Shares	Fair Value	Shares	Fair Value
Non-vested, beginning of year	32,030	$26.76	39,135	$30.72
Granted	23,000	30.25	8,000	25.80
Vested	(10,570)	30.89	(11,205)	32.15
Forfeited	—	—	(3,900)	31.72
Non-vested at December 31	44,460	$30.12	32,030	$26.76

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NOTE 13 - EARNINGS PER SHARE

The following table sets forth the computations of basic and diluted earnings per share:

	Years Ended December 31,
	2022		2021
	(In Thousands, Except Per Share Data)
Numerator, net income	$	29,233	$	24,915
Denominator:
Weighted average shares outstanding		8,174		8,213
Less: Weighted average unvested restricted shares		(37)		(35)
Denominator: Basic earnings per share		8,137		8,178
Weighted average shares outstanding, basic		8,137		8,178
Add: Dilutive effect of stock options and restricted stock		40		21
Denominator: Diluted earnings per share		8,177		8,199
Basic earnings per common share	$	3.59	$	3.05
Diluted earnings per common share	$	3.58	$	3.04

Stock options which had no intrinsic value because their effect would be anti-dilutive, and therefore would not be included in the diluted EPS calculation, were 60,500 and 109,100 for the years ended December 31, 2022 and 2021, respectively, based on the closing price of the Company’s common stock which was $33.44 and $25.99 as of December 31, 2022 and 2021, respectively.

NOTE 14 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

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:

	December 31,
	2022		2021
	(In Thousands)
Commitments to grant loans	$	90,379	$	78,996
Unfunded commitments under lines of credit		149,883		156,899
Standby letters of credit		15,052		8,462
	$	255,314	$	244,357

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.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The majority of these standby letters of credit expire within the next twelve months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Bank requires collateral supporting these letters

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of credit when deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.

NOTE 15 – INTEREST RATE SWAPS

The Company enters into interest rate swaps that allow our commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate into a fixed-rate. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are not marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. There was no effect on earnings in any periods presented. At December 31, 2022, based upon the swap contract values, the company pledged cash in the amount of $350,000 as collateral for its interest rate swaps with a third-party financial institution which had a fair value $1,464,000.

Summary information regarding these derivatives is presented below:

(Amounts in thousands)
	Notional Amount, December 31,						Fair Value December 31,
		2022		2021	Interest Rate Paid	Interest Rate Received		2022		2021
Customer interest rate swap
Maturing November, 2030	$	6,513	$	6,873	Term SOFR + Margin	Fixed	$	889	$	144
Maturing December, 2030		4,297		4,553	Term SOFR + Margin	Fixed		575		91
Total	$	10,810	$	11,426			$	1,464	$	235
Third party interest rate swap
Maturing November, 2030	$	6,513	$	6,873	Fixed	Term SOFR + Margin	$	889	$	144
Maturing December, 2030		4,297		4,553	Fixed	Term SOFR + Margin		575		91
Total	$	10,810	$	11,426			$	1,464	$	235

The following table presents the fair values of derivative instruments in the Consolidated Balance Sheet.

	(Amounts in thousands)
	Assets			Liabilities
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
December 31, 2022
Interest rate derivatives	Other assets	$	1,464	Other liabilities	$	1,464
December 31, 2021
Interest rate derivatives	Other assets		235	Other liabilities		235

NOTE 16 – FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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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.

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 December 31, 2022 and 2021 are as follows (in thousands):

	Fair Value Measurement Reporting Date using
Description	Total		Level 1		Level 2		Level 3
December 31, 2022
ASSETS
U.S. Treasury securities	$	41,854	$	—	$	41,854	$	—
U.S. Government agencies		18,323		—		18,323		—
States and political subdivisions		127,852		—		127,852		—
Mortgage-backed securities-government
sponsored entities		230,898		—		230,898		—
Interest rate derivatives		1,464		—		1,464		—
LIABILITIES
Interest rate derivatives		1,464		—		1,464		—
December 31, 2021
ASSETS
U.S. Treasury securities	$	19,351	$	—	$	19,351	$	—
U.S. Government agencies		16,011		—		16,011		—
States and political subdivisions		145,867		—		145,867		—
Mortgage-backed securities-government
sponsored entities		225,553		—		225,553		—
Interest rate derivatives		235		—		235		—
		235		—		235
LIABILITIES
Interest rate derivatives		235		—		235		—

Securities:

The fair value of securities available for sale (carried at fair value) 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.

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Interest Rate Swaps:

The fair value of interest rate swaps is based upon the present value of the expected future cash flows using the SOFR swap curve, the basis for the underlying interest rate. To price interest rate swaps, cash flows are first projected for each payment date using the fixed rate for the fixed side of the swap and the forward rates for the floating side of the swap. These swap cash flows are then discounted to time zero using SOFR zero-coupon interest rates. The sum of the present value of both legs is the fair market value of the interest rate swap. These valuations have been derived from our third party vendor’s proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions that we believe to be reasonable.

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 December 31, 2022 and 2021 are as follows (in thousands):

	Fair Value Measurement Reporting Date using
Description	Total		Level 1		Level 2		Level 3
December 31, 2022
Impaired Loans	$	413	$	—	$	—	$	413
Foreclosed real estate		346		—		—		346
December 31, 2021
Impaired Loans	$	1,402	$	—	$	—	$	1,402
Foreclosed real estate		1,742		—		—		1,742

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 December 31, 2022, the fair value investment in impaired loans totaled $413,000, which included two loan relationships with a carrying value of $413,000 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 December 31, 2022, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $0 over the life of the loans. As of December 31, 2022, the fair value investment in impaired loans included one loan relationships with a carrying value of $50,000 that required a valuation allowance of $50,000 since the estimated realizable value of the collateral did not support the recorded investment in the loan. As of December 31, 2022, the Company has recognized charge-offs against the allowance for loan losses on this impaired loan in the amount of $0 over the life of the loan.

As of December 31, 2021, the fair value investment in impaired loans totaled $1,402,000, which included three loan relationships with a carrying value of $157,000 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 December 31, 2021, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $0 over the life of the loans. As of December 31, 2021, the fair value investment in impaired loans included one loan relationships with a carrying value of $1,517,000 that required a valuation allowance of $272,000 since the estimated realizable value of the collateral did not support the recorded investment in the loan. As of December 31, 2021, the Company has recognized charge-offs against the allowance for loan losses on this impaired loan in the amount of $0 over the life of the loan.

Foreclosed real estate owned (carried at fair value):

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

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

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2022
Impaired loans	$	413	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-10.0% (8.92%)
Foreclosed real estate owned	$	346	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00% ‎(7.00%)

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2021
Impaired loans	$	1,402	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-10.0% (1.12%)
Foreclosed real estate owned	$	1,742	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00% ‎(7.00%)

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

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

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.

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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 December 31, 2022 and December 31, 2021. (In thousands):

	Fair Value Measurements at December 31, 2022
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	31,866	$	31,866	$	31,866	$	—	$	—
Loans receivable, net		1,456,946		1,418,300		—		—		1,418,300
Mortgage servicing rights		213		498		—		—		498
Regulatory stock (1)		5,418		5,418		5,418		—		—
Bank owned life insurance (1)		43,364		43,364		43,364		—		—
Accrued interest receivable (1)		6,917		6,917		6,917		—		—
Financial liabilities:
Deposits		1,727,727		1,727,184		1,223,958		—		503,226
Short-term borrowings (1)		93,215		93,215		93,215		—		—
Other borrowings		40,000		40,074		—		—		40,074
Accrued interest payable (1)		2,653		2,653		2,653		—		—
Off-balance sheet financial instruments:
Commitments to extend credit and ‎outstanding letters of credit		—		—		—		—		—

	Fair Value Measurements at December 31, 2021
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	206,681	$	206,681	$	206,681	$	—	$	—
Loans receivable, net		1,338,489		1,389,870		—		—		1,389,870
Mortgage servicing rights		289		500		—		—		500
Regulatory stock (1)		3,927		3,927		3,927		—		—
Bank owned life insurance (1)		40,038		40,038		40,038		—		—
Accrued interest receivable (1)		5,889		5,889		5,889		—		—
Financial liabilities:
Deposits		1,756,793		1,759,722		1,228,091		—		531,631
Short-term borrowings (1)		60,822		60,822		60,822		—		—
Other borrowings		29,998		30,221		—		—		30,221
Accrued interest payable (1)		1,203		1,203		1,203		—		—
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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NOTE 17 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables present the changes in accumulated other comprehensive income (loss) (in thousands) by component, net of tax, for the years ended December 31, 2022 and 2021:

	Unrealized gains on available for sale securities (a)		Unrealized gain on pension liability (a)		Total (a)
Balance as of December 31, 2021	$	(1,453)	$	1,197	$	(256)
Other comprehensive income (loss) before reclassification		(56,476)		(619)		(57,095)
Amount reclassified from accumulated other comprehensive loss		(2)		—		(2)
Total other comprehensive income		(56,478)		(619)		(57,097)
Balance as of December 31, 2022	$	(57,931)	$	578	$	(57,353)
	Unrealized gains on available for sale securities (a)		Unrealized gain on pension liability (a)
Balance as of December 31, 2020	$	4,096	$	1,023	$	5,119
Other comprehensive income (loss) before reclassification		(5,476)		174		(5,302)
Amount reclassified from accumulated other comprehensive loss		(73)		—		(73)
Total other comprehensive		(5,549)		174		(5,375)
Balance as of December 31, 2021	$	(1,453)	$	1,197	$	(256)

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

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) (in thousands) for the years ended December 31, 2022 and 2021:

	Amount Reclassified
	From Accumulated				Affected Line Item in
	Other				Consolidated
	Comprehensive				Statements of
Details about other comprehensive income	Income (a)				Income
	Twelve months		Twelve months
	ended		ended
	December 31,		December 31,
	2022		2021
Unrealized gains on available for sale securities	$	3	$	92	Net realized gains on sales of securities
		(1)		(19)	Income tax expense
	$	2	$	73

(a)Amounts in parentheses indicate debits to net income.

‎

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NOTE 18 - NORWOOD FINANCIAL CORP (PARENT COMPANY ONLY) FINANCIAL INFORMATION

BALANCE SHEETS

	December 31,
	2022		2021
	(In Thousands)
ASSETS
Cash on deposit in bank subsidiary	$	3,938	$	1,511
Investment in bank subsidiary		164,248		204,547
Other assets		2,365		2,472
Total assets	$	170,551	$	208,530
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities	$	3,466	$	3,268
Stockholders’ equity		167,085		205,262
Total liabilities and stockholders' equity	$	170,551	$	208,530

STATEMENTS OF INCOME

	Years Ended December 31,
	2022		2021
Income:	(In Thousands)
Dividends from bank subsidiary	$	13,228	$	10,697
Expenses		743		627
		12,485		10,070
Income tax benefit		(219)		(171)
		12,704		10,241
Equity in undistributed earnings of subsidiary		16,529		14,674
Net Income	$	29,233	$	24,915
Comprehensive Income	$	(27,864)	$	19,540

STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2022		2021
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	29,233	$	24,915
Adjustments to reconcile net income to
net cash provided by operating activities:
Undistributed earnings of bank subsidiary		(16,529)		(14,674)
Other, net		607		(129)
Net Cash Provided by Operating Activities		13,311		10,112
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised		657		394
Sale of treasury stock for ESOP		132		130
Acquisition of treasury stock		(2,515)		(1,440)
Cash dividends paid		(9,158)		(8,539)
Net Cash Used in Financing Activities		(10,884)		(9,455)
Net Increase in Cash and Cash Equivalents		2,427		657
CASH AND CASH EQUIVALENTS - BEGINNING		1,511		854
CASH AND CASH EQUIVALENTS - ENDING	$	3,938	$	1,511

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

(a) Disclosure 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 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.

(b) Internal Control over Financial Reporting. Management’s Report on Internal Control over Financial Reporting is included in this Annual Report on Form 10-K under Item 8.

(c) Changes in Internal Control over Financial Reporting. 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.

Item 9B. Other Information

None.

 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information contained under the sections captioned “Proposal I - Election of Directors” and “Corporate Governance” in the Proxy Statement for the 2023 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated herein by reference.

The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer and principal accounting officer or controller. The Code of Ethics is posted on the stockholder services page of Wayne Bank’s website at www.waynebank.com/stockholder-services. The Company intends to report any waiver or amendment to its Code of Ethics on its website at www.waynebank.com/stockholder-services.

Item 11. Executive Compensation.

The information contained under the sections captioned “Executive Compensation” and “Director Compensation” in the Proxy Statement are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(a)          Security Ownership of Certain Beneficial Owners

                              Information required by this item is incorporated herein by reference to the Section captioned “Principal Holders of Our Common Stock” of the Proxy Statement.

(b)          Security Ownership of Management

                              Information required by this item is incorporated herein by reference to the section captioned “Proposal I - Election of Directors” of the Proxy Statement.

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(c)          Changes in Control

                             Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.

(d)          Equity Compensation Plan Information

EQUITY COMPENSATION PLAN INFORMATION

	(a)	(b)		(c)
	Number of Securities to be issued upon exercise of outstanding options, warrants and rights*	Weighted-average exercise price of outstanding options, warrants and rights *		Number of securities remaining available for future issuance under equity compensation plans, (excluding securities reflected in column (a)) *
Equity compensation plans
approved by security holders:
2006 Stock Option Plan	11,125	$	17.93	—
2014 Equity Incentive Plan, as amended(1)	252,310	$	29.42	117,035
Equity compensation plans
not approved by security holders:.
None	—		—	—
TOTAL	263,435	$	28.94	117,035

* Share and per share data adjusted for the 50% stock dividend declared on August 8, 2017.

 ⁽¹⁾ The second amendment to the 2014 Equity Incentive Plan, which increased the total shares available for stock awards by 100,000 shares, was approved by the stockholders of the Company at the Annual Meeting of Stockholders on April 26, 2022.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by this item is incorporated herein by reference to the sections in the Proxy Statement captioned “Related Party Transactions” and “Corporate Governance”.

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporated herein by reference to the section in the Proxy Statement captioned “Proposal III -Ratification of Appointment of Independent Auditors.”

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)Listed below are all financial statements, schedules and exhibits filed as part of this Annual Report on Form 10-K.

1.The consolidated balance sheets of Norwood Financial Corp and subsidiary as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive (loss) income, stockholders’ equity and cash flows for

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each of the years in the two-year period ended December 31, 2022, together with the related notes and the independent registered public accounting firm reports of S.R. Snodgrass, P.C. (PCAOB: 00074), independent registered public accounting firm.

2.Schedules omitted as they are not applicable.

‎

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3.The following exhibits are filed as part of the Form 10-K

No.	Description
3(i)	Amended and Restated Articles of Incorporation of Norwood Financial Corp (13)
3(ii)	Bylaws of Norwood Financial Corp (1)
4.1	Specimen Stock Certificate of Norwood Financial Corp (2)
4.2	Description of Capital Stock of Norwood Financial Corp (15)
10.1†	Employment Agreement with Lewis J. Critelli (3)
10.2†	Change in Control Severance Agreement with William S. Lance (3)
10.3†	Change in Control Severance Agreement with Robert J. Mancuso (4)
10.4†	Salary Continuation Agreement between the Bank and William W. Davis, Jr. (5)
10.5†	Amended and Restated Salary Continuation Agreement, dated September 1, 2017, between the Bank and Lewis J. Critelli (6)
10.7†	2006 Stock Option Plan (7)
10.8†	First and Second Amendments to Salary Continuation Agreement with William W. Davis, Jr. (8)
10.11†	2014 Equity Incentive Plan, as amended (9)
10.12†	Addendum to Change in Control Severance Agreement with William S. Lance (10)
10.13†	Salary Continuation Agreement, dated September 1, 2017, between Wayne Bank and William S. Lance (6)
10.14†	Salary Continuation Agreement, dated September 1, 2017, between Wayne Bank and Robert J. Mancuso (6)
10.15†	Change-In-Control Severance Agreement, dated February 14, 2022, by and among Norwood Financial Corp, Wayne Bank, and Vincent G. O’Bell (20)
10.16†	Change-In-Control Severance Agreement, dated January 16, 2018, by and among Norwood Financial Corp, Wayne Bank, and John F. Carmody (11)
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 (11)
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 (11)
10.19	Wayne Bank Executive Annual Incentive Plan (14)
10.20	Salary-Continuation Agreement dated March 1, 2021, between Wayne Bank and John F. Carmody (12)
10.21	First Amendment to Salary-Continuation Agreement dated January 24, 2023, between Wayne Bank and William S. Lance
10.22	Addendum to Change in Control Severance Agreement dated January 20, 2023 with William S. Lance
10.23	Employment Agreement dated May 9, 2022, by and among Norwood Financial Corp, Wayne Bank and James O. Donnelly (16)
10.24	Stock Award Agreement dated May 10, 2022, between Norwood Financial Corp and James O. Donnelly (17)
10.25	Salary-Continuation Agreement dated May 10, 2022, between Wayne Bank and James O. Donnelly (18)
10.26	Consulting Agreement dated July 1, 2022, by and between Norwood Financial Corp and Lewis J. Critelli (19)
21	Subsidiaries of Norwood Financial Corp
23	Consent of S.R. Snodgrass, P.C.
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

74

101	The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.
101.INS	Inline XBRL Instance Document (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded with the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

†	Management contract or compensatory plan or arrangement.
(1)	Incorporated by reference into this document from the identically numbered exhibit to the Company’s Form 10-Q filed with the Commission on August 8, 2014.
(2)	Incorporated herein by reference into this document from the identically numbered Exhibit to the Company’s Form 10, Registration Statement initially filed in paper with the Commission on April 29, 1996, Registration No. 0-28364.
(3)	Incorporated herein by reference from the identically numbered exhibits to the Company’s Form 10-K filed with the Commission on March 15, 2010.
(4)	Incorporated by reference into this document from Exhibit 10.4 to the Company’s Form 10-K filed with the Commission on March 14, 2013. File No 0-28364.
(5)	Incorporated herein by reference into this document from Exhibit 10.6 to the Company’s Form 10-K filed with the Commission on March 23, 2000, File No. 0-28364.
(6)	Incorporated by reference from the exhibits to the Current Report on Form 8-K filed with the Commission on September 5, 2017.
7)	Incorporated herein by reference from Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (File No. 333-134831) filed with the Commission on June 8, 2006.
(8)	Incorporated herein by reference from Exhibits 10.1 and 10.5 to the Company’s Current Report on Form 8-K filed April 4, 2006.
(9)	Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-8 (File No. 333-266622) filed with the Commission on August 8, 2022.
(10)	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 18, 2015.
(11)	Incorporated by reference into this document from the exhibits to the Company’s Current Report on Form 8-K filed with the Commission on January 16, 2018
(12)	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 2, 2021, (File No. 0-28364).
(13)	Incorporated herein by reference from the identically numbered exhibit to the Company’s Form 10-K filed with the Commission on March 13, 2020.
(14)	Incorporated herein by reference from the identically numbered exhibit to the Company’s Form 10-K filed with the Commission on March 13, 2020.

(15) Incorporated herein by reference from the identically numbered exhibit to the Company’s Form 10-K filed with the

Commission on March 9, 2021.

(16)	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 12, 2022, (File No. 0-28364).
(17)	Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on May 12, 2022, (File No. 0-28364).
(18)	Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on May 12, 2022, (File No. 0-28364).
(19)	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 5, 2022, (File No. 0-28364).

(20) Incorporated by reference to Exhibit 10.15 to the Company’s Form 10-K filed with the Commission on March 11, 2022, (File

No. 0-28364).

75

Item 16. Form 10-K Summary

None.

‎

76

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

Dated: March 17, 2023	By:	/s/ James O. Donnelly
		James O. Donnelly President and Chief Executive Officer (Duly Authorized Representative)

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on March 17, 2023 on behalf of the registrant and in the capacities indicated.

/s/ James O. Donnelly	/s/ Lewis J. Critelli
James O. Donnelly President, Chief Executive Officer and Director (Principal Executive Officer)	Lewis J. Critelli Director
/s/ Andrew A. Forte	/s/ Susan Campfield
Dr. Andrew A. Forte Director	Susan Campfield Director
/s/ Joseph W. Adams	/s/ Kevin M. Lamont
Joseph W. Adams Director /s/ Ralph A. Matergia	Kevin M. Lamont Director /s/ Kenneth A. Phillips
Ralph A. Matergia Director	Dr. Kenneth A. Phillips Director
/s/ Jeffrey S. Gifford	/s/ Alexandra K. Nolan
Jeffrey S. Gifford Director	Alexandra K. Nolan Director
/s/ William S. Lance	/s/ Meg L. Hungerford
William S. Lance Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	Meg L. Hungerford Director

77

EX-10.21

Exhibit 10.21

FIRST AMENDMENT TO

SALARY CONTINUATION AGREEMENT

THIS FIRST AMENDMENT (the “Amendment”) is adopted January 24, 2023, by and between Wayne Bank (the “Employer”), and William Lance (the “Executive”). 

WHEREAS, the Employer and the Executive entered into a Salary Continuation Agreement dated September 1, 2017 (the “Agreement”) to provide deferred compensation benefits to the Executive under certain circumstances; and

 WHEREAS, the Employer and the Executive now wish to increase the Executive’s benefits under the Agreement;

NOW, THEREFORE, the Employer and the Executive adopt the following amendments  to the Agreement:

Section 2.1 of the Agreement shall be deleted and replaced with the following:

2.1Normal Retirement Benefit.  If Separation from Service occurs at Normal Retirement Age, the Employer shall pay the Executive an annual benefit in the amount of Sixty-Six Thousand Dollars ($66,000) in lieu of any other benefit hereunder.  If Separation from Service occurs after Normal Retirement Age, for each full month between Normal Retirement Age and Separation from Service, up to a maximum of twenty-four (24) months, the Bank shall increase this annual benefit by .3274%.  The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following Separation from Service.

Sections 2.4 and 2.5 of the Agreement shall be deleted and replaced with the following:

2.4Change in Control Benefit.  (a) If a Change in Control occurs prior to Separation of Service, Disability and Normal Retirement Age, the Employer shall pay the Executive an annual benefit in the amount of Sixty-Six Thousand Dollars ($66,000) in lieu of any other benefit hereunder.  The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following Normal Retirement Age. (b) If a Change in Control occurs after Normal Retirement Age, but prior to Separation of Service and Disability, the Employer shall pay the Executive an annual benefit shown on Schedule A for the Plan Year ending immediately prior to Change in Control in lieu of any other benefit hereunder.  Additionally, the annual benefit shall be increased by a pro-rated amount relative to the Executive’s service during the partial Plan Year in which Change in Control takes place. If Change in Control occurs after the Executive has reached age sixty-seven (67) the annual benefit shall be Seventy-One Thousand Three Hundred Eighty-Six Dollars ($71,386).  The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following Change in Control.

2.5Death Prior to Commencement of Benefit Payments.  In the event the Executive dies prior to Separation from Service, Disability and Change in Control and reaching age sixty-seven (67) the Employer shall pay the Beneficiary the annual benefit shown on Schedule A for the Plan Year ending immediately prior to the Executive’s death in lieu of any other benefit hereunder.  Additionally, the annual benefit shall be increased by a pro-rated amount relative to the Executive’s service during the partial Plan Year in which the Executive’s death takes place. In the event the Executive dies prior to Separation from Service, Disability and Change in Control and after the Executive has reached age sixty-seven (67) the annual benefit shall be Seventy-One Thousand Three Hundred Eighty-Six Dollars ($71,386) in lieu of any other benefit hereunder.  The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following the Executive’s death.

The Schedule A originally attached to, and made a part of, the Agreement shall be replaced by the Schedule A attached hereto.

IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Amendment as indicated below:

Executive:Employer:

/s/ William LanceBy:/s/ James O. Donnelly

Its:President and CEO

Salary Continuation Agreement

Schedule A

William Lance

					Early Termination	Normal Retirement Benefit	Disability	Change In Control Before Normal Retirement Age	Change In Control After Normal Retirement Age	Death
Plan Anniversary Date: 09/30/2023
Normal Retirement: 06/09/2024, Age 65
Normal Retirement Payment: Monthly for 15 Years					Amount Payable Monthly for 15 Years at Normal Retirement Age	Amount Payable Monthly for 15 Years at Separation from Service on or after Normal Retirement Age	Amount Payable Monthly for 15 Years Upon Disability	Amount Payable Monthly for 15 Years at Normal Retirement Age	Amount Payable Monthly for 15 Years upon a Change in Control	Amount Payable Monthly for 15 Years Upon Death
End of Month Values As Of	Age	Discount Rate	Benefit Level	Based On	Annual	Annual	Annual	Annual	Annual	Annual
		Pre/Post			Benefit 1	Benefit 1	Benefit 1	Benefit 1, 2	Benefit 1, 2	Benefit 1, 2
Feb-23	63	4.00%/4.00%	66,000	439,400	41,135		38,873	66,000		66,000
Sep-23	64	4.00%/4.00%	66,000	581,539	53,012		51,447	66,000		66,000
Jun-24	65	4.00%/4.00%	66,000	746,035	66,000	66,000	66,000	66,000	66,000	66,000
Jun-25	66	4.00%/4.00%	68,640	775,877		68,640			68,640	68,640
Jun-26	67	4.00%/4.00%	71,386	806,912		71,386			71,386	71,386

The first line represents the plan values as of February 1, 2023.

1 The annual benefit amount will be distributed in 12 equal monthly payments for a total of 180 monthly payments.

2 Note that accounting rules may require an additional accrual at the time this benefit is triggered.

IF THERE IS A CONFLICT BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT.

/s/ William Lance By /s/ James O. Donnelly

Date 1/24/2023Title President and CEO

Date 1/24/2023

Birth Date: 06/09/1959					Early Termination			Disability	Change In Control	Death
Plan Anniversary Date: 09/30/2023
Normal Retirement: 06/09/2024, Age 65
Normal Retirement Payment: Monthly for 15 Years					Amount Payable			Amount Payable Monthly for 15 Years Upon Disability	Amount Payable Monthly for 15 Years at Normal Retirement Age	Amount Payable Monthly for 15 Years Upon Death
					Monthly for 15 Years at Normal Retirement Age
Values As Of	Age	Discount Rate	Benefit Level	Based On	Vesting	Vested Benefit Liability	Annual	Annual	Annual	Annual
		Pre/Post					Benefit 1	Benefit 1	Benefit 1,2	Benefit 1,2
Feb-23	63	4.00%/4.00%	66,000	439,400	100.00%	439,400	41,135	38,873	66,000	66,000
Sep-23	64	4.00%/4.00%	66,000	581,539	100.00%	581,539	53,012	51,447	66,000	66,000
Jun-24	65	4.00%/4.00%	66,000	746,035	100.00%	746,035	66,000	66,000	66,000	66,000

EX-10.22

Exhibit 10.22

ADDENDUM TO THE CHANGE-IN-CONTROL SEVERANCE AGREEMENT

This Addendum to the Change-in-Control Severance Agreement is made and entered into between Norwood Financial Corp. (the "Company"), Wayne Bank ("Bank") and William S. Lance (the "Executive") as of this 20th day of January, 2023.

WHEREAS, the Company, the Bank and the Executive have previously entered into a Change-in-Control Severance Agreement, dated March 2, 2010 (the "Agreement"), providing for the payment of severance benefits to the Executive in the event of a change-in-control of the Company and the Bank; and

WHEREAS, the Agreement, as previously extended, is scheduled to expire on March 2, 2023, and the parties desire to extend the term of the Agreement for an additional two year period, ending as of March 2, 2025; and

WHEREAS, Section 13 of the Agreement provides that amendments to the Agreement may be made in writing and signed by all parties;

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt of which is hereby acknowledged, this Addendum is hereby approved by the undersigned parties, as follows:

1. Section 5 of the Agreement is hereby amended by the inclusion of the following sentence at the end of Section 5, as follows:

"Notwithstanding anything herein to the contrary, the Term of this Agreement shall be extended from the current date of expiration of the term of this Agreement through March 2, 2025, except as may be extended beyond that date by future action of the parties."

2. Except as set forth herein, such Agreement shall remain in full force and effect as in effect as of the date of this Addendum.

IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date first hereinabove written.

Wayne Bank

/s/ James O. Donnelly

By:James O. Donnelly

Its:President and Chief Executive Officer

Norwood Financial Corp.

/s/ James O. Donnelly

By:James O. Donnelly

Its:President and Chief Executive Officer

Executive

/s/ William S. Lance

William S Lance

Executive Vice President and

Chief Financial Officer

EX-21

Exhibit 21

Subsidiaries of the Registrant

Parent

Norwood Financial Corp.

Subsidiaries	State or Other Jurisdiction of Incorporation	Percentage Ownership
Wayne Bank	Pennsylvania	100%
Subsidiaries of Wayne Bank
Norwood Investment Corp.	Pennsylvania	100%
WCB Realty Corp.	Pennsylvania	100%
WTRO Properties, Inc.	Pennsylvania	100%

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements File No. 333-266622 and File No. 333-134831on Form S-8 of Norwood Financial Corp. of our report dated March 17, 2023, relating to our audit of the consolidated financial statements,  which is incorporated in this Annual Report on Form 10-K of Norwood Financial Corp. for the year ended December 31, 2022.

King of Prussia, Pennsylvania

March 17, 2023 

S.R. Snodgrass, P.C.  2009 Mackenzie Way, Suite 340  Cranberry Township, PA 16066  Phone: 724-934-0344  Fax: 724-934-0345

EX-31.1

Exhibit 31.1

CERTIFICATION

I, James O. Donnelly, certify that:

1.I have reviewed this annual report on Form 10-K 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 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:  March 17, 2023	By:	/s/ James O. Donnelly
		James O. Donnelly President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, William S. Lance, certify that:

1.I have reviewed this annual report on Form 10-K 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 overfinancial reporting to be designed under our supervision, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements forexternal 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 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:  March 17, 2023	By:	/s/ William S. Lance
		William S. Lance Executive Vice President & 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 Annual Report of Norwood Financial Corp. (the Company) on Form 10-K for the year ending December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, James O. Donnelly, 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/ James O. Donnelly	/s/ William S. Lance
James O. Donnelly	William S. Lance
President and Chief Executive Officer	Executive Vice President and Chief Financial Officer

March 17, 2023

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2022	Mar. 01, 2023	Jun. 30, 2022
Document And Entity Information [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2022
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Transition Report	false
Entity File Number	0-28364
Entity Registrant Name	NORWOOD FINANCIAL CORP
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	23-2828306
Entity Address, Address Line One	717 Main Street
Entity Address, City or Town	Honesdale
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	18431
City Area Code	570
Local Phone Number	253-1455
Title of 12(b) Security	Common Stock, $.10 par value
Trading Symbol	NWFL
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		8,181,001
Entity Public Float			$ 180.5
Documents Incorporated by Reference [Text Block]	Portions of the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders. (Part III)
Entity Central Index Key	0001013272
Amendment Flag	false
Document Fiscal Period Focus	FY
Auditor Firm ID	74
Auditor Location	King of Prussia, Pennsylvania
Auditor Name	S.R. Snodgrass, P.C

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
ASSETS
Cash and due from banks	$ 28,847	$ 21,073
Interest-bearing deposits with banks	3,019	185,608
Cash and cash equivalents	31,866	206,681
Securities available for sale	418,927	406,782
Loans receivable (net of allowance for loan losses 2022: $16,999; 2021: $16,442)	1,456,946	1,338,489
Regulatory stock, at cost	5,418	3,927
Premises and equipment, net	17,924	17,289
Bank owned life insurance	43,364	40,038
Accrued interest receivable	6,917	5,889
Foreclosed real estate owned	346	1,742
Deferred tax assets, net	23,549	8,791
Goodwill	29,266	29,266
Other intangibles	306	407
Other assets	12,241	9,203
Total Assets	2,047,070	2,068,504
Deposits:
Non-interest bearing demand	434,529	440,652
Interest-bearing demand	237,891	196,786
Money market deposit accounts	273,165	309,439
Savings	278,372	281,214
Time	503,770	528,702
Total Deposits	1,727,727	1,756,793
Short-term borrowings	93,215	60,822
Other borrowings	40,000	29,998
Accrued interest payable	2,653	1,203
Other liabilities	16,390	14,426
Total Liabilities	1,879,985	1,863,242
STOCKHOLDERS' EQUITY
Common stock, $0.10 par value per share, authorized: 20,000,000 shares, issued: 2022: 8,291,401 shares, 2021: 8,266,751 shares	829	827
Surplus	96,897	96,443
Retained earnings	130,020	110,015
Treasury stock at cost: 2022: 124,650 shares; 2021: 65,328 shares	(3,308)	(1,767)
Accumulated other comprehensive loss	(57,353)	(256)
Total Stockholders' Equity	167,085	205,262
Total Liabilities and Stockholders' Equity	$ 2,047,070	$ 2,068,504

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Consolidated Balance Sheets [Abstract]
Preferred Stock, No Par Value
Net of Allowance for Loan losses	$ 16,999	$ 16,442
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred Stock, Shares Issued	0
Common Stock, Par Value Per Share	$ 0.10	$ 0.10
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Shares, Issued	8,291,401	8,266,751
Treasury Stock, Shares	124,650	65,328

XML

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
INTEREST INCOME
Loans receivable, including fees	$ 66,013	$ 65,257
Securities: Taxable	7,262	4,055
Securities: Tax exempt	1,789	1,492
Interest-bearing deposits with banks	602	266
Total Interest Income	75,666	71,070
INTEREST EXPENSE
Deposits	6,471	4,757
Short-term borrowings	524	284
Other borrowings	274	716
Total Interest Expense	7,269	5,757
Net Interest Income	68,397	65,313
PROVISION FOR LOAN LOSSES	900	4,200
Net Interest Income After Provision for Loan Losses	67,497	61,113
OTHER INCOME
OTHER INCOME	8,761	7,021
Net realized gains on sales of securities	3	92
Net gain on sale of loans	3	177
Net gain on sale of foreclosed real estate owned	427	36
Earnings and proceeds on life insurance policies	1,087	941
Other	1,906	674
Total Other Income	9,932	8,361
OTHER EXPENSES
Salaries and employee benefits	22,071	20,608
Occupancy	3,701	3,533
Furniture and equipment	1,266	1,289
Data processing and related operations	2,948	2,415
Federal Deposit Insurance Corporation insurance assessment	612	681
Advertising	516	473
Professional fees	1,719	1,582
Postage and telephone	959	993
Taxes, other than income	1,013	1,122
Foreclosed real estate	73	151
Amortization of intangible assets	101	123
Other	6,065	5,644
Total Other Expenses	41,044	38,614
Income before Income Taxes	36,385	30,860
INCOME TAX EXPENSE	7,152	5,945
Net income	$ 29,233	$ 24,915
EARNINGS PER SHARE BASIC	$ 3.59	$ 3.05
EARNINGS PER SHARE DILUTED	$ 3.58	$ 3.04
Service Charges And Fees [Member]
OTHER INCOME
OTHER INCOME	$ 5,661	$ 5,693
Income From Fiduciary Activities [Member]
OTHER INCOME
OTHER INCOME	$ 845	$ 748

XML

Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Consolidated Statements of Comprehensive Income [Abstract]
Net Income	$ 29,233	$ 24,915
Other comprehensive (loss) income
Unrealized (loss) gain on pension liability	(784)	220
Tax Effect	165	(46)
Investment securities available for sale:
Unrealized holding loss	(71,488)	(6,931)
Tax Effect	15,012	1,455
Reclassification of gains from sale of securities	(3)	(92)
Tax Effect	1	19
Other comprehensive loss	(57,097)	(5,375)
COMPREHENSIVE (LOSS) INCOME	$ (27,864)	$ 19,540

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Consolidated Statements of Changes in Stockholders’ Equity - USD ($)	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Beginning balance at Dec. 31, 2020	$ 824,000	$ 95,388,000	$ 93,796,000	$ (342,000)	$ 5,119,000	$ 194,785,000
Beginning balance, shares at Dec. 31, 2020	8,236,331			10,263
Net Income			24,915,000			24,915,000
Other comprehensive loss					(5,375,000)	(5,375,000)
Cash dividends declared			(8,696,000)			(8,696,000)
Acquisition of treasury stock, shares				56,162
Acquisition of treasury stock				$ (1,440,000)		(1,440,000)
Stock options exercised	$ 2,000	392,000				$ 394,000
Stock options exercised, shares	22,420					22,420
Sale of treasury stock for ESOP		(5,000)		$ 135,000		$ 130,000
Sale of treasury stock for ESOP, shares				(4,997)
Compensation expense related to stock options		214,000				214,000
Restricted stock awards	$ 1,000	454,000		$ 3,900		335,000
Restricted stock awards, shares	8,000			(120,000)
Ending balance, shares at Dec. 31, 2021	8,266,751			65,328
Ending balance at Dec. 31, 2021	$ 827,000	96,443,000	110,015,000	$ (1,767,000)	(256,000)	205,262,000
Net Income			29,233,000			29,233,000
Other comprehensive loss					(57,097,000)	(57,097,000)
Cash dividends declared			(9,228,000)			(9,228,000)
Acquisition of treasury stock, shares				96,062
Acquisition of treasury stock				$ (2,515,000)		(2,515,000)
Stock options exercised		(212,000)		$ 869,000		$ 657,000
Stock options exercised, shares	1,650			(32,775)		34,425
Sale of treasury stock for ESOP		27,000		$ 105,000		$ 132,000
Sale of treasury stock for ESOP, shares				(3,965)
Compensation expense related to stock options		269,000				269,000
Restricted stock awards	$ 2,000	370,000				372,000
Restricted stock awards, shares	23,000
Ending balance, shares at Dec. 31, 2022	8,291,401			124,650
Ending balance at Dec. 31, 2022	$ 829,000	$ 96,897,000	$ 130,020,000	$ (3,308,000)	$ (57,353,000)	$ 167,085,000

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Consolidated Statements of Changes in Stockholders’ Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Consolidated Statements of Changes in Stockholders’ Equity [Abstract]
Cash dividends declared	$ 1.13	$ 1.06

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 29,233	$ 24,915
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	900	4,200
Depreciation	1,470	1,481
Amortization of intangible assets	101	123
Deferred income taxes	419	(383)
Net amortization of securities premiums and discounts	1,303	1,529
Net realized gain on sales of securities	(3)	(92)
Earnings and proceeds on life insurance policies	(1,087)	(941)
Gain (loss) on sales of fixed assets and foreclosed real estate owned	(379)	108
Net amortization of loan fees	(217)	(3,497)
Net gain on sale of loans	(3)	(177)
Loans originated for sale	(845)	(8,616)
Proceeds from sale of loans originated for sale	848	8,793
Compensation expense related to stock options	269	214
Compensation expense related to restricted stock	372	335
(Increase) decrease in accrued interest receivable	(1,028)	343
Increase (decrease) in accrued interest payable	1,450	(398)
Other, net	(2,069)	1,261
Net cash provided by operating activities	30,734	29,198
Securities available for sale:
Proceeds from sales	5,113	11,366
Proceeds from maturities and principal reductions on mortgage-backed securities	40,780	68,218
Purchases	(130,828)	(268,242)
Purchase of regulatory stock	(6,366)	(4,201)
Redemption of regulatory stock	4,875	4,255
Net (increase) decrease in loans	(118,999)	57,938
Proceeds from bank-owned life insurance policies	761	511
Purchase of bank-owned life insurance	(3,000)
Purchase of premises and equipment	(2,153)	(1,258)
Proceeds from sales of foreclosed real estate owned	1,823	291
Proceeds from sales of bank premises and fixed assets		158
Net cash used in investing activities	(207,994)	(130,964)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits	(29,066)	221,151
Net increase (decrease) in short-term borrowings	32,393	(2,481)
Repayments of other borrowings	(29,998)	(12,461)
Proceeds from other borrowings	40,000
Stock options exercised	657	394
Sale of treasury stock for ESOP	132	130
Acquisition of treasury stock	(2,515)	(1,440)
Cash dividends paid	(9,158)	(8,539)
Net Cash Provided by Financing Activities	2,445	196,754
Net (Decrease) increase in cash and cash equivalents	(174,815)	94,988
CASH AND CASH EQUIVALENTS - BEGINNING	206,681	111,693
CASH AND CASH EQUIVALENTS - END	31,866	206,681
Cash payments for:
Interest paid	5,819	6,155
Income taxes paid, net of refunds	6,891	5,330
Supplemental Schedule of Noncash Investing Activities:
Transfers of loans to foreclosed real estate owned and repossession of other assets	776	1,740
Dividends payable	$ 2,366	$ 2,296

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Nature of Operations

12 Months Ended

Dec. 31, 2022

Nature of Operations [Abstract]

Nature of Operations

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF OPERATIONS

Norwood Financial Corp (Company) is a one bank holding company. Wayne Bank (Bank) is a wholly-owned subsidiary of the Company. The Bank is a state-chartered bank headquartered in Honesdale, Pennsylvania. The Company derives substantially all of its income from bank-related services which include interest earnings on commercial mortgages, residential real estate mortgages, commercial and consumer loans, as well as interest earnings on investment securities and fees from deposit services to its customers. The Company is subject to regulation and supervision by the Federal Reserve Board while the Bank is subject to regulation and supervision by the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking and Securities.

 

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 determination of other-than-temporary impairment on securities, the determination of goodwill impairment and the fair value of financial instruments.

Significant Group Concentrations of Credit Risk

Most of the Company’s activities are with customers located within its markets in Northeastern Pennsylvania and the New York Counties of Delaware, Sullivan, Ontario, Otsego and Yates. Note 3 discusses the types of securities that the Company invests in. Note 4 discusses the types of lending that the Company engages in. The Company does not have any significant concentrations to any one industry or customer.

Concentrations of Credit Risk

The Bank operates primarily in Wayne, Pike, Lackawanna, Luzerne and Monroe Counties, Pennsylvania and Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York. Accordingly, the Bank has extended credit primarily to commercial entities and individuals in these areas whose ability to honor their contracts is influenced by the region’s economy. These customers are also the primary depositors of the Bank. The Bank is limited in extending credit by legal lending limits to any single borrower or group of related borrowers.

Securities

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Securities available for sale are carried at fair value. Unrealized gains and losses are reported in other comprehensive income, net of the related deferred tax effect. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using a method which approximates the interest method over the term of the security.

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

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

Declines in the fair value of 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, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent of the Company to not sell the securities and it is more likely than not that it will not have to sell the securities before recovery of their cost basis.

Regulatory Stock

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

Management evaluates the regulatory stock for impairment. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB. Management considers the FHLB’s regulatory capital ratios, liquidity, and the fact that new shares of FHLB stock continue to change hands at the $100 par value. Management believes no impairment charge is necessary related to FHLB stock as of December 31, 2022.

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees. Interest income is accrued on the unpaid principal balance. Loan origination fees are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan.

The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Troubled Debt Restructurings

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

Loans Acquired

Loans acquired including loans that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable, are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. Loans are evaluated individually to determine if there is evidence of deterioration of credit quality since origination. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment or as a loss accrual or a valuation allowance. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining estimated life. Decreases in expected cash flows are recognized immediately as impairment. Any valuation allowances on these impaired loans reflect only losses incurred after the acquisition.

For purchased loans acquired that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value. Loans may be aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit discounts. The remaining differences between the purchase price and the unpaid principal balance at the date of acquisition are recorded in interest income over the life of the loans.

Mortgage Servicing Rights

Servicing assets are recognized as separate assets when rights are acquired through purchase or through the sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon a third party appraisal. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance to the extent that fair value is less than the capitalized amount. The Company’s loan servicing assets at December 31, 2022 and 2021, respectively, were not impaired. Total servicing assets included in other assets as of December 31, 2022 and 2021, were $213,000 and $289,000, respectively.

Allowance for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are classified as substandard. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either 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 real estate loans for impairment disclosures, unless such loans were acquired with impairment or are the subject of a restructuring agreement.

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation expense is calculated principally on the straight-line method over the respective assets estimated useful lives as follows:

	Years
Buildings and improvements	10 - 40
Furniture and equipment	3 - 10

Leases

The Company applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification. See Note 8 for related disclosures.

Transfers of Financial Assets

Transfers of financial assets, including loan and loan participation sales, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Foreclosed Real Estate

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value less cost to sell at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of its carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in other expenses.

Bank Owned Life Insurance

The Company invests in bank owned life insurance (BOLI) as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Bank on a select group of employees. The Company is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from the increase in cash surrender value of the policies or from death benefits realized is included in other income on the Consolidated Statements of Income.

Goodwill

In connection with three acquisitions the Company recorded goodwill in the amount of $29.3 million, representing the excess of amounts paid over the fair value of net assets of the institutions acquired. Goodwill is tested and deemed impaired when the carrying value of goodwill exceeds its implied fair value. The value of the goodwill can change in the future. We expect the value of the goodwill to decrease if there is a significant decrease in the franchise value of the Bank. If an impairment loss is determined in the future, we will reflect the loss as an expense for the period in which the impairment is determined, leading to a reduction of our net income for that period by the amount of the impairment loss. No impairment was recognized for the years ended December 31, 2022 and 2021.

Other Intangible Assets

At December 31, 2022, the Company had other intangible assets of $306,000, which is net of accumulated amortization of $1,448,000. These intangible assets will continue to be amortized using the sum-of-the-years digits method of amortization over ten years. At December 31, 2021, the Company had other intangible assets of $407,000, which was net of accumulated amortization of $1,347,000. Amortization expense related to other intangible assets was $101,000 and $123,000 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, the estimated future amortization expense for the core deposit intangible is as follows (in thousands):

2023	$	85
2024		69
2025		54
2026		38
2027		26
Thereafter		34
	$	306

Income Taxes

Deferred income tax assets and liabilities are determined based on the differences between financial statement carrying amounts and the tax basis of existing assets and liabilities. These differences are measured at the enacted tax rates that will be in effect when these differences reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

The Company and its subsidiary file a consolidated federal income tax return. The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company analyzes each tax position taken in its tax returns and determines the likelihood that the position will be realized. Only tax positions that are “more-likely-than-not” to be realized can be recognized in an entity’s financial statements. For tax positions that do not meet this recognition threshold, an entity will record an unrecognized tax benefit for the difference between the position taken on the tax return and the amount recognized in the financial statements. The Company does not have any unrecognized tax benefits at December 31, 2022 or 2021, or during the years then ended. No unrecognized tax benefits are expected to arise within the next twelve months.

Advertising Costs

Advertising costs are expensed as incurred.

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 less any unvested restricted shares. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method. Treasury shares are not deemed outstanding for earnings per share calculations.

Employee Benefit Plans

The Company has a defined contributory profit-sharing plan which includes provisions of a 401(k) plan. The Company’s contributions are expensed as the cost is incurred.

The Company has several supplemental executive retirement plans. To fund the benefits under these plans, the Company is the owner of single premium life insurance policies on the participants.

The Company provides pension benefits to eligible employees. The Company’s funding policy is to contribute at least the minimum required contributions annually.

Interest Rate Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments.  

Stock Option Plans

The Company recognizes the value of share-based payment transactions as compensation costs in the financial statements over the period that an employee provides service in exchange for the award. The fair value of the share-based payments for stock options is estimated using the Black-Scholes option-pricing model. The Company used the modified-prospective transition method to record compensation expense. Under the modified-prospective method, companies are required to record compensation cost for new and

modified awards over the related vesting period of such awards and record compensation cost prospectively for the unvested portion, at the date of adoption, of previously issued and outstanding awards over the remaining vesting period of such awards. No change to prior periods presented is permitted under the modified-prospective method.

Restricted Stock

The Company recognizes compensation cost related to restricted stock based on the market price of the stock at the grant date over the vesting 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 under the Company’s 2014 Equity Incentive Plan. The Company recognizes compensation expense for the fair value of the restricted stock on a straight-line basis over the requisite service period for the entire award.

Cash Flow Information

For the purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits with banks and federal funds sold.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, letters of credit and commitments to sell loans. Such financial instruments are recorded on the balance sheets when they become receivable or payable.

Trust Assets

Assets held by the Company in a fiduciary capacity for customers are not included in the financial statements since such items are not assets of the Company. Trust income is reported on the accrual method.

Treasury Stock

Common shares repurchased are recorded as treasury stock at cost.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and defined benefit pension obligations, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income as presented in the Consolidated Statement of Comprehensive Income.

Revenue Recognition

Under ASC Topic 606, management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment securities gains, loans servicing, gains on loans sold and earnings on bank-owned life insurance are not within the scope of this Topic.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the year ended December 31:

(dollars in thousands)	2022		2021
Noninterest Income
In-scope of Topic 606:
Service charges on deposit accounts	$	419	$	398
ATM Fees		452		443
Overdraft Fees		1,155		1,029
Safe deposit box rental		93		100
Loan related service fees		849		1,238
Debit card		2,496		2,228
Fiduciary activities		845		748
Commissions on mutual funds & annuities		119		127
Gain on sales of other real estate owned		427		36
Other income		1,906		674
Noninterest Income (in-scope of Topic 606)		8,761		7,021
Out-of-scope of Topic 606:
Net realized gains on sales of securities		3		92
Loan servicing fees		78		130
Gain on sales of loans		3		177
Earnings on and proceeds from bank-owned life insurance		1,087		941
Noninterest Income (out-of-scope of Topic 606)		1,171		1,340
Total Noninterest Income	$	9,932	$	8,361

Segment Reporting

The Company acts as an independent community financial services provider and offers traditional banking related financial services to individual, business and government customers. Through its Community Office and automated teller machine network, the Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans; and the providing of safe deposit services. The Company also performs personal, corporate, pension and fiduciary services through its Trust Department.

Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial, retail, mortgage banking and trust operations of the Company. As such, discrete information is not available and segment reporting would not be meaningful.

Reclassification of Comparative Amounts

Certain comparative amounts for the prior year have been reclassified to conform to current-year classifications. Such reclassifications had no material effect on net income or stockholders’ equity.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This standard, along with several other subsequent codification updates, replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses that are expected to occur over the remaining life of a financial asset and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The new current expected credit losses model (“CECL”) will apply to the allowance for loan losses, available-for-sale and held-to-maturity debt securities, purchased financial assets with credit deterioration and certain off-balance sheet credit exposures.

Management has completed its implementation plan, segmentation and testing, and model validation. The implementation plan included drafting of additional controls and policies to govern data uploads to its third-party vendor, balancing and reconciling, testing

and auditing of inputs, and review and decision-making surrounding segmentation, methodologies, qualitative factor adjustments, and reasonable and supportable forecasts and reversion techniques. Parallel runs were processed during 2022 and the results were consistent with management's expectations. The implementation plan is currently going through the Company's control structure and internal control testing is being performed.

As a result of adopting this standard, the Company expects the increase in its allowance effective January 1, 2023, to be in the range of $2.0 million to $2.5 million. In addition, the adoption of ASU No. 2016-13 will require the Company to gross up its previously purchased credit impaired loans through the allowance at January 1, 2023. As a result, the Company expects an increase in its allowance as of January 1, 2023, to be in the range of $2.2 million to $2.7 million. These estimates are subject to further refinements based on ongoing evaluations of our model, methodologies, and judgments, as well as prevailing economic conditions and forecasts as of the adoption date. The adoption of ASU 2016-13 is not expected to have a significant impact on our regulatory capital ratios.

At adoption, the Company did not have any securities classified as HTM debt securities. No allowance was recorded related to AFS debt securities at the date of adoption, January 1, 2023.

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 unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Update is effective for smaller reporting companies and all other entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the sunset (or expiration) date of Accounting Standards Codification (ASC) Topic 848 to December 31, 2024. This gives reporting entities two additional years to apply the accounting relief provided under ASC Topic 848 for matters related to reference rate reform. ASU 2022-06 is effective for all reporting entities immediately upon issuance and must be applied on a prospective basis. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848. ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (ASC 815): Fair Value Hedging - Portfolio Layer Method. ASC 815 currently permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in this Update allow non-prepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity

to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby allowing consistent accounting for similar hedges. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

 

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Securities

12 Months Ended

Dec. 31, 2022

Securities [Abstract]

Securities

NOTE 3 - SECURITIES

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

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE FOR SALE:
U.S. Treasury securities	$	45,066	$	—	$	(3,212)	$	41,854
U.S. Government agencies		21,266		—		(2,943)		18,323
States and political subdivisions		157,524		2		(29,674)		127,852
Mortgage-backed securities-
government sponsored entities		268,400		—		(37,502)		230,898
Total debt securities	$	492,256	$	2	$	(73,331)	$	418,927

	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE FOR SALE:
U.S. Treasury securities	$	19,550	$	6	$	(205)	$	19,351
U.S. Government agencies		16,251		24		(264)		16,011
States and political subdivisions		145,107		2,155		(1,395)		145,867
Mortgage-backed securities-
government sponsored entities		227,712		766		(2,925)		225,553
Total debt securities	$	408,620	$	2,951	$	(4,789)	$	406,782

The following tables show the Company’s 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 (in thousands):

	December 31, 2022
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	25,733	$	(849)	$	16,121	$	(2,363)	$	41,854	$	(3,212)
U.S. Government agencies		8,321		(885)		10,002		(2,058)		18,323		(2,943)
States and political subdivisions		66,680		(11,194)		57,367		(18,480)		124,047		(29,674)
Mortgage-backed securities-government sponsored entities		102,361		(10,639)		128,537		(26,863)		230,898		(37,502)
	$	203,095	$	(23,567)	$	212,027	$	(49,764)	$	415,122	$	(73,331)

	December 31, 2021
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	18,361	$	(205)	$	—	$	—	$	18,361	$	(205)
U.S. Government agencies		7,912		(109)		3,843		(155)		11,755		(264)
States and political subdivisions		74,658		(1,395)		—		—		74,658		(1,395)
Mortgage-backed securities-government sponsored entities		170,647		(2,856)		2,919		(69)		173,566		(2,925)
	$	271,578	$	(4,565)	$	6,762	$	(224)	$	278,340	$	(4,789)

The Company has 203 debt securities in the less than twelve month category and 140 debt securities in the twelve months or more category as of December 31, 2022. In management’s opinion, the unrealized losses on securities reflect changes in interest rates subsequent to the acquisition of specific securities. No other-than-temporary-impairment charges were recorded in 2022. Management believes that all other unrealized losses represent temporary impairment of the securities, and it is more likely than not that it will not have to sell the securities before recovery of their cost basis.

The amortized cost and fair value of debt securities as of December 31, 2022 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.

	Amortized		Fair
	Cost		Value
		(In Thousands)
Due in one year or less	$	5,883	$	5,821
Due after one year through five years		43,272		40,981
Due after five years through ten years		54,146		44,419
Due after ten years		120,555		96,808
		223,856		188,029
Mortgage-backed securities - government sponsored entities		268,400		230,898
	$	492,256	$	418,927

Gross realized gains and gross realized losses on sales of securities available for sale were $14,000 and $11,000, respectively, in 2022, compared to $92,000 and $0, respectively, in 2021. The proceeds from the sales of securities totaled $5,113,000 and $11,366,000 for the years ended December 31, 2022 and 2021, respectively.

Securities with a carrying value of $378,472,000 and $339,769,000 at December 31, 2022 and 2021, 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

12 Months Ended

Dec. 31, 2022

Loans Receivable and Allowance for Loan Losses [Abstract]

Loans Receivable and Allowance for Loan Losses

NOTE 4 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Set forth below is selected data relating to the composition of the loan portfolio (in thousands):

	December 31, 2022				December 31, 2021
Real Estate:
Residential	$	298,813	20.3	%	$	273,040	20.1	%
Commercial		651,544	44.2			628,724	46.4
Agricultural		68,915	4.7			61,925	4.6
Construction		32,469	2.2			21,990	1.6
Commercial loans		187,257	12.7			186,031	13.7
Other agricultural loans		35,277	2.4			37,930	2.8
Consumer loans to individuals		200,149	13.5			146,400	10.8
Total loans		1,474,424	100.0	%		1,356,040	100.0	%
Deferred fees, net		(479)				(1,109)
Total loans receivable		1,473,945				1,354,931
Allowance for loan losses		(16,999)				(16,442)
Net loans receivable	$	1,456,946			$	1,338,489

During 2021 and 2020, the Company participated in the Paycheck Protection Program (“PPP”), administered directly by the United States Small Business Administration (“SBA”). The PPP provides loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during the COVID-19 emergency. As of December 31, 2022 and 2021, the Company had outstanding principal balances of $121,000 and $15,209,000, respectively, in PPP loans. The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. PPP loans are included in the Commercial loan category.

In accordance with the SBA terms and conditions on these PPP loans, the Company received approximately $0 and $2.9 million in fees associated with the processing of these loans in 2022 and 2021, respectively. Upon funding of the loans, these fees were deferred and are amortized over the life of the loan as an adjustment to yield in accordance with FASB ASC 310-20-25-2.

As a result of the acquisition of UpState, the Company added $15,410,000 of loans that were accounted for in accordance with ASC 310-30. Based on a review of the loans acquired by the Company’s 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 $6,937,000.  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.

Changes in the accretable yield for purchased credit-impaired loans were as follows for the twelve months ended December 31:

(In thousands)

	2022		2021
Balance at beginning of period	$	1,884	$	1,365
Additions		—		—
Accretion		(710)		(880)
Reclassification and other		653		1,399
Balance at end of period	$	1,827	$	1,884

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

	December 31, 2022		December 31, 2021
Outstanding Balance
	$	8,368	$	12,862
Carrying Amount
	$	6,290	$	8,304

Loans acquired with credit deterioration of $15,410,000 and accounted for in accordance with ASC 310-30 were individually evaluated to estimate credit losses and a net recovery amount for each loan. The net cash flows for each loan were then discounted to present value using a risk-adjusted market rate. The table below presents the components of the purchase accounting adjustments:

(In Thousands)	July 7, 2020
Contractually required principal and interest	$	15,410
Non-accretable discount		(5,213)
Expected cash flows		10,197
Accretable discount		(1,724)
Estimated fair value	$	8,473

There has been no allowance for loan losses recorded for acquired loans with specific evidence of deterioration in credit quality. As of December 31, 2022, for loans that were acquired prior to 2020 with or without specific evidence of deterioration in credit quality, adjustments to the allowance for loan losses have been accounted for through the allowance for loan loss adequacy calculation.

The Company maintains a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans. The 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. The Company does 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.

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

	Real Estate Loans
									Commercial			Other	Consumer
	Residential		Commercial			Agricultural	Construction		Loans			Agricultural	Loans		Total
	(In thousands)
December 31, 2022
Individually evaluated for impairment	$	—	$	402	$	—	$	—	$	61	$	—	$	—	$	463
Loans acquired with deteriorated credit quality		567		2,049		2,034		—		1,640		—		—		6,290
Collectively evaluated for impairment		298,246		649,093		66,881		32,469		185,556		35,277		200,149		1,467,671
Total Loans	$	298,813	$	651,544	$	68,915	$	32,469	$	187,257	$	35,277	$	200,149	$	1,474,424

	Real Estate Loans
									Commercial			Other	Consumer
	Residential		Commercial			Agricultural	Construction		Loans			Agricultural	Loans		Total
	(In thousands)
December 31, 2021
Individually evaluated for impairment	$	—	$	1,658	$	—	$	—	$	16	$	—	$	—	$	1,674
Loans acquired with deteriorated credit quality		784		3,285		1,918		—		198		2,119		—		8,304
Collectively evaluated for impairment		272,256		623,781		60,007		21,990		185,817		35,811		146,400		1,346,062
Total Loans	$	273,040	$	628,724	$	61,925	$	21,990	$	186,031	$	37,930	$	146,400	$	1,356,040

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

			Unpaid Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2022	(In thousands)
With no related allowance recorded:
Real Estate Loans
Commercial	$	402	$	402	$	—
Commercial loans		11		11		—
Subtotal		413		413		—
With an allowance recorded:
Commercial loans		50		50		50
Subtotal		50		50		50
Total:
Real Estate Loans
Commercial	$	402	$	402	$	—
Commercial loans		61		61		50
Total Impaired Loans	$	463	$	463	$	50

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2021	(In thousands)
With no related allowance recorded:
Real Estate Loans
Commercial	$	141	$	141	$	—
Commercial loans		16		16		—
Subtotal		157		157		—
With an allowance recorded:
Real Estate Loans
Commercial		1,517		1,517		272
Subtotal		1,517		1,517		272
Total:
Real Estate Loans
Residential						—
Commercial	$	1,658	$	1,658	$	272
Commercial loans		16		16		—
Total Impaired Loans	$	1,674	$	1,674	$	272

The following information for impaired loans is presented for the years ended December 31, 2022 and 2021:

	Average Recorded				Interest Income
	Investment				Recognized
	2022		2021		2022		2021
	(In thousands)
Total:
Real Estate Loans
Commercial	$	740	$	2,358	$	93	$	157
Commercial loans		24		18		—		7
Total Loans	$	764	$	2,376	$	93	$	164

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 December 31, 2022, there were no troubled debt restructured loans. During 2022, there were no new loan relationships identified as troubled debt restructurings. During 2022, there were no charge-offs on loans classified as troubled debt restructurings.

As of December 31, 2021, there were no troubled debt restructured loans. During 2021, there were no new loans relationships identified as troubled debt restructurings. During 2021, there were no charge-offs on loans classified as troubled debt restructurings.

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 December 31, 2022 and 2021, foreclosed real estate owned totaled $346,000 and $1,742,000, respectively. As of December 31, 2022, included within foreclosed real estate owned is one commercial property that was received via a deed in lieu. As of December 31, 2022, the Company has initiated formal foreclosure proceedings on four consumer residential mortgage loans with an outstanding balance of $223,000.

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. Loans greater than 90 days past due are considered Substandard unless full payment is expected. 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 Company 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 December 31, 2022 and December 31, 2021 (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
December 31, 2022
Commercial real estate loans	$	646,775	$	1,079	$	3,690	$	—	$	—	$	651,544
Real estate - agricultural		66,444		368		2,103		—		—		68,915
Commercial loans		186,966		184		107		—		—		187,257
Other agricultural loans		34,071		556		650		—		—		35,277
Total	$	934,256	$	2,187	$	6,550	$	—	$	—	$	942,993

			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
December 31, 2021
Commercial real estate loans	$	618,541	$	5,146	$	4,765	$	—	$	272	$	628,724
Real estate - agricultural		60,193		—		1,732		—		—		61,925
Commercial loans		185,729		199		103		—		—		186,031
Other agricultural loans		35,573		210		2,147		—		—		37,930
Total	$	900,036	$	5,555	$	8,747	$	-	$	272	$	914,610

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. Nonperforming loans include loans that have been placed on nonaccrual status and loans remaining in accrual status on which the contractual payment of principal and interest has become 90 days past due.

The following table presents the recorded investment in the loan classes based on payment activity as of December 31, 2022 and December 31, 2021 (in thousands):

	Performing		Nonperforming		Total
December 31, 2022
Residential real estate loans	$	298,327	$	486	$	298,813
Construction		32,469		—		32,469
Consumer loans to individuals		199,985		164		200,149
Total	$	530,781	$	650	$	531,431

	Performing		Nonperforming		Total
December 31, 2021
Residential real estate loans	$	272,571	$	469	$	273,040
Construction		21,990		—		21,990
Consumer loans to individuals		146,345		55		146,400
Total	$	440,906	$	524	$	441,430

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 December 31, 2022 and December 31, 2021 (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		Purchased Credit Impaired Loans		Total Loans
December 31, 2022
Real Estate loans
Residential	$	297,350	$	187	$	223	$	—	$	486	$	896	$	567	$	298,813
Commercial		648,688		405		—		—		402		807		2,049		651,544
Agricultural		66,751		130		—		—		—		130		2,034		68,915
Construction		32,469		—		—		—		—		—		-		32,469
Commercial loans		185,485		71		—		—		61		132		1,640		187,257
Other agricultural loans		35,277		—		—		—		—		—		—		35,277
Consumer loans		198,893		853		239		—		164		1,256		-		200,149
Total	$	1,464,913	$	1,646	$	462	$	—	$	1,113	$	3,221	$	6,290	$	1,474,424

	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		Purchased Credit Impaired Loans		Total Loans
December 31, 2021
Real Estate loans
Residential	$	271,622	$	155	$	10	$	—	$	469	$	634	$	784	$	273,040
Commercial		625,336		—		—		—		103		103		3,285		628,724
Agricultural		59,982		25		—		—		—		25		1,918		61,925
Construction		21,990		—		—		—		—		—		-		21,990
Commercial loans		185,801		3		13		91		16		32		198		186,031
Other agricultural loans		35,811		—		—		—		—		—		2,119		37,930
Consumer loans		145,986		248		111		—		55		414		-		146,400
Total	$	1,346,528	$	431	$	134	$	91	$	643	$	1,208	$	8,304	$	1,356,040

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

(In thousands)	Residential Real Estate		Commercial Real Estate		Agricultural		Construction		Commercial		Other Agricultural		Consumer		Total
Beginning balance, December 31, 2021	$	2,175	$	10,878	$	—	$	133	$	1,490	$	—	$	1,766	$	16,442
Charge Offs		(172)		(20)		—		—		(16)		—		(457)		(665)
Recoveries		130		82		—		—		46		—		64		322
Provision for loan losses		700		(2,647)		259		276		925		124		1,263		900
Ending balance, December 31, 2022	$	2,833	$	8,293	$	259	$	409	$	2,445	$	124	$	2,636	$	16,999
Ending balance individually evaluated ‎for impairment	$	—	$	—	$	—	$	—	$	50	$	—	$	—	$	50
Ending balance collectively evaluated ‎for impairment	$	2,833	$	8,293	$	259	$	409	$	2,395	$	124	$	2,636	$	16,949

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2020	$	1,960	$	8,004	$	150	$	1,360	$	1,676	$	13,150
Charge Offs		(17)		(452)		—		(200)		(480)		(1,149)
Recoveries		74		19		—		49		99		241
Provision for loan losses		158		3,307		(17)		281		471		4,200
Ending balance, December 31, 2021	$	2,175	$	10,878	$	133	$	1,490	$	1,766	$	16,442
Ending balance individually evaluated ‎for impairment	$	—	$	272	$	—	$	—	$	—	$	272
Ending balance collectively evaluated for impairment	$	2,175	$	10,606	$	133	$	1,490	$	1,766	$	16,170

During the period ended December 31, 2022, the allowance for loan losses increased from $16,442,000 to $16,999,000. This $557,000 increase in the required allowance was due primarily to a $2.4 million increase in the qualitative factor related to loan growth and a $445,000 increase in the qualitative factor related to large balance loans, which was partially offset by a $2.3 million decrease in the qualitative factor related to COVID-19.

During the period ended December 31, 2021, the allowance for loan losses increased from $13,150,000 to $16,442,000. This $3,292,000 increase in the required allowance was due primarily to a $1.5 million increase in the qualitative factor related to loan growth and a $1.4 million increase due to an increase in the qualitative factor related to large balance loans.

Interest income that would have been recorded on loans accounted for on a non-accrual basis under the original terms of the loans was $182,000 and $35,000 for 2022 and 2021, respectively.

As of December 31, 2022 and 2021, the Company considered its concentration of credit risk to be acceptable. As of December 31, 2022, the highest concentrations are in commercial rentals and the residential rentals category, with loans outstanding of $141.9 million, or 9.6% of loans outstanding, to commercial rentals, and $113.0 million, or 7.7% of loans outstanding, to residential rentals. There were no charge-offs on loans within these concentrations for the years ended December 31, 2022 and 2021, respectively.

During 2022, the Company sold residential mortgage loans totaling $845,000. During 2021, the Company sold residential mortgage loans totaling $8,616,000. Gross realized gains and gross realized losses on sales of residential mortgage loans were $3,000 and $0, respectively, in 2022 and $177,000 and $0, respectively, in 2021. The proceeds from the sales of residential mortgage loans totaled $848,000 and $8,793,000 for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021, the outstanding value of loans serviced for others totaled $60.0 million and $65.4 million, respectively.

 

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Premises and Equipment

12 Months Ended

Dec. 31, 2022

Premises and Equipment [Abstract]

Premises and Equipment

NOTE 5 - PREMISES AND EQUIPMENT

Components of premises and equipment at December 31 are as follows:

	2022		2021
	(In Thousands)
Land and improvements	$	3,864	$	3,879
Buildings and improvements		23,444		21,846
Furniture and equipment		10,506		10,183
		37,814		35,908
Accumulated depreciation		(19,890)		(18,619)
	$	17,924	$	17,289

Depreciation expense totaled $1,470,000 and $1,481,000 for the years ended December 31, 2022 and 2021, respectively.
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Deposits

12 Months Ended

Dec. 31, 2022

Deposits:

Deposits

NOTE 6 - DEPOSITS

Aggregate time deposits in denominations greater than $250,000 were $213,623,000 and $257,238,000 at December 31, 2022 and 2021, respectively.

At December 31, 2022, the scheduled maturities of time deposits are as follows (in thousands):

2023	$	336,258
2024		96,823
2025		57,384
2026		8,632
2027		4,673
	$	503,770

 

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Borrowings

12 Months Ended

Dec. 31, 2022

Borrowings [Abstract]

Borrowings

NOTE 7 – BORROWINGS

Short-term borrowings at December 31 consist of the following:

	2022		2021
	(In Thousands)
Securities sold under agreements to repurchase	$	50,951	$	60,822
Federal Home Loan Bank short-term borrowings		42,264		—
	$	93,215	$	60,822

The outstanding balances and related information of short-term borrowings are summarized as follows:

	Years Ended December 31,
	2022			2021
	(Dollars In Thousands)
Average balance during the year	$	69,711		$	73,810
Average interest rate during the year		0.75	%		0.39	%
Maximum month-end balance during the year	$	93,215		$	90,409
Weighted average interest rate at the end of the year		2.65	%		0.34	%

Securities sold under agreements to repurchase generally mature within one day to one year from the transaction date. Securities with an amortized cost and fair value of $63,737,000 and $54,562,000 at December 31, 2022 and $66,353,000 and $65,162,000 at December 31, 2021, respectively, were pledged as collateral for these agreements. The securities underlying the agreements were under the Company’s control.

The collateral pledged for repurchase agreements that are classified as secured borrowings is summarized as follows (in thousands):

	As of December 31, 2022
	Remaining Contractual Maturity of the Agreements
	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
Repurchase Agreements:
Mortgage-backed securities - government sponsored entities	$	54,562	$	—	$	—	$	—	$	54,562
Total liability recognized for repurchase agreements										50,951

	As of December 31, 2021
	Remaining Contractual Maturity of the Agreements
	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
Repurchase Agreements:
Mortgage-backed securities - government sponsored entities	$	65,162	$	—	$	—	$	—	$	65,162
Total liability recognized for repurchase agreements										60,822

The Company has a line of credit commitment available from the FHLB of Pittsburgh for borrowings of up to $150,000,000, which renews annually in June. At December 31, 2022, there was $42,264,000 of borrowings outstanding on this line. There were no borrowings outstanding on this line of credit at December 31, 2021. The Company has a line of credit commitment available from Atlantic Community Bankers Bank for $7,000,000, which expires on June 30, 2023. There were no borrowings under this line of credit at December 31, 2022 and 2021. The Company has a line of credit commitment available from PNC Bank for $16,000,000 at December 31, 2022. There were no borrowings under this line of credit at December 31, 2022 and December 31, 2021. The Company also has a line of credit commitment from Zions Bank for $17,000,000 at December 31, 2022. There were no borrowings under this line of credit at December 31, 2022 and December 31, 2021.

Other borrowings consisted of the following at December 31, 2022 and 2021:

	2022		2021
	(In Thousands)
Amortizing fixed rate borrowing due March 2022 at 1.75%	$	—	$	227
Amortizing fixed rate borrowing due August 2022 at 1.94%		—		1,364
Amortizing fixed rate borrowing due October 2022 at 1.88%		—		1,386
Amortizing fixed rate borrowing due October 2023 at 3.24%		—		3,856
Amortizing fixed rate borrowing due December 2023 at 3.22%		—		2,097
Fixed rate term borrowing due December 2023 at 1.95%		—		10,000
Amortizing fixed rate borrowing due December 2023 at 1.73%		—		5,190
Amortizing fixed rate borrowing due April 2024 at 0.91%		—		5,878
Amortizing fixed rate borrowing due December 2023 at 5.08%		40,000		—
	$	40,000	$	29,998

Contractual maturities and scheduled cash flows of other borrowings at December 31, 2022 are as follows (in thousands):

2023	$	40,000
	$	40,000

The Bank’s maximum borrowing capacity with the FHLB was $655,344,000 of which $82,264,000 was outstanding in the form of advances and $92,900,000 was outstanding in the form of letters of credit at December 31, 2022. Advances from the FHLB are secured by qualifying assets of the Bank.

 

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Operating Leases

12 Months Ended

Dec. 31, 2022

Operating Leases [Abstract]

Operating Leases

NOTE 8 – OPERATING LEASES

The Company leases seven office locations under operating leases. Several assumptions and judgments were made when applying the requirements of Topic 842 to the Company’s existing lease commitments, including the allocation of consideration in the contracts between lease and nonlease components, determination of the lease term, and determination of the discount rate used in calculating the present value of the lease payments.

The Company has elected to account for the variable nonlease components, such as common area maintenance charges, utilities, real estate taxes, and insurance, separately from the lease component. Such variable nonlease components are reported in net occupancy expense on the Consolidated Statements of Income when paid. These variable nonlease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in other assets and other liabilities on the Consolidated Balance Sheets. The lease cost associated with the operating leases for the year ending December 31, 2022 and 2021, amounted to $609,000 and $587,000 respectively. The right-of-use asset associated with operating leases amounted to $4,109,000 and $4,511,000 at December 31, 2022 and 2021, respectively. The lease liability associated with operating leases amounted to $4,195,000 and $4,577,000 at December 31, 2022 and 2021, respectively.

Certain of the Company’s leases contain options to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the positive performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease. The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at December 31, 2022.

	Operating
Weighted-average remaining term		10.7 years
Weighted-average discount rate		2.71%

The following table presents the undiscounted cash flows due related to operating leases as of December 31, 2022, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:

Undiscounted cash flows due (in thousands)	Operating
2023	$	557
2024		544
2025		561
2026		504
2027		401
2028 and thereafter		2,414
Total undiscounted cash flows		4,981
Discount on cash flows		(786)
Total lease liabilities	$	4,195

Under Topic 842, the lessee can elect to not record on the Consolidated Balance Sheets a lease whose term is twelve months or less and does not include a purchase option that the lessee is reasonably certain to exercise. As of December 31, 2022, the Company had no leases that had a term of twelve months or less.

 

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2022

Employee Benefit Plans [Abstract]

Employee Benefit Plans

NOTE 9 – EMPLOYEE BENEFIT PLANS

The Company has a defined contributory profit-sharing plan which includes provisions of a 401(k) plan. The plan permits employees to make pre-tax contributions, not to exceed the limits set by the Internal Revenue Service. The amount of contributions to the plan, including matching contributions, is at the discretion of the Board of Directors. All employees over the age of 21 are eligible to participate in the plan and receive Company contributions after 90 days of employment. Eligible employees are able to contribute to the Plan at the beginning of the first quarterly period after their date of employment. Employee contributions vest immediately, and any Company contributions are fully vested after four years. The Company’s contributions are expensed as the cost is incurred, funded currently, and amounted to $1,310,000 and $1,135,000 for the years ended December 31, 2022 and 2021, respectively.

The Company has several non-qualified supplemental executive retirement plans for the benefit of certain executive officers and former officers. At December 31, 2022 and 2021, other liabilities include $3,518,000 and $3,481,000 accrued under the Plan. Compensation expense includes approximately $461,000 and $364,000 relating to the supplemental executive retirement plan for 2022 and 2021, respectively. To fund the benefits under this plan, the Company is the owner of single premium life insurance policies on participants in the non-qualified retirement plan. At December 31, 2022 and 2021, the cash value of these policies was $43,364,000 and $40,038,000, respectively.

The Company provides postretirement benefits in the form of split-dollar life arrangements to employees who meet the eligibility requirements. The net periodic postretirement benefit expense included in salaries and employee benefits was $101,000 and $153,000 for the years ended December 31, 2022 and 2021, respectively.

FASB authoritative guidance on accounting for deferred compensation and postretirement benefit aspects of endorsement split-dollar life insurance arrangements requires the recognition of a liability and related compensation expense for endorsement split-dollar life insurance that provides a benefit to an employee that extends to postretirement periods. The life insurance policies purchased for the purpose of providing such benefits do not effectively settle an entity’s obligation to the employee. Accordingly, the entity must recognize a liability and related compensation expense during the employee’s active service period based on the future cost of insurance to be incurred during the employee’s retirement. This expense is included in the SERP plan expense for 2022 and 2021 discussed above. If the entity has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the FASB authoritative guidance on employer’s accounting for postretirement benefits other than pensions. The accumulated postretirement benefit obligation was $1,731,000 and $1,630,000 at December 31, 2022 and 2021, respectively.

Certain key executives have change in control agreements with the Company. These agreements provide certain potential benefits in the event of termination of employment following a change in control.

The Company participates in the Pentegra Mulitemployer Defined Benefit Pension Plan (EIN 13-5645888 and Plan # 333) as a result of its acquisition of North Penn. As of December 31, 2022 and 2021, the Company’s Plan was 106.7% and 116.6% funded, respectively, and total contributions made are not more than 5% of the total contributions to the Plan. The Company’s expense related to the Plan was $11,000 in 2022 and $17,000 in 2021. During the plan years ending December 31, 2022 and 2021, the Company made contributions of $11,000 and $17,000, respectively.

As a result of its acquisition of Delaware, the Company is a member of the New York State Bankers Retirement System. Substantially all full-time employees who were former employees of Delaware are covered under this defined benefit pension plan (the “Delaware Plan”). The Company’s funding policy is to contribute at least the minimum required contribution annually. Pension cost is computed using the projected unit credit actuarial cost method. Effective December 31, 2012, the Delaware Plan was closed to new participants and accrued benefits were frozen.

The following table sets forth the projected benefit obligation and change in plan assets for the Delaware Plan at December 31:

(in Thousands)	2022		2021
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	(7,622)	$	(8,065)
Service cost		—		(51)
Interest cost		(216)		(206)
Actuarial (gain) loss		1,615		177
Benefits paid		476		523
Benefit obligation at end of year	$	(5,747)	$	(7,622)
Change in plan assets:
Fair value of plan assets at beginning of year	$	7,691	$	7,744
Actual return on plan assets		(1,933)		474
Benefits paid		(553)		(527)
Fair value of assets at end of year		5,205		7,691
Funded status at end of year	$	(542)	$	69

The Delaware Plan paid $476,000 and $523,000 in benefit payments in 2022 and 2021, respectively. Estimated benefit payments under the Delaware Plan are expected to be approximately $479,000, $463,000, $446,000, $449,000 and $439,000 for the next five years. Payments are expected to be approximately $2,081,000 in total for the five-year period ending December 31, 2032. The Company was not required to make any contributions to the Delaware Plan in 2022 or 2021. The increase in the projected discount rate from 2.93% to 5.44% decreased the projected benefit obligation for the year ended December 31, 2022 by approximately $1.6 million.

The accumulated benefit obligation for the Delaware Plan was $5,747,000 and $7,622,000 at December 31, 2022 and 2021, respectively.

The following table sets forth the amounts recognized in accumulated other comprehensive income for the years ended December 31 (in thousands):

	2022		2021
Transition asset	$	—	$	—
Prior service credit		—		—
(Loss) gain		(784)		220
Total	$	(784)	$	220

Net pension cost (income) included the following components (in thousands):

	2022		2021
Service cost benefits earned during the period	$	—	$	51
Interest cost on projected benefit obligation		216		206
Actual return on assets		(336)		(394)
Net amortization and deferral		(53)		(34)
Net periodic pension cost (income)	$	(173)	$	(171)

The weighted average assumptions used to determine the benefit obligation at December 31 are as follows:

	2022		2021
Discount rate	5.44	%	2.93	%

The weighted average assumptions used to determine the net periodic pension cost at December 31 are as follows:

	2022		2021
Discount rate	5.44	%	2.63	%
Expected long-term return on plan assets	6.00	%	5.25	%
Rate of compensation increase	—	%	—	%

The expected long-term return on plan assets was determined based upon expected returns on individual asset types included in the asset portfolio.

The Delaware Plan’s weighted-average asset allocations at December 31, by asset category, are as follows:

	2022		2021
Cash equivalents	16.6	%	—	%
Equity securities	25.1	%	35.7	%
Fixed income securities	21.7	%	35.0	%
Other	36.6	%	29.3	%
	100.0	%	100.0	%

The New York Bankers Retirement System (“System”) overall investment strategy is to invest in a diversifiedportfolio while managing the variability between the assets and projected liabilities of underfunded pension plans. The System’s Board Members approved a migration (the “Migration”) of substantially all of the System’s assets toone fund, Commingled Pensions Trust Fund (LDI Diversified Balanced) of JPMorgan Chase Bank, N.A. (“JPMCBLDI Diversified Balanced Fund” or the “Fund”). The Fund is a collective investment fund managed by the Trustee under the Declaration of Trust. The Trustee is the Fund’s manager and makes day-to-day investment decisions for the Fund. The Fund is a group trust within the meaning of Internal Revenue Service Revenue Ruling 81-100, as amended. In reliance upon exemptions from the registration requirements of the federal securities laws, neither the Fund nor the Fund’s Units are registered with the Securities and Exchange Commission (“SEC”) or any state securities commission. Because the Fund is not subject to registration under federal or state securities laws, certain protections that might otherwise be provided to investors in registered funds are not available to investors in the Fund. However, as a bank-sponsored collective investment trust holding qualified retirement plan assets, the Fund is required to comply with applicable provisions of the Employee Retirement Income Security Act of

1974, as amended (“ERISA”), and the Trustee is subject to supervision and regulation by the Office of theComptroller of the Currency and the Department of Labor.

The Fund employs a liability driven investing (“LDI”) strategy for pension plans that are seeking a solution that is balanced between growth and hedging. The Bloomberg Barclays Long A U.S. Corporate Index, the Fund’s primary liability-performance benchmark, is used as a proxy for plan projected liabilities. The growth-oriented portion of the Fund invests in a mix of asset classes that the Fund’s Trustee believes will collectively maximize total risk-adjusted return through a combination of capital appreciation and income. This portion of the Fund will comprise between 35% and 90% of the portfolio and will invest directly or indirectly via underlying funds in a broad mix of global equity, credit, global fixed income, real estate and cash-plus strategies. The remaining portionof the Fund, between 10% and 65% of the portfolio, provides exposure to U.S. long duration fixed income and is used to minimize volatility relative to a plan’s projected liabilities. This portion of the Fund will invest directly or indirectly via underlying funds in investment grade corporate bonds and securities issued by the U.S. Treasury and its agencies or instrumentalities.

At December 31, 2022 and 2021, the portfolio was substantially managed by one investment firm who controlled approximately 96% and 100%, respectively, of the System’s assets. Also, at December 31, 2022 and 2021, approximately $7.0 million and $-0-, respectively, of System’s assets in the short-term investment fund (STIF)account had not yet been allocated to an investment manager, nor deployed for benefit payments or expenses.

At December 31, 2022 and 2021, the System had an investment concentration of approximately 96% and 100%, respectively, of its total portfolio in the JPMCB LDI Diversified Balanced Fund, a commingled pension trust fund. In accordance with ASC Subtopic 820-10, certain investments measured at net asset value per share (or its equivalents) are not required to be classified in the fair value hierarchy.

 

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Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes [Abstract]

Income Taxes

NOTE 10 - INCOME TAXES

The components of the provision for federal income taxes are as follows:

	Years Ended December 31,
	2022		2021
	(In Thousands)
Current	$	6,733	$	6,328
Deferred		419		(383)
	$	7,152	$	5,945

Deferred income taxes reflect temporary differences in the recognition of revenue and expenses for tax reporting and financial statement purposes, principally because certain items, such as the allowance for loan losses and loan fees are recognized in different periods for financial reporting and tax return purposes. As of December 31, 2022, the Company had a $3,535,000 net operating loss carryforward that will begin to expire by December 31, 2037. A valuation allowance has not been established for deferred tax assets. Realization of the deferred tax assets is dependent on generating sufficient taxable income. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. Deferred tax assets are recorded in other assets.

Income tax expense of the Company is less than the amounts computed by applying statutory federal income tax rates to income before income taxes because of the following:

	Percentage of Income
	before Income Taxes
	Years Ended December 31,
	2022		2021
Tax at statutory rates	21.0	%	21.0	%
Tax exempt interest income, net of interest expense disallowance	(1.6)		(1.9)
Non-deductible merger related expenses	—		—
Earnings and proceeds on life insurance	(0.6)		(0.6)
Other	0.9		0.8
	19.7	%	19.3	%

The net deferred tax asset included in other assets in the accompanying Consolidated Balance Sheets includes the following amounts of deferred tax assets and liabilities:

	2022		2021
	(In Thousands)
Deferred tax assets:
Allowance for loan losses	$	3,985	$	3,855
Deferred compensation		834		817
Core deposit intangible		204		231
Pension liability		267		302
Foreclosed real estate valuation allowance		19		19
Net operating loss carryforward		829		913
Purchase price adjustment		1,779		2,487
Net unrealized loss on securities		15,399		386
Other		2,838		1,228
Total Deferred Tax Assets		26,154		10,238

Deferred tax liabilities:
Premises and equipment		1,085		1,004
Deferred loan fees		1,366		125
Net unrealized gain on pension liability		154		318
Total Deferred Tax Liabilities		2,605		1,447
Net Deferred Tax Asset	$	23,549	$	8,791

The Company’s federal and state income tax returns for taxable years through 2019 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

 

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Regulatory Matters and Stockholders' Equity

12 Months Ended

Dec. 31, 2022

Regulatory Matters and Stockholders' Equity [Abstract]

Regulatory Matters and Stockholders' Equity

NOTE 11 - REGULATORY MATTERS AND STOCKHOLDERS’ EQUITY

The Company and Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total, Tier 1 and Common Equity Tier 1 capital (as defined in the regulations) to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of December 31, 2022 and 2021, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2022, the most recent notification from the regulators has categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Company’s actual capital amounts and ratios are presented in the following table:

								To be Well Capitalized
								under Prompt
					For Capital Adequacy			Corrective Action
	Actual				Purposes			Provision
	Amount		Ratio		Amount	Ratio		Amount	Ratio
	(Dollars in Thousands)
As of December 31, 2022:
Total capital (to risk-weighted assets)	$	211,055	13.58	%	≥$124,303	≥8.00	%	≥$155,379	≥10.00	%
Tier 1 capital (to risk-weighted assets)		194,124	12.49		≥$93,228	≥6.00		≥$124,303	≥8.00
Common Equity Tier 1 capital (to risk-weighted assets)		194,124	12.49		≥$69,921	≥4.50		≥$100,997	≥6.50
Tier 1 capital (to average assets)		194,124	9.36		≥$82,934	≥4.00		≥$103,668	≥5.00

As of December 31, 2021:
Total capital (to risk-weighted assets)	$	191,469	13.66	%	≥$112,117	≥8.00	%	≥$140,146	≥10.00	%
Tier 1 capital (to risk-weighted assets)		175,027	12.49		≥84,087	≥6.00		≥112,117	≥8.00
Common Equity Tier 1 capital (to risk-weighted assets)		175,027	12.49		≥63,066	≥4.50		≥91,095	≥6.50
Tier 1 capital (to average assets)		175,027	8.51		≥82,243	≥4.00		≥102,804	≥5.00

The Bank’s ratios do not differ significantly from the Company’s ratios presented above.

The Company and the Bank are subject to regulatory capital rules which, among other things, impose a common equity Tier 1 minimum capital requirement of 4.50% of risk-weighted assets; set the minimum leverage ratio for all banking organizations at a uniform 4.00% of total assets; set the minimum Tier 1 capital to risk-based assets requirement at 6.00% of risk-weighted assets; and assign a risk-weight of 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 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 rule also 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 2.50% of common equity Tier 1 capital to risk-weighted assets above regulatory minimum risk-based requirements. The Company and the Bank are in compliance with their respective new capital requirements, including the capital conservation buffer, as of December 31, 2022.

Pennsylvania banking regulations limit the ability of the Bank to pay dividends or make loans or advances to the Company. Dividends that may be paid in any calendar year are limited to the current year's net profits, combined with the retained net profits of the preceding two years. At December 31, 2022, dividends from the Bank available to be paid to the Company, without prior approval of the Bank's regulatory agency, totaled $52.7 million, subject to the Bank meeting or exceeding regulatory capital requirements. The Company's principal source of funds for dividend payments to shareholders is dividends received from the Bank.

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Stock Based Compensation

12 Months Ended

Dec. 31, 2022

Stock Based Compensation [Abstract]

Stock-Based Compensation

NOTE 12 - STOCK BASED COMPENSATION

At the Annual Meeting held on April 22, 2014, the Company’s stockholders approved the Norwood Financial Corp 2014 Equity Incentive Plan. An aggregate of 375,000 shares of authorized but unissued Common Stock of the Company were reserved for future issuance under the Plan. This includes up to 60,000 shares for awards to outside directors. The Plan also authorized the Company to award restricted stock to officers and outside directors, limited to 63,000 shares of restricted stock awards for officers and 12,000 shares of restricted stock awards for outside directors. At the Annual Meeting held on April 24, 2018, the Company’s stockholders approved an amendment to the 2014 Equity Incentive Plan to ease certain restrictions on restricted stock awards to outside directors. As a result of this amendment, the number of shares available for restricted stock awards to officers was reduced by 300 shares to 62,700, while the number of shares available for restricted stock awards to outside directors was increased by 20,300 to 32,300 shares. At the Annual Meeting held on April 26, 2022, the Company’s stockholders approved an amendment to the 2014 Equity Incentive Plan to increase the number of shares available for awards. As a result of this amendment, the number of shares available for stock awards to officers was increased by 60,000 shares, including 40,000 shares for restricted stock awards, while the number of shares available for stock awards to outside directors was increased by 40,000 shares, including 30,000 shares for restricted stock awards. Under this plan, the Company has granted 357,966 shares, which included 229,866 options to employees, 10,400 options to directors, 74,125 shares of restricted stock to officers and 43,575 shares of restricted stock to directors. The restricted shares vest over five years. The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted stock under the company’s restricted stock plan. Management recognizes compensation expense for the fair value of restricted stock on a straight-line basis over the requisite service period for the entire award. As of December 31, 2022, there were 117,035 shares available for future awards under this plan, which includes 71,010 shares available for officer awards and 46,025 shares available for awards to outside directors. Included in these totals are 28,575 shares available for restricted stock awards to officers and 18,725 shares available for restricted stock awards to outside directors.

Total unrecognized compensation cost related to stock options was $382,000 as of December 31, 2022 and $269,000 as of December 31, 2021. Salaries and employee benefits expense includes $269,000 and $214,000 of compensation costs related to options for the years ended December 31, 2022 and 2021, respectively. Compensation costs related to restricted stock amounted to $372,000 and $335,000 for the years ended December 31, 2022 and 2021, respectively. The expected future compensation expense relating to non-vested restricted stock outstanding as of December 31, 2022 and 2021 was $1,294,000 and $953,000, respectively.

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:

	2022					2021
		Weighted					Weighted
		Average		Average			Average		Average
		Exercise		Intrinsic			Exercise		Intrinsic
	Options	Price		Value		Options	Price		Value
Outstanding, beginning of year	226,075	$	26.37			215,970	$	25.73
Granted	38,000		33.53			43,500		25.80
Exercised	(34,425)		19.08			(22,420)		17.59
Forfeited	(10,675)		27.56			(10,975)		29.48
Outstanding, end of year	218,975	$	26.70	$	1,100	226,075	$	26.37	$	520
Exercisable, end of year	180,975	$	27.68	$	1,100	182,575	$	26.50	$	511

Exercise prices for options outstanding as of December 31, 2022 ranged from $17.93 to $36.02 per share. The weighted average remaining contractual life is 6.8 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	Years Ended December 31,
	2022		2021
Dividend yield		3.57%		3.55%
Expected life		10 years		10 years
Expected volatility		35.01%		34.69%
Risk-free interest rate		3.87%		1.51%
Weighted average fair value of options granted	$	10.06	$	6.49

The expected volatility is based on historical volatility. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

Proceeds from stock option exercises totaled $657,000 in 2022. Shares issued in connection with stock option exercises are issued from available treasury shares or from available authorized shares. During 2022, for the shares issued in connection with stock option exercises, 1,650 shares in total, all shares were issued from available authorized shares.

As of December 31, 2022, outstanding stock options consist of the following:

		Average				Average
	Options	Exercise		Remaining	Options	Exercise
	Outstanding	Price		Life, Years	Exercisable	Price
	11,125	$	17.93	1.0	11,125	$	17.93
	8,250		19.39	1.9	8,250		19.39
	9,375		19.03	2.9	9,375		19.03
	12,125		22.37	4.0	12,125		22.37
	25,250		32.81	5.0	25,250		32.81
	22,100		32.34	6.0	22,100		32.34
	22,500		36.02	7.0	22,500		36.02
	30,750		26.93	8.0	30,750		26.93
	1,000		26.35	8.3	1,000		26.35
	1,000		25.38	8.5	1,000		25.38
	37,500		25.80	9.0	37,500		25.80
	38,000		33.53	10.0	—		—
Total	218,975				180,975

A summary of the Company’s restricted stock activity and related information for the years ended December 31 is as follows:

	2022		2021
		Weighted-Average		Weighted-Average
	Number of	Grant Date	Number of	Grant Date
	Shares	Fair Value	Shares	Fair Value
Non-vested, beginning of year	32,030	$26.76	39,135	$30.72
Granted	23,000	30.25	8,000	25.80
Vested	(10,570)	30.89	(11,205)	32.15
Forfeited	—	—	(3,900)	31.72
Non-vested at December 31	44,460	$30.12	32,030	$26.76

 

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Earnings Per Share

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 13 - EARNINGS PER SHARE

The following table sets forth the computations of basic and diluted earnings per share:

	Years Ended December 31,
	2022		2021
	(In Thousands, Except Per Share Data)
Numerator, net income	$	29,233	$	24,915
Denominator:
Weighted average shares outstanding		8,174		8,213
Less: Weighted average unvested restricted shares		(37)		(35)
Denominator: Basic earnings per share		8,137		8,178
Weighted average shares outstanding, basic		8,137		8,178
Add: Dilutive effect of stock options and restricted stock		40		21
Denominator: Diluted earnings per share		8,177		8,199
Basic earnings per common share	$	3.59	$	3.05
Diluted earnings per common share	$	3.58	$	3.04

Stock options which had no intrinsic value because their effect would be anti-dilutive, and therefore would not be included in the diluted EPS calculation, were 60,500 and 109,100 for the years ended December 31, 2022 and 2021, respectively, based on the closing price of the Company’s common stock which was $33.44 and $25.99 as of December 31, 2022 and 2021, respectively.

 

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Off-Balance Sheet Financial Instruments

12 Months Ended

Dec. 31, 2022

Off-Balance Sheet Financial Instruments and Guarantees [Abstract]

Off-Balance Sheet Financial Instruments and Guarantees

NOTE 14 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

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:

	December 31,
	2022		2021
	(In Thousands)
Commitments to grant loans	$	90,379	$	78,996
Unfunded commitments under lines of credit		149,883		156,899
Standby letters of credit		15,052		8,462
	$	255,314	$	244,357

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.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The majority of these standby letters of credit expire within the next twelve months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Bank requires collateral supporting these letters

of credit when deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.

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Interest Rate Swaps

12 Months Ended

Dec. 31, 2022

Interest Rate Swaps [Abstract]

Interest Rate Swaps

NOTE 15 – INTEREST RATE SWAPS

The Company enters into interest rate swaps that allow our commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate into a fixed-rate. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are not marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. There was no effect on earnings in any periods presented. At December 31, 2022, based upon the swap contract values, the company pledged cash in the amount of $350,000 as collateral for its interest rate swaps with a third-party financial institution which had a fair value $1,464,000.

Summary information regarding these derivatives is presented below:

(Amounts in thousands)
	Notional Amount, December 31,						Fair Value December 31,
		2022		2021	Interest Rate Paid	Interest Rate Received		2022		2021
Customer interest rate swap
Maturing November, 2030	$	6,513	$	6,873	Term SOFR + Margin	Fixed	$	889	$	144
Maturing December, 2030		4,297		4,553	Term SOFR + Margin	Fixed		575		91
Total	$	10,810	$	11,426			$	1,464	$	235
Third party interest rate swap
Maturing November, 2030	$	6,513	$	6,873	Fixed	Term SOFR + Margin	$	889	$	144
Maturing December, 2030		4,297		4,553	Fixed	Term SOFR + Margin		575		91
Total	$	10,810	$	11,426			$	1,464	$	235

The following table presents the fair values of derivative instruments in the Consolidated Balance Sheet.

	(Amounts in thousands)
	Assets			Liabilities
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
December 31, 2022
Interest rate derivatives	Other assets	$	1,464	Other liabilities	$	1,464
December 31, 2021
Interest rate derivatives	Other assets		235	Other liabilities		235

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Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2022

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

NOTE 16 – FAIR VALUES OF FINANCIAL INSTRUMENTS

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.

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 December 31, 2022 and 2021 are as follows (in thousands):

	Fair Value Measurement Reporting Date using
Description	Total		Level 1		Level 2		Level 3
December 31, 2022
ASSETS
U.S. Treasury securities	$	41,854	$	—	$	41,854	$	—
U.S. Government agencies		18,323		—		18,323		—
States and political subdivisions		127,852		—		127,852		—
Mortgage-backed securities-government
sponsored entities		230,898		—		230,898		—
Interest rate derivatives		1,464		—		1,464		—
LIABILITIES
Interest rate derivatives		1,464		—		1,464		—
December 31, 2021
ASSETS
U.S. Treasury securities	$	19,351	$	—	$	19,351	$	—
U.S. Government agencies		16,011		—		16,011		—
States and political subdivisions		145,867		—		145,867		—
Mortgage-backed securities-government
sponsored entities		225,553		—		225,553		—
Interest rate derivatives		235		—		235		—
		235		—		235
LIABILITIES
Interest rate derivatives		235		—		235		—

Securities:

The fair value of securities available for sale (carried at fair value) 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.

Interest Rate Swaps:

The fair value of interest rate swaps is based upon the present value of the expected future cash flows using the SOFR swap curve, the basis for the underlying interest rate. To price interest rate swaps, cash flows are first projected for each payment date using the fixed rate for the fixed side of the swap and the forward rates for the floating side of the swap. These swap cash flows are then discounted to time zero using SOFR zero-coupon interest rates. The sum of the present value of both legs is the fair market value of the interest rate swap. These valuations have been derived from our third party vendor’s proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions that we believe to be reasonable.

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 December 31, 2022 and 2021 are as follows (in thousands):

	Fair Value Measurement Reporting Date using
Description	Total		Level 1		Level 2		Level 3
December 31, 2022
Impaired Loans	$	413	$	—	$	—	$	413
Foreclosed real estate		346		—		—		346
December 31, 2021
Impaired Loans	$	1,402	$	—	$	—	$	1,402
Foreclosed real estate		1,742		—		—		1,742

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 December 31, 2022, the fair value investment in impaired loans totaled $413,000, which included two loan relationships with a carrying value of $413,000 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 December 31, 2022, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $0 over the life of the loans. As of December 31, 2022, the fair value investment in impaired loans included one loan relationships with a carrying value of $50,000 that required a valuation allowance of $50,000 since the estimated realizable value of the collateral did not support the recorded investment in the loan. As of December 31, 2022, the Company has recognized charge-offs against the allowance for loan losses on this impaired loan in the amount of $0 over the life of the loan.

As of December 31, 2021, the fair value investment in impaired loans totaled $1,402,000, which included three loan relationships with a carrying value of $157,000 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 December 31, 2021, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $0 over the life of the loans. As of December 31, 2021, the fair value investment in impaired loans included one loan relationships with a carrying value of $1,517,000 that required a valuation allowance of $272,000 since the estimated realizable value of the collateral did not support the recorded investment in the loan. As of December 31, 2021, the Company has recognized charge-offs against the allowance for loan losses on this impaired loan in the amount of $0 over the life of the loan.

Foreclosed real estate owned (carried at fair value):

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

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

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2022
Impaired loans	$	413	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-10.0% (8.92%)
Foreclosed real estate owned	$	346	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00% ‎(7.00%)

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2021
Impaired loans	$	1,402	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-10.0% (1.12%)
Foreclosed real estate owned	$	1,742	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00% ‎(7.00%)

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

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

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 estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at December 31, 2022 and December 31, 2021. (In thousands):

	Fair Value Measurements at December 31, 2022
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	31,866	$	31,866	$	31,866	$	—	$	—
Loans receivable, net		1,456,946		1,418,300		—		—		1,418,300
Mortgage servicing rights		213		498		—		—		498
Regulatory stock (1)		5,418		5,418		5,418		—		—
Bank owned life insurance (1)		43,364		43,364		43,364		—		—
Accrued interest receivable (1)		6,917		6,917		6,917		—		—
Financial liabilities:
Deposits		1,727,727		1,727,184		1,223,958		—		503,226
Short-term borrowings (1)		93,215		93,215		93,215		—		—
Other borrowings		40,000		40,074		—		—		40,074
Accrued interest payable (1)		2,653		2,653		2,653		—		—
Off-balance sheet financial instruments:
Commitments to extend credit and ‎outstanding letters of credit		—		—		—		—		—

	Fair Value Measurements at December 31, 2021
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	206,681	$	206,681	$	206,681	$	—	$	—
Loans receivable, net		1,338,489		1,389,870		—		—		1,389,870
Mortgage servicing rights		289		500		—		—		500
Regulatory stock (1)		3,927		3,927		3,927		—		—
Bank owned life insurance (1)		40,038		40,038		40,038		—		—
Accrued interest receivable (1)		5,889		5,889		5,889		—		—
Financial liabilities:
Deposits		1,756,793		1,759,722		1,228,091		—		531,631
Short-term borrowings (1)		60,822		60,822		60,822		—		—
Other borrowings		29,998		30,221		—		—		30,221
Accrued interest payable (1)		1,203		1,203		1,203		—		—
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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Accumulated Other Comprehensive Income

12 Months Ended

Dec. 31, 2022

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

NOTE 17 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables present the changes in accumulated other comprehensive income (loss) (in thousands) by component, net of tax, for the years ended December 31, 2022 and 2021:

	Unrealized gains on available for sale securities (a)		Unrealized gain on pension liability (a)		Total (a)
Balance as of December 31, 2021	$	(1,453)	$	1,197	$	(256)
Other comprehensive income (loss) before reclassification		(56,476)		(619)		(57,095)
Amount reclassified from accumulated other comprehensive loss		(2)		—		(2)
Total other comprehensive income		(56,478)		(619)		(57,097)
Balance as of December 31, 2022	$	(57,931)	$	578	$	(57,353)
	Unrealized gains on available for sale securities (a)		Unrealized gain on pension liability (a)
Balance as of December 31, 2020	$	4,096	$	1,023	$	5,119
Other comprehensive income (loss) before reclassification		(5,476)		174		(5,302)
Amount reclassified from accumulated other comprehensive loss		(73)		—		(73)
Total other comprehensive		(5,549)		174		(5,375)
Balance as of December 31, 2021	$	(1,453)	$	1,197	$	(256)

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

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) (in thousands) for the years ended December 31, 2022 and 2021:

	Amount Reclassified
	From Accumulated				Affected Line Item in
	Other				Consolidated
	Comprehensive				Statements of
Details about other comprehensive income	Income (a)				Income
	Twelve months		Twelve months
	ended		ended
	December 31,		December 31,
	2022		2021
Unrealized gains on available for sale securities	$	3	$	92	Net realized gains on sales of securities
		(1)		(19)	Income tax expense
	$	2	$	73

(a)Amounts in parentheses indicate debits to net income.

 

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Norwood Financial Corp (Parent Company Only) Financial Information

12 Months Ended

Dec. 31, 2022

Norwood Financial Corp (Parent Company Only) Financial Information [Abstract]

Norwood Financial Corp (Parent Company Only) Financial

NOTE 18 - NORWOOD FINANCIAL CORP (PARENT COMPANY ONLY) FINANCIAL INFORMATION

BALANCE SHEETS

	December 31,
	2022		2021
	(In Thousands)
ASSETS
Cash on deposit in bank subsidiary	$	3,938	$	1,511
Investment in bank subsidiary		164,248		204,547
Other assets		2,365		2,472
Total assets	$	170,551	$	208,530
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities	$	3,466	$	3,268
Stockholders’ equity		167,085		205,262
Total liabilities and stockholders' equity	$	170,551	$	208,530

STATEMENTS OF INCOME

	Years Ended December 31,
	2022		2021
Income:	(In Thousands)
Dividends from bank subsidiary	$	13,228	$	10,697
Expenses		743		627
		12,485		10,070
Income tax benefit		(219)		(171)
		12,704		10,241
Equity in undistributed earnings of subsidiary		16,529		14,674
Net Income	$	29,233	$	24,915
Comprehensive Income	$	(27,864)	$	19,540

STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2022		2021
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	29,233	$	24,915
Adjustments to reconcile net income to
net cash provided by operating activities:
Undistributed earnings of bank subsidiary		(16,529)		(14,674)
Other, net		607		(129)
Net Cash Provided by Operating Activities		13,311		10,112
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised		657		394
Sale of treasury stock for ESOP		132		130
Acquisition of treasury stock		(2,515)		(1,440)
Cash dividends paid		(9,158)		(8,539)
Net Cash Used in Financing Activities		(10,884)		(9,455)
Net Increase in Cash and Cash Equivalents		2,427		657
CASH AND CASH EQUIVALENTS - BEGINNING		1,511		854
CASH AND CASH EQUIVALENTS - ENDING	$	3,938	$	1,511

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

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

Estimates

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 determination of other-than-temporary impairment on securities, the determination of goodwill impairment and the fair value of financial instruments.

Significant Group Concentrations of Credit Risk and Concentrations of Credit Risk

Significant Group Concentrations of Credit Risk

Most of the Company’s activities are with customers located within its markets in Northeastern Pennsylvania and the New York Counties of Delaware, Sullivan, Ontario, Otsego and Yates. Note 3 discusses the types of securities that the Company invests in. Note 4 discusses the types of lending that the Company engages in. The Company does not have any significant concentrations to any one industry or customer.

Concentrations of Credit Risk

The Bank operates primarily in Wayne, Pike, Lackawanna, Luzerne and Monroe Counties, Pennsylvania and Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York. Accordingly, the Bank has extended credit primarily to commercial entities and individuals in these areas whose ability to honor their contracts is influenced by the region’s economy. These customers are also the primary depositors of the Bank. The Bank is limited in extending credit by legal lending limits to any single borrower or group of related borrowers.

Securities

Securities

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Securities available for sale are carried at fair value. Unrealized gains and losses are reported in other comprehensive income, net of the related deferred tax effect. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using a method which approximates the interest method over the term of the security.

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

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

Declines in the fair value of 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, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent of the Company to not sell the securities and it is more likely than not that it will not have to sell the securities before recovery of their cost basis.

Regulatory Stock

Regulatory Stock

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

Management evaluates the regulatory stock for impairment. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB. Management considers the FHLB’s regulatory capital ratios, liquidity, and the fact that new shares of FHLB stock continue to change hands at the $100 par value. Management believes no impairment charge is necessary related to FHLB stock as of December 31, 2022.

Loans Receivable

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees. Interest income is accrued on the unpaid principal balance. Loan origination fees are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan.

The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Troubled Debt Restructurings

Troubled Debt Restructurings

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

Loans Acquired

Loans Acquired

Loans acquired including loans that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable, are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. Loans are evaluated individually to determine if there is evidence of deterioration of credit quality since origination. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment or as a loss accrual or a valuation allowance. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining estimated life. Decreases in expected cash flows are recognized immediately as impairment. Any valuation allowances on these impaired loans reflect only losses incurred after the acquisition.

For purchased loans acquired that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value. Loans may be aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit discounts. The remaining differences between the purchase price and the unpaid principal balance at the date of acquisition are recorded in interest income over the life of the loans.

Mortgage Servicing Rights

Mortgage Servicing Rights

Servicing assets are recognized as separate assets when rights are acquired through purchase or through the sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon a third party appraisal. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance to the extent that fair value is less than the capitalized amount. The Company’s loan servicing assets at December 31, 2022 and 2021, respectively, were not impaired. Total servicing assets included in other assets as of December 31, 2022 and 2021, were $213,000 and $289,000, respectively.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are classified as substandard. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either 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 real estate loans for impairment disclosures, unless such loans were acquired with impairment or are the subject of a restructuring agreement.

Premises and Equipment

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation expense is calculated principally on the straight-line method over the respective assets estimated useful lives as follows:

	Years
Buildings and improvements	10 - 40
Furniture and equipment	3 - 10

Leases

Leases

The Company applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification. See Note 8 for related disclosures.

Transfers of Financial Assets

Transfers of Financial Assets

Transfers of financial assets, including loan and loan participation sales, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Foreclosed Real Estate

Foreclosed Real Estate

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value less cost to sell at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of its carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in other expenses.

Bank Owned Life Insurance

Bank Owned Life Insurance

The Company invests in bank owned life insurance (BOLI) as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Bank on a select group of employees. The Company is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from the increase in cash surrender value of the policies or from death benefits realized is included in other income on the Consolidated Statements of Income.

Goodwill

Goodwill

In connection with three acquisitions the Company recorded goodwill in the amount of $29.3 million, representing the excess of amounts paid over the fair value of net assets of the institutions acquired. Goodwill is tested and deemed impaired when the carrying value of goodwill exceeds its implied fair value. The value of the goodwill can change in the future. We expect the value of the goodwill to decrease if there is a significant decrease in the franchise value of the Bank. If an impairment loss is determined in the future, we will reflect the loss as an expense for the period in which the impairment is determined, leading to a reduction of our net income for that period by the amount of the impairment loss. No impairment was recognized for the years ended December 31, 2022 and 2021.

Other Intangible Assets

Other Intangible Assets

At December 31, 2022, the Company had other intangible assets of $306,000, which is net of accumulated amortization of $1,448,000. These intangible assets will continue to be amortized using the sum-of-the-years digits method of amortization over ten years. At December 31, 2021, the Company had other intangible assets of $407,000, which was net of accumulated amortization of $1,347,000. Amortization expense related to other intangible assets was $101,000 and $123,000 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, the estimated future amortization expense for the core deposit intangible is as follows (in thousands):

2023	$	85
2024		69
2025		54
2026		38
2027		26
Thereafter		34
	$	306

Income Taxes

Income Taxes

Deferred income tax assets and liabilities are determined based on the differences between financial statement carrying amounts and the tax basis of existing assets and liabilities. These differences are measured at the enacted tax rates that will be in effect when these differences reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

The Company and its subsidiary file a consolidated federal income tax return. The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company analyzes each tax position taken in its tax returns and determines the likelihood that the position will be realized. Only tax positions that are “more-likely-than-not” to be realized can be recognized in an entity’s financial statements. For tax positions that do not meet this recognition threshold, an entity will record an unrecognized tax benefit for the difference between the position taken on the tax return and the amount recognized in the financial statements. The Company does not have any unrecognized tax benefits at December 31, 2022 or 2021, or during the years then ended. No unrecognized tax benefits are expected to arise within the next twelve months.

Advertising Costs

Advertising Costs Advertising costs are expensed as incurred.

Earnings Per Share

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 less any unvested restricted shares. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method. Treasury shares are not deemed outstanding for earnings per share calculations.

Employee Benefit Plans

Employee Benefit Plans

The Company has a defined contributory profit-sharing plan which includes provisions of a 401(k) plan. The Company’s contributions are expensed as the cost is incurred.

The Company has several supplemental executive retirement plans. To fund the benefits under these plans, the Company is the owner of single premium life insurance policies on the participants.

The Company provides pension benefits to eligible employees. The Company’s funding policy is to contribute at least the minimum required contributions annually.

Interest Rate Derivatives

Interest Rate DerivativesThe Company is exposed to certain risk arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments.  

Stock Option Plans

Stock Option Plans

The Company recognizes the value of share-based payment transactions as compensation costs in the financial statements over the period that an employee provides service in exchange for the award. The fair value of the share-based payments for stock options is estimated using the Black-Scholes option-pricing model. The Company used the modified-prospective transition method to record compensation expense. Under the modified-prospective method, companies are required to record compensation cost for new and

modified awards over the related vesting period of such awards and record compensation cost prospectively for the unvested portion, at the date of adoption, of previously issued and outstanding awards over the remaining vesting period of such awards. No change to prior periods presented is permitted under the modified-prospective method.

Restricted Stock

Restricted Stock

The Company recognizes compensation cost related to restricted stock based on the market price of the stock at the grant date over the vesting 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 under the Company’s 2014 Equity Incentive Plan. The Company recognizes compensation expense for the fair value of the restricted stock on a straight-line basis over the requisite service period for the entire award.

Cash Flow Information

Cash Flow Information

For the purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits with banks and federal funds sold.

Off-Balance Sheet Financial Instruments

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, letters of credit and commitments to sell loans. Such financial instruments are recorded on the balance sheets when they become receivable or payable.

Trust Assets

Trust Assets

Assets held by the Company in a fiduciary capacity for customers are not included in the financial statements since such items are not assets of the Company. Trust income is reported on the accrual method.

Treasury Stock

Treasury StockCommon shares repurchased are recorded as treasury stock at cost.

Comprehensive Income

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and defined benefit pension obligations, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income as presented in the Consolidated Statement of Comprehensive Income.

Revenue Recognition

Revenue Recognition

Under ASC Topic 606, management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment securities gains, loans servicing, gains on loans sold and earnings on bank-owned life insurance are not within the scope of this Topic.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the year ended December 31:

(dollars in thousands)	2022		2021
Noninterest Income
In-scope of Topic 606:
Service charges on deposit accounts	$	419	$	398
ATM Fees		452		443
Overdraft Fees		1,155		1,029
Safe deposit box rental		93		100
Loan related service fees		849		1,238
Debit card		2,496		2,228
Fiduciary activities		845		748
Commissions on mutual funds & annuities		119		127
Gain on sales of other real estate owned		427		36
Other income		1,906		674
Noninterest Income (in-scope of Topic 606)		8,761		7,021
Out-of-scope of Topic 606:
Net realized gains on sales of securities		3		92
Loan servicing fees		78		130
Gain on sales of loans		3		177
Earnings on and proceeds from bank-owned life insurance		1,087		941
Noninterest Income (out-of-scope of Topic 606)		1,171		1,340
Total Noninterest Income	$	9,932	$	8,361

Segment Reporting

Segment Reporting

The Company acts as an independent community financial services provider and offers traditional banking related financial services to individual, business and government customers. Through its Community Office and automated teller machine network, the Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans; and the providing of safe deposit services. The Company also performs personal, corporate, pension and fiduciary services through its Trust Department.

Management does not separately allocate expenses, including the cost of funding loan demand, between the commercial, retail, mortgage banking and trust operations of the Company. As such, discrete information is not available and segment reporting would not be meaningful.

Reclassification of Comparative Amounts

Reclassification of Comparative Amounts

Certain comparative amounts for the prior year have been reclassified to conform to current-year classifications. Such reclassifications had no material effect on net income or stockholders’ equity.

New Accounting Pronouncements Not Yet Adopted

New Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This standard, along with several other subsequent codification updates, replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses that are expected to occur over the remaining life of a financial asset and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The new current expected credit losses model (“CECL”) will apply to the allowance for loan losses, available-for-sale and held-to-maturity debt securities, purchased financial assets with credit deterioration and certain off-balance sheet credit exposures.

Management has completed its implementation plan, segmentation and testing, and model validation. The implementation plan included drafting of additional controls and policies to govern data uploads to its third-party vendor, balancing and reconciling, testing

and auditing of inputs, and review and decision-making surrounding segmentation, methodologies, qualitative factor adjustments, and reasonable and supportable forecasts and reversion techniques. Parallel runs were processed during 2022 and the results were consistent with management's expectations. The implementation plan is currently going through the Company's control structure and internal control testing is being performed.

As a result of adopting this standard, the Company expects the increase in its allowance effective January 1, 2023, to be in the range of $2.0 million to $2.5 million. In addition, the adoption of ASU No. 2016-13 will require the Company to gross up its previously purchased credit impaired loans through the allowance at January 1, 2023. As a result, the Company expects an increase in its allowance as of January 1, 2023, to be in the range of $2.2 million to $2.7 million. These estimates are subject to further refinements based on ongoing evaluations of our model, methodologies, and judgments, as well as prevailing economic conditions and forecasts as of the adoption date. The adoption of ASU 2016-13 is not expected to have a significant impact on our regulatory capital ratios.

At adoption, the Company did not have any securities classified as HTM debt securities. No allowance was recorded related to AFS debt securities at the date of adoption, January 1, 2023.

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 unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Update is effective for smaller reporting companies and all other entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the sunset (or expiration) date of Accounting Standards Codification (ASC) Topic 848 to December 31, 2024. This gives reporting entities two additional years to apply the accounting relief provided under ASC Topic 848 for matters related to reference rate reform. ASU 2022-06 is effective for all reporting entities immediately upon issuance and must be applied on a prospective basis. This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848. ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (ASC 815): Fair Value Hedging - Portfolio Layer Method. ASC 815 currently permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in this Update allow non-prepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity

to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby allowing consistent accounting for similar hedges. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Summary of Significant Accounting Policies [Abstract]

Schedule of Estimated Useful Lives

	Years
Buildings and improvements	10 - 40
Furniture and equipment	3 - 10

Schedule of Estimated Future Amortization Expense for the Core Deposit Intangible

2023	$	85
2024		69
2025		54
2026		38
2027		26
Thereafter		34
	$	306

Noninterest Income

(dollars in thousands)	2022		2021
Noninterest Income
In-scope of Topic 606:
Service charges on deposit accounts	$	419	$	398
ATM Fees		452		443
Overdraft Fees		1,155		1,029
Safe deposit box rental		93		100
Loan related service fees		849		1,238
Debit card		2,496		2,228
Fiduciary activities		845		748
Commissions on mutual funds & annuities		119		127
Gain on sales of other real estate owned		427		36
Other income		1,906		674
Noninterest Income (in-scope of Topic 606)		8,761		7,021
Out-of-scope of Topic 606:
Net realized gains on sales of securities		3		92
Loan servicing fees		78		130
Gain on sales of loans		3		177
Earnings on and proceeds from bank-owned life insurance		1,087		941
Noninterest Income (out-of-scope of Topic 606)		1,171		1,340
Total Noninterest Income	$	9,932	$	8,361

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Securities (Tables)

12 Months Ended

Dec. 31, 2022

Securities [Abstract]

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

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE FOR SALE:
U.S. Treasury securities	$	45,066	$	—	$	(3,212)	$	41,854
U.S. Government agencies		21,266		—		(2,943)		18,323
States and political subdivisions		157,524		2		(29,674)		127,852
Mortgage-backed securities-
government sponsored entities		268,400		—		(37,502)		230,898
Total debt securities	$	492,256	$	2	$	(73,331)	$	418,927

	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE FOR SALE:
U.S. Treasury securities	$	19,550	$	6	$	(205)	$	19,351
U.S. Government agencies		16,251		24		(264)		16,011
States and political subdivisions		145,107		2,155		(1,395)		145,867
Mortgage-backed securities-
government sponsored entities		227,712		766		(2,925)		225,553
Total debt securities	$	408,620	$	2,951	$	(4,789)	$	406,782

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

	December 31, 2022
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	25,733	$	(849)	$	16,121	$	(2,363)	$	41,854	$	(3,212)
U.S. Government agencies		8,321		(885)		10,002		(2,058)		18,323		(2,943)
States and political subdivisions		66,680		(11,194)		57,367		(18,480)		124,047		(29,674)
Mortgage-backed securities-government sponsored entities		102,361		(10,639)		128,537		(26,863)		230,898		(37,502)
	$	203,095	$	(23,567)	$	212,027	$	(49,764)	$	415,122	$	(73,331)

	December 31, 2021
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities	$	18,361	$	(205)	$	—	$	—	$	18,361	$	(205)
U.S. Government agencies		7,912		(109)		3,843		(155)		11,755		(264)
States and political subdivisions		74,658		(1,395)		—		—		74,658		(1,395)
Mortgage-backed securities-government sponsored entities		170,647		(2,856)		2,919		(69)		173,566		(2,925)
	$	271,578	$	(4,565)	$	6,762	$	(224)	$	278,340	$	(4,789)

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

	Amortized		Fair
	Cost		Value
		(In Thousands)
Due in one year or less	$	5,883	$	5,821
Due after one year through five years		43,272		40,981
Due after five years through ten years		54,146		44,419
Due after ten years		120,555		96,808
		223,856		188,029
Mortgage-backed securities - government sponsored entities		268,400		230,898
	$	492,256	$	418,927

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Loans Receivable and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2022

Loans Receivable and Allowance for Loan Losses [Abstract]

Composition of the Loan Portfolio

	December 31, 2022				December 31, 2021
Real Estate:
Residential	$	298,813	20.3	%	$	273,040	20.1	%
Commercial		651,544	44.2			628,724	46.4
Agricultural		68,915	4.7			61,925	4.6
Construction		32,469	2.2			21,990	1.6
Commercial loans		187,257	12.7			186,031	13.7
Other agricultural loans		35,277	2.4			37,930	2.8
Consumer loans to individuals		200,149	13.5			146,400	10.8
Total loans		1,474,424	100.0	%		1,356,040	100.0	%
Deferred fees, net		(479)				(1,109)
Total loans receivable		1,473,945				1,354,931
Allowance for loan losses		(16,999)				(16,442)
Net loans receivable	$	1,456,946			$	1,338,489

Changes in the Accretable Yield for Purchased Credit-impaired Loans

	2022		2021
Balance at beginning of period	$	1,884	$	1,365
Additions		—		—
Accretion		(710)		(880)
Reclassification and other		653		1,399
Balance at end of period	$	1,827	$	1,884

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

	December 31, 2022		December 31, 2021
Outstanding Balance
	$	8,368	$	12,862
Carrying Amount
	$	6,290	$	8,304

Components Of Purchase Accounting Adjustments Related To Purchased Credit-impaired Loans Acquired

(In Thousands)	July 7, 2020
Contractually required principal and interest	$	15,410
Non-accretable discount		(5,213)
Expected cash flows		10,197
Accretable discount		(1,724)
Estimated fair value	$	8,473

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

	Real Estate Loans
									Commercial			Other	Consumer
	Residential		Commercial			Agricultural	Construction		Loans			Agricultural	Loans		Total
	(In thousands)
December 31, 2022
Individually evaluated for impairment	$	—	$	402	$	—	$	—	$	61	$	—	$	—	$	463
Loans acquired with deteriorated credit quality		567		2,049		2,034		—		1,640		—		—		6,290
Collectively evaluated for impairment		298,246		649,093		66,881		32,469		185,556		35,277		200,149		1,467,671
Total Loans	$	298,813	$	651,544	$	68,915	$	32,469	$	187,257	$	35,277	$	200,149	$	1,474,424

	Real Estate Loans
									Commercial			Other	Consumer
	Residential		Commercial			Agricultural	Construction		Loans			Agricultural	Loans		Total
	(In thousands)
December 31, 2021
Individually evaluated for impairment	$	—	$	1,658	$	—	$	—	$	16	$	—	$	—	$	1,674
Loans acquired with deteriorated credit quality		784		3,285		1,918		—		198		2,119		—		8,304
Collectively evaluated for impairment		272,256		623,781		60,007		21,990		185,817		35,811		146,400		1,346,062
Total Loans	$	273,040	$	628,724	$	61,925	$	21,990	$	186,031	$	37,930	$	146,400	$	1,356,040

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 Principal
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2022	(In thousands)
With no related allowance recorded:
Real Estate Loans
Commercial	$	402	$	402	$	—
Commercial loans		11		11		—
Subtotal		413		413		—
With an allowance recorded:
Commercial loans		50		50		50
Subtotal		50		50		50
Total:
Real Estate Loans
Commercial	$	402	$	402	$	—
Commercial loans		61		61		50
Total Impaired Loans	$	463	$	463	$	50

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
December 31, 2021	(In thousands)
With no related allowance recorded:
Real Estate Loans
Commercial	$	141	$	141	$	—
Commercial loans		16		16		—
Subtotal		157		157		—
With an allowance recorded:
Real Estate Loans
Commercial		1,517		1,517		272
Subtotal		1,517		1,517		272
Total:
Real Estate Loans
Residential						—
Commercial	$	1,658	$	1,658	$	272
Commercial loans		16		16		—
Total Impaired Loans	$	1,674	$	1,674	$	272

The following information for impaired loans is presented for the years ended December 31, 2022 and 2021:

	Average Recorded				Interest Income
	Investment				Recognized
	2022		2021		2022		2021
	(In thousands)
Total:
Real Estate Loans
Commercial	$	740	$	2,358	$	93	$	157
Commercial loans		24		18		—		7
Total Loans	$	764	$	2,376	$	93	$	164

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
December 31, 2022
Commercial real estate loans	$	646,775	$	1,079	$	3,690	$	—	$	—	$	651,544
Real estate - agricultural		66,444		368		2,103		—		—		68,915
Commercial loans		186,966		184		107		—		—		187,257
Other agricultural loans		34,071		556		650		—		—		35,277
Total	$	934,256	$	2,187	$	6,550	$	—	$	—	$	942,993

			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
December 31, 2021
Commercial real estate loans	$	618,541	$	5,146	$	4,765	$	—	$	272	$	628,724
Real estate - agricultural		60,193		—		1,732		—		—		61,925
Commercial loans		185,729		199		103		—		—		186,031
Other agricultural loans		35,573		210		2,147		—		—		37,930
Total	$	900,036	$	5,555	$	8,747	$	-	$	272	$	914,610

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. Nonperforming loans include loans that have been placed on nonaccrual status and loans remaining in accrual status on which the contractual payment of principal and interest has become 90 days past due.

The following table presents the recorded investment in the loan classes based on payment activity as of December 31, 2022 and December 31, 2021 (in thousands):

	Performing		Nonperforming		Total
December 31, 2022
Residential real estate loans	$	298,327	$	486	$	298,813
Construction		32,469		—		32,469
Consumer loans to individuals		199,985		164		200,149
Total	$	530,781	$	650	$	531,431

	Performing		Nonperforming		Total
December 31, 2021
Residential real estate loans	$	272,571	$	469	$	273,040
Construction		21,990		—		21,990
Consumer loans to individuals		146,345		55		146,400
Total	$	440,906	$	524	$	441,430

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		Purchased Credit Impaired Loans		Total Loans
December 31, 2022
Real Estate loans
Residential	$	297,350	$	187	$	223	$	—	$	486	$	896	$	567	$	298,813
Commercial		648,688		405		—		—		402		807		2,049		651,544
Agricultural		66,751		130		—		—		—		130		2,034		68,915
Construction		32,469		—		—		—		—		—		-		32,469
Commercial loans		185,485		71		—		—		61		132		1,640		187,257
Other agricultural loans		35,277		—		—		—		—		—		—		35,277
Consumer loans		198,893		853		239		—		164		1,256		-		200,149
Total	$	1,464,913	$	1,646	$	462	$	—	$	1,113	$	3,221	$	6,290	$	1,474,424

	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		Purchased Credit Impaired Loans		Total Loans
December 31, 2021
Real Estate loans
Residential	$	271,622	$	155	$	10	$	—	$	469	$	634	$	784	$	273,040
Commercial		625,336		—		—		—		103		103		3,285		628,724
Agricultural		59,982		25		—		—		—		25		1,918		61,925
Construction		21,990		—		—		—		—		—		-		21,990
Commercial loans		185,801		3		13		91		16		32		198		186,031
Other agricultural loans		35,811		—		—		—		—		—		2,119		37,930
Consumer loans		145,986		248		111		—		55		414		-		146,400
Total	$	1,346,528	$	431	$	134	$	91	$	643	$	1,208	$	8,304	$	1,356,040

Allowance for Loan Losses and Recorded Investment in Financing Receivables

	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		Purchased Credit Impaired Loans		Total Loans
December 31, 2021
Real Estate loans
Residential	$	271,622	$	155	$	10	$	—	$	469	$	634	$	784	$	273,040
Commercial		625,336		—		—		—		103		103		3,285		628,724
Agricultural		59,982		25		—		—		—		25		1,918		61,925
Construction		21,990		—		—		—		—		—		-		21,990
Commercial loans		185,801		3		13		91		16		32		198		186,031
Other agricultural loans		35,811		—		—		—		—		—		2,119		37,930
Consumer loans		145,986		248		111		—		55		414		-		146,400
Total	$	1,346,528	$	431	$	134	$	91	$	643	$	1,208	$	8,304	$	1,356,040

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

(In thousands)	Residential Real Estate		Commercial Real Estate		Agricultural		Construction		Commercial		Other Agricultural		Consumer		Total
Beginning balance, December 31, 2021	$	2,175	$	10,878	$	—	$	133	$	1,490	$	—	$	1,766	$	16,442
Charge Offs		(172)		(20)		—		—		(16)		—		(457)		(665)
Recoveries		130		82		—		—		46		—		64		322
Provision for loan losses		700		(2,647)		259		276		925		124		1,263		900
Ending balance, December 31, 2022	$	2,833	$	8,293	$	259	$	409	$	2,445	$	124	$	2,636	$	16,999
Ending balance individually evaluated ‎for impairment	$	—	$	—	$	—	$	—	$	50	$	—	$	—	$	50
Ending balance collectively evaluated ‎for impairment	$	2,833	$	8,293	$	259	$	409	$	2,395	$	124	$	2,636	$	16,949

(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Beginning balance, December 31, 2020	$	1,960	$	8,004	$	150	$	1,360	$	1,676	$	13,150
Charge Offs		(17)		(452)		—		(200)		(480)		(1,149)
Recoveries		74		19		—		49		99		241
Provision for loan losses		158		3,307		(17)		281		471		4,200
Ending balance, December 31, 2021	$	2,175	$	10,878	$	133	$	1,490	$	1,766	$	16,442
Ending balance individually evaluated ‎for impairment	$	—	$	272	$	—	$	—	$	—	$	272
Ending balance collectively evaluated for impairment	$	2,175	$	10,606	$	133	$	1,490	$	1,766	$	16,170

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2022

Premises and Equipment [Abstract]

Components of Premises and Equipment

Components of premises and equipment at December 31 are as follows:

	2022		2021
	(In Thousands)
Land and improvements	$	3,864	$	3,879
Buildings and improvements		23,444		21,846
Furniture and equipment		10,506		10,183
		37,814		35,908
Accumulated depreciation		(19,890)		(18,619)
	$	17,924	$	17,289

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Deposits (Tables)

12 Months Ended

Dec. 31, 2022

Deposits:

Schedule of Maturities of Time Deposits

2023	$	336,258
2024		96,823
2025		57,384
2026		8,632
2027		4,673
	$	503,770

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Borrowings (Tables)

12 Months Ended

Dec. 31, 2022

Borrowings [Abstract]

Short-Term Borrowings

Short-term borrowings at December 31 consist of the following:

	2022		2021
	(In Thousands)
Securities sold under agreements to repurchase	$	50,951	$	60,822
Federal Home Loan Bank short-term borrowings		42,264		—
	$	93,215	$	60,822

The outstanding balances and related information of short-term borrowings are summarized as follows:

	Years Ended December 31,
	2022			2021
	(Dollars In Thousands)
Average balance during the year	$	69,711		$	73,810
Average interest rate during the year		0.75	%		0.39	%
Maximum month-end balance during the year	$	93,215		$	90,409
Weighted average interest rate at the end of the year		2.65	%		0.34	%

Collateral Pledged for Repurchase Agreements

	As of December 31, 2022
	Remaining Contractual Maturity of the Agreements
	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
Repurchase Agreements:
Mortgage-backed securities - government sponsored entities	$	54,562	$	—	$	—	$	—	$	54,562
Total liability recognized for repurchase agreements										50,951

	As of December 31, 2021
	Remaining Contractual Maturity of the Agreements
	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
Repurchase Agreements:
Mortgage-backed securities - government sponsored entities	$	65,162	$	—	$	—	$	—	$	65,162
Total liability recognized for repurchase agreements										60,822

Other Borrowings

	2022		2021
	(In Thousands)
Amortizing fixed rate borrowing due March 2022 at 1.75%	$	—	$	227
Amortizing fixed rate borrowing due August 2022 at 1.94%		—		1,364
Amortizing fixed rate borrowing due October 2022 at 1.88%		—		1,386
Amortizing fixed rate borrowing due October 2023 at 3.24%		—		3,856
Amortizing fixed rate borrowing due December 2023 at 3.22%		—		2,097
Fixed rate term borrowing due December 2023 at 1.95%		—		10,000
Amortizing fixed rate borrowing due December 2023 at 1.73%		—		5,190
Amortizing fixed rate borrowing due April 2024 at 0.91%		—		5,878
Amortizing fixed rate borrowing due December 2023 at 5.08%		40,000		—
	$	40,000	$	29,998

Contractual Maturities of Other Borrowings

2023	$	40,000
	$	40,000

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Operating Leases (Tables)

12 Months Ended

Dec. 31, 2022

Operating Leases [Abstract]

Lease Cost

	Operating
Weighted-average remaining term		10.7 years
Weighted-average discount rate		2.71%

Undiscounted Cash Flows Due

Undiscounted cash flows due (in thousands)	Operating
2023	$	557
2024		544
2025		561
2026		504
2027		401
2028 and thereafter		2,414
Total undiscounted cash flows		4,981
Discount on cash flows		(786)
Total lease liabilities	$	4,195

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2022

Employee Benefit Plans [Abstract]

Schedule Of Projected Benefit Obligation And Changes In Plan Assets For The Defined Benefit Pension Plan

(in Thousands)	2022		2021
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	(7,622)	$	(8,065)
Service cost		—		(51)
Interest cost		(216)		(206)
Actuarial (gain) loss		1,615		177
Benefits paid		476		523
Benefit obligation at end of year	$	(5,747)	$	(7,622)
Change in plan assets:
Fair value of plan assets at beginning of year	$	7,691	$	7,744
Actual return on plan assets		(1,933)		474
Benefits paid		(553)		(527)
Fair value of assets at end of year		5,205		7,691
Funded status at end of year	$	(542)	$	69

Schedule of Amounts Recognized in Accumulated Other Comprehensive Income

	2022		2021
Transition asset	$	—	$	—
Prior service credit		—		—
(Loss) gain		(784)		220
Total	$	(784)	$	220

Components Of Net Pension Cost (Income)

	2022		2021
Service cost benefits earned during the period	$	—	$	51
Interest cost on projected benefit obligation		216		206
Actual return on assets		(336)		(394)
Net amortization and deferral		(53)		(34)
Net periodic pension cost (income)	$	(173)	$	(171)

Schedule of Weighted Average Assumptions Used to Determine the Benefit Obligation and the Net Periodic Cost

The weighted average assumptions used to determine the benefit obligation at December 31 are as follows:

	2022		2021
Discount rate	5.44	%	2.93	%

The weighted average assumptions used to determine the net periodic pension cost at December 31 are as follows:

	2022		2021
Discount rate	5.44	%	2.63	%
Expected long-term return on plan assets	6.00	%	5.25	%
Rate of compensation increase	—	%	—	%

Schedule Of Target Asset Allocations

	2022		2021
Cash equivalents	16.6	%	—	%
Equity securities	25.1	%	35.7	%
Fixed income securities	21.7	%	35.0	%
Other	36.6	%	29.3	%
	100.0	%	100.0	%

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income Taxes [Abstract]

Schedule of Components of the Provision for Federal Income Taxes

	Years Ended December 31,
	2022		2021
	(In Thousands)
Current	$	6,733	$	6,328
Deferred		419		(383)
	$	7,152	$	5,945

Schedule of Effective Income Tax Rate Reconciliation

	Percentage of Income
	before Income Taxes
	Years Ended December 31,
	2022		2021
Tax at statutory rates	21.0	%	21.0	%
Tax exempt interest income, net of interest expense disallowance	(1.6)		(1.9)
Non-deductible merger related expenses	—		—
Earnings and proceeds on life insurance	(0.6)		(0.6)
Other	0.9		0.8
	19.7	%	19.3	%

Schedule of Deferred Tax Assets and Liabilities

	2022		2021
	(In Thousands)
Deferred tax assets:
Allowance for loan losses	$	3,985	$	3,855
Deferred compensation		834		817
Core deposit intangible		204		231
Pension liability		267		302
Foreclosed real estate valuation allowance		19		19
Net operating loss carryforward		829		913
Purchase price adjustment		1,779		2,487
Net unrealized loss on securities		15,399		386
Other		2,838		1,228
Total Deferred Tax Assets		26,154		10,238

Deferred tax liabilities:
Premises and equipment		1,085		1,004
Deferred loan fees		1,366		125
Net unrealized gain on pension liability		154		318
Total Deferred Tax Liabilities		2,605		1,447
Net Deferred Tax Asset	$	23,549	$	8,791

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Regulatory Matters and Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2022

Regulatory Matters and Stockholders' Equity [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

								To be Well Capitalized
								under Prompt
					For Capital Adequacy			Corrective Action
	Actual				Purposes			Provision
	Amount		Ratio		Amount	Ratio		Amount	Ratio
	(Dollars in Thousands)
As of December 31, 2022:
Total capital (to risk-weighted assets)	$	211,055	13.58	%	≥$124,303	≥8.00	%	≥$155,379	≥10.00	%
Tier 1 capital (to risk-weighted assets)		194,124	12.49		≥$93,228	≥6.00		≥$124,303	≥8.00
Common Equity Tier 1 capital (to risk-weighted assets)		194,124	12.49		≥$69,921	≥4.50		≥$100,997	≥6.50
Tier 1 capital (to average assets)		194,124	9.36		≥$82,934	≥4.00		≥$103,668	≥5.00

As of December 31, 2021:
Total capital (to risk-weighted assets)	$	191,469	13.66	%	≥$112,117	≥8.00	%	≥$140,146	≥10.00	%
Tier 1 capital (to risk-weighted assets)		175,027	12.49		≥84,087	≥6.00		≥112,117	≥8.00
Common Equity Tier 1 capital (to risk-weighted assets)		175,027	12.49		≥63,066	≥4.50		≥91,095	≥6.50
Tier 1 capital (to average assets)		175,027	8.51		≥82,243	≥4.00		≥102,804	≥5.00

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Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2022

Stock Based Compensation [Abstract]

Summary of Stock Option Activity

	2022					2021
		Weighted					Weighted
		Average		Average			Average		Average
		Exercise		Intrinsic			Exercise		Intrinsic
	Options	Price		Value		Options	Price		Value
Outstanding, beginning of year	226,075	$	26.37			215,970	$	25.73
Granted	38,000		33.53			43,500		25.80
Exercised	(34,425)		19.08			(22,420)		17.59
Forfeited	(10,675)		27.56			(10,975)		29.48
Outstanding, end of year	218,975	$	26.70	$	1,100	226,075	$	26.37	$	520
Exercisable, end of year	180,975	$	27.68	$	1,100	182,575	$	26.50	$	511

Schedule of Fair Value Assumptions

	Years Ended December 31,
	2022		2021
Dividend yield		3.57%		3.55%
Expected life		10 years		10 years
Expected volatility		35.01%		34.69%
Risk-free interest rate		3.87%		1.51%
Weighted average fair value of options granted	$	10.06	$	6.49

Schedule of Outstanding Stock Options

		Average				Average
	Options	Exercise		Remaining	Options	Exercise
	Outstanding	Price		Life, Years	Exercisable	Price
	11,125	$	17.93	1.0	11,125	$	17.93
	8,250		19.39	1.9	8,250		19.39
	9,375		19.03	2.9	9,375		19.03
	12,125		22.37	4.0	12,125		22.37
	25,250		32.81	5.0	25,250		32.81
	22,100		32.34	6.0	22,100		32.34
	22,500		36.02	7.0	22,500		36.02
	30,750		26.93	8.0	30,750		26.93
	1,000		26.35	8.3	1,000		26.35
	1,000		25.38	8.5	1,000		25.38
	37,500		25.80	9.0	37,500		25.80
	38,000		33.53	10.0	—		—
Total	218,975				180,975

Summary of Restricted Stock Activity

	2022		2021
		Weighted-Average		Weighted-Average
	Number of	Grant Date	Number of	Grant Date
	Shares	Fair Value	Shares	Fair Value
Non-vested, beginning of year	32,030	$26.76	39,135	$30.72
Granted	23,000	30.25	8,000	25.80
Vested	(10,570)	30.89	(11,205)	32.15
Forfeited	—	—	(3,900)	31.72
Non-vested at December 31	44,460	$30.12	32,030	$26.76

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

Computations of Basic and Diluted Earnings Per Share

	Years Ended December 31,
	2022		2021
	(In Thousands, Except Per Share Data)
Numerator, net income	$	29,233	$	24,915
Denominator:
Weighted average shares outstanding		8,174		8,213
Less: Weighted average unvested restricted shares		(37)		(35)
Denominator: Basic earnings per share		8,137		8,178
Weighted average shares outstanding, basic		8,137		8,178
Add: Dilutive effect of stock options and restricted stock		40		21
Denominator: Diluted earnings per share		8,177		8,199
Basic earnings per common share	$	3.59	$	3.05
Diluted earnings per common share	$	3.58	$	3.04

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Off-Balance Sheet Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2022

Off-Balance Sheet Financial Instruments and Guarantees [Abstract]

Schedule of Fair Value, Off-balance Sheet Risks

	December 31,
	2022		2021
	(In Thousands)
Commitments to grant loans	$	90,379	$	78,996
Unfunded commitments under lines of credit		149,883		156,899
Standby letters of credit		15,052		8,462
	$	255,314	$	244,357

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Interest Rate Swaps (Tables)

12 Months Ended

Dec. 31, 2022

Interest Rate Swaps [Abstract]

Summary of Derivatives

(Amounts in thousands)
	Notional Amount, December 31,						Fair Value December 31,
		2022		2021	Interest Rate Paid	Interest Rate Received		2022		2021
Customer interest rate swap
Maturing November, 2030	$	6,513	$	6,873	Term SOFR + Margin	Fixed	$	889	$	144
Maturing December, 2030		4,297		4,553	Term SOFR + Margin	Fixed		575		91
Total	$	10,810	$	11,426			$	1,464	$	235
Third party interest rate swap
Maturing November, 2030	$	6,513	$	6,873	Fixed	Term SOFR + Margin	$	889	$	144
Maturing December, 2030		4,297		4,553	Fixed	Term SOFR + Margin		575		91
Total	$	10,810	$	11,426			$	1,464	$	235

Fair Value of Derivative Instruments

	(Amounts in thousands)
	Assets			Liabilities
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
December 31, 2022
Interest rate derivatives	Other assets	$	1,464	Other liabilities	$	1,464
December 31, 2021
Interest rate derivatives	Other assets		235	Other liabilities		235

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Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2022

Fair Values of Financial Instruments [Abstract]

Fair Value, Assets Measured on Recurring Basis

	Fair Value Measurement Reporting Date using
Description	Total		Level 1		Level 2		Level 3
December 31, 2022
ASSETS
U.S. Treasury securities	$	41,854	$	—	$	41,854	$	—
U.S. Government agencies		18,323		—		18,323		—
States and political subdivisions		127,852		—		127,852		—
Mortgage-backed securities-government
sponsored entities		230,898		—		230,898		—
Interest rate derivatives		1,464		—		1,464		—
LIABILITIES
Interest rate derivatives		1,464		—		1,464		—
December 31, 2021
ASSETS
U.S. Treasury securities	$	19,351	$	—	$	19,351	$	—
U.S. Government agencies		16,011		—		16,011		—
States and political subdivisions		145,867		—		145,867		—
Mortgage-backed securities-government
sponsored entities		225,553		—		225,553		—
Interest rate derivatives		235		—		235		—
		235		—		235
LIABILITIES
Interest rate derivatives		235		—		235		—

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis

	Fair Value Measurement Reporting Date using
Description	Total		Level 1		Level 2		Level 3
December 31, 2022
Impaired Loans	$	413	$	—	$	—	$	413
Foreclosed real estate		346		—		—		346
December 31, 2021
Impaired Loans	$	1,402	$	—	$	—	$	1,402
Foreclosed real estate		1,742		—		—		1,742

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)
December 31, 2022
Impaired loans	$	413	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-10.0% (8.92%)
Foreclosed real estate owned	$	346	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00% ‎(7.00%)

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2021
Impaired loans	$	1,402	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-10.0% (1.12%)
Foreclosed real estate owned	$	1,742	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00% ‎(7.00%)

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

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

Fair Value, by Balance Sheet Grouping

	Fair Value Measurements at December 31, 2022
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	31,866	$	31,866	$	31,866	$	—	$	—
Loans receivable, net		1,456,946		1,418,300		—		—		1,418,300
Mortgage servicing rights		213		498		—		—		498
Regulatory stock (1)		5,418		5,418		5,418		—		—
Bank owned life insurance (1)		43,364		43,364		43,364		—		—
Accrued interest receivable (1)		6,917		6,917		6,917		—		—
Financial liabilities:
Deposits		1,727,727		1,727,184		1,223,958		—		503,226
Short-term borrowings (1)		93,215		93,215		93,215		—		—
Other borrowings		40,000		40,074		—		—		40,074
Accrued interest payable (1)		2,653		2,653		2,653		—		—
Off-balance sheet financial instruments:
Commitments to extend credit and ‎outstanding letters of credit		—		—		—		—		—

	Fair Value Measurements at December 31, 2021
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	206,681	$	206,681	$	206,681	$	—	$	—
Loans receivable, net		1,338,489		1,389,870		—		—		1,389,870
Mortgage servicing rights		289		500		—		—		500
Regulatory stock (1)		3,927		3,927		3,927		—		—
Bank owned life insurance (1)		40,038		40,038		40,038		—		—
Accrued interest receivable (1)		5,889		5,889		5,889		—		—
Financial liabilities:
Deposits		1,756,793		1,759,722		1,228,091		—		531,631
Short-term borrowings (1)		60,822		60,822		60,822		—		—
Other borrowings		29,998		30,221		—		—		30,221
Accrued interest payable (1)		1,203		1,203		1,203		—		—
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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Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2022

Accumulated Other Comprehensive Income [Abstract]

Summary of Changes In Accumulated Other Comprehensive Income (Loss)

	Unrealized gains on available for sale securities (a)		Unrealized gain on pension liability (a)		Total (a)
Balance as of December 31, 2021	$	(1,453)	$	1,197	$	(256)
Other comprehensive income (loss) before reclassification		(56,476)		(619)		(57,095)
Amount reclassified from accumulated other comprehensive loss		(2)		—		(2)
Total other comprehensive income		(56,478)		(619)		(57,097)
Balance as of December 31, 2022	$	(57,931)	$	578	$	(57,353)
	Unrealized gains on available for sale securities (a)		Unrealized gain on pension liability (a)
Balance as of December 31, 2020	$	4,096	$	1,023	$	5,119
Other comprehensive income (loss) before reclassification		(5,476)		174		(5,302)
Amount reclassified from accumulated other comprehensive loss		(73)		—		(73)
Total other comprehensive		(5,549)		174		(5,375)
Balance as of December 31, 2021	$	(1,453)	$	1,197	$	(256)

(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 of
Details about other comprehensive income	Income (a)				Income
	Twelve months		Twelve months
	ended		ended
	December 31,		December 31,
	2022		2021
Unrealized gains on available for sale securities	$	3	$	92	Net realized gains on sales of securities
		(1)		(19)	Income tax expense
	$	2	$	73

(a)Amounts in parentheses indicate debits to net income.

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Norwood Financial Corp (Parent Company Only) Financial Information (Tables) - Parent Company [Member]

12 Months Ended

Dec. 31, 2022

Condensed Financial Statements, Captions [Line Items]

Parent Company Only – Balance Sheets

BALANCE SHEETS

	December 31,
	2022		2021
	(In Thousands)
ASSETS
Cash on deposit in bank subsidiary	$	3,938	$	1,511
Investment in bank subsidiary		164,248		204,547
Other assets		2,365		2,472
Total assets	$	170,551	$	208,530
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities	$	3,466	$	3,268
Stockholders’ equity		167,085		205,262
Total liabilities and stockholders' equity	$	170,551	$	208,530

Parent Company Only – Statements of Income

STATEMENTS OF INCOME

	Years Ended December 31,
	2022		2021
Income:	(In Thousands)
Dividends from bank subsidiary	$	13,228	$	10,697
Expenses		743		627
		12,485		10,070
Income tax benefit		(219)		(171)
		12,704		10,241
Equity in undistributed earnings of subsidiary		16,529		14,674
Net Income	$	29,233	$	24,915
Comprehensive Income	$	(27,864)	$	19,540

Parent Company Only – Statements of Cash Flows

STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2022		2021
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	29,233	$	24,915
Adjustments to reconcile net income to
net cash provided by operating activities:
Undistributed earnings of bank subsidiary		(16,529)		(14,674)
Other, net		607		(129)
Net Cash Provided by Operating Activities		13,311		10,112
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised		657		394
Sale of treasury stock for ESOP		132		130
Acquisition of treasury stock		(2,515)		(1,440)
Cash dividends paid		(9,158)		(8,539)
Net Cash Used in Financing Activities		(10,884)		(9,455)
Net Increase in Cash and Cash Equivalents		2,427		657
CASH AND CASH EQUIVALENTS - BEGINNING		1,511		854
CASH AND CASH EQUIVALENTS - ENDING	$	3,938	$	1,511

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Summary of Significant Accounting Policies (Narrative) (Details)	12 Months Ended
	Dec. 31, 2022 USD ($) item $ / shares	Dec. 31, 2021 USD ($)	Jan. 01, 2023 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Regulatory Stock, Par Value | $ / shares	$ 100
Impairment of investments	$ 0
Loan servicing assets, impairment	0	$ 0
Servicing Assets	$ 213,000	289,000
Number of acquisitions | item	3
Goodwill	$ 29,266,000	29,266,000
Goodwill, Impairment Loss	0	0
Intangible Assets, Net (Excluding Goodwill)	306,000	407,000
Finite-Lived Intangible Assets, Accumulated Amortization	$ 1,448,000	1,347,000
Finite-Lived Intangible Asset, Useful Life	10 years
Amortization of Intangibles	$ 101,000	123,000
Unrecognized Tax Benefits	0	$ 0
Unrecognized tax benefits expected within next twelve months	0
Minimum [Member] | Accounting Standards Update 2016-13 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Loans acquired with deteriorated credit quality	2,000,000.0		$ 2,200,000
Maximum [Member] | Accounting Standards Update 2016-13 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Loans acquired with deteriorated credit quality	$ 2,500,000		$ 2,700,000

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Summary of Significant Accounting Policies (Schedule of Estimated Useful Lives ) (Details)	12 Months Ended
	Dec. 31, 2022
Minimum [Member] | Buildings and improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Minimum [Member] | Furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Maximum [Member] | Buildings and improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	40 years
Maximum [Member] | Furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years

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Summary of Significant Accounting Policies (Schedule of Estimated Future Amortization Expense for the Core Deposit Intangible) (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Summary of Significant Accounting Policies [Abstract]
2023	$ 85
2024	69
2025	54
2026	38
2027	26
Thereafter	34
Amortization Expense for the Core Deposit Intangible, Total	$ 306

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Summary of Significant Accounting Policies (Revenue) (Details) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Noninterest Income (in scope of Topic 606)	$ 8,761	$ 7,021
Net realized gains on sales of securities	3	92
Loan servicing fees	78	130
Gain on sales of loans	3	177
Earnings on and proceeds from bank-owned life insurance	1,087	941
Noninterest Income (out-of-scope of Topic 606)	1,171	1,340
Total Other Income	9,932	8,361
Service Charges On Deposit Accounts [Member]
Noninterest Income (in scope of Topic 606)	419	398
ATM Fees [Member]
Noninterest Income (in scope of Topic 606)	452	443
Overdraft Fees [Member]
Noninterest Income (in scope of Topic 606)	1,155	1,029
Safe Deposit Box Rental [Member]
Noninterest Income (in scope of Topic 606)	93	100
Loan Related Service Fees [Member]
Noninterest Income (in scope of Topic 606)	849	1,238
Debit Card [Member]
Noninterest Income (in scope of Topic 606)	2,496	2,228
Fiduciary Activities [Member]
Noninterest Income (in scope of Topic 606)	845	748
Commissions On Mutual Funds And Annuities [Member]
Noninterest Income (in scope of Topic 606)	119	127
Gains On Sales Of Other Real Estate Owned [Member]
Noninterest Income (in scope of Topic 606)	427	36
Other Income [Member]
Noninterest Income (in scope of Topic 606)	$ 1,906	$ 674

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Securities (Narrative) (Details)	12 Months Ended
	Dec. 31, 2022 USD ($) security	Dec. 31, 2021 USD ($)
Securities [Abstract]
Debt securities in unrealized loss position in the less than twelve months category | security	203
Debt securities in unrealized loss position in the twelve months or more category | security	140
Impairment of investments	$ 0
Available-for-sale Securities Pledged as Collateral	378,472,000	$ 339,769,000
Proceeds from sales	5,113,000	11,366,000
Gross realized losses	11,000	0
Available-for-sale Securities, Gross Realized Gain (Loss)	$ 14,000	$ 92,000

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Securities (Schedule of Amortized Cost Gross Unrealized Gains and Losses, and Fair Values of Securities) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	$ 492,256
Available for Sale, Fair Value	418,927	$ 406,782
Debt Securities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	492,256	408,620
Available for Sale, Gross Unrealized Gains	2	2,951
Available for Sale, Gross Unrealized Losses	(73,331)	(4,789)
Available for Sale, Fair Value	418,927	406,782
U.S. Treasury Securities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	45,066	19,550
Available for Sale, Gross Unrealized Gains		6
Available for Sale, Gross Unrealized Losses	(3,212)	(205)
Available for Sale, Fair Value	41,854	19,351
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	21,266	16,251
Available for Sale, Gross Unrealized Gains		24
Available for Sale, Gross Unrealized Losses	(2,943)	(264)
Available for Sale, Fair Value	18,323	16,011
States And Political Subdivisions [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	157,524	145,107
Available for Sale, Gross Unrealized Gains	2	2,155
Available for Sale, Gross Unrealized Losses	(29,674)	(1,395)
Available for Sale, Fair Value	127,852	145,867
Mortgage-backed Securities-Government Sponsored Entities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	268,400	227,712
Available for Sale, Gross Unrealized Gains		766
Available for Sale, Gross Unrealized Losses	(37,502)	(2,925)
Available for Sale, Fair Value	$ 230,898	$ 225,553

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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	Dec. 31, 2022	Dec. 31, 2021
Debt Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	$ 203,095	$ 271,578
Less than 12 Months, Unrealized Losses	(23,567)	(4,565)
12 Months or More, Fair Value	212,027	6,762
12 Months or More, Unrealized Losses	(49,764)	(224)
Total, Fair Value	415,122	278,340
Total, Unrealized Losses	(73,331)	(4,789)
U.S. Treasury Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	25,733	18,361
Less than 12 Months, Unrealized Losses	(849)	(205)
12 Months or More, Fair Value	16,121
12 Months or More, Unrealized Losses	(2,363)
Total, Fair Value	41,854	18,361
Total, Unrealized Losses	(3,212)	(205)
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	8,321	7,912
Less than 12 Months, Unrealized Losses	(885)	(109)
12 Months or More, Fair Value	10,002	3,843
12 Months or More, Unrealized Losses	(2,058)	(155)
Total, Fair Value	18,323	11,755
Total, Unrealized Losses	(2,943)	(264)
States And Political Subdivisions [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	66,680	74,658
Less than 12 Months, Unrealized Losses	(11,194)	(1,395)
12 Months or More, Fair Value	57,367
12 Months or More, Unrealized Losses	(18,480)
Total, Fair Value	124,047	74,658
Total, Unrealized Losses	(29,674)	(1,395)
Mortgage-backed Securities-Government Sponsored Entities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	102,361	170,647
Less than 12 Months, Unrealized Losses	(10,639)	(2,856)
12 Months or More, Fair Value	128,537	2,919
12 Months or More, Unrealized Losses	(26,863)	(69)
Total, Fair Value	230,898	173,566
Total, Unrealized Losses	$ (37,502)	$ (2,925)

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Securities (Schedule of Amortized Cost and Fair Value Of Debt Securities by Contractual Maturity) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Securities [Abstract]
Available for Sale, Amortized Cost, Due in one year or less	$ 5,883
Available for Sale, Amortized Cost, Due after one year through five years	43,272
Available for Sale, Amortized Cost, Due after five years through ten years	54,146
Available for Sale, Amortized Cost, Due after ten years	120,555
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Amortized Cost Basis, Total	223,856
Available for Sale, Amortized Cost, Mortgage-backed securities-government sponsored entities	268,400
Available for Sale, Amortized Cost, Total	492,256
Available for Sale, Fair Value, Due in one year or less	5,821
Available for Sale, Fair Value, Due after one year through five years	40,981
Available for Sale, Fair Value, Due after five years through ten years	44,419
Available for Sale, Fair Value, Due after ten years	96,808
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Total	188,029
Available for Sale, Fair Value, Mortgage-backed securities-government sponsored entities	230,898
Available for Sale, Fair Value, Total	$ 418,927	$ 406,782

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Loans Receivable and Allowance for Loan Losses (Narrative) (Details)	12 Months Ended
	Dec. 31, 2022 USD ($) loan	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Certain Loans and Debt Securities Acquired in Transfer, Allowance for Credit Losses Due to Subsequent Impairment	$ 0
Financing Receivable, Modifications, Post-Modification Recorded Investment	0
Financing Receivable, Troubled Debt Restructuring	0
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	0
Loans acquired with credit deterioration	15,410,000
Real Estate Acquired Through Foreclosure	$ 346,000	$ 1,742,000
Number Of Properties Under Foreclosure Proceedings | loan	4
Annual Loan Review threshold, amount	$ 1,500,000
Loans and Leases Receivable, Gross	1,474,424,000	1,356,040,000
Proceeds from Sale of Mortgage Loans Held-for-sale	845,000	8,616,000
Allowance for Loan and Lease Losses, Adjustments, Other	2,400,000	1,500,000
Allowance for Loan and Lease Losses, Period Increase (Decrease)	557,000	3,292,000
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans	182,000	35,000
Allowance for Loan and Lease Losses, Real Estate	16,999,000	16,442,000	$ 13,150,000
Servicing Asset at Amortized Cost	60,000,000.0	65,400,000
Outstanding Balance	8,368,000	12,862,000
Hospitality Lodging Industry [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	0	0
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage Loans in Process of Foreclosure, Amount	223,000
Loans and Leases Receivable, Gross	298,813,000	273,040,000
Proceeds from Sale of Mortgage Loans Held-for-sale	848,000	8,793,000
Gross Realized Gains on Loans	3,000	177,000
Gross Realized Losses on Loans	0	0
Residential Real Estate Loans [Member] | Hospitality Lodging Industry [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 113,000,000.0
Concentration Risk, Percentage	7.70%
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number Of Properties Under Foreclosure Proceedings | loan	1
Loans and Leases Receivable, Gross	$ 651,544,000	628,724,000
Commercial Real Estate Loans [Member] | Commercial Rentals [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 141,900,000
Concentration Risk, Percentage	9.60%
PPP Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 121,000	15,209,000
Fee income	0	2,900,000
UpState New York Bancorp, Inc. [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Assets, Fair Value Adjustment	6,937,000
Outstanding Balance	15,410,000
COVID [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for Loan and Lease Losses, Period Increase (Decrease)	445,000	$ 1,400,000
Economic Conditions [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for Loan and Lease Losses, Period Increase (Decrease)	$ 2,300,000

XML

Loans Receivable and Allowance for Loan Losses (Composition of the Loan Portfolio) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 1,474,424	$ 1,356,040
Deferred fees, net	(479)	(1,109)
Total loans receivable	1,473,945	1,354,931
Allowance for loan losses	(16,999)	(16,442)	$ (13,150)
Loans receivable (net of allowance for loan losses 2022: $16,999; 2021: $16,442)	$ 1,456,946	$ 1,338,489
Percent of Loans	100.00%	100.00%
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 298,813	$ 273,040
Allowance for loan losses	$ (2,833)	$ (2,175)	(1,960)
Percent of Loans	20.30%	20.10%
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 651,544	$ 628,724
Allowance for loan losses	$ (8,293)	$ (10,878)	(8,004)
Percent of Loans	44.20%	46.40%
Agricultural Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 68,915	$ 61,925
Percent of Loans	4.70%	4.60%
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 32,469	$ 21,990
Allowance for loan losses	$ (409)	$ (133)	(150)
Percent of Loans	2.20%	1.60%
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 187,257	$ 186,031
Allowance for loan losses	$ (2,445)	$ (1,490)	(1,360)
Percent of Loans	12.70%	13.70%
Other Agricultural Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 35,277	$ 37,930
Percent of Loans	2.40%	2.80%
Consumer Loans To Individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	$ 200,149	$ 146,400
Allowance for loan losses	$ (2,636)	$ (1,766)	$ (1,676)
Percent of Loans	13.50%	10.80%

XML

Loans Receivable and Allowance for Loan Losses (Changes in the Accretable Yield for Purchased Credit Impaired Loans) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Loans Receivable and Allowance for Loan Losses [Abstract]
Balance at beginning of period	$ 1,884	$ 1,365
Additions
Accretion	(710)	(880)
Reclassification and other	653	1,399
Balance at end of period	$ 1,827	$ 1,884

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	Dec. 31, 2022	Dec. 31, 2021
Loans Receivable and Allowance for Loan Losses [Abstract]
Outstanding Balance	$ 8,368	$ 12,862
Carrying Amount	$ 6,290	$ 8,304

XML

Loans Receivable and Allowance for Loan Losses (Components of Purchase Accounting Adjustments Related to Purchased Credit-impaired Loans Acquired) (Details) $ in Thousands	Jul. 07, 2020 USD ($)
Loans Receivable and Allowance for Loan Losses [Abstract]
Contractually required principal and interest	$ 15,410
Non-accretable discount	(5,213)
Expected cash flows	10,197
Accretable discount	(1,724)
Estimated fair value	$ 8,473

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	Dec. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 463	$ 1,674
Loans acquired with deteriorated credit quality	6,290	8,304
Collectively evaluated for impairment	1,467,671	1,346,062
Total Loans	1,474,424	1,356,040
Purchased Credit-Impaired [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	6,290	8,304
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans acquired with deteriorated credit quality	567	784
Collectively evaluated for impairment	298,246	272,256
Total Loans	298,813	273,040
Residential Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	567	784
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	402	1,658
Loans acquired with deteriorated credit quality	2,049	3,285
Collectively evaluated for impairment	649,093	623,781
Total Loans	651,544	628,724
Commercial Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	2,049	3,285
Agricultural Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans acquired with deteriorated credit quality	2,034	1,918
Collectively evaluated for impairment	66,881	60,007
Total Loans	68,915	61,925
Agricultural Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	2,034	1,918
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	32,469	21,990
Total Loans	32,469	21,990
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	61	16
Loans acquired with deteriorated credit quality	1,640	198
Collectively evaluated for impairment	185,556	185,817
Total Loans	187,257	186,031
Commercial [Member] | Purchased Credit-Impaired [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans	1,640	198
Other Agricultural Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans acquired with deteriorated credit quality		2,119
Collectively evaluated for impairment	35,277	35,811
Total Loans	35,277	37,930
Other Agricultural Loans [Member] | Purchased Credit-Impaired [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans		2,119
Consumer Loans To Individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	200,149	146,400
Total Loans	$ 200,149	$ 146,400

XML

Loans Receivable and Allowance for Loan Losses (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	$ 764	$ 2,376
Interest Income Recognized, Total	93	164
Impaired Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	413	157
Impaired Financing Receivable, with Related Allowance, Recorded Investment	50	1,517
Impaired Financing Receivable, Recorded Investment	463	1,674
Unpaid Principal Balance, With no related allowance recorded	413	157
Unpaid Principal Balance, With an allowance recorded	50	1,517
Unpaid Principal Balance, Total	463	1,674
Associated Allowance	50	272
Commercial Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	740	2,358
Interest Income Recognized, Total	93	157
Commercial Real Estate Loans [Member] | Impaired Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	402	141
Impaired Financing Receivable, with Related Allowance, Recorded Investment		1,517
Impaired Financing Receivable, Recorded Investment	402	1,658
Unpaid Principal Balance, With no related allowance recorded	402	141
Unpaid Principal Balance, With an allowance recorded		1,517
Unpaid Principal Balance, Total	402	1,658
Associated Allowance		272
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	24	18
Interest Income Recognized, Total		7
Commercial [Member] | Impaired Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	11	16
Impaired Financing Receivable, with Related Allowance, Recorded Investment	50
Impaired Financing Receivable, Recorded Investment	61	16
Unpaid Principal Balance, With no related allowance recorded	11	16
Unpaid Principal Balance, With an allowance recorded	50
Unpaid Principal Balance, Total	61	$ 16
Associated Allowance	$ 50

XML

Loans Receivable and Allowance for Loan Losses (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	$ 530,781	$ 440,906
Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	650	524
Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	942,993	914,610
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	934,256	900,036
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	2,187	5,555
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	6,550	8,747
Doubtful Or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount		0
Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount		272
Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	531,431	441,430
Commercial Real Estate Loans [Member] | Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	651,544	628,724
Commercial Real Estate Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	646,775	618,541
Commercial Real Estate Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	1,079	5,146
Commercial Real Estate Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	3,690	4,765
Commercial Real Estate Loans [Member] | Doubtful Or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount		0
Commercial Real Estate Loans [Member] | Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount		272
Agricultural Real Estate Loans [Member] | Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	68,915	61,925
Agricultural Real Estate Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	66,444	60,193
Agricultural Real Estate Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	368
Agricultural Real Estate Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	2,103	1,732
Commercial [Member] | Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	187,257	186,031
Commercial [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	186,966	185,729
Commercial [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	184	199
Commercial [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	107	103
Commercial [Member] | Doubtful Or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount		0
Commercial [Member] | Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount		0
Other Agricultural Loans [Member] | Summarized by Aggregate Risk Rating [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	35,277	37,930
Other Agricultural Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	34,071	35,573
Other Agricultural Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	556	210
Other Agricultural Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	650	2,147
Other Agricultural Loans [Member] | Doubtful Or Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount
Other Agricultural Loans [Member] | Loss [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount
Residential Real Estate Loans [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	298,327	272,571
Residential Real Estate Loans [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	486	469
Residential Real Estate Loans [Member] | Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	298,813	273,040
Construction Real Estate Loans [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	32,469	21,990
Construction Real Estate Loans [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount
Construction Real Estate Loans [Member] | Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	32,469	21,990
Consumer Loans To Individuals [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	199,985	146,345
Consumer Loans To Individuals [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	164	55
Consumer Loans To Individuals [Member] | Summarized by Performance of Individual Credits [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying Amount	$ 200,149	$ 146,400

XML

Loans Receivable and Allowance for Loan Losses (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Financing Receivable, Past Due [Line Items]
Total Loans	$ 1,474,424	$ 1,356,040
Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Non-Accrual	1,113	643
Total Past Due and Non-Accrual	3,221	1,208
Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	6,290	8,304
Financing Receivables, 1 to 30 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	1,464,913	1,346,528
Financing Receivables, 31 to 60 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	1,646	431
Financing Receivables, 61 to 90 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due and still accruing	462	134
Financing Receivables, Greater than 90 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due and still accruing		91
Residential Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	298,813	273,040
Residential Real Estate Loans [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Non-Accrual	486	469
Total Past Due and Non-Accrual	896	634
Residential Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	567	784
Residential Real Estate Loans [Member] | Financing Receivables, 1 to 30 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	297,350	271,622
Residential Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	187	155
Residential Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due and still accruing	223	10
Commercial Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	651,544	628,724
Commercial Real Estate Loans [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Non-Accrual	402	103
Total Past Due and Non-Accrual	807	103
Commercial Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	2,049	3,285
Commercial Real Estate Loans [Member] | Financing Receivables, 1 to 30 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	648,688	625,336
Commercial Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	405
Agricultural Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	68,915	61,925
Agricultural Real Estate Loans [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Total Past Due and Non-Accrual	130	25
Agricultural Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	2,034	1,918
Agricultural Real Estate Loans [Member] | Financing Receivables, 1 to 30 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	66,751	59,982
Agricultural Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	130	25
Construction Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	32,469	21,990
Construction Real Estate Loans [Member] | Financing Receivables, 1 to 30 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	32,469	21,990
Commercial [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	187,257	186,031
Commercial [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Non-Accrual	61	16
Total Past Due and Non-Accrual	132	32
Commercial [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	1,640	198
Commercial [Member] | Financing Receivables, 1 to 30 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	185,485	185,801
Commercial [Member] | Financing Receivables, 31 to 60 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	71	3
Commercial [Member] | Financing Receivables, 61 to 90 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due and still accruing		13
Commercial [Member] | Financing Receivables, Greater than 90 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due and still accruing		91
Other Agricultural Loans [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	35,277	37,930
Other Agricultural Loans [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Total Loans		2,119
Other Agricultural Loans [Member] | Financing Receivables, 1 to 30 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	35,277	35,811
Consumer Loans To Individuals [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	200,149	146,400
Consumer Loans To Individuals [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Non-Accrual	164	55
Total Past Due and Non-Accrual	1,256	414
Consumer Loans To Individuals [Member] | Financing Receivables, 1 to 30 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	198,893	145,986
Consumer Loans To Individuals [Member] | Financing Receivables, 31 to 60 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due	853	248
Consumer Loans To Individuals [Member] | Financing Receivables, 61 to 90 Days Past Due [Member] | Company Originated [Member]
Financing Receivable, Past Due [Line Items]
Past Due and still accruing	$ 239	$ 111

XML

Loans Receivable and Allowance for Loan Losses (Allowance for Loan Losses and Recorded Investment in Financing Receivables) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	$ 16,442	$ 13,150
Charge Offs	(665)	(1,149)
Recoveries	322	241
Provision for loan losses	900	4,200
Ending balance,	16,999	16,442
Ending balance individually evaluated for impairment	50	272
Ending balance collectively evaluated for impairment	16,949	16,170
Residential Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	2,175	1,960
Charge Offs	(172)	(17)
Recoveries	130	74
Provision for loan losses	700	158
Ending balance,	2,833	2,175
Ending balance individually evaluated for impairment
Ending balance collectively evaluated for impairment	2,833	2,175
Commercial Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	10,878	8,004
Charge Offs	(20)	(452)
Recoveries	82	19
Provision for loan losses	(2,647)	3,307
Ending balance,	8,293	10,878
Ending balance individually evaluated for impairment		272
Ending balance collectively evaluated for impairment	8,293	10,606
Farmland [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision for loan losses	259
Ending balance,	259
Ending balance collectively evaluated for impairment	259
Construction Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	133	150
Charge Offs
Recoveries
Provision for loan losses	276	(17)
Ending balance,	409	133
Ending balance individually evaluated for impairment
Ending balance collectively evaluated for impairment	409	133
Commercial [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	1,490	1,360
Charge Offs	(16)	(200)
Recoveries	46	49
Provision for loan losses	925	281
Ending balance,	2,445	1,490
Ending balance individually evaluated for impairment	50
Ending balance collectively evaluated for impairment	2,395	1,490
Other Agricultural [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision for loan losses	124
Ending balance,	124
Ending balance collectively evaluated for impairment	124
Consumer Loans To Individuals [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	1,766	1,676
Charge Offs	(457)	(480)
Recoveries	64	99
Provision for loan losses	1,263	471
Ending balance,	2,636	1,766
Ending balance individually evaluated for impairment
Ending balance collectively evaluated for impairment	$ 2,636	$ 1,766

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Premises and Equipment (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Premises and Equipment [Abstract]
Depreciation expense	$ 1,470	$ 1,481

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Premises and Equipment (Components of Premises and Equipment) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 37,814	$ 35,908
Accumulated depreciation	(19,890)	(18,619)
Property, Plant and Equipment, Net, Total	17,924	17,289
Land and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	3,864	3,879
Buildings and improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	23,444	21,846
Furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 10,506	$ 10,183

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Deposits (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Deposits:
Time Deposits, $250,000 or More	$ 213,623	$ 257,238

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Deposits (Schedule of Maturities of Time Deposits) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Deposits:
2023	$ 336,258
2024	96,823
2025	57,384
2026	8,632
2027	4,673
Time Deposits, Total	$ 503,770	$ 528,702

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Borrowings (Narrative) (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Available-for-sale Securities Pledged as Collateral	$ 378,472,000	$ 339,769,000
FHLB of Pittsburgh [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	150,000,000
Line of Credit Facility, Fair Value of Amount Outstanding	42,264,000
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available	655,344,000
Advances from Federal Home Loan Banks	82,264,000
Outstanding letter of credit amount	92,900,000
Atlantic Community Bankers Bank [Member]
Debt Instrument [Line Items]
Long-term Line of Credit	0	0
Line of Credit Facility, Maximum Borrowing Capacity	7,000,000
PNC Bank [Member]
Debt Instrument [Line Items]
Long-term Line of Credit	0	0
Line of Credit Facility, Maximum Borrowing Capacity	16,000,000
Zion Bank [Member]
Debt Instrument [Line Items]
Long-term Line of Credit	0	0
Line of Credit Facility, Maximum Borrowing Capacity	17,000,000
Securities Sold under Agreements to Repurchase [Member]
Debt Instrument [Line Items]
Available-for-sale securities pledged as collateral, amortized cost	63,737,000	66,353,000
Available-for-sale Securities Pledged as Collateral	$ 54,562,000	$ 65,162,000

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Borrowings (Short-Term Borrowings) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Short-term Debt [Line Items]
Short-term borrowings	$ 93,215	$ 60,822
Securities Sold under Agreements to Repurchase [Member]
Short-term Debt [Line Items]
Short-term borrowings	50,951	$ 60,822
FHLB of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member]
Short-term Debt [Line Items]
Short-term borrowings	$ 42,264

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Borrowings (Outstanding Balances and Related Information of Short-Term Borrowings) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Borrowings [Abstract]
Short-term Debt, Average Balance During the Year	$ 69,711	$ 73,810
Short-term Debt, Average Interest Rate During the Year	0.75%	0.39%
Short-term Debt, Maximum Month-end Balance During The Year	$ 93,215	$ 90,409
Short-term Debt, Weighted Average Interest Rate at the End of the Year	2.65%	0.34%

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Borrowings (Collateral Pledged for Repurchase Agreements) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Assets Sold under Agreements to Repurchase [Line Items]
Available-for-sale Securities Pledged as Collateral	$ 378,472	$ 339,769
Short-term Borrowings	93,215	60,822
Mortgage-backed Securities-Government Sponsored Entities [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Available-for-sale Securities Pledged as Collateral	54,562	65,162
Maturity Overnight [Member] | Mortgage-backed Securities-Government Sponsored Entities [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Available-for-sale Securities Pledged as Collateral	54,562	65,162
Securities Sold under Agreements to Repurchase [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Available-for-sale Securities Pledged as Collateral	54,562	65,162
Short-term Borrowings	$ 50,951	$ 60,822

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Borrowings (Other Borrowings) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances	$ 40,000	$ 29,998
Amortizing fixed rate borrowing due March 2022 at 1.75% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances		227
Debt Instrument, Interest Rate, Stated Percentage	1.75%
Amortizing fixed rate borrowing due August 2022 at 1.94% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances		1,364
Debt Instrument, Interest Rate, Stated Percentage	1.94%
Amortizing fixed rate borrowing due October 2022 at 1.88% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances		1,386
Debt Instrument, Interest Rate, Stated Percentage	1.88%
Amortizing fixed rate borrowing due October 2023 at 3.24% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances		3,856
Debt Instrument, Interest Rate, Stated Percentage	3.24%
Amortizing fixed rate borrowing due December 2023 at 3.22% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances		2,097
Debt Instrument, Interest Rate, Stated Percentage	3.22%
Fixed Rate Term Borrowing Due December 2023 At 1.95% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances		10,000
Debt Instrument, Interest Rate, Stated Percentage	1.95%
Amortizing Fixed Rate Borrowing Due December 2023 At 1.73% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances		5,190
Debt Instrument, Interest Rate, Stated Percentage	1.73%
Amortizing Fixed Rate Borrowing Due April 2024 At 0.91% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances		$ 5,878
Debt Instrument, Interest Rate, Stated Percentage	0.91%
Amortizing Fixed Rate Borrowing Due December 2023 At 5.08% [Member]
Debt Instrument [Line Items]
Long-term Federal Home Loan Bank Advances	$ 40,000
Debt Instrument, Interest Rate, Stated Percentage	5.08%

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Borrowings (Contractual Maturities of Other Borrowings) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Borrowings [Abstract]
2023	$ 40,000
Long-term Federal Home Loan Bank Advances, Total	$ 40,000	$ 29,998

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Operating Leases (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) item	Dec. 31, 2021 USD ($)
Operating Leases [Abstract]
Number of operating leases | item	7
Lease, Cost	$ 609	$ 587
Right-of-use assets	$ 4,109	$ 4,511
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Prepaid Expense and Other Assets	Prepaid Expense and Other Assets
Operating Lease, Liability	$ 4,195	$ 4,577
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration]	Other liabilities	Other liabilities

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Operating Leases (Lease Cost) (Details)	Dec. 31, 2022
Operating Leases [Abstract]
Weighted-average remaining term	10 years 8 months 12 days
Weighted-average discount rate	2.71%

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Operating Leases (Undiscounted Cash Flows Due) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Operating Leases [Abstract]
2023	$ 557
2024	544
2025	561
2026	504
2027	401
2028 and thereafter	2,414
Total undiscounted cash flows	4,981
Discount on cash flows	(786)
Total lease liabilities	$ 4,195	$ 4,577
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration]	Other liabilities	Other liabilities

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Employee Benefit Plans (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Defined Benefit Plan Disclosure [Line Items]
Defined Contribution Plan, Employer Contributions, Vesting Period	4 years
Defined Contribution Plan, Cost	$ 1,310	$ 1,135
Defined Benefit Plan, Benefit Obligation	5,747	7,622	$ 8,065
Defined Benefit Plan, Net Periodic Benefit Cost	(173)	(171)
Defined Benefit Plan, Benefits Paid	476	$ 523
Defined Benefit Plan, Expected Future Benefit Payments, Next Twelve Months	479
Defined Benefit Plan, Expected Future Benefit Payments, Year Five	439
Defined Benefit Plan, Expected Future Benefit Payments, Year Four	449
Defined Benefit Plan, Expected Future Benefit Payments, Year Three	446
Defined Benefit Plan, Expected Future Benefit Payments, Year Two	463
Defined Benefit Plan, Expected Future Benefit Payment	$ 2,081
Projected Benefit Obligation, Projected Discount Rate	5.44%	2.93%
Change in Projected Benefit Obligation from Change in Projected Discount Rate	$ 1,600
Defined Benefit Plan, Accumulated Benefit Obligation	$ 5,747	$ 7,622
Defined Benefit Plan, Target Plan Asset Allocations	100.00%	100.00%
Accumulated Postretirement Benefit Obligation	$ 1,731	$ 1,630
Supplemental Employee Retirement Plan, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation	3,518	3,481
Pension and Other Postretirement Benefits Cost (Reversal of Cost)	461	364
Cash Surrender Value of Life Insurance	43,364	40,038
Defined Benefit Plan, Net Periodic Benefit Cost	101	153
Other Postretirement Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Net Periodic Benefit Cost	11	17
Defined Benefit Plan, Contributions by Employer	$ 11	$ 17
Defined Benefit Plan, Percentage of Plan Funded	106.70%	116.60%
Cash And Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	16.60%
Domestic equities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	25.10%	35.70%
Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	21.70%	35.00%
Other Investments [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	36.60%	29.30%
JPMCB LDI Diversified Balanced Fund [Member]
Defined Benefit Plan Disclosure [Line Items]
Investment concentration	96.00%	100.00%
Maximum [Member] | Other Postretirement Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Contribution Percentage	5.00%
Commingled Pensions Trust Fund [Member] | Minimum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	10.00%
Commingled Pensions Trust Fund [Member] | Minimum [Member] | Global Equity, Global Fixed Income, Real Estate And Cash-Plus [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	35.00%
Commingled Pensions Trust Fund [Member] | Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	65.00%
Commingled Pensions Trust Fund [Member] | Maximum [Member] | Global Equity, Global Fixed Income, Real Estate And Cash-Plus [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	90.00%
Short-Term Investment Fund (STIF) [Member] | Other Investments [Member]
Defined Benefit Plan Disclosure [Line Items]
Investment concentration	96.00%	100.00%
Investment amount	$ 7,000	$ 0

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Employee Benefit Plans (Schedule of Projected Benefit Obligation and Changes in Plan Assets for the Defined Benefit Pension Plan) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Change in benefit obligation:
Projected benefit obligation at beginning of year	$ (7,622)	$ (8,065)
Service cost		(51)
Interest cost	$ (216)	(206)
Defined Benefit Plan Net Periodic Benefit Cost Credit Interest Cost Statement Of Income Or Comprehensive Income Extensible List Not Disclosed Flag	Interest cost
Actuarial (gain) loss	$ 1,615	177
Benefits paid	476	523
Benefit obligation at end of year	(5,747)	(7,622)
Change in plan assets:
Balance	7,691	7,744
Actual return on plan assets	(1,933)	474
Benefits paid	(553)	(527)
Fair value of plan assets at end of year	5,205	7,691
Funded status at end of year	$ (542)	$ 69

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Employee Benefit Plans (Schedule of Amounts Recognized in Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Pension Plans And Other Postretirement Benefits [Abstract]
Gain	$ (784)	$ 220
Total	$ (784)	$ 220

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Employee Benefit Plans (Components of Net Pension Cost (Income)) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Defined Benefit Plan Disclosure [Line Items]
Service cost benefits earned during the period		$ 51
Interest cost on projected benefit obligation	$ 216	206
Defined Benefit Plan Net Periodic Benefit Cost Credit Interest Cost Statement Of Income Or Comprehensive Income Extensible List Not Disclosed Flag	Interest cost
Actual return on assets	$ (336)	(394)
Net amortization and deferral	$ (53)	(34)
Defined Benefit Plan Net Periodic Benefit Cost Credit Amortization Of Prior Service Cost Credit Statement Of Income Or Comprehensive Income Extensible List Not Disclosed Flag	Net amortization and deferral
Net periodic pension cost	$ (173)	(171)
Other Postretirement Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Net periodic pension cost	$ 11	$ 17

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Employee Benefit Plans (Schedule of Weighted Average Assumptions Used to Determine the Benefit Obligation And the Net Periodic Cost) (Details)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Pension Plans And Other Postretirement Benefits [Abstract]
Discount rate, benefit obligation	5.44%	2.93%
Discount rate, net periodic pension cost	5.44%	2.63%
Expected long-term return on plan assets	6.00%	5.25%

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Employee Benefit Plans (Schedule Of Target Asset Allocations) (Details)	Dec. 31, 2022	Dec. 31, 2021
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	100.00%	100.00%
Cash And Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	16.60%
Domestic equities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	25.10%	35.70%
Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	21.70%	35.00%
Other Investments [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Plan Asset Allocations	36.60%	29.30%

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Employee Benefit Plans (Schedule of Changes in Level 3 Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Employee Benefit Plans [Abstract]
Balance	$ 7,691	$ 7,744
Balance	$ 5,205	$ 7,691

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Income Taxes (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($)
Operating Loss Carryforwards [Line Items]
Net operating loss carryforward	$ 3,535
Net operating loss carryforward, expiration date	Dec. 31, 2037
Earliest Tax Year [Member]
Operating Loss Carryforwards [Line Items]
Open Tax Year	2019

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Income Taxes (Schedule of Components of the Provision for Federal Income Taxes) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Income Taxes [Abstract]
Current	$ 6,733	$ 6,328
Deferred	419	(383)
Income Tax Expense (Benefit), Total	$ 7,152	$ 5,945

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Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Income Taxes [Abstract]
Tax at statutory rates	21.00%	21.00%
Tax exempt interest income, net of interest expense disallowance	(1.60%)	(1.90%)
Earnings and proceeds on life insurance	(0.60%)	(0.60%)
Other	0.90%	0.80%
Effective Income Tax Rate, Continuing Operations, Total	19.70%	19.30%

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Income Taxes (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Income Taxes [Abstract]
Deferred tax assets, Allowance for loan losses	$ 3,985	$ 3,855
Deferred tax assets, Deferred compensation	834	817
Deferred tax assets, Core deposit intangible	204	231
Deferred tax assets, Pension liability	267	302
Deferred tax assets, Foreclosed real estate valuation allowance	19	19
Deferred tax assets, Net operating loss carryforward	829	913
Deferred Tax Assets, Purchase price adjustment	1,779	2,487
Deferred tax assets, Net unrealized loss on securities	15,399	386
Deferred tax assets, Other	2,838	1,228
Total Deferred Tax Assets	26,154	10,238
Deferred tax liabilities, Premises and equipment	1,085	1,004
Deferred tax liabilities, Deferred loan fees	1,366	125
Deferred tax liabilities, Net unrealized gain on pension liability	154	318
Total Deferred Tax Liabilities	2,605	1,447
Net Deferred Tax Asset	$ 23,549	$ 8,791

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Regulatory Matters and Stockholders' Equity (Narrative) (Details) $ in Millions	12 Months Ended
	Dec. 31, 2022 USD ($)	Dec. 31, 2021
Regulatory Matters and Stockholders' Equity [Abstract]
Tier 1 capital (to risk-weighted assets) For Capital Adequacy Purposes, Ratio	0.0600	0.0600
Common Equity Tier 1 capital (to risk-weighted assets) For Capital Adequacy Purposes, Ratio	0.0450	0.0450
Tier 1 capital (to average assets) For Capital Adequacy Purposes, Ratio	0.0400	0.0400
Statutory Accounting Practices, Statutory Amount Available for Dividend Payments without Regulatory Approval	$ 52.7
Risk weight assigned to exposures	150.00%
Capital conservation buffer	2.50%

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Regulatory Matters and Stockholders' Equity (Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations) (Details) $ in Thousands	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Regulatory Matters and Stockholders' Equity [Abstract]
Total capital (to risk-weighted assets), Amount	$ 211,055	$ 191,469
Total capital (to risk-weighted assets) For Capital Adequacy Purposes, Amount	124,303	112,117
Total capital (to risk-weighted assets) To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 155,379	$ 140,146
Total capital (to risk-weighted assets), Ratio	0.1358	0.1366
Total capital (to risk-weighted assets) For Capital Adequacy Purposes, Ratio	0.0800	0.0800
Total capital (to risk-weighted assets) To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	0.1000	0.1000
Tier 1 capital (to risk-weighted assets), Amount	$ 194,124	$ 175,027
Tier 1 capital (to risk-weighted assets) For Capital Adequacy Purposes, Amount	93,228	84,087
Tier 1 capital (to risk-weighted assets) To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 124,303	$ 112,117
Tier 1 capital (to risk-weighted assets), Ratio	0.1249	0.1249
Tier 1 capital (to risk-weighted assets) For Capital Adequacy Purposes, Ratio	0.0600	0.0600
Tier 1 capital (to risk-weighted assets) To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	0.0800	0.0800
Common Equity Tier 1 capital (to risk-weighted assets), amount	$ 194,124	$ 175,027
Common Equity Tier 1 capital (to risk-weighted assets), for Capital Adequacy Purposes, amount	69,921	63,066
Common Equity Tier 1 capital (to risk-weighted assets) to be Well Capitalized under Prompt Corrective Action Provision, amount	$ 100,997	$ 91,095
Common Equity Tier 1 capital (to risk-weighted assets), Ratio	0.1249	0.1249
Common Equity Tier 1 capital (to risk-weighted assets) For Capital Adequacy Purposes, Ratio	0.0450	0.0450
Common Equity Tier 1 capital (to risk-weighted assets) to be Well Capitalized under Prompt Corrective Action Provision	0.0650	0.0650
Tier 1 capital (to average assets), Amount	$ 194,124	$ 175,027
Tier 1 capital (to average assets) For Capital Adequacy Purposes, Amount	82,934	82,243
Tier 1 capital (to average assets) To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 103,668	$ 102,804
Tier 1 capital (to average assets), Ratio	0.0936	0.0851
Tier 1 capital (to average assets) For Capital Adequacy Purposes, Ratio	0.0400	0.0400
Tier 1 capital (to average assets) To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	0.0500	0.0500

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Stock Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Apr. 22, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, min	$ 17.93
Exercise price, max	$ 36.02
Allocated Share-based Compensation Expense	$ 269	$ 214
Future compensation expense of non-vested restricted stock outstanding	1,294	953
Unrecognized Salaries And Employee Benefits Expense	$ 382	$ 269
Options, Granted	38,000	43,500
Compensation expense related to stock options	$ 269	$ 214
Share price	$ 33.44	$ 25.99
Options, Exercised in Period	34,425	22,420
Remaining Life, Years	6 years 9 months 18 days
Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Exercised in Period	1,650
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 372	$ 335
Non-vested stock outstanding	44,460	32,030	39,135
Officer [Member] | Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares increased (decreased)	60,000
Officer [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares increased (decreased)	40,000
Director [Member] | Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares increased (decreased)	40,000
Director [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares increased (decreased)	30,000
Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Exercised in Period	1,650	22,420
Norwood Financial Corp 2014 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				375,000
Shares available for awards	117,035
Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				63,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for awards	71,010
Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Officer [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for awards	28,575
Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Outside Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				60,000
Shares available for awards	46,025
Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Outside Directors [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				12,000
Shares available for awards	18,725
Amended Norwood Financial Corp 2014 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options and restricted stock, granted	357,966
Amended Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Officer [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	62,700
Options and restricted stock, granted	74,125
Shares increased (decreased)	(300)
Amended Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Outside Directors [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	32,300
Options and restricted stock, granted	43,575
Shares increased (decreased)	20,300
Amended Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options and restricted stock, granted			229,866
Amended Norwood Financial Corp 2014 Equity Incentive Plan [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options and restricted stock, granted			10,400

XML

Stock Based Compensation (Summary of Stock Option Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Stock Based Compensation [Abstract]
Options, beginning of year	226,075	215,970
Options, Granted	38,000	43,500
Options, Exercised	(34,425)	(22,420)
Options, Forfeited	(10,675)	(10,975)
Options, end of year	218,975	226,075
Options, Exercisable, end of period	180,975	182,575
Weighted Average Exercise Price Per Share, Outstanding, beginning of period	$ 26.37	$ 25.73
Weighted Average Exercise Price Per Share, Granted	33.53	25.80
Weighted Average Exercise Price Per Share, Exercised	19.08	17.59
Weighted Average Exercise Price Per Share, Forfeited	27.56	29.48
Weighted Average Exercise Price Per Share, Outstanding, end of period	26.70	26.37
Weighted Average Exercise Price Per Share, Exercisable, end of period	$ 27.68	$ 26.50
Weighted Average Remaining Contractual Term, Outstanding	6 years 9 months 18 days
Aggregate Intrinsic Value, Outstanding, beginning of period	$ 520
Aggregate Intrinsic Value, Outstanding, end of period	1,100	$ 520
Aggregate Intrinsic Value, Exercisable at end of period	$ 1,100	$ 511

XML

Stock Based Compensation (Schedule of Fair Value Assumptions) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Stock Based Compensation [Abstract]
Dividend yield	3.57%	3.55%
Expected life	10 years	10 years
Expected volatility	35.01%	34.69%
Risk-free interest rate	3.87%	1.51%
Weighted average fair value of options granted	$ 10.06	$ 6.49

XML

Stock Based Compensation (Schedule of Outstanding Stock Options) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	218,975	226,075	215,970
Average Exercise Price	$ 26.70	$ 26.37	$ 25.73
Remaining Life, Years	6 years 9 months 18 days
Options Exercisable	180,975	182,575
Average Exercise Price	$ 27.68	$ 26.50
Average Exercise Price 1 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	11,125
Average Exercise Price	$ 17.93
Remaining Life, Years	1 year
Options Exercisable	11,125
Average Exercise Price	$ 17.93
Average Exercise Price 2 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	8,250
Average Exercise Price	$ 19.39
Remaining Life, Years	1 year 10 months 24 days
Options Exercisable	8,250
Average Exercise Price	$ 19.39
Average Exercise Price 3 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	9,375
Average Exercise Price	$ 19.03
Remaining Life, Years	2 years 10 months 24 days
Options Exercisable	9,375
Average Exercise Price	$ 19.03
Average Exercise Price 4 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	12,125
Average Exercise Price	$ 22.37
Remaining Life, Years	4 years
Options Exercisable	12,125
Average Exercise Price	$ 22.37
Average Exercise Price 5 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	25,250
Average Exercise Price	$ 32.81
Remaining Life, Years	5 years
Options Exercisable	25,250
Average Exercise Price	$ 32.81
Average Exercise Price 6 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	22,100
Average Exercise Price	$ 32.34
Remaining Life, Years	6 years
Options Exercisable	22,100
Average Exercise Price	$ 32.34
Average Exercise Price 7 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	22,500
Average Exercise Price	$ 36.02
Remaining Life, Years	7 years
Options Exercisable	22,500
Average Exercise Price	$ 36.02
Average Exercise Price 8 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	30,750
Average Exercise Price	$ 26.93
Remaining Life, Years	8 years
Options Exercisable	30,750
Average Exercise Price	$ 26.93
Average Exercise Price 9 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	1,000
Average Exercise Price	$ 26.35
Remaining Life, Years	8 years 3 months 18 days
Options Exercisable	1,000
Average Exercise Price	$ 26.35
Average Exercise Price 10 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	1,000
Average Exercise Price	$ 25.38
Remaining Life, Years	8 years 6 months
Options Exercisable	1,000
Average Exercise Price	$ 25.38
Average Exercise Price 11 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	37,500
Average Exercise Price	$ 25.80
Remaining Life, Years	9 years
Options Exercisable	37,500
Average Exercise Price	$ 25.80
Average Exercise Price 12 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding	38,000
Average Exercise Price	$ 33.53
Remaining Life, Years	10 years

XML

Stock Based Compensation (Summary of Restricted Stock Activity) (Details) - Restricted Stock [Member] - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock Non-vested, beginning balance	32,030	39,135
Restricted stock, granted	23,000	8,000
Restricted stock, vested	(10,570)	(11,205)
Restricted stock, forfeited		(3,900)
Restricted stock Non-vested, ending balance	44,460	32,030
Restricted stock Non-vested, weighted-average grant date fair value, beginning balance	$ 26.76	$ 30.72
Restricted stock, granted, weighted-average grant date fair value	30.25	25.80
Restricted stock, vested, weighted-average grant date fair value	30.89	32.15
Restricted stock, forfeited, weighted-average grant date fair value		31.72
Restricted stock Non-vested, weighted-average grant date fair value, ending balance	$ 30.12	$ 26.76

XML

Earnings Per Share (Narrative) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	60,500	109,100
Share price	$ 33.44	$ 25.99

XML

Earnings Per Share (Computations of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Earnings Per Share [Abstract]
Numerator, net income	$ 29,233	$ 24,915
Weighted Average Number of Shares Outstanding, Basic [Abstract]
Weighted average shares outstanding	8,174	8,213
Less: Weighted average unvested restricted shares	(37)	(35)
Basic EPS weighted average shares outstanding	8,137	8,178
Weighted Average Number of Shares Outstanding, Diluted [Abstract]
Basic EPS weighted average shares outstanding	8,137	8,178
Add: Dilutive effect of stock options and restricted shares	40	21
Diluted EPS weighted average shares outstanding	8,177	8,199
Earnings Per Share, Basic	$ 3.59	$ 3.05
Earnings Per Share, Diluted	$ 3.58	$ 3.04

XML

Off-Balance Sheet Financial Instruments (Schedule of Fair Value, Off-balance Sheet Risks) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Loss Contingencies [Line Items]
Financial instrument commitments	$ 255,314	$ 244,357
Commitments to Grant Loans [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	90,379	78,996
Unfunded Commitments Under Lines of Credit [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	149,883	156,899
Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	$ 15,052	$ 8,462

XML

Interest Rate Swaps (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Effect on earnings	$ 0
Derivative Asset, Statement of Financial Position [Extensible Enumeration]	Prepaid Expense and Other Assets	Prepaid Expense and Other Assets
Interest Rate Contract [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Pledged cash as collateral	$ 350,000
Derivative Asset	$ 1,464,000	$ 235,000

XML

Interest Rate Swaps (Summary of Derivatives) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Customer Interest Rate Swap [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	$ 10,810	$ 11,426
Fair Value	1,464	235
Customer Interest Rate Swap [Member] | London Interbank Offered Rate (LIBOR) Swap Rate [Member] | Maturing November, 2030 [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	6,513	6,873
Fair Value	889	144
Customer Interest Rate Swap [Member] | London Interbank Offered Rate (LIBOR) Swap Rate [Member] | Maturing December, 2030 [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	4,297	4,553
Fair Value	575	91
Third Party Interest Rate Swap [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	10,810	11,426
Fair Value	1,464	235
Third Party Interest Rate Swap [Member] | London Interbank Offered Rate (LIBOR) Swap Rate [Member] | Maturing November, 2030 [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	6,513	6,873
Fair Value	889	144
Third Party Interest Rate Swap [Member] | London Interbank Offered Rate (LIBOR) Swap Rate [Member] | Maturing December, 2030 [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	4,297	4,553
Fair Value	$ 575	$ 91

XML

Interest Rate Swaps (Fair Value of Derivative Instruments) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative Asset, Statement of Financial Position [Extensible Enumeration]	Prepaid Expense and Other Assets	Prepaid Expense and Other Assets
Derivative Liability, Statement of Financial Position [Extensible Enumeration]	Other liabilities	Other liabilities
Interest Rate Contract [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Assets	$ 1,464	$ 235
Liabilities	$ 1,464	$ 235

XML

Fair Values of Financial Instruments (Narrative) (Details)	12 Months Ended
	Dec. 31, 2022 USD ($) loan	Dec. 31, 2021 USD ($) loan
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 413,000	$ 1,402,000
Impaired Financing Receivable, Recorded Investment	463,000	1,674,000
Impaired Financing Receivable, Related Allowance	$ 50,000	$ 272,000
Number of impaired loans not requiring a valuation allowance | loan	2	3
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 413,000	$ 157,000
Impaired Financing Receivable, with Related Allowance, Recorded Investment	50,000	1,517,000
Impaired Loans, Cumulative Charge-Offs	$ 0	0
Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of loans with related allowance | loan	1
Impaired Financing Receivable, with Related Allowance, Recorded Investment	$ 50,000	$ 1,517,000
Number of impaired loans, with related allowance | loan		1
Valuation allowance	50,000	$ 272,000
Impaired Loans, Cumulative Charge-Offs	$ 0	$ 0

XML

Fair Values of Financial Instruments (Fair Value, Assets Measured on Recurring Basis) (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
U.S. Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	$ 41,854	$ 19,351
U.S. Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
U.S. Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	41,854	19,351
U.S. Treasury Securities [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	18,323	16,011
U.S. Government Agencies [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
U.S. Government Agencies [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	18,323	16,011
U.S. Government Agencies [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
States And Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	127,852	145,867
States And Political Subdivisions [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
States And Political Subdivisions [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	127,852	145,867
States And Political Subdivisions [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
Mortgage-backed Securities-Government Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	230,898	225,553
Mortgage-backed Securities-Government Sponsored Entities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
Mortgage-backed Securities-Government Sponsored Entities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	230,898	225,553
Mortgage-backed Securities-Government Sponsored Entities [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
Interest Rate Derivatives [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	1,464	235
LIABILITIES	1,464	235
Interest Rate Derivatives [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
LIABILITIES
Interest Rate Derivatives [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	1,464	235
LIABILITIES	1,464	235
Interest Rate Derivatives [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS
LIABILITIES

XML

Fair Values of Financial Instruments (Fair Value, Assets and Liabilities Measured on Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 413	$ 1,402
Fair Value, Nonrecurring [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	413	1,402
Fair Value, Nonrecurring [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure
Fair Value, Nonrecurring [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure
Fair Value, Nonrecurring [Member] | Impaired Loans [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	413	1,402
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	346	1,742
Fair Value, Nonrecurring [Member] | Foreclosed Real Estate Owned [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure
Fair Value, Nonrecurring [Member] | Foreclosed Real Estate Owned [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure
Fair Value, Nonrecurring [Member] | Foreclosed Real Estate Owned [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 346	$ 1,742

XML

Fair Values of Financial Instruments (Additional Qualitative Information about Level 3 Assets) (Details) $ in Thousands	Dec. 31, 2022 USD ($) item	Dec. 31, 2021 USD ($) item
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure | $	$ 413	$ 1,402
Impaired Loans [Member] | Appraisal of collateral [Member] | Measurement Input, Appraised Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure | $	$ 413	$ 1,402
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	0
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	0.100	0.100
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	0.0892	0.0112
Foreclosed Real Estate Owned [Member] | Appraisal of collateral [Member] | Measurement Input, Liquidation Expenses [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure | $	$ 346	$ 1,742
Servicing Asset, Measurement Input	0.0700	0.0700
Foreclosed Real Estate Owned [Member] | Weighted Average [Member] | Appraisal of collateral [Member] | Measurement Input, Liquidation Expenses [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Servicing Asset, Measurement Input	0.0700	0.0700

XML

Fair Values of Financial Instruments (Fair Value, by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Cash and cash equivalents, Fair Value Disclosure	$ 31,866	$ 206,681
Financial assets: Loans receivable, net, Fair Value Disclosure	1,418,300	1,389,870
Financial assets: Mortgage servicing rights, Fair Value Disclosure	498	500
Financial assets: Regulatory stock, Fair Value Disclosure	5,418	3,927
Financial assets: Bank owned life insurance, Fair Value Disclosure	43,364	40,038
Financial assets: Accrued interest receivable, Fair Value Disclosure	6,917	5,889
Financial liabilities: Deposits, Fair Value Disclosure	1,727,184	1,759,722
Financial liabilities: Short-term borrowings, Fair Value Disclosure	93,215	60,822
Financial liabilities: Other borrowings, Fair Value Disclosure	40,074	30,221
Financial liabilities: Accrued interest payable, Fair Value Disclosure	2,653	1,203
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit, Fair Value Disclosure
Financial assets: Cash and cash equivalents	31,866	206,681	$ 111,693
Financial assets: Loans receivable, net	1,456,946	1,338,489
Financial assets: Mortgage servicing rights	213	289
Financial assets: Regulatory stock	5,418	3,927
Financial assets: Bank owned life insurance	43,364	40,038
Financial assets: Accrued interest receivable	6,917	5,889
Financial liabilities: Deposits	1,727,727	1,756,793
Financial liabilities: Short-term borrowings	93,215	60,822
Financial liabilities: Other borrowings	40,000	29,998
Financial liabilities: Accrued interest payable	2,653	1,203
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit
Fair Value, Inputs, 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	31,866	206,681
Financial assets: Loans receivable, net, Fair Value Disclosure
Financial assets: Mortgage servicing rights, Fair Value Disclosure
Financial assets: Regulatory stock, Fair Value Disclosure	5,418	3,927
Financial assets: Bank owned life insurance, Fair Value Disclosure	43,364	40,038
Financial assets: Accrued interest receivable, Fair Value Disclosure	6,917	5,889
Financial liabilities: Deposits, Fair Value Disclosure	1,223,958	1,228,091
Financial liabilities: Short-term borrowings, Fair Value Disclosure	93,215	60,822
Financial liabilities: Other borrowings, Fair Value Disclosure
Financial liabilities: Accrued interest payable, Fair Value Disclosure	2,653	1,203
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit, Fair Value Disclosure
Fair Value, 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
Financial assets: Loans receivable, net, Fair Value Disclosure
Financial assets: Mortgage servicing rights, Fair Value Disclosure
Financial assets: Regulatory stock, Fair Value Disclosure
Financial assets: Bank owned life insurance, Fair Value Disclosure
Financial assets: Accrued interest receivable, Fair Value Disclosure
Financial liabilities: Deposits, Fair Value Disclosure
Financial liabilities: Short-term borrowings, Fair Value Disclosure
Financial liabilities: Other borrowings, Fair Value Disclosure
Financial liabilities: Accrued interest payable, Fair Value Disclosure
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit, Fair Value Disclosure
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
Financial assets: Loans receivable, net, Fair Value Disclosure	1,418,300	1,389,870
Financial assets: Mortgage servicing rights, Fair Value Disclosure	498	500
Financial assets: Regulatory stock, Fair Value Disclosure
Financial assets: Bank owned life insurance, Fair Value Disclosure
Financial assets: Accrued interest receivable, Fair Value Disclosure
Financial liabilities: Deposits, Fair Value Disclosure	503,226	531,631
Financial liabilities: Short-term borrowings, Fair Value Disclosure
Financial liabilities: Other borrowings, Fair Value Disclosure	40,074	30,221
Financial liabilities: Accrued interest payable, Fair Value Disclosure
Off-balance sheet financial instruments: Commitments to extend credit and outstanding letters of credit, Fair Value Disclosure

XML

Accumulated Other Comprehensive Income (Summary Of Changes In Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (256)
Other comprehensive loss	(57,097)	$ (5,375)
Ending balance	(57,353)	(256)
Unrealized gains and losses on available-for-sale securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(1,453)	4,096
Other comprehensive income (loss) before reclassification	(56,476)	(5,476)
Amount reclassified from accumulated other comprehensive (income) loss	(2)	(73)
Other comprehensive loss	(56,478)	(5,549)
Ending balance	(57,931)	(1,453)
Unrealized gain (loss) on pension liability [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	1,197	1,023
Other comprehensive income (loss) before reclassification	(619)	174
Other comprehensive loss	(619)	174
Ending balance	578	1,197
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(256)	5,119
Other comprehensive income (loss) before reclassification	(57,095)	(5,302)
Amount reclassified from accumulated other comprehensive (income) loss	(2)	(73)
Other comprehensive loss	(57,097)	(5,375)
Ending balance	$ (57,353)	$ (256)

XML

Accumulated Other Comprehensive Income (Significant Amounts Reclassified Out Of Each Component Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of securities	$ 3	$ 92
Income tax expense	(7,152)	(5,945)
Net income	29,233	24,915
Amount Reclassified From Accumulated Other Comprehensive Income (Loss) [Member] | Unrealized gains and losses on available-for-sale securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of securities	3	92
Income tax expense	(1)	(19)
Net income	$ 2	$ 73

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Norwood Financial Corp (Parent Company Only) Financial Information (Balance Sheets) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Condensed Financial Statements, Captions [Line Items]
Cash on deposit in bank subsidiary	$ 28,847	$ 21,073
Securities available for sale	418,927	406,782
Other assets	12,241	9,203
Total Assets	2,047,070	2,068,504
Liabilities	1,879,985	1,863,242
Stockholders’ equity	167,085	205,262	$ 194,785
Total Liabilities and Stockholders' Equity	2,047,070	2,068,504
Parent Company [Member]
Condensed Financial Statements, Captions [Line Items]
Cash on deposit in bank subsidiary	3,938	1,511
Investment in bank subsidiary	164,248	204,547
Other assets	2,365	2,472
Total Assets	170,551	208,530
Liabilities	3,466	3,268
Stockholders’ equity	167,085	205,262
Total Liabilities and Stockholders' Equity	$ 170,551	$ 208,530

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Norwood Financial Corp (Parent Company Only) Financial Information (Statements of Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Condensed Financial Statements, Captions [Line Items]
Income before Income Taxes	$ 36,385	$ 30,860
Income tax expense	7,152	5,945
Net income	29,233	24,915
COMPREHENSIVE (LOSS) INCOME	(27,864)	19,540
Parent Company [Member]
Condensed Financial Statements, Captions [Line Items]
Dividends from bank subsidiary	13,228	10,697
Expenses	743	627
Income before Income Taxes	12,485	10,070
Income tax expense	(219)	(171)
Income before equity in undistributed earnings	12,704	10,241
Equity in undistributed earnings of subsidiary	16,529	14,674
Net income	29,233	24,915
COMPREHENSIVE (LOSS) INCOME	$ (27,864)	$ 19,540

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Norwood Financial Corp (Parent Company Only) Financial Information (Statements of Cash Flows) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Condensed Financial Statements, Captions [Line Items]
Net Income	$ 29,233	$ 24,915
Net realized gain on sales of securities	(3)	(92)
Other, net	(2,069)	1,261
Net cash provided by operating activities	30,734	29,198
Proceeds from sales of securities	5,113	11,366
Net cash used in investing activities	(207,994)	(130,964)
Stock options exercised	657	394
Sale of treasury stock for ESOP	132	130
Acquisition of treasury stock	(2,515)	(1,440)
Cash dividends paid	(9,158)	(8,539)
Net Cash Provided by Financing Activities	2,445	196,754
Net Increase (Decrease) in Cash and Cash Equivalents	(174,815)	94,988
CASH AND CASH EQUIVALENTS - BEGINNING	206,681	111,693
CASH AND CASH EQUIVALENTS - END	31,866	206,681
Parent Company [Member]
Condensed Financial Statements, Captions [Line Items]
Net Income	29,233	24,915
Undistributed earnings of bank subsidiary	(16,529)	(14,674)
Other, net	607	(129)
Net cash provided by operating activities	13,311	10,112
Stock options exercised	657	394
Sale of treasury stock for ESOP	132	130
Acquisition of treasury stock	(2,515)	(1,440)
Cash dividends paid	(9,158)	(8,539)
Net Cash Provided by Financing Activities	(10,884)	(9,455)
Net Increase (Decrease) in Cash and Cash Equivalents	2,427	657
CASH AND CASH EQUIVALENTS - BEGINNING	1,511	854
CASH AND CASH EQUIVALENTS - END	$ 3,938	$ 1,511