10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2023

OR

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

For the transition period from __________ to __________

Commission file number 0-28364

Norwood Financial Corp

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2828306
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)
717 Main Street, Honesdale, Pennsylvania	18431
(Address of principal executive offices)	(Zip Code)

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

N/A

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

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

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

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

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

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

Class	Outstanding as of August 1, 2023
Common stock, par value $0.10 per share	8,069,350

NORWOOD FINANCIAL CORP

FORM 10-Q

FOR THE QUARTER ENDED June 30, 2023

		Page Number
PART I -	CONSOLIDATED FINANCIAL INFORMATION OF NORWOOD FINANCIAL CORP	3
Item 1.	Financial Statements (unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	49
PART II -	OTHER INFORMATION	50
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
Signatures		52

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2

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

NORWOOD FINANCIAL CORP

Consolidated Balance Sheets (unaudited)

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

	June 30,		December 31,
	2023		2022
ASSETS
Cash and due from banks	$	30,053	$	28,847
Interest-bearing deposits with banks		3,036		3,019
Cash and cash equivalents		33,089		31,866
Securities available for sale, at fair value (net of allowance for credit losses of $0)		403,621		418,927
Loans receivable, net of allowance for credit losses of $17,483 and $16,999)		1,560,216		1,456,946
Regulatory stock, at cost		7,924		5,418
Bank premises and equipment, net		17,363		17,924
Bank owned life insurance		45,806		43,364
Accrued interest receivable		7,276		6,917
Foreclosed real estate owned		387		346
Deferred tax assets, net		23,301		23,549
Goodwill		29,266		29,266
Other intangibles		260		306
Other assets		13,256		12,241
TOTAL ASSETS	$	2,141,765	$	2,047,070
LIABILITIES
Deposits:
Non-interest bearing demand	$	425,757	$	434,529
Interest-bearing		1,306,240		1,293,198
Total deposits		1,731,997		1,727,727
Short-term borrowings		112,290		93,215
Other borrowings		99,687		40,000
Accrued interest payable		7,101		2,653
Other liabilities		17,266		16,390
TOTAL LIABILITIES		1,968,341		1,879,985
STOCKHOLDERS’ EQUITY
Preferred stock, no par value per share,
authorized: 5,000,000 shares; issued: none		—		—
Common stock, $0.10 par value per share,
authorized: 20,000,000 shares,
issued: 2023: 8,291,401 shares, 2022: 8,291,401 shares		829		829
Surplus		97,268		96,897
Retained earnings		135,583		130,020
Treasury stock at cost: 2023: 223,926 shares; 2022: 124,650 shares		(6,007)		(3,308)
Accumulated other comprehensive loss		(54,249)		(57,353)
TOTAL STOCKHOLDERS’ EQUITY		173,424		167,085
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,141,765	$	2,047,070

See accompanying notes to the unaudited consolidated financial statements. 
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3

NORWOOD FINANCIAL CORP

Consolidated Statements of Income (unaudited)

(dollars in thousan ds, except per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
INTEREST INCOME
Loans receivable, including fees	$	20,702	$	15,714	$	39,860	$	31,089
Securities		2,481		2,197		4,986		4,091
Other		53		182		101		260
Total interest income		23,236		18,093		44,947		35,440
INTEREST EXPENSE
Deposits		5,740		1,083		10,102		2,142
Short-term borrowings		797		60		1,576		108
Other borrowings		1,057		56		1,534		195
Total interest expense		7,594		1,199		13,212		2,445
NET INTEREST INCOME		15,642		16,894		31,735		32,995
(RELEASE OF) PROVISION FOR
CREDIT LOSS EXPENSE		(1,750)		300		(1,450)		600
NET INTEREST INCOME AFTER
(RELEASE OF) PROVISION FOR CREDIT LOSSES		17,392		16,594		33,185		32,395
OTHER INCOME
Service charges and fees		1,353		1,475		2,665		2,946
Income from fiduciary activities		229		214		441		416
Net realized (losses) gains on sales of securities		(212)		—		(209)		—
Gains on sales of loans, net		10		—		10		—
Gain on sales of foreclosed real estate owned		—		—		—		427
Earnings and proceeds on bank owned life insurance		229		449		442		625
Other		174		351		346		1,414
Total other income		1,783		2,489		3,695		5,828
OTHER EXPENSES
Salaries and employee benefits		5,842		5,840		11,810		11,271
Occupancy, furniture & equipment, net		1,314		1,206		2,576		2,513
Data processing and related operations		822		666		1,590		1,295
Taxes, other than income		162		240		323		533
Professional fees		323		406		608		981
Federal Deposit Insurance Corporation insurance		244		142		445		326
Foreclosed real estate		74		10		103		63
Amortization of intangibles		23		27		46		54
Other		2,134		1,935		3,873		3,594
Total other expenses		10,938		10,472		21,374		20,630
INCOME BEFORE INCOME TAXES		8,237		8,611		15,506		17,593
INCOME TAX EXPENSE		1,734		1,756		3,221		3,610
NET INCOME	$	6,503	$	6,855	$	12,285	$	13,983
BASIC EARNINGS PER SHARE	$	0.81	$	0.84	$	1.52	$	1.71
DILUTED EARNINGS PER SHARE	$	0.81	$	0.84	$	1.51	$	1.71

See accompanying notes to the unaudited consolidated financial statements.

 
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4

NORWOOD FINANCIAL CORP

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(dollars in thousands)

	Three Months Ended
	June 30,
	2023		2022
Net income	$	6,503	$	6,855
Other comprehensive income (loss)
Investment securities available for sale:
Unrealized holding gains (losses)		(5,636)		(20,893)
Tax effect		1,183		4,388
Reclassification of investment securities losses
recognized in net income		212		—
Tax effect		(45)		—
Other comprehensive income (loss)		(4,286)		(16,505)
Comprehensive Income (Loss)	$	2,217	$	(9,650)

	Six Months Ended
	June 30,
	2023		2022
Net income	$	12,285	$	13,983
Other comprehensive (loss) income
Investment securities available for sale:
Unrealized holding (loss) gain		3,719		(50,602)
Tax effect		(780)		10,628
Reclassification of investment securities gains
recognized in net income		209		—
Tax effect		(44)		—
Other comprehensive (loss)		3,104		(39,974)
Comprehensive (Loss) Income	$	15,389	$	(25,991)

See accompanying notes to the unaudited consolidated financial statements.

 
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5

NORWOOD FINANCIAL CORP

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Six Months Ended June 30, 2023 and 2022

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

													Accumulated
													Other
	Common Stock						Retained		Treasury Stock				Comprehensive
	Shares		Amount		Surplus		Earnings		Shares		Amount		Income (Loss)		Total
Balance, December 31, 2022		8,291,401	$	829	$	96,897	$	130,020		124,650	$	(3,308)	$	(57,353)	$	167,085
Net Income		-		-		-		12,285		-		-		-		12,285
Other comprehensive income		-		-		-		-		-		-		3,104		3,104
Cash dividends declared ($0.58 per share)		-		-		-		(4,711)		-		-		-		(4,711)
Acquisition of treasury stock										113,526		(3,077)				(3,077)
Cumulative effect of adoption of ASU 2016-13		-		-		-		(2,011)		-		-		-		(2,011)
Compensation expense related to restricted stock		-		-		224		-						-		224
Stock options exercised		-		-		(44)		-		(14,250)		378		-		334
Compensation expense related to stock options		-		-		191		-		-		-		-		191
Balance, June 30, 2023		8,291,401	$	829	$	97,268	$	135,583		223,926	$	(6,007)	$	(54,249)	$	173,424
													Accumulated
													Other
	Common Stock						Retained		Treasury Stock				Comprehensive
	Shares		Amount		Surplus		Earnings		Shares		Amount		Income (Loss)		Total
Balance, December 31, 2021		8,266,751	$	827	$	96,443	$	110,015		65,328	$	(1,767)	$	(256)	$	205,262
Net Income		-		-		-		13,983		-		-		-		13,983
Other comprehensive loss		-		-		-		-		-		-		(39,974)		(39,974)
Cash dividends declared ($0.56 per share)		-		-		-		(4,584)		-		-		-		(4,584)
Acquisition of treasury stock		-		-		-		-		47,981		(1,252)		-		(1,252)
Compensation expense related to restricted stock		7,500		1		170		-		-		-		-		171
Stock options exercised		1,650		-		5		-		(3,225)		86		-		91
Compensation expense related to stock options		-		-		134		-		-		-		-		134
Balance, June 30, 2022		8,275,901	$	828	$	96,752	$	119,414		110,084	$	(2,933)	$	(40,230)	$	173,831

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6

NORWOOD FINANCIAL CORP

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Three Months Ended June 30, 2023 and 2022

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

P
													Accumulated
													Other
	Common Stock						Retained		Treasury Stock				Comprehensive
	Shares		Amount		Surplus		Earnings		Shares		Amount		Income (Loss)		Total
Balance, March 31, 2023		8,291,401	$	829	$	97,063	$	131,416		110,400	$	(2,930)	$	(49,963)	$	176,415
Net Income		-		-		-		6,503		-		-		-		6,503
Other comprehensive loss		-		-		-		-		-		-		(4,286)		(4,286)
Cash dividends declared ($0.29 per share)		-		-		-		(2,336)		-		-		-		(2,336)
Acquisition of treasury stock		-		-		-		-		113,526		(3,077)		-		(3,077)
Compensation expense related to restricted stock		-		-		110		-		-		-		-		110
Stock options exercised		-		-		-		-		-		-		-		-
Compensation expense related to stock options		-		-		95		-		-		-		-		95
Balance, June 30, 2023		8,291,401	$	829	$	97,268	$	135,583		223,926	$	(6,007)	$	(54,249)	$	173,424
													Accumulated
													Other
	Common Stock						Retained		Treasury Stock				Comprehensive
	Shares		Amount		Surplus		Earnings		Shares		Amount		Income (Loss)		Total
Balance, March 31, 2022		8,268,401	$	827	$	96,619	$	114,845		65,089	$	(1,760)	$	(23,725)	$	186,806
Net Income		-		-		-		6,855		-		-		-		6,855
Other comprehensive loss		-		-		-		-		-		-		(16,505)		(16,505)
Cash dividends declared ($0.28 per share)		-		-		-		(2,286)		-		-		-		(2,286)
Acquisition of treasury stock										47,470		(1,239)				(1,239)
Compensation expense related to restricted stock		7,500		1		88		-		-		-		-		89
Stock options exercised		-		-		(22)				(2,475)		66				44
Compensation expense related to stock options		-		-		67		-		-		-		-		67
Balance, June 30, 2022		8,275,901	$	828	$	96,752	$	119,414		110,084	$	(2,933)	$	(40,230)	$	173,831

See accompanying notes to the unaudited consolidated financial statements.
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7

NORWOOD FINANCIAL CORP

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)
	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	12,285	$	13,983
Adjustments to reconcile net income to net cash provided by operating activities:
(Release of) Provision for credit losses		(1,450)		600
Depreciation		706		746
Amortization of intangible assets		46		54
Deferred income taxes		(577)		283
Net amortization of securities premiums and discounts		457		747
Net realized gain on sales of securities		209		—
Earnings and proceeds on life insurance policies		(442)		(625)
Gain on sales and write-downs of fixed assets and foreclosed real estate owned, net		177		(379)
Net amortization of loan fees		272		(340)
Net gain on sale of loans		(10)		—
Mortgage loans originated for sale		1,234		—
Proceeds from sale of loans originated for sale		(1,224)		—
Compensation expense related to stock options		191		134
Compensation expense related to restricted stock		224		171
Increase in accrued interest receivable		(359)		(196)
Increase (decrease) in accrued interest payable		4,448		(65)
Other, net		38		351
Net cash provided by operating activities		16,225		15,464
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales		3,345		—
Proceeds from maturities and principal reductions on mortgage-backed securities		15,223		23,754
Purchases		—		(109,196)
Purchase of regulatory stock		(11,168)		(528)
Redemption of regulatory stock		8,662		2,059
Net increase in loans		(104,543)		(48,651)
Proceeds of bank-owned life insurance		—		496
Purchase of bank-owned life insurance		(2,000)		(3,000)
Purchase of premises and equipment		(268)		(537)
Proceeds from sales of foreclosed real estate owned		195		1,823
Net cash used in investing activities		(90,554)		(133,780)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		4,270		43,037
Net increase in short-term borrowings		19,075		9,605
Repayments of other borrowings		(20,313)		(25,586)
Proceeds from other borrowings		80,000		—
Stock options exercised		334		91
Purchase of treasury stock		(3,077)		(1,252)
Cash dividends paid		(4,737)		(4,594)
Net cash provided by financing activities		75,552		21,301
Increase (decrease) in cash and cash equivalents		1,223		(97,015)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		31,866		206,681
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	33,089	$	109,666

 
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8

NORWOOD FINANCIAL CORP

Consolidated Statements of Cash Flows (Unaudited) (continued)

(dollars in thousands)
	Six Months Ended June 30,
	2023		2022
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest on deposits and borrowings	$	8,764	$	2,510
Income taxes paid, net of refunds	$	3,502	$	4,147
Supplemental Schedule of Noncash Investing Activities:
Transfers of loans to foreclosed real estate and repossession of other assets	$	988	$	161
Dividends payable	$	2,340	$	2,286

See accompanying notes to the unaudited consolidated financial statements.

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9

Notes to the Unaudited Consolidated Financial Statements

1.           Basis of Presentation

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

The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles for interim financial statements and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. The financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the consolidated financial position and results of operations of the Company. The operating results for the three-month and six-month periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other future interim period.

Accounting Pronouncements Adopted in 2023

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent related updates. This ASU replaces the incurred loss methodology for recognizing credit losses and requires the Company to measure the current expected credit losses (“CECL”) on financial assets measured at amortized cost, including loans, off-balance sheet credit exposures such as unfunded commitments, and other financial instruments. In addition, ASC 326 requires credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down when management does not intend to sell or believes that it is not more likely than not they will be required to sell. This guidance became effective on January 1, 2023 for the Bank. The results reported for periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

The Bank adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans, available-for-sale debt securities and unfunded commitments. On January 1, 2023, the Bank recorded a cumulative effect decrease to retained earnings of $1,751,000 related to loans, $260,000 related to unfunded commitments, and $0 related to available-for-sale securities.

The Bank adopted the provisions of ASC 326 related to financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30 using the prospective transition approach. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $250,000 of the allowance for credit losses (“ACL”).

The Bank adopted the provisions of ASC 326 related to presenting other-than-temporary impairment on available-for-sale debt securities prior to January 1, 2023 using the prospective transition approach, though no such charges had been recorded on the securities held by the Bank as of the date of adoption.

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 The impact of the change from the incurred loss model to the current expected credit loss model is detailed below (in thousands).

			January 1, 2023
			Pre-adoption		Adoption Impact		As Reported
Assets
	ACL on debt securities available for sale	$	-	$	-	$	-
	ACL on loans
	Residential real estate		2,833		(1,545)		1,288
	Commercial real estate		8,293		5,527		13,820
	Agricultural		259		(200)		59
	Construction		409		388		797
	Commercial loans		2,445		(1,156)		1,289
	Other agricultural loans		124		3		127
	Consumer		2,636		(551)		2,085
Liabilities
	ACL for unfunded commitments		-		329		329
		$	16,999	$	2,795	$	19,794

Purchased Credit Deteriorated (“PCD”) Loans

The Bank has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. A loan is considered a PCD loan if, at acquisition, it is probable that the Company will be unable to collect all contractually required payments receivable. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through credit loss expense.

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.  Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles.

Historical credit loss experience is the basis for the estimation of expected credit losses. We apply historical loss rates to pools of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on a preferred group of macroeconomic indicators used to create projections of economic conditions, obtained from the St. Louis Federal Reserve

11

economic database. The Company selected nine metrics which was correlated with the bank and its peer group’s historical loss patterns. The adjustments are then weighted for relevance before applying to each pool. Future macroeconomic forecast adjustments are then obtained using and eight-quarter moving average for each metric for the reasonable and supportable period. Each quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on local and current conditions

The Bank has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and therefore, should be individually assessed. We evaluate all commercial loans that meet the following criteria: (1) when it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Specific reserves are established based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition costs when appropriate. A specific reserve is established or a charge-off is taken if the fair value of the loan is less than the loan balance.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Bank estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Bank. The allowance for credit losses on off-balance sheet credit exposures is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Allowance for Credit Losses – Available for Sale Securities

The Bank measures expected credit losses on available-for-sale debt securities when the Bank does not intend to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Bank evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Bank considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Economic forecast data is utilized to calculate the present value of expected cash flows. The Bank obtains its forecast data through a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario, and utilizes a single scenario in the model. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

The allowance for credit losses on available-for-sale debt securities is included within Investment securities available-for-sale on the consolidated balance sheet. Changes in the allowance for credit losses are recorded within Provision for credit losses on the consolidated statement of income. Losses are charged against the allowance when the Bank believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $1,950,000 at June 30, 2023 and is included within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

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2.           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 security gains, loan servicing, gains on the sale of 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 three and six months ended June 30:

	Three months ended
	June 30,
(dollars in thousands)
Noninterest Income	2023		2022
In-scope of Topic 606:
Service charges on deposit accounts	$	110	$	106
ATM fees		106		108
Overdraft fees		342		316
Safe deposit box rental		22		23
Loan related service fees		131		252
Debit card fees		576		627
Fiduciary activities		229		214
Commissions on mutual funds and annuities		36		26
Gains on sales of other real estate owned		—		—
Other income		174		351
Noninterest Income (in-scope of Topic 606)		1,726		2,023
Out-of-scope of Topic 606:
Net realized gains (losses) on sales of securities		(212)		—
Loan servicing fees		30		17
Gains on sales of loans		10		—
Earnings on and proceeds from bank-owned life insurance		229		449
Noninterest Income (out-of-scope of Topic 606)		57		466
Total Noninterest Income	$	1,783	$	2,489

	Six months ended
	June 30,
(dollars in thousands)
Noninterest Income	2023		2022
In-scope of Topic 606:
Service charges on deposit accounts	$	214	$	205
ATM fees		212		213
Overdraft fees		661		604
Safe deposit box rental		48		46
Loan related service fees		284		522
Debit card fees		1,135		1,255
Fiduciary activities		441		416
Commissions on mutual funds and annuities		61		66
Gains on sales of other real estate owned		—		427
Other income		346		1,414
Noninterest Income (in-scope of Topic 606)		3,402		5,168
Out-of-scope of Topic 606:
Net realized gains (losses) on sales of securities		(209)		—
Loan servicing fees		50		35
Gains on sales of loans		10		—
Earnings on and proceeds from bank-owned life insurance		442		625
Noninterest Income (out-of-scope of Topic 606)		293		660
Total Noninterest Income	$	3,695	$	5,828

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3.          Earnings Per Share

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

The following table sets forth the weighted average shares outstanding used in the computations of basic and diluted earnings per share.

(in thousands)	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
Weighted average shares outstanding	8,101	8,192	8,138	8,197
Less: Unvested restricted shares	(42)	(36)	(43)	(34)
Basic EPS weighted average shares outstanding	8,059	8,156	8,095	8,163
Basic EPS weighted average shares outstanding	8,059	8,156	8,095	8,163
Add: Dilutive effect of stock options and restricted shares	16	12	17	12
Diluted EPS weighted average shares outstanding	8,075	8,168	8,112	8,175

For the three and six month periods ended June 30, 2023, there were 110,350 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of the Company’s common stock of $29.53 per share as of June 30, 2023.

For the three and six month periods ended June 30, 2022, there were 151,600 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of Norwood common stock of $24.26 per share as of June 30, 2022.

4.           Stock-Based Compensation

During the six-month period ended June 30, 2023, 2,500 stock options were granted. As of June 30, 2023, there was $191,000 of total unrecognized compensation cost related to non-vested options granted in 2022 and 2023 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2023. Compensation costs related to stock options amounted to $191,000 and $134,000 during the six-month periods ended June 30, 2023 and 2022, respectively.

A summary of the Company’s stock option activity for the six-month period ended June 30, 2023 is as follows:

		Weighted
		Average Exercise		Weighted Average		Aggregate
		Price		Remaining		Intrinsic Value
	Options	Per Share		Contractual Term		($000)
Outstanding at January 1, 2023	218,975	$	28.70	6.8	Yrs.	$	1,100
Granted	2,500		29.60	9.8
Exercised	(14,250)		23.39	5.7
Forfeited	—		-	-
Outstanding at June 30, 2023	207,225	$	29.07	6.4	Yrs.	$	539
Exercisable at June 30, 2023	166,725	$	28.04	5.7	Yrs.	$	539

Intrinsic value represents the amount by which the market price of the stock on the measurement date exceeded the exercise price of the option. The market price was $29.53 per share as of June 30, 2023 and $33.44 per share as of December 31, 2022.

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A summary of the Company’s restricted stock activity for the six-month periods ended June 30, 2023 and 2022 is as follows:

	2023			2022
		Weighted-Average				Weighted-Average
	Number of	Grant Date		Number of	Grant Date
	Restricted Stock	Fair Value		Restricted Stock	Fair Value
Non-vested, January 1,	44,460	$	30.12	32,030	$	26.76
Granted	—		—	7,500		25.71
Vested	(3,000)		25.71	—		—
Forfeited	—		—	—		—
Non-vested, June 30,	41,460	$	30.44	39,530	$	28.99

The expected future compensation expense relating to the 41,460 shares of non-vested restricted stock outstanding as of June 30, 2023 is $1,070,000. This cost will be recognized over the remaining vesting period of 4.5 years. Compensation costs related to restricted stock amounted to $224,000 and $171,000 during the six-month periods ended June 30, 2023 and 2022, respectively.

5.           Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss) (in thousands) by component net of tax for the three and six months ended June 30, 2023 and 2022:

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2022	$	(57,353)
Other comprehensive income before reclassification		2,939
Amount reclassified from accumulated other comprehensive loss		165
Total other comprehensive loss		3,104
Balance as of June 30, 2023	$	(54,249)
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2021	$	(256)
Other comprehensive loss before reclassification		(39,974)
Amount reclassified from accumulated other comprehensive income		-
Total other comprehensive loss		(39,974)
Balance as of June 30, 2022	$	(40,230)

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	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of March 31, 2023	$	(49,963)
Other comprehensive loss before reclassification		(4,453)
Amount reclassified from accumulated other comprehensive loss		167
Total other comprehensive loss		(4,286)
Balance as of June 30, 2023	$	(54,249)
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of March 31, 2022	$	(23,725)
Other comprehensive loss before reclassification		(16,505)
Amount reclassified from accumulated other comprehensive loss		-
Total other comprehensive loss		(16,505)
Balance as of June 30, 2022	$	(40,230)

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

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) (in thousands) for the three and six months ended June 30, 2023 and 2022:

	Amount Reclassified
	From Accumulated
	Other
	Comprehensive
	Income (Loss) (a)				Affected Line Item in
	Three months ended				Consolidated
	June 30,				Statements
Details about other comprehensive income	2023		2022		of Income
Unrealized losses on available for sale securities	$	(212)	$	—	Net realized (losses) gains on sales of securities
Tax effect		45		—	Income tax expense
	$	(167)	$	—
	Six months ended
	June 30,
	2023		2022
Unrealized losses on available for sale securities	$	(209)	$	—	Net realized (losses) gains on sales of securities
Tax effect		44		—	Income tax expense
	$	(165)	$	—

(a) Amounts in parentheses indicate debits to net income

6.           Off-Balance Sheet Financial Instruments and Guarantees

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

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

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

(in thousands)	June 30,
	2023		2022
Commitments to grant loans	$	96,514	$	93,304
Unfunded commitments under lines of credit		162,256		146,921
Standby letters of credit		13,809		12,995
	$	272,579	$	253,220

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

The Bank does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued, have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Bank, generally, holds collateral and/or personal guarantees supporting these commitments. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees. The current amount of the liability as of June 30, 2023 for guarantees under standby letters of credit issued is not material.

7.           Securities

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

	June 30, 2023
			Gross		Gross			Allowance
	Amortized		Unrealized		Unrealized			for Credit	Fair
	Cost		Gains		Losses			Losses	Value
	(In Thousands)
Available for Sale:
U.S. Treasury securities	$	45,147	$	-	$	(3,178)	$	-	$	41,969
U.S. Government agencies		21,325		-		(2,818)		-		18,507
States and political subdivisions		152,140		-		(25,621)		-		126,519
Mortgage-backed securities-
government sponsored entities		254,410		-		(37,784)		-		216,626
Total debt securities	$	473,022	$	-	$	(69,401)	$	-	$	403,621

	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

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The following tables summarize debt securities available for sale in a loss position for which an allowance for credit losses has not been recorded, aggregated by security type and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	June 30, 2023
	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	$	17,350	$	(415)	$	24,619	$	(2,763)	$	41,969	$	(3,178)
U.S. Government agencies		4,783		(112)		13,724		(2,706)		18,507		(2,818)
States and political subdivisions		8,013		(253)		118,016		(25,368)		126,029		(25,621)
Mortgage-backed securities-government sponsored entities		24,147		(1,630)		192,479		(36,154)		216,626		(37,784)
	$	54,293	$	(2,410)	$	348,838	$	(66,991)	$	403,131	$	(69,401)

	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)

At June 30, 2023, the Company had 39 debt securities in an unrealized loss position in the less than twelve months category and 302 debt securities in the twelve months or more category. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decline in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the six months ended June 30, 2023, or other-than-temporary impairment charges for the six months ended June 30, 2022. The Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

The amortized cost and fair value of debt securities as of June 30, 2023 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

	Available for Sale
	Amortized Cost		Fair Value
		(In Thousands)
Due in one year or less	$	11,727	$	11,588
Due after one year through five years		43,492		40,448
Due after five years through ten years		54,494		44,947
Due after ten years		108,899		90,012
		218,612		186,995
Mortgage-backed securities-government sponsored entities		254,410		216,626
	$	473,022	$	403,621

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

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2023		2022		2023		2022
Gross realized gains	$	—	$	—	$	4	$	—
Gross realized losses		(212)		—		(213)		—
Net realized gains (losses)	$	(212)	$	—	$	(209)	$	—
Proceeds from sales of securities	$	1,363	$	—	$	3,345	$	—

Securities with a carrying value of $362,977,000 and $378,472,000 at June 30, 2023 and December 31, 2022, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

8.           Loans Receivable and Allowance for Loan Losses

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

	June 30, 2023				December 31, 2022
Real Estate Loans:
Residential	$	307,462	19.5	%	$	298,813	20.3	%
Commercial		670,353	42.5			651,544	44.2
Agricultural		67,729	4.3			68,915	4.7
Construction		38,245	2.4			32,469	2.2
Commercial loans		211,714	13.4			187,257	12.7
Other agricultural loans		34,722	2.2			35,277	2.4
Consumer loans to individuals		247,758	15.7			200,149	13.5
Total loans		1,577,983	100.0	%		1,474,424	100.0	%
Deferred fees, net		(284)				(479)
Total loans receivable		1,577,699				1,473,945
Allowance for credit losses		(17,483)				(16,999)
Net loans receivable	$	1,560,216			$	1,456,946

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate owned on the Consolidated Balance Sheets. As of June 30, 2023 and December 31, 2022, foreclosed real estate owned totaled $387,000 and $346,000, respectively. During the six months ended June 30, 2023, there was one addition to the foreclosed real estate category, with a carrying value of $290,000, and two sales of properties with a carrying value of $195,000. Additionally, the company recognized a write-down on one property in the amount of $54,000 based on the realizable value of the property. As of June 30, 2023, the Company has initiated formal foreclosure proceedings on three properties classified as consumer residential mortgages with an aggregate carrying value of $168,000.

The following table shows the amount of loans in each category that were individually and collectively evaluated for credit loss:

	Real Estate Loans
									Commercial			Other	Consumer
	Residential		Commercial			Agricultural	Construction		Loans			Agricultural	Loans		Total
June 30, 2023	(In thousands)
Individually evaluated	$	—	$	423	$	—	$	—	$	67	$	—	$	—	$	490
Collectively evaluated		307,462		669,930		67,729		38,245		211,647		34,722		247,758		1,577,493
Total Loans	$	307,462	$	670,353	$	67,729	$	38,245	$	211,714	$	34,722	$	247,758	$	1,577,983

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

	Real Estate Loans
									Commercial			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

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

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
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

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the three-month period ended June 30, 2022 (in thousands):

		Average Recorded		Interest Income
		Investment		Recognized
	2022		2022
Real Estate Loans:
Commercial	$	822	$	20
Commercial Loans		13		3
Total	$	835	$	23

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

20

distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as nonperformance, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis. Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration. Loan Review, in conjunction with a third-party consultant, also annually reviews all criticized credits and relationships of $1,500,000 and over to re-affirm risk ratings.

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of June 30, 2023 and December 31, 2022 (in thousands):

	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing			Non-accrual	Total Past Due and Non-Accrual		Total Loans
June 30, 2023
Real Estate loans
Residential	$	306,101	$	741	$	48	$	-	$	572	$	1,361	$	307,462
Commercial		668,321		60		26		-		1,946		2,032		670,353
Agricultural		67,729		-		-		-		-		-		67,729
Construction		38,245		-		-		-		-		-		38,245
Commercial loans		211,168		430		-		-		116		546		211,714
Other agricultural loans		34,468		254				-		-		254		34,722
Consumer loans		246,219		770		180		-		589		1,539		247,758
Total	$	1,572,251	$	2,255	$	254	$	-	$	3,223	$	5,732	$	1,577,983

	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

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for credit losses. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the allowance.

21

The following table presents the allowance for credit 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, 2022	$	2,833	$	8,293	$	259	$	409	$	2,445	$	124	$	2,636	$	16,999
Impact of adopting ASC 326		(1,545)		5,527		(200)		388		(1,156)		3		(551)		2,466
Charge Offs		(6)		(154)		-		-		(147)		-		(308)		(615)
Recoveries		6		9		-		-		6		-		46		67
(Release of) Provision for credit losses		(24)		(2,422)		(4)		22		133		(41)		902		(1,434)
Ending balance, June 30, 2023	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483
Ending balance individually evaluated	$	-	$	—	$	-	$	-	$	—	$	-	$	-	$	—
Ending balance collectively evaluated	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483

(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		(120)		-		-		-		(15)		-		(134)		(269)
Recoveries		118		80		-		-		23		-		23		244
Provision for loan losses		567		(1,803)		218		109		1,006		112		391		600
Ending balance, June 30, 2022	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017
Ending balance individually evaluated ‎for impairment	$	-	$	-	$	-	$	-	$	—	$	-	$	—	$	—
Ending balance collectively evaluated ‎for impairment	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017

(In thousands)	Residential Real Estate		Commercial Real Estate			Farmland		Construction	Commercial			Other Agricultural	Consumer		Total
Beginning balance, March 31, 2023	$	1,359	$	13,725	$	121	$	703	$	1,158	$	82	$	2,297	$	19,445
Charge Offs		(6)		(42)		-		-		(97)		-		(106)		(251)
Recoveries		-		3		-		-		-		-		20		23
(Release of) Provision for credit losses		(89)		(2,433)		(66)		116		220		4		514		(1,734)
Ending balance, June 30, 2023	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483

(In thousands)	Residential Real Estate		Commercial Real Estate			Farmland		Construction	Commercial			Other Agricultural	Consumer		Total
Beginning balance, March 31, 2022	$	2,326	$	10,287	$	504	$	134	$	1,495	$	292	$	1,622	$	16,660
Charge Offs		(5)		—		-		—		—		-		(82)		(87)
Recoveries		116		6		-		—		14		-		8		144
Provision for loan losses		303		(1,138)		(286)		108		995		(180)		498		300
Ending balance, June 30, 2022	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017

22

The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company’s historical loss experience. The Company chose to apply qualitative factors based on “quantitative metrics” which link the quantifiable metrics to historical changes in the qualitative factor categories. The Company also chose to apply economic projections to the model. A select group of economic indicators was utilized which was then correlated to the historical loss experience of the Company and its peers. Based on the correlation results, the economic adjustments are then weighted for relevancy and applied to the individual loan pools.

The following table presents the carrying value of loans on nonaccrual status and loans past due over 90 days still accruing interest (in thousands):

		Nonaccrual		Nonaccrual				Loans Past Due
		with no		with		Total		Over 90 Days		Total
	ACL		ACL		Nonaccrual		Still Accruing		Nonperforming
June 30, 2023
Real Estate loans
Residential	$	572	$	-	$	572	$	-	$	572
Commercial		1,946		-		1,946		-		1,946
Agricultural		-		-		-		-		-
Construction		-		-		-		-		-
Commercial loans		116		-		116		-		116
Other agricultural loans		-		-		-		-		-
Consumer loans		589		-		589		-		589
Total	$	3,223	$	-	$	3,223	$	-	$	3,223

23

Based on the most recent analysis performed, the following table presents the recorded investment in non-homogenous pools by internal risk rating systems (in thousands):

														Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year													Loans		Loans
														Amortized		Converted
June 30, 2023		2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	42,820	$	132,576	$	115,797	$	71,807	$	75,625	$	204,184	$	16,172	$	-	$	658,981
Special Mention		1,000		417		243		1,351		-		4,486		-		-		7,497
Substandard		-		-		59		1,471		-		2,345		-		-		3,875
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	43,820	$	132,993	$	116,099	$	74,629	$	75,625	$	211,015	$	16,172	$	-	$	670,353
Commercial real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	112	$	42	$	-	$	-	$	154
Real Estate - Agriculture
Risk Rating
Pass	$	1,343	$	13,045	$	5,655	$	9,078	$	8,493	$	26,877	$	616	$	-	$	65,107
Special Mention		-		-		-		-		-		496		-		-		496
Substandard		-		541		-		1,067		-		193		325		-		2,126
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,343	$	13,586	$	5,655	$	10,145	$	8,493	$	27,566	$	941	$	-	$	67,729
Real Estate - Agriculture
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial loans
Risk Rating
Pass	$	41,554	$	49,515	$	27,604	$	21,117	$	13,043	$	20,061	$	34,156	$	-	$	207,050
Special Mention		601		1,528		315		186		49		211		1,344		-		4,234
Substandard		-		-		-		-		-		430		-		-		430
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	42,155	$	51,043	$	27,919	$	21,303	$	13,092	$	20,702	$	35,500	$	-	$	211,714
Commercial loans
Current period gross charge-offs	$	-	$	32	$	24	$	50	$	-	$	41	$	-	$	-	$	147
Other agricultural loans
Risk Rating
Pass	$	1,507	$	5,868	$	3,599	$	3,133	$	2,640	$	4,768	$	12,351	$	-	$	33,866
Special Mention		-		-		3		185		100		-		155		-		443
Substandard		-		-		-		-		413		-		-		-		413
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,507	$	5,868	$	3,602	$	3,318	$	3,153	$	4,768	$	12,506	$	-	$	34,722
Other agricultural loans
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total
Risk Rating
Pass	$	87,224	$	201,004	$	152,655	$	105,135	$	99,801	$	255,890	$	63,295	$	-	$	965,004
Special Mention		1,601		1,945		561		1,722		149		5,193		1,499		-		12,670
Substandard		-		541		59		2,538		413		2,968		325		-		6,844
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	88,825	$	203,490	$	153,275	$	109,395	$	100,363	$	264,051	$	65,119	$	-	$	984,518

24

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 (in thousands):

			Special				Doubtful
	Pass		Mention		Substandard		or 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

25

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due over 90 days and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the carrying value of residential and consumer loans based on payment activity (in thousands):

														Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year													Loans		Loans
														Amortized		Converted
June 30, 2023		2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	13,560	$	55,863	$	59,707	$	37,220	$	17,375	$	94,858	$	28,307	$	-	$	306,890
Nonperforming		-		-		-		-		58		463		51		-		572
Total	$	13,560	$	55,863	$	59,707	$	37,220	$	17,433	$	95,321	$	28,358	$	-	$	307,462
Residential real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	6	$	-	$	-	$	6
Construction										-
Payment Performance
Performing	$	5,220	$	21,705	$	6,786	$	1,528	$	1,911	$	788	$	307	$	-	$	38,245
Nonperforming		-		-		-		-		-		-		-		-		-
Total	$	5,220	$	21,705	$	6,786	$	1,528	$	1,911	$	788	$	307	$	-	$	38,245
Construction
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer loans to individuals										-
Payment Performance
Performing	$	81,233	$	89,832	$	30,125	$	18,044	$	14,013	$	12,800	$	1,122	$	-	$	247,169
Nonperforming		-		461		41		21		63		3		-		-		589
Total	$	81,233	$	90,293	$	30,166	$	18,065	$	14,076	$	12,803	$	1,122	$	-	$	247,758
Consumer loans to individuals
Current period gross charge-offs	$	3	$	146	$	98	$	28	$	15	$	7	$	11	$	-	$	308
Total										-
Payment Performance
Performing	$	100,013	$	167,400	$	96,618	$	56,792	$	33,299	$	108,446	$	29,736	$	-	$	592,304
Nonperforming		-		461		41		21		121		466		51		-		1,161
Total	$	100,013	$	167,861	$	96,659	$	56,813	$	33,420	$	108,912	$	29,787	$	-	$	593,465

26

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. The following table presents the recorded investment in the loan classes based on payment activity as of December 31, 2022 (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

Occasionally, the Bank modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Bank provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. During the period ended June 30, 2023, there were no modifications made to borrowers experiencing financial difficulty.

The Company’s primary business activity as of June 30 2023 was with customers located in northeastern Pennsylvania and the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates. Accordingly, the Company has extended credit primarily to commercial entities and individuals in this area whose ability to repay their loans is influenced by the region’s economy.

As of June 30, 2023, the Company considered its concentration of credit risk to be acceptable. The highest concentrations are in commercial rentals with $146.5 million of loans outstanding, or 9.3% of total loans outstanding, and residential rentals with loans outstanding of $121.8 million, or 7.7% of loans outstanding. For the six months ended June 30, 2023, the Company did not recognize any charge offs on loans in the named concentrations.

9.           Operating Leases

The Company leases seven office locations and one back-office facility 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 six-month periods ended June 30, 2023 and 2022, amounted to $362,000 and $299,000 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 June 30, 2023.

	Operating
Weighted-average remaining term		9.8
Weighted-average discount rate		2.85%

27

The following table presents the undiscounted cash flows due related to operating leases as of June 30, 2023, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:

Undiscounted cash flows due (in thousands)		Operating
2023	$	327
2024		664
2025		680
2026		524
2027		401
2028 and thereafter		2,414
Total undiscounted cash flows		5,010
Discount on cash flows		739
Total lease liabilities	$	4,271

10.          Fair Value of Assets and Liabilities

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

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

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

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

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 16 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

28

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

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2023 and December 31, 2022 are as follows:

	Fair Value Measurement Using
	Reporting Date
Description	Total		Level 1		Level 2		Level 3
June 30, 2023	(In thousands)
ASSETS
Available for Sale:
U.S. Treasury securities	$	41,969	$	-	$	41,969	$	-
U.S. Government agencies		18,507		-		18,507		-
States and political subdivisions		126,519		-		126,519		-
Mortgage-backed securities-government
sponsored entities		216,626		-		216,626		-
Interest rate derivatives		1,447		-		1,447		-
LIABILITIES
Interest rate derivatives		1,447		-		1,447		-
Description	Total		Level 1		Level 2		Level 3
December 31, 2022	(In thousands)
ASSETS
Available for Sale:
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		-

Securities:

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

Interest Rate Swaps:

The fair value of interest rate swaps is based upon the present value of the expected future cash flows using the Secured Overnight Financing Rate (“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.

29

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

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2023 and December 31, 2022 are as follows:

			Fair Value Measurement Using Reporting Date
(In thousands)
Description	Total		Level 1		Level 2		Level 3
June 30, 2023
Individually analyzed loans held for investment	$	490	$	-	$	-	$	490
Foreclosed Real Estate Owned		387		-		-		387
December 31, 2022
Impaired Loans	$	413	$	-	$	-	$	413
Foreclosed Real Estate Owned		346		-		-		346

Individually analyzed loans held for investment:

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

As of June 30, 2023, the fair value of individually analyzed loans held for investment was $490,000 which included three loan relationships that did not require an ACL since the estimated realizable value of the collateral exceeded the recorded investment in the loan. As of June 30, 2023, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans held for investment in the amount of $0.

As of December 31, 2022, the fair value investment in impaired loans totaled $413,000 which included three loan relationships that did not require a valuation allowance since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan. As of 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.

Foreclosed real estate owned:

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

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
June 30, 2023
Individually analyzed loans held for investment	$	490	Appraisal of collateral(1)	Appraisal adjustments(2)	10.0%-10.0% (10.0%)
Foreclosed real estate owned	$	387	Appraisal of collateral(1)	Liquidation Expenses(2)	7.00% (7.00%)

30

	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%)

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

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

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

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2023 and December 31, 2022.

Loans receivable (carried at cost):

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

Mortgage servicing rights (generally carried at cost)

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

Deposit liabilities (carried at cost):

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

Other borrowings (carried at cost):

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

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The estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at June 30, 2023 and December 31, 2022. (In thousands)

	Fair Value Measurements at June 30, 2023
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	33,089	$	33,089	$	33,089	$	-	$	-
Loans receivable, net		1,560,216		1,504,798		-		-		1,504,798
Mortgage servicing rights		189		497		-		-		497
Regulatory stock (1)		7,924		7,924		7,924		-		-
Bank owned life insurance (1)		45,806		45,806		45,806		-		-
Accrued interest receivable (1)		7,276		7,276		7,276		-		-
Financial liabilities:
Deposits		1,731,997		1,730,506		1,120,024		-		610,482
Short-term borrowings (1)		112,290		112,290		112,290		-		-
Other borrowings		99,687		98,689		-		-		98,689
Accrued interest payable (1)		7,101		7,101		7,101		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and ‎outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2022
	Carrying Amount		Fair 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		-		-		-		-		-

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

11.          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 June 30, 2023 and 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. The fair value of the swaps as of June 30, 2023 and December 31, 2022 was $1,447,000 and $1,464,000, respectively.

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Summary information regarding these derivatives is presented below

(Amounts in thousands)
	Notional Amount								Fair Value
		June 30, 2023		December 31, 2022		Interest Rate Paid		Interest Rate Received		June 30, 2023		December 31, 2022
Customer interest rate swap
Maturing November, 2030	$	6,330	$	6,513	Term SOFR + Margin			Fixed	$	880	$	889
Maturing December, 2030		4,166		4,297	Term SOFR + Margin			Fixed		567		575
Total	$	10,496	$	10,810					$	1,447	$	1,464
Third party interest rate swap
Maturing November, 2030	$	6,330	$	6,513		Fixed	Term SOFR + Margin		$	880	$	889
Maturing December, 2030		4,166		4,297		Fixed	Term SOFR + Margin			567		575
Total	$	10,496	$	10,810					$	1,447	$	1,464

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
June 30, 2023
Interest rate derivatives	Other assets	$	1,447	Other liabilities	$	1,447
December 31, 2022
Interest rate derivatives	Other assets		1,464	Other liabilities		1,464

12.           New and Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”. The ASU provided optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The ASU is effective as of March 12, 2020 through December 31, 2022. Furthermore, in December 2022, the FASB issued ASU 2022-06, “Deferral of the Sunset Date of Reference Rate Reform (Topic 848)”. This ASU extends the sunset date of ASC Topic 848 (Reference Rate Reform) to December 31, 2024, in response to the United Kingdom’s Financial Conduct Authority (FCA) extension of the intended cessation date of LIBOR in the United States. The Company evaluated the impact of this standard, and believes that its adoption will not have a material impact on the Company’s consolidated financial condition or results of operations.

In March 2023, the FASB issued ASU No. 2023-02, "Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)". The ASU allows entities to elect the proportional amortization method, on a tax-credit-program-by-tax-credit-program basis, for all equity investments in tax credit programs meeting the eligibility criteria in Accounting Standards Codification (ASC) 323-740-25-1. While the ASU does not significantly alter the existing eligibility criteria, it does provide clarifications to address existing interpretive issues. It also prescribes specific information reporting entities must disclose about tax credit investments each period. This ASU is effective for reporting periods beginning after December 15, 2023, for public business entities, or January 1, 2024 for the Company. The Company does not expect the adoption of this ASU to have a material impact on the Company's financial statements.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q may include certain forward-looking statements based on current management expectations. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may”, “will”, “believe”, “expect”, “estimate”, “anticipate”, “continue”, or similar terms or variations on those terms, or the negative of those terms. The actual results of the Company could differ materially from those management expectations. This includes statements regarding general economic conditions, public health crisis such as the governmental, social and economic effects of the COVID 19 pandemic, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities and failure to integrate or profitably operate acquired businesses. Additional potential factors include changes in interest rates, the rate of inflation, deposit flows, cost of funds, demand for loan products and financial services, competition and changes in the quality or composition of loan and investment portfolios of the Company. Other factors that could cause future results to vary from current management expectations include changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices, instability in the banking system, the potential for a recessionary economy and any adverse impact resulting from the COVID 19 pandemic. Further description of the risks and uncertainties to the business are included in the Company’s other filings with the Securities and Exchange Commission.

During 2022, the Federal Reserve took unprecedented action during the year to restrain inflation and improve the stability of the economy by raising the target federal funds rate several times from 25 basis points in the beginning of the year to 75 basis points toward the end of the year and brought the benchmark interest rates up by a collective 4.50 percent. During the first quarter 2023, the Federal Reserve increased the target federal funds rate another 0.25 percent and further increased the target federal funds rate another 0.25 percent in May 2023. At its June 2023 meeting, the Federal Reserve left interest rates unchanged for the first time since March 2022, in order to give themselves time to assess the still developing effects of previous increases in interest rates and borrowing costs. However, on July 26, 2023, the Federal Reserve increased the target funds rate another 0.25 percent. The Federal Reserve has indicated that it may further increase the target federal funds rate in 2023 in an attempt to reduce inflation. Any substantial or unexpected change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations. As inflation increases and market interest rates rise, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. In addition, recent bank failures have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on our financial condition and results of operations.

The majority of the assets and liabilities of a financial institution are monetary in nature, and therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. However, inflation does have an impact on the Company, particularly with respect to the growth of total assets and noninterest expenses, which tend to rise during periods of general inflation. Risks also exist due to supply and demand imbalances, employment shortages, the interest rate environment, and geopolitical tensions. It is reasonably foreseeable that estimates made in the financial statements could be materially and adversely impacted in the near term as a result of these conditions, including expected credit losses on loans and the fair value of financial instruments that are carried at fair value.

Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

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Critical Accounting Policies

Note 2 to the Company’s consolidated financial statements for the fiscal year ended December 31, 2022 (included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2022) 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. See Note 1, "Basis of Presentation" for additional information on the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans and investment securities, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses to be a critical accounting policy.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, the valuation of deferred tax assets, the fair value of financial instruments, and the determination of goodwill impairment. Please refer to the discussion of the allowance for credit losses calculation under “Changes in Financial Condition - Loans” below.

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

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

In connection with 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 in purchase transactions, at its fair value at the date of acquisition. Goodwill is tested and deemed impaired when the carrying value of goodwill exceeds its implied fair value. The value of the goodwill can change in the future. We expect the value of the goodwill to decrease if there is a significant decrease in the franchise value of the Company or the Bank. If an impairment loss is determined in the future, we will reflect the loss as an expense for the period in which the impairment is determined, leading to a reduction of our net income for that period by the amount of the impairment loss.

Changes in Financial Condition

General

Total assets as of June 30, 2023 were $2.142 billion compared to $2.047 billion as of December 31, 2022. The increase was due primarily to a $103.3 million increase in loans receivable.

Securities

The fair value of securities available for sale as of June 30, 2023 was $403.6 million compared to $418.9 million as of December 31, 2022. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decline in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the six months ended June 30, 2023, or other-than-temporary impairment charges for the six months ended June 30, 2022. The Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

Loans

Loans receivable totaled $1.560 billion at June 30, 2023 compared to $1.457 billion as of December 31, 2022. The $103.3 million increase in loans receivable during the six months ended June 30, 2023, was due primarily to an $18.8 million increase in commercial real estate loans, a $24.5 million increase in commercial loans and a $47.6 million increase in consumer loans.

The allowance for credit losses totaled $17,483,000 as of June 30, 2023, and represented 1.11% of total loans outstanding, compared to $16,999,000, or 1.15% of total loans outstanding, at December 31, 2022. The Company had net charge-offs for the six months ended June 30, 2023 of $548,000, compared to $25,000 in the corresponding period in 2022, primarily due to a $286,000

35

increase in commercial loan charge-offs and a $173,000 increase in consumer loan charge-offs. The Company’s management assesses the adequacy of the allowance for credit losses on a quarterly basis. Based on management’s best judgement, the qualitative factors are applied to the final adjusted loss rate each quarter. Management considers the allowance for credit losses adequate at June 30, 2023 based on the Company’s criteria. However, there can be no assurance that the allowance for credit losses will be adequate to cover significant losses, if any, which might be incurred in the future.

As of June 30, 2023, non-performing loans totaled $3,223,000 or 0.20% of total loans compared to $1,113,000, or 0.08%, of total loans at December 31, 2022. The increase in non-performing loans as of June 30, 2023, is due primarily to the inclusion of approximately $1.5 million of previously classified purchased credit-impaired loans in conjunction with the adoption of “CECL”, and a $425,000 increase in consumer loans. At June 30, 2023, non-performing assets totaled $3,610,000, or 0.17%, of total assets, compared to $1,459,000, or 0.07%, of total assets at December 31, 2022.

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

(dollars in thousands)	June 30, 2023			December 31, 2022
Loans accounted for on a non-accrual basis:
Real Estate
Residential	$	572		$	486
Commercial		1,946			402
Agricultural		—			—
Construction		—			—
Commercial and financial loans		116			61
Other agricultural loans		—			—
Consumer loans to individuals		589			164
Total non-accrual loans		3,223			1,113
Accruing loans which are contractually
past due 90 days or more		—			—
Total non-performing loans		3,223			1,113
Foreclosed real estate		387			346
Total non-performing assets	$	3,610		$	1,459
Purchased credit impaired loans (a)	$	N/A		$	6,290
Allowance for credit losses	$	17,483		$	16,999
Coverage of non-performing loans (a) (b)		542%	%		1,527%	%
Non-performing loans to total loans(a)		0.20	%		0.08	%
Non-performing loans to total assets(a)		0.15	%		0.05	%
Non-performing assets to total assets(a)		0.17	%		0.07	%

(a) Purchased impaired loans are loans obtained in acquisition transactions that as of the acquisition date were specifically identified as displaying signs of credit deterioration and for which the Company did not expect to collect all contractually required principal and interest payments. Prior to 2023, those loans were impaired at the date of acquisition, were recorded at estimated fair value and were generally delinquent in payments. The Company estimated the timing and amount of expected cash flows in excess of the estimated fair value and established an accretable discount on the acquisition date relating to these impaired loans that is recognized in interest income.

(b) Prior to 2023, loans acquired with specific evidence of deterioration in credit quality, a specific credit fair value adjustment is established at the date of acquisition and will not impact the allowance for loan losses unless actual losses exceed the established fair value adjustment.

Deposits

During the six-months ended June 30, 2023, total deposits increased $4.3 million due primarily to a $108.2 million increase in certificates of deposit. The increase in certificates of deposit was due to a migration from lower costing non-maturity deposit balances, as well as new money resulting from deposit promotions. All other deposit categories decreased $103.9 million, net.

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

(dollars in thousands)	June 30, 2023		December 31, 2022
Non-interest bearing demand	$	425,757	$	434,529
Interest-bearing demand		212,760		237,891
Money market deposit accounts		237,002		273,165
Savings		244,505		278,372
Time deposits <$250,000		390,176		290,147
Time deposits >$250,000		221,797		213,623
Total	$	1,731,997	$	1,727,727

Borrowings

Short-term borrowings increased $19.1 million to $112.3 million at June 30, 2023, compared to $93.2 million at December 31, 2022, due primarily to an increase in overnight borrowings to fund liquidity needs.

Other borrowings as of June 30, 2023, were $99.7 million compared to $40.0 million as of December 31, 2022. Federal Home Loan Bank borrowings increased $49.7 million during the period due primarily as a source to fund loan growth. A new $10.0 million term borrowing that was initiated under the Federal Reserve Long-Term Funding Program also contributed to the increase.

Other borrowings consisted of the following:

(dollars in thousands)	June 30, 2023		December 31, 2022
Notes with the FHLB:
Amortizing fixed rate borrowing due December 2023 at 5.08%	$	20,253	$	40,000
Fixed rate borrowing due April 2025 at 4.26%		20,000		—
Fixed rate borrowing due April 2026 at 4.04%		20,000		—
Amortizing fixed rate borrowing due May 2027 at 4.37%		29,434		—
	$	89,687	$	40,000
Notes with the Federal Reserve Bank
Fixed rate borrowing due March 2024 at 4.83%		10,000		—
	$	10,000	$	—

Stockholders’ Equity and Capital Ratios

As of June 30, 2023, total stockholders’ equity was $173.4 million, compared to $167.1 million as of December 31, 2022. Total stockholders’ equity increased $12.3 million due to net income, offset partially by $4.7 million of dividends declared. Stockholders” equity increased $3.1 million due to an increase in the fair value of securities in the available-for-sale portfolio, net of tax. The increase in fair value of securities is the result of a change in interest rates and spreads, which may impact the value of the securities. Because of interest rate volatility, the Company’s accumulated other comprehensive income could materially fluctuate for each interim and year-end period.

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

	June 30, 2023	December 31, 2022
Tier 1 Capital
(To average assets)	9.21%	9.36%
Tier 1 Capital
(To risk-weighted assets)	12.05%	12.49%
Common Equity Tier 1 Capital
(To risk-weighted assets)	12.05%	12.49%
Total Capital
(To risk-weighted assets)	13.04%	13.58%

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.

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. The Company and the Bank were in compliance with all applicable regulatory capital requirements as of June 30, 2023.

In December 2018, the Federal Reserve announced that a banking organization that experiences a reduction in retained earnings due to the CECL adoption as of the beginning of the fiscal year in which CECL is adopted may elect to phase in the regulatory capital impact of adopting CECL. Transitional amounts are calculated for the following items: retained earnings, temporary difference deferred tax assets and credit loss allowances eligible for inclusion in regulatory capital. When calculating regulatory capital ratios, 25% of the transitional amounts are phased in during the first year. An additional 25% of the transitional amounts are phased in over each of the next two years and at the beginning of the fourth year, the day-one effects of CECL are completely reflected in regulatory capital.

The Company adopted the transition guidance applied these effects to regulatory capital in the first quarter of 2023 upon adoption of CECL. See Note 1, "Basis of Presentation" for additional information on the adoption of CECL.

Liquidity

As of June 30, 2023, the Company had cash and cash equivalents of $33.1 million in the form of cash, due from banks and short-term deposits with other institutions. In addition, the Company had total securities available for sale of $403.6 million which could be used for liquidity needs. Total liquidity of $436.7 million as of June 30, 2023, represents 20.4% of total assets compared to $450.8 million and 22.0% of total assets as of December 31, 2022. The Company also monitors other liquidity measures, all of which were within the Company’s policy guidelines as of June 30, 2023 and December 31, 2022. Based upon these measures, the Company believes its liquidity is adequate.

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Capital Resources

The Company has a line of credit commitment from Atlantic Community Bankers Bank for $7,000,000 which expires June 30, 2024. There were no borrowings under this line as of June 30, 2023 and December 31, 2022.

The Company has a line of credit commitment available which has no stated expiration date from PNC Bank for $16,000,000. There were no borrowings under this line as of June 30, 2023 and December 31, 2022.

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank was approximately $672,270,000 as of June 30, 2023, of which $137,399,000 was outstanding in the form of borrowings as of June 30, 2023. As of December 31, 2022, the maximum borrowing capacity was $655,344,000, of which $82,264,000 of borrowings was outstanding as of December 31, 2022. Additionally, as of June 30, 2023, the Bank had secured Letters of Credit from the Federal Home Loan Bank in the amount of $61,500,000 as collateral for specific municipal deposits. These Letters of Credit reduce the availability under the maximum borrowing capacity. As of December 31, 2022, there was $92,900,000 outstanding in the form of Letters of Credit. Advances and Letters of Credit from the Federal Home Loan Bank are secured by qualifying assets of the Bank.

Non-GAAP Financial Measures

This report contains or references fully taxable-equivalent (fte) interest income and net interest income, which are non-GAAP financial measures. Interest income (fte) and net interest income (fte) are derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of interest income (fte) and net interest income (fte) ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (fte) and Net interest income (fte) is reconciled to GAAP interest income and net interest income on pages 41 and 45. Fully taxable equivalent interest income and net interest income is also reflected in the table on pages 42 and 46. Although the Company believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP measures.

‎

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Results of Operations

NORWOOD FINANCIAL CORP

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis,	Three Months Ended June 30,
dollars in thousands)	2023						2022
	Average				Average		Average				Average
	Balance		Interest		Rate		Balance		Interest		Rate
	(2)		(1)		(3)		(2)		(1)		(3)
Assets
Interest-earning assets:
Interest-bearing deposits with banks	$	3,868	$	53		5.48%	$	86,793	$	182		0.84%
Securities available for sale:
Taxable		415,642		2,097		2.02		404,764		1,739		1.72
Tax-exempt (1)		70,427		485		2.75		80,002		580		2.90
Total securities available for sale (1)		486,069		2,582		2.12		484,766		2,319		1.91
Loans receivable (1) (4) (5)		1,559,252		20,788		5.33		1,385,679		15,780		4.56
Total interest-earning assets		2,049,189		23,423		4.57		1,957,238		18,281		3.74
Non-interest earning assets:
Cash and due from banks		24,815						24,720
Allowance for credit losses		(19,524)						(16,802)
Other assets		69,867						78,339
Total non-interest earning assets		75,158						86,257
Total Assets	$	2,124,347					$	2,043,495
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand and money market	$	462,566	$	1,159		1.00	$	539,946	$	226		0.17
Savings		254,471		77		0.12		306,086		52		0.07
Time		604,425		4,504		2.98		481,885		805		0.67
Total interest-bearing deposits		1,321,462		5,740		1.74		1,327,917		1,083		0.33
Short-term borrowings		95,930		797		3.32		68,901		60		0.35
Other borrowings		93,144		1,057		4.54		8,836		56		2.54
Total interest-bearing liabilities		1,510,536		7,594		2.01		1,405,654		1,199		0.34
Non-interest bearing liabilities:
Demand deposits		414,709						440,996
Other liabilities		21,861						15,801
Total non-interest bearing liabilities		436,570						456,797
Stockholders' equity		177,241						181,044
Total Liabilities and Stockholders' Equity	$	2,124,347					$	2,043,495
Net interest income/spread (tax equivalent basis)				15,829		2.56%				17,082		3.40%
Tax-equivalent basis adjustment				(187)						(188)
Net interest income			$	15,642					$	16,894
Net interest margin (tax equivalent basis)						3.09%						3.49%

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

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

(3)Annualized

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

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

‎

40

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

	Increase/(Decrease)
	Three months ended June 30, 2023 Compared to
	Three months ended June 30, 2022
	Variance due to
	Volume		Rate		Net
	(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks	$	(211)	$	82	$	(129)
Securities available for sale:
Taxable		54		304		358
Tax-exempt securities		(68)		(27)		(95)
Total securities		(14)		277		263
Loans receivable		2,179		2,829		5,008
Total interest-earning assets		1,954		3,188		5,142
Interest-bearing liabilities:
Interest-bearing demand and money market		(165)		1,098		933
Savings		(12)		37		25
Time		767		2,932		3,699
Total interest-bearing deposits		590		4,067		4,657
Short-term borrowings		177		560		737
Other borrowings		673		328		1,001
Total interest-bearing liabilities		1,440		4,955		6,395
Net interest income (tax-equivalent basis)	$	514	$	(1,767)	$	(1,253)

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

‎

41

Comparison of Operating Results for the Three Months Ended June 30, 2023 to June 30, 2022

General

For the three months ended June 30, 2023, net income totaled $6,503,000 compared to $6,855,000 earned in the three months ended June 30, 2022. The decrease in net income for the three months ended June 30, 2023 was due primarily to a $1,252,000 decrease in net interest income and a $706,000 decrease total other income, net. A $2,050,000 reduction in the provision for credit losses offset the decreased income. Earnings per share for the three-months ended June 30, 2023 were $0.81 per share for basic shares and fully diluted shares, compared to $0.84 per share for basic shares and for fully diluted shares for the three months ended June 30, 2022. The resulting annualized return on average assets and annualized return on average equity for the three months ended June 30, 2023 were 1.23% and 14.72%, respectively, compared to 1.35% and 15.19%, respectively, for the same period in 2022.

The following table sets forth changes in net income:

(dollars in thousands)	Three months ended
	June 30, 2023 to June 30, 2022
Net income three months ended June 30, 2022	$	6,855
Change due to:
Net interest income		(1,252)
Provision for credit losses		2,050
Net gains on sales of securities and loans		(202)
Service charges and fees		(122)
Earnings and proceeds on bank-owned life insurance		(220)
Other income		(162)
Salaries and employee benefits		(2)
Occupancy, furniture and equipment		(108)
All other expenses		(356)
Income tax expense		22
Net income three months ended June 30, 2023	$	6,503

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the three months ended June 30, 2023 totaled $15,829,000 which was $1,253,000 lower than the comparable period in 2022. The decrease in net interest income was due primarily to a $6,395,000 increase in total interest expense, which was slightly offset by a $5,142,000 increase in in total interest income (fte). The fte net interest spread and net interest margin were 2.56% and 3.09%, respectively, for the three months ended June 30, 2023 compared to 3.40% and 3.49%, respectively, for the same period in 2022. See “Non-GAAP Financial Measures” described above on page 40.

For the three-months ended June 30, 2023, interest income (fte) totaled $23,423,000 with a yield on average earning assets of 4.57% compared to $18,281,000 and 3.74% for the 2022 period. Average loans increased $173.6 million during the three-months ended June 30, 2023, over the comparable period of 2022, while average securities increased $1.3 million. Average earning assets totaled $2.049 billion for the three months ended June 30, 2023, an increase of $92.0 million, over the average for the same period in 2022. See “Non-GAAP Financial Measures” described above on page 40.

Interest expense for the three months ended June 30, 2023 totaled $7,594,000 at an average cost of 2.01% compared to $1,199,000 and 0.34%, respectively, for the same period in 2022. The increase in interest expense during the three-months ended June 30, 2023 reflects the overall higher level of market interest rates. During the three months ended June 30, 2023, the average cost of time deposits, which is the most significant component of funding costs, increased 2.31% compared to the same three-month period of last year, while short-term borrowing costs increased 2.97% and other borrowing costs increased 2.00% compared to the same three-month period of last year.

Provision for Credit Losses

The Company released a portion of the allowance for credit losses during the three months ended June 30, 2023, which resulted in a negative provision expense of $1,750,000, compared to $300,000 of provision expense for the three months ended June 30, 2022. The Company makes provisions for or releases of credit losses in an amount necessary to maintain the allowance for credit losses at an acceptable level under the current expected credit loss methodology analysis. The Company recorded a net charge-

42

off of $228,000 for the quarter ended June 30, 2023, compared to a net recovery of $57,000 for the similar period in 2022. At June 30, 2023, the allowance for credit losses related to loans receivable represented 1.11% of loans receivable. Additionally, at June 30, 2023, the allowance for credit losses related to loans receivable represented 542% of non-performing loans.

Other Income

Other income totaled $1,783,000 for the three months ended June 30, 2023, compared to $2,489,000 for the same period in 2022. The decrease was due primarily to a lower level of service charges and fees, a reduction in earnings and proceeds on bank-owned life insurance, and income recognized in 2022 on payoffs of purchased impaired loans that were carried at a discount. All other categories of other income decreased $152,000, net.

Other Expense

Other expense for the three months ended June 30, 2023 totaled $10,938,000 which was $466,000, or 4.5%, higher than the same period of 2022, due primarily to a $156,000 increase in data processing expenses, and a $108,000 increase in occupancy and equipment costs. All other categories of other expense increased $202,000, net.

Income Tax Expense

Income tax expense totaled $1,734,000 for an effective tax rate of 21.0% for the three months ended June 30, 2023 compared to $1,756,000 for an effective tax rate of 20.4% for the three months ended June 30, 2022.

43

Results of Operations

NORWOOD FINANCIAL CORP

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis,	Six Months Ended June 30,
dollars in thousands)	2023						2022
	Average				Average		Average				Average
	Balance		Interest		Rate		Balance		Interest		Rate
	(2)		(1)		(3)		(2)		(1)		(3)
Assets
Interest-earning assets:
Interest bearing deposits with banks	$	4,039	$	101		5.00%	$	127,175	$	260		0.41%
Securities available for sale:
Taxable		418,372		4,212		2.01		384,364		3,205		1.67
Tax-exempt (1)		71,069		979		2.76		77,556		1,122		2.89
Total securities available for sale (1)		489,441		5,191		2.12		461,920		4,327		1.87
Loans receivable (1) (4) (5)		1,533,318		40,024		5.22		1,370,534		31,223		4.56
Total interest-earning assets		2,026,798		45,316		4.47		1,959,629		35,810		3.65
Non-interest earning assets:
Cash and due from banks		25,395						24,001
Allowance for loan losses		(19,267)						(16,688)
Other assets		67,247						91,031
Total non-interest earning assets		73,375						98,344
Total Assets	$	2,100,173					$	2,057,973
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand and money market	$	481,381	$	2,118		0.88	$	530,451	$	428		0.16
Savings		264,871		182		0.14		307,221		115		0.07
Time		575,277		7,802		2.71		491,079		1,599		0.65
Total interest-bearing deposits		1,321,529		10,102		1.53		1,328,751		2,142		0.32
Short-term borrowings		98,846		1,576		3.19		65,724		108		0.33
Other borrowings		65,496		1,534		4.68		18,567		195		2.10
Total interest-bearing liabilities		1,485,871		13,212		1.78		1,413,042		2,445		0.35
Non-interest bearing liabilities:
Demand deposits		418,941						437,430
Other liabilities		20,560						15,411
Total non-interest bearing liabilities		439,501						452,841
Stockholders' equity		174,801						192,090
Total Liabilities and Stockholders' Equity	$	2,100,173					$	2,057,973
Net interest income/spread (tax equivalent basis)				32,104		2.69%				33,365		3.30%
Tax-equivalent basis adjustment				(369)						(370)
Net interest income			$	31,735					$	32,995
Net interest margin (tax equivalent basis)						3.17%						3.41%

44

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

	Increase/(Decrease)
	Six months ended June 30, 2023 Compared to
	Six months ended June 30, 2022
	Variance due to
	Volume		Rate		Net
	(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks	$	(336)	$	177	$	(159)
Securities available for sale:
Taxable		328		679		1,007
Tax-exempt securities		(95)		(48)		(143)
Total securities		233		631		864
Loans receivable		4,017		4,784		8,801
Total interest-earning assets		3,914		5,592		9,506
Interest-bearing liabilities:
Interest-bearing demand and money market		(194)		1,884		1,690
Savings		(28)		95		67
Time		1,002		5,201		6,203
Total interest-bearing deposits		780		7,180		7,960
Short-term borrowings		399		1,069		1,468
Other borrowings		757		582		1,339
Total interest-bearing liabilities		1,936		8,831		10,767
Net interest income (tax-equivalent basis)	$	1,978	$	(3,239)	$	(1,261)

Comparison of Operating Results for the Six Months Ended June 30, 2023 to June 30, 2022

General

For the six months ended June 30, 2023, net income totaled $12,285,000 compared to $13,983,000 earned in the six months ended June 30, 2022. The decrease in net income for the six months ended June 30, 2023 was due primarily to a $1,260,000 decrease in net interest income and a $2,133,000 decrease in total other income, net. A $2,050,000 decrease in the provision for credit loss expense offset a portion of the reduced income. Earnings per share for the six-months ended June 30, 2023 were $1.52 per share for basic shares and $1.51 per share for fully diluted shares, compared to $1.71 per share for basic shares and for fully diluted shares for the six months ended June 30, 2022. The resulting annualized return on average assets and annualized return on average equity for the six months ended June 30, 2023 were 1.18% and 14.17%, respectively, compared to 1.37% and 14.68%, respectively, for the same period in 2022.

45

The following table sets forth changes in net income:

(dollars in thousands)	Six months ended
	June 30, 2023 to June 30, 2022
Net income six months ended June 30, 2022	$	13,983
Change due to:
Net interest income		(1,260)
Provision for credit losses		2,050
Service charges and fees		(281)
Net gains on sales of securities and loans		(199)
Net gains on sales of foreclosed real estate owned		(427)
Earnings and proceeds on bank-owned life insurance		(183)
Other income		(1,043)
Salaries and employee benefits		(539)
Occupancy, furniture and equipment		(63)
Data processing related		(295)
Professional fees		373
All other expenses		(220)
Income tax expense		389
Net income six months ended June 30, 2023	$	12,285

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the six months ended June 30, 2023 totaled $32,104,000 which was $1,261,000 lower than the comparable period in 2022. The decrease in net interest income was due primarily to a $10,767,000 increase in total interest expense, which was slightly offset by a $9,506,000 increase in in total interest income (fte). The (fte) net interest spread and net interest margin were 2.69% and 3.17%, respectively, for the six months ended June 30, 2023 compared to 3.30% and 3.41%, respectively, for the same period in 2022. See “Non-GAAP Financial Measures” described above on page 40.

For the six-months ended June 30, 2023, interest income (fte) totaled $45,316,000 with a yield on average earning assets of 4.47% compared to $35,810,000 and 3.65% for the 2022 period. Average loans increased $162.8 million during the six-months ended June 30, 2023, over the comparable period of 2022, while average securities increased $27.5 million. Average earning assets totaled $2.027 billion for the six months ended June 30, 2023, an increase of $67.2 million, over the average for the same period in 2022. See “Non-GAAP Financial Measures” described above on page 40.

Interest expense for the six months ended June 30, 2023 totaled $13,212,000 at an average cost of 1.78% compared to $2,445,000 and 0.35%, respectively, for the same period in 2022. The increase in interest expense during the six-months ended June 30, 2023 reflects the overall higher level of market interest rates. During the six months ended June 30, 2023, the average cost of time deposits, which is the most significant component of funding costs, increased 2.06% compared to the same six-month period of last year, while short-term borrowing costs increased 2.86% and other borrowing costs increased 2.58% compared to the same six-month period of last year.

Provision for Credit Losses

The Company released a portion of the allowance for credit losses during the six months ended June 30, 2023, which resulted in a credit to expense for the six months ended June 30, 2023 of $1,450,000, compared to $600,000 for the six months ended June 30, 2022. The Company makes provisions for credit losses in an amount necessary to maintain the allowance for credit losses at an acceptable level. The Company recorded a net charge-off of $548,000 for the six months ended June 30, 2023, compared to a net charge-off of $25,000 for the similar period in 2022. At June 30, 2023, the allowance for credit losses related to loans receivable represented 1.11% of loans receivable. Additionally, at June 30, 2023, the allowance for credit losses related to loans receivable represented 542% of non-performing loans.

Other Income

Other income totaled $3,695,000 for the six months ended June 30, 2023, compared to $5,828,000 for the same period in 2022. The decrease was due primarily to $954,000 of income recognized in 2022 on payoffs of purchased impaired loans that were carried at a discount. Gains on sales of foreclosed real estate owned decreased $427,000, while all other categories of other income decreased $752,000, net.

46

Other Expense

Other expense for the six months ended June 30, 2023 totaled $21,374,000 which was $744,000, or 3.6%, higher than the same period of 2022, due primarily to a $539,000 increase in salaries and employee benefits. All other categories of other expense increased $205,000, net.

Income Tax Expense

Income tax expense totaled $3,321,000 for an effective tax rate of 21.4% for the six months ended June 30, 2023 compared to $3,610,000 for an effective tax rate of 20.5% for the six months ended June 30, 2022.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

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

Net interest income, which is the primary source of the Company’s earnings, is impacted by changes in interest rates and the relationship of different interest rates. To manage the impact of the rate changes, the balance sheet must be structured so that repricing opportunities exist for both assets and liabilities at approximately the same time intervals. The Company uses net interest simulation to assist in interest rate risk management. The process includes simulating various interest rate environments and their impact on net interest income. As of June 30, 2023, the level of net interest income at risk in a rising or declining 200 basis point change in interest rates was within the Company’s policy limits. The Company’s policy allows for a decrease of no more than 10% of net interest income for a ± 200 basis point shift in interest rates.

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

As of June 30, 2023, the Company had a negative 90-day interest sensitivity gap of $95.4 million or 4.5% of total assets, compared to the $46.7 million interest sensitivity gap, or 2.3% of total assets, as of December 31, 2022. At June 30, 2023, rate-sensitive assets repricing within 90 days increased $16.2 million since December 31, 2022 due to a $14.0 million increase in loans repricing. Rate-sensitive liabilities repricing within 90 days increased $64.9 million since year end due primarily to a $72.7 million increase in time deposits. A negative gap means that rate-sensitive liabilities are greater than rate-sensitive assets at the time interval. This would indicate that in a rising rate environment, the cost of interest-bearing liabilities in the 90-day time frame could increase faster than the yield on interest-earning assets. The repricing intervals are managed by ALCO strategies, including adjusting the average life of the investment portfolio, pricing of deposit liabilities to attract longer term time deposits, loan pricing to encourage variable rate products and evaluation of loan sales of long-term fixed rate mortgages.

Certain interest-bearing deposits with no stated maturity dates are included in the interest-sensitivity table below. The balances allocated to the respective time periods represent an estimate of the total outstanding balance that has the potential to migrate through withdrawal or transfer to time deposits, thereby impacting the interest-sensitivity position of the Company. The estimates were derived from an independently prepared non-maturity deposit study for the Bank which addressed the various deposit types and their pricing sensitivity to movements in market interest rates. The process involved analyzing correlations between product rates and market rates over a ten-year period. The Company believes the study provides pertinent data to support the assumptions used in modeling non-maturity deposits.

47

June 30, 2023

Rate Sensitivity Table

(dollars in thousands)

	3 Months		3-12 Months		1 to 3 Years		Over 3 Years		Total
Federal funds sold and interest-bearing deposits	$	3,036	$	—	$	—	$	—	$	3,036
Securities		10,449		33,599		83,635		275,938		403,621
Loans Receivable		232,807		245,909		511,524		587,459		1,577,699
Total RSA	$	246,292	$	279,508	$	595,159	$	863,397	$	1,984,356
Non-maturity interest-bearing deposits	$	105,291	$	108,412	$	286,489	$	194,076	$	694,268
Time Deposits		162,947		310,038		127,829		11,158		611,972
Borrowings		73,442		47,521		84,191		6,823		211,977
Total RSL	$	341,680	$	465,971	$	498,509	$	212,057	$	1,518,217
Interest Sensitivity Gap	$	(95,388)	$	(186,463)	$	96,650	$	651,340	$	466,139
Cumulative Gap		(95,388)		(281,851)		(185,201)		466,139
RSA/RSL-cumulative		72.08%		65.10%		85.82%		130.70%
December 31, 2022
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%

‎

48

Item 4. Controls and Procedures

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

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

‎

49

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

Not applicable.

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

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

(b)    Use of Proceeds. Not Applicable

(c)    Issuer Purchases of Equity Securities. Set forth below is information regarding the Company’s stock repurchases during the quarter ended June 30, 2023.

	Issuer Purchases of Equity Securities
							Maximum Number
					Total Number of		(or Approximate
	Total				Shares (or Units)		Dollar Value) of Shares
	Number		Average		Purchased as Part of		(or Units)
	of Shares		Price Paid		Publicly		that May Yet Be
	(or Units)		Per Share		Announced Plans		Purchased Under the
	Purchased		(or Unit)		or Programs *		Plans or Programs
April 1 – 30, 2023		72,181	$	27.04		72,181		310,709
May 1 – 31, 2023		36,615		26.29		36,615		274,094
June 1 – 30, 2023		-		-		-		274,094
Total		108,796	$	26.79		108,796		274,094

*On March 30, 2021, the Company announced a share repurchase program for up to approximately 5% of the Company’s outstanding shares of common stock, or approximately 400,000 shares, in the open market, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.  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. Both share repurchase programs are currently in effect.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

‎

50

Item 6. Exhibits

No.	Description
3(i)	Amended and Restated Articles of Incorporation of Norwood Financial Corp (1)
3(ii)	Bylaws of Norwood Financial Corp(2)
4.0	Specimen Stock Certificate of Norwood Financial Corp (3)
31.1	Rule 13a-14(a)/15d-14(a) Certification of CEO
31.2	Rule 13a-14(a)/15d-14(a) Certification of CFO
32	Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of Sarbanes Oxley Act of 2002
101	The following materials from the Company’s Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Changes in Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.
101.INS	Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within 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)

(1)Incorporated by reference into this document from Exhibit 3(i) to the Company’s Form 10-K filed with the Commission on March 13, 2020.

(2)Incorporated by reference from Exhibit 3(ii) to the Company’s Form 10-Q filed with the Commission on May 8, 2020.

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

51

Signatures

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

		NORWOOD FINANCIAL CORP
Date: August 11, 2023	By:	/s/ James O. Donnelly
		James O. Donnelly
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 11, 2023		/s/ William S. Lance
		William S. Lance
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

52

EX-31.1

Exhibit 31.1

CERTIFICATION

I, James O. Donnelly, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 11, 2023	/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 quarterly report on Form 10-Q of Norwood Financial Corp;

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

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

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

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

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

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

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

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

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

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

Date: August 11, 2023	/s/ William S. Lance
	William S. Lance
	Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Norwood Financial Corp (the Company) on Form 10-Q for the period ending June 30,2023 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
August 11, 2023

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2023	Aug. 01, 2023
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
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, par value $0.10 per share
Trading Symbol	NWFL
Security Exchange Name	NASDAQ
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		8,069,350
Entity Central Index Key	0001013272
Amendment Flag	false
Document Fiscal Period Focus	Q2

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
ASSETS
Cash and due from banks	$ 30,053	$ 28,847
Interest-bearing deposits with banks	3,036	3,019
Cash and cash equivalents	33,089	31,866
Securities available for sale, at fair value (net of allowance for credit losses of $0)	403,621	418,927
Loans receivable, net of allowance for credit losses of $17,483 and $16,999)	1,560,216	1,456,946
Regulatory stock, at cost	7,924	5,418
Bank premises and equipment, net	17,363	17,924
Bank owned life insurance	45,806	43,364
Accrued interest receivable	7,276	6,917
Foreclosed real estate owned	387	346
Deferred tax assets, net	23,301	23,549
Goodwill	29,266	29,266
Other intangibles	260	306
Other assets	13,256	12,241
TOTAL ASSETS	2,141,765	2,047,070
Deposits:
Non-interest bearing demand	425,757	434,529
Interest-bearing	1,306,240	1,293,198
Total deposits	1,731,997	1,727,727
Short-term borrowings	112,290	93,215
Other borrowings	99,687	40,000
Accrued interest payable	7,101	2,653
Other liabilities	17,266	16,390
TOTAL LIABILITIES	1,968,341	1,879,985
STOCKHOLDERS' EQUITY
Preferred stock, no par value per share, authorized: 5,000,000 shares; issued: none
Common stock, $0.10 par value per share, authorized: 20,000,000 shares, issued: 2023: 8,291,401 shares, 2022: 8,291,401 shares	829	829
Surplus	97,268	96,897
Retained earnings	135,583	130,020
Treasury stock at cost: 2023: 223,926 shares; 2022: 124,650 shares	(6,007)	(3,308)
Accumulated other comprehensive loss	(54,249)	(57,353)
TOTAL STOCKHOLDERS’ EQUITY	173,424	167,085
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 2,141,765	$ 2,047,070

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Consolidated Balance Sheets [Abstract]
Securities available for sale, at fair value, allowance for credit losses	$ 0	$ 0
Net of Allowance for Loan losses	$ 17,483	$ 16,999
Preferred Stock, No Par Value
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred Stock, Shares Issued	0	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	8,291,401
Treasury Stock, Shares	223,926	124,650

XML

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
INTEREST INCOME
Loans receivable, including fees	$ 20,702	$ 15,714	$ 39,860	$ 31,089
Securities	2,481	2,197	4,986	4,091
Other	53	182	101	260
Total interest income	23,236	18,093	44,947	35,440
INTEREST EXPENSE
Deposits	5,740	1,083	10,102	2,142
Short-term borrowings	797	60	1,576	108
Other borrowings	1,057	56	1,534	195
Total interest expense	7,594	1,199	13,212	2,445
NET INTEREST INCOME	15,642	16,894	31,735	32,995
(RELEASE OF) PROVISION FOR CREDIT LOSS EXPENSE	(1,750)	300	(1,450)	600
NET INTEREST INCOME AFTER (RELEASE OF) PROVISION FOR CREDIT LOSSES	17,392	16,594	33,185	32,395
OTHER INCOME
Other income	1,726	2,023	3,402	5,168
Net realized (losses) gains on sales of securities	(212)		(209)
Gains on sales of loans, net	10		10
Gain on sales of foreclosed real estate owned				427
Earnings and proceeds on bank owned life insurance	229	449	442	625
Other	174	351	346	1,414
Total other income	1,783	2,489	3,695	5,828
OTHER EXPENSES
Salaries and employee benefits	5,842	5,840	11,810	11,271
Occupancy, furniture & equipment, net	1,314	1,206	2,576	2,513
Data processing and related operations	822	666	1,590	1,295
Taxes, other than income	162	240	323	533
Professional fees	323	406	608	981
Federal Deposit Insurance Corporation insurance	244	142	445	326
Foreclosed real estate	74	10	103	63
Amortization of intangibles	23	27	46	54
Other	2,134	1,935	3,873	3,594
Total other expenses	10,938	10,472	21,374	20,630
INCOME BEFORE INCOME TAXES	8,237	8,611	15,506	17,593
INCOME TAX EXPENSE	1,734	1,756	3,221	3,610
NET INCOME	$ 6,503	$ 6,855	$ 12,285	$ 13,983
BASIC EARNINGS PER SHARE	$ 0.81	$ 0.84	$ 1.52	$ 1.71
DILUTED EARNINGS PER SHARE	$ 0.81	$ 0.84	$ 1.51	$ 1.71
Service Charges And Fees [Member]
OTHER INCOME
Other income	$ 1,353	$ 1,475	$ 2,665	$ 2,946
Income From Fiduciary Activities [Member]
OTHER INCOME
Other income	$ 229	$ 214	$ 441	$ 416

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Consolidated Statements of Comprehensive Income (Loss) [Abstract]
Net income	$ 6,503	$ 6,855	$ 12,285	$ 13,983
Investment securities available for sale:
Unrealized holding gains (losses)	(5,636)	(20,893)	3,719	(50,602)
Tax Effect	1,183	4,388	(780)	10,628
Reclassification of investment securities losses recognized in net income	212		209
Tax Effect	(45)		(44)
Other comprehensive income (loss)	(4,286)	(16,505)	3,104	(39,974)
Comprehensive Income (Loss)	$ 2,217	$ (9,650)	$ 15,389	$ (25,991)

XML

Consolidated Statements of Changes in Stockholders’ Equity - USD ($) $ in Thousands	Common Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Beginning balance at Dec. 31, 2021	$ 827	$ 96,443	$ 110,015	$ (1,767)	$ (256)	$ 205,262
Beginning balance, shares at Dec. 31, 2021	8,266,751			65,328
Net Income			13,983			13,983
Other comprehensive income (loss)					(39,974)	(39,974)
Cash dividends declared			(4,584)			(4,584)
Acquisition of treasury stock, shares				47,981
Acquisition of treasury stock				$ (1,252)		(1,252)
Compensation expense related to restricted stock, shares	7,500
Compensation expense related to restricted stock	$ 1	170				171
Stock options exercised		5		$ 86		91
Stock options exercised, shares	1,650			(3,225)
Compensation expense related to stock options		134				134
Ending balance, shares at Jun. 30, 2022	8,275,901			110,084
Ending balance at Jun. 30, 2022	$ 828	96,752	119,414	$ (2,933)	(40,230)	173,831
Beginning balance at Mar. 31, 2022	$ 827	96,619	114,845	$ (1,760)	(23,725)	186,806
Beginning balance, shares at Mar. 31, 2022	8,268,401			65,089
Net Income			6,855			6,855
Other comprehensive income (loss)					(16,505)	(16,505)
Cash dividends declared			(2,286)			(2,286)
Acquisition of treasury stock, shares				47,470
Acquisition of treasury stock				$ (1,239)		(1,239)
Compensation expense related to restricted stock, shares	7,500
Compensation expense related to restricted stock	$ 1	88				89
Stock options exercised		(22)		$ 66		44
Stock options exercised, shares				(2,475)
Compensation expense related to stock options		67				67
Ending balance, shares at Jun. 30, 2022	8,275,901			110,084
Ending balance at Jun. 30, 2022	$ 828	96,752	119,414	$ (2,933)	(40,230)	173,831
Beginning balance (Accounting Standards Update 2016-13 [Member]) at Dec. 31, 2022			(2,011)			(2,011)
Beginning balance at Dec. 31, 2022	$ 829	96,897	130,020	$ (3,308)	(57,353)	167,085
Beginning balance, shares at Dec. 31, 2022	8,291,401			124,650
Net Income			12,285			12,285
Other comprehensive income (loss)					3,104	3,104
Cash dividends declared			(4,711)			(4,711)
Acquisition of treasury stock, shares				113,526
Acquisition of treasury stock				$ (3,077)		(3,077)
Compensation expense related to restricted stock		224				224
Stock options exercised		(44)		$ 378		$ 334
Stock options exercised, shares				(14,250)		14,250
Compensation expense related to stock options		191				$ 191
Ending balance, shares at Jun. 30, 2023	8,291,401			223,926
Ending balance at Jun. 30, 2023	$ 829	97,268	135,583	$ (6,007)	(54,249)	173,424
Beginning balance at Mar. 31, 2023	$ 829	97,063	131,416	$ (2,930)	(49,963)	176,415
Beginning balance, shares at Mar. 31, 2023	8,291,401			110,400
Net Income			6,503			6,503
Other comprehensive income (loss)					(4,286)	(4,286)
Cash dividends declared			(2,336)			(2,336)
Acquisition of treasury stock, shares				113,526
Acquisition of treasury stock				$ (3,077)		(3,077)
Compensation expense related to restricted stock		110				110
Compensation expense related to stock options		95				95
Ending balance, shares at Jun. 30, 2023	8,291,401			223,926
Ending balance at Jun. 30, 2023	$ 829	$ 97,268	$ 135,583	$ (6,007)	$ (54,249)	$ 173,424

XML

Consolidated Statements of Changes in Stockholders’ Equity (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Consolidated Statements of Changes in Stockholders’ Equity [Abstract]
Cash dividends declared	$ 0.29	$ 0.28	$ 0.58	$ 0.56

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 12,285	$ 13,983
Adjustments to reconcile net income to net cash provided by operating activities:
(Release of) Provision for credit losses	(1,450)	600
Depreciation	706	746
Amortization of intangible assets	46	54
Deferred income taxes	(577)	283
Net amortization of securities premiums and discounts	457	747
Net realized gain on sales of securities	209
Earnings and proceeds on life insurance policies	(442)	(625)
Gain on sales and write-downs of fixed assets and foreclosed real estate owned, net	177	(379)
Net amortization of loan fees	272	(340)
Net gain on sale of loans	(10)
Mortgage loans originated for sale	1,234
Proceeds from sale of loans originated for sale	(1,224)
Compensation expense related to stock options	191	134
Compensation expense related to restricted stock	224	171
Increase in accrued interest receivable	(359)	(196)
Increase (decrease) in accrued interest payable	4,448	(65)
Other, net	38	351
Net cash provided by operating activities	16,225	15,464
Securities available for sale:
Proceeds from sales	3,345
Proceeds from maturities and principal reductions on mortgage-backed securities	15,223	23,754
Purchases		(109,196)
Purchase of regulatory stock	(11,168)	(528)
Redemption of regulatory stock	8,662	2,059
Net increase in loans	(104,543)	(48,651)
Proceeds of bank-owned life insurance		496
Purchase of bank-owned life insurance	(2,000)	(3,000)
Purchase of premises and equipment	(268)	(537)
Proceeds from sales of foreclosed real estate owned	195	1,823
Net cash used in investing activities	(90,554)	(133,780)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	4,270	43,037
Net increase in short-term borrowings	19,075	9,605
Repayments of other borrowings	(20,313)	(25,586)
Proceeds from other borrowings	80,000
Stock options exercised	334	91
Purchase of treasury stock	(3,077)	(1,252)
Cash dividends paid	(4,737)	(4,594)
Net cash provided by financing activities	75,552	21,301
Increase (decrease) in cash and cash equivalents	1,223	(97,015)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	31,866	206,681
CASH AND CASH EQUIVALENTS, END OF PERIOD	33,089	109,666
Cash payments for:
Interest on deposits and borrowings	8,764	2,510
Income taxes paid, net of refunds	3,502	4,147
Supplemental Schedule of Noncash Investing Activities:
Transfers of loans to foreclosed real estate and repossession of other assets	988	161
Dividends payable	$ 2,340	$ 2,286

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2023

Basis of Presentation [Abstract]

Basis of Presentation

1.           Basis of Presentation

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

The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles for interim financial statements and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. The financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the consolidated financial position and results of operations of the Company. The operating results for the three-month and six-month periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other future interim period.

Accounting Pronouncements Adopted in 2023

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent related updates. This ASU replaces the incurred loss methodology for recognizing credit losses and requires the Company to measure the current expected credit losses (“CECL”) on financial assets measured at amortized cost, including loans, off-balance sheet credit exposures such as unfunded commitments, and other financial instruments. In addition, ASC 326 requires credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down when management does not intend to sell or believes that it is not more likely than not they will be required to sell. This guidance became effective on January 1, 2023 for the Bank. The results reported for periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

The Bank adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans, available-for-sale debt securities and unfunded commitments. On January 1, 2023, the Bank recorded a cumulative effect decrease to retained earnings of $1,751,000 related to loans, $260,000 related to unfunded commitments, and $0 related to available-for-sale securities.

The Bank adopted the provisions of ASC 326 related to financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30 using the prospective transition approach. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $250,000 of the allowance for credit losses (“ACL”).

The Bank adopted the provisions of ASC 326 related to presenting other-than-temporary impairment on available-for-sale debt securities prior to January 1, 2023 using the prospective transition approach, though no such charges had been recorded on the securities held by the Bank as of the date of adoption.

 The impact of the change from the incurred loss model to the current expected credit loss model is detailed below (in thousands).

			January 1, 2023
			Pre-adoption		Adoption Impact		As Reported
Assets
	ACL on debt securities available for sale	$	-	$	-	$	-
	ACL on loans
	Residential real estate		2,833		(1,545)		1,288
	Commercial real estate		8,293		5,527		13,820
	Agricultural		259		(200)		59
	Construction		409		388		797
	Commercial loans		2,445		(1,156)		1,289
	Other agricultural loans		124		3		127
	Consumer		2,636		(551)		2,085
Liabilities
	ACL for unfunded commitments		-		329		329
		$	16,999	$	2,795	$	19,794

Purchased Credit Deteriorated (“PCD”) Loans

The Bank has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. A loan is considered a PCD loan if, at acquisition, it is probable that the Company will be unable to collect all contractually required payments receivable. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through credit loss expense.

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.  Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles.

Historical credit loss experience is the basis for the estimation of expected credit losses. We apply historical loss rates to pools of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on a preferred group of macroeconomic indicators used to create projections of economic conditions, obtained from the St. Louis Federal Reserve

economic database. The Company selected nine metrics which was correlated with the bank and its peer group’s historical loss patterns. The adjustments are then weighted for relevance before applying to each pool. Future macroeconomic forecast adjustments are then obtained using and eight-quarter moving average for each metric for the reasonable and supportable period. Each quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on local and current conditions

The Bank has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and therefore, should be individually assessed. We evaluate all commercial loans that meet the following criteria: (1) when it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Specific reserves are established based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition costs when appropriate. A specific reserve is established or a charge-off is taken if the fair value of the loan is less than the loan balance.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Bank estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Bank. The allowance for credit losses on off-balance sheet credit exposures is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Allowance for Credit Losses – Available for Sale Securities

The Bank measures expected credit losses on available-for-sale debt securities when the Bank does not intend to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Bank evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Bank considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Economic forecast data is utilized to calculate the present value of expected cash flows. The Bank obtains its forecast data through a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario, and utilizes a single scenario in the model. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

The allowance for credit losses on available-for-sale debt securities is included within Investment securities available-for-sale on the consolidated balance sheet. Changes in the allowance for credit losses are recorded within Provision for credit losses on the consolidated statement of income. Losses are charged against the allowance when the Bank believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $1,950,000 at June 30, 2023 and is included within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

 

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Revenue Recognition

6 Months Ended

Jun. 30, 2023

Revenue Recognition [Abstract]

Revenue Recognition

2.           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 security gains, loan servicing, gains on the sale of 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 three and six months ended June 30:

	Three months ended
	June 30,
(dollars in thousands)
Noninterest Income	2023		2022
In-scope of Topic 606:
Service charges on deposit accounts	$	110	$	106
ATM fees		106		108
Overdraft fees		342		316
Safe deposit box rental		22		23
Loan related service fees		131		252
Debit card fees		576		627
Fiduciary activities		229		214
Commissions on mutual funds and annuities		36		26
Gains on sales of other real estate owned		—		—
Other income		174		351
Noninterest Income (in-scope of Topic 606)		1,726		2,023
Out-of-scope of Topic 606:
Net realized gains (losses) on sales of securities		(212)		—
Loan servicing fees		30		17
Gains on sales of loans		10		—
Earnings on and proceeds from bank-owned life insurance		229		449
Noninterest Income (out-of-scope of Topic 606)		57		466
Total Noninterest Income	$	1,783	$	2,489

	Six months ended
	June 30,
(dollars in thousands)
Noninterest Income	2023		2022
In-scope of Topic 606:
Service charges on deposit accounts	$	214	$	205
ATM fees		212		213
Overdraft fees		661		604
Safe deposit box rental		48		46
Loan related service fees		284		522
Debit card fees		1,135		1,255
Fiduciary activities		441		416
Commissions on mutual funds and annuities		61		66
Gains on sales of other real estate owned		—		427
Other income		346		1,414
Noninterest Income (in-scope of Topic 606)		3,402		5,168
Out-of-scope of Topic 606:
Net realized gains (losses) on sales of securities		(209)		—
Loan servicing fees		50		35
Gains on sales of loans		10		—
Earnings on and proceeds from bank-owned life insurance		442		625
Noninterest Income (out-of-scope of Topic 606)		293		660
Total Noninterest Income	$	3,695	$	5,828

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Earnings Per Share

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Earnings Per Share

3.          Earnings Per Share

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

The following table sets forth the weighted average shares outstanding used in the computations of basic and diluted earnings per share.

(in thousands)	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
Weighted average shares outstanding	8,101	8,192	8,138	8,197
Less: Unvested restricted shares	(42)	(36)	(43)	(34)
Basic EPS weighted average shares outstanding	8,059	8,156	8,095	8,163
Basic EPS weighted average shares outstanding	8,059	8,156	8,095	8,163
Add: Dilutive effect of stock options and restricted shares	16	12	17	12
Diluted EPS weighted average shares outstanding	8,075	8,168	8,112	8,175

For the three and six month periods ended June 30, 2023, there were 110,350 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of the Company’s common stock of $29.53 per share as of June 30, 2023.

For the three and six month periods ended June 30, 2022, there were 151,600 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of Norwood common stock of $24.26 per share as of June 30, 2022.

 

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2023

Stock-Based Compensation [Abstract]

Stock-Based Compensation

4.           Stock-Based Compensation

During the six-month period ended June 30, 2023, 2,500 stock options were granted. As of June 30, 2023, there was $191,000 of total unrecognized compensation cost related to non-vested options granted in 2022 and 2023 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2023. Compensation costs related to stock options amounted to $191,000 and $134,000 during the six-month periods ended June 30, 2023 and 2022, respectively.

A summary of the Company’s stock option activity for the six-month period ended June 30, 2023 is as follows:

		Weighted
		Average Exercise		Weighted Average		Aggregate
		Price		Remaining		Intrinsic Value
	Options	Per Share		Contractual Term		($000)
Outstanding at January 1, 2023	218,975	$	28.70	6.8	Yrs.	$	1,100
Granted	2,500		29.60	9.8
Exercised	(14,250)		23.39	5.7
Forfeited	—		-	-
Outstanding at June 30, 2023	207,225	$	29.07	6.4	Yrs.	$	539
Exercisable at June 30, 2023	166,725	$	28.04	5.7	Yrs.	$	539

Intrinsic value represents the amount by which the market price of the stock on the measurement date exceeded the exercise price of the option. The market price was $29.53 per share as of June 30, 2023 and $33.44 per share as of December 31, 2022.

A summary of the Company’s restricted stock activity for the six-month periods ended June 30, 2023 and 2022 is as follows:

	2023			2022
		Weighted-Average				Weighted-Average
	Number of	Grant Date		Number of	Grant Date
	Restricted Stock	Fair Value		Restricted Stock	Fair Value
Non-vested, January 1,	44,460	$	30.12	32,030	$	26.76
Granted	—		—	7,500		25.71
Vested	(3,000)		25.71	—		—
Forfeited	—		—	—		—
Non-vested, June 30,	41,460	$	30.44	39,530	$	28.99

The expected future compensation expense relating to the 41,460 shares of non-vested restricted stock outstanding as of June 30, 2023 is $1,070,000. This cost will be recognized over the remaining vesting period of 4.5 years. Compensation costs related to restricted stock amounted to $224,000 and $171,000 during the six-month periods ended June 30, 2023 and 2022, respectively.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2023

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

5.           Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss) (in thousands) by component net of tax for the three and six months ended June 30, 2023 and 2022:

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2022	$	(57,353)
Other comprehensive income before reclassification		2,939
Amount reclassified from accumulated other comprehensive loss		165
Total other comprehensive loss		3,104
Balance as of June 30, 2023	$	(54,249)
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2021	$	(256)
Other comprehensive loss before reclassification		(39,974)
Amount reclassified from accumulated other comprehensive income		-
Total other comprehensive loss		(39,974)
Balance as of June 30, 2022	$	(40,230)

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of March 31, 2023	$	(49,963)
Other comprehensive loss before reclassification		(4,453)
Amount reclassified from accumulated other comprehensive loss		167
Total other comprehensive loss		(4,286)
Balance as of June 30, 2023	$	(54,249)
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of March 31, 2022	$	(23,725)
Other comprehensive loss before reclassification		(16,505)
Amount reclassified from accumulated other comprehensive loss		-
Total other comprehensive loss		(16,505)
Balance as of June 30, 2022	$	(40,230)

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

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) (in thousands) for the three and six months ended June 30, 2023 and 2022:

	Amount Reclassified
	From Accumulated
	Other
	Comprehensive
	Income (Loss) (a)				Affected Line Item in
	Three months ended				Consolidated
	June 30,				Statements
Details about other comprehensive income	2023		2022		of Income
Unrealized losses on available for sale securities	$	(212)	$	—	Net realized (losses) gains on sales of securities
Tax effect		45		—	Income tax expense
	$	(167)	$	—
	Six months ended
	June 30,
	2023		2022
Unrealized losses on available for sale securities	$	(209)	$	—	Net realized (losses) gains on sales of securities
Tax effect		44		—	Income tax expense
	$	(165)	$	—

(a) Amounts in parentheses indicate debits to net income

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Off-Balance Sheet Financial Instruments and Guarantees

6 Months Ended

Jun. 30, 2023

Off-Balance Sheet Financial Instruments and Guarantees [Abstract]

Off-Balance Sheet Financial Instruments and Guarantees

6.           Off-Balance Sheet Financial Instruments and Guarantees

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

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

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

(in thousands)	June 30,
	2023		2022
Commitments to grant loans	$	96,514	$	93,304
Unfunded commitments under lines of credit		162,256		146,921
Standby letters of credit		13,809		12,995
	$	272,579	$	253,220

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

The Bank does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued, have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Bank, generally, holds collateral and/or personal guarantees supporting these commitments. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees. The current amount of the liability as of June 30, 2023 for guarantees under standby letters of credit issued is not material.

 

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Securities

6 Months Ended

Jun. 30, 2023

Securities [Abstract]

Securities

7.           Securities

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

	June 30, 2023
			Gross		Gross			Allowance
	Amortized		Unrealized		Unrealized			for Credit	Fair
	Cost		Gains		Losses			Losses	Value
	(In Thousands)
Available for Sale:
U.S. Treasury securities	$	45,147	$	-	$	(3,178)	$	-	$	41,969
U.S. Government agencies		21,325		-		(2,818)		-		18,507
States and political subdivisions		152,140		-		(25,621)		-		126,519
Mortgage-backed securities-
government sponsored entities		254,410		-		(37,784)		-		216,626
Total debt securities	$	473,022	$	-	$	(69,401)	$	-	$	403,621

	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

The following tables summarize debt securities available for sale in a loss position for which an allowance for credit losses has not been recorded, aggregated by security type and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	June 30, 2023
	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	$	17,350	$	(415)	$	24,619	$	(2,763)	$	41,969	$	(3,178)
U.S. Government agencies		4,783		(112)		13,724		(2,706)		18,507		(2,818)
States and political subdivisions		8,013		(253)		118,016		(25,368)		126,029		(25,621)
Mortgage-backed securities-government sponsored entities		24,147		(1,630)		192,479		(36,154)		216,626		(37,784)
	$	54,293	$	(2,410)	$	348,838	$	(66,991)	$	403,131	$	(69,401)

	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)

At June 30, 2023, the Company had 39 debt securities in an unrealized loss position in the less than twelve months category and 302 debt securities in the twelve months or more category. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decline in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the six months ended June 30, 2023, or other-than-temporary impairment charges for the six months ended June 30, 2022. The Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

The amortized cost and fair value of debt securities as of June 30, 2023 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

	Available for Sale
	Amortized Cost		Fair Value
		(In Thousands)
Due in one year or less	$	11,727	$	11,588
Due after one year through five years		43,492		40,448
Due after five years through ten years		54,494		44,947
Due after ten years		108,899		90,012
		218,612		186,995
Mortgage-backed securities-government sponsored entities		254,410		216,626
	$	473,022	$	403,621

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

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2023		2022		2023		2022
Gross realized gains	$	—	$	—	$	4	$	—
Gross realized losses		(212)		—		(213)		—
Net realized gains (losses)	$	(212)	$	—	$	(209)	$	—
Proceeds from sales of securities	$	1,363	$	—	$	3,345	$	—

Securities with a carrying value of $362,977,000 and $378,472,000 at June 30, 2023 and December 31, 2022, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

 

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Loans Receivable and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2023

Loans Receivable and Allowance for Loan Losses [Abstract]

Loans Receivable and Allowance for Loan Losses

8.           Loans Receivable and Allowance for Loan Losses

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

	June 30, 2023				December 31, 2022
Real Estate Loans:
Residential	$	307,462	19.5	%	$	298,813	20.3	%
Commercial		670,353	42.5			651,544	44.2
Agricultural		67,729	4.3			68,915	4.7
Construction		38,245	2.4			32,469	2.2
Commercial loans		211,714	13.4			187,257	12.7
Other agricultural loans		34,722	2.2			35,277	2.4
Consumer loans to individuals		247,758	15.7			200,149	13.5
Total loans		1,577,983	100.0	%		1,474,424	100.0	%
Deferred fees, net		(284)				(479)
Total loans receivable		1,577,699				1,473,945
Allowance for credit losses		(17,483)				(16,999)
Net loans receivable	$	1,560,216			$	1,456,946

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate owned on the Consolidated Balance Sheets. As of June 30, 2023 and December 31, 2022, foreclosed real estate owned totaled $387,000 and $346,000, respectively. During the six months ended June 30, 2023, there was one addition to the foreclosed real estate category, with a carrying value of $290,000, and two sales of properties with a carrying value of $195,000. Additionally, the company recognized a write-down on one property in the amount of $54,000 based on the realizable value of the property. As of June 30, 2023, the Company has initiated formal foreclosure proceedings on three properties classified as consumer residential mortgages with an aggregate carrying value of $168,000.

The following table shows the amount of loans in each category that were individually and collectively evaluated for credit loss:

	Real Estate Loans
									Commercial			Other	Consumer
	Residential		Commercial			Agricultural	Construction		Loans			Agricultural	Loans		Total
June 30, 2023	(In thousands)
Individually evaluated	$	—	$	423	$	—	$	—	$	67	$	—	$	—	$	490
Collectively evaluated		307,462		669,930		67,729		38,245		211,647		34,722		247,758		1,577,493
Total Loans	$	307,462	$	670,353	$	67,729	$	38,245	$	211,714	$	34,722	$	247,758	$	1,577,983

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

	Real Estate Loans
									Commercial			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

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

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
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

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the three-month period ended June 30, 2022 (in thousands):

		Average Recorded		Interest Income
		Investment		Recognized
	2022		2022
Real Estate Loans:
Commercial	$	822	$	20
Commercial Loans		13		3
Total	$	835	$	23

Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a

distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as nonperformance, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis. Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration. Loan Review, in conjunction with a third-party consultant, also annually reviews all criticized credits and relationships of $1,500,000 and over to re-affirm risk ratings.

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of June 30, 2023 and December 31, 2022 (in thousands):

	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing			Non-accrual	Total Past Due and Non-Accrual		Total Loans
June 30, 2023
Real Estate loans
Residential	$	306,101	$	741	$	48	$	-	$	572	$	1,361	$	307,462
Commercial		668,321		60		26		-		1,946		2,032		670,353
Agricultural		67,729		-		-		-		-		-		67,729
Construction		38,245		-		-		-		-		-		38,245
Commercial loans		211,168		430		-		-		116		546		211,714
Other agricultural loans		34,468		254				-		-		254		34,722
Consumer loans		246,219		770		180		-		589		1,539		247,758
Total	$	1,572,251	$	2,255	$	254	$	-	$	3,223	$	5,732	$	1,577,983

	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

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for credit losses. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the allowance.

The following table presents the allowance for credit 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, 2022	$	2,833	$	8,293	$	259	$	409	$	2,445	$	124	$	2,636	$	16,999
Impact of adopting ASC 326		(1,545)		5,527		(200)		388		(1,156)		3		(551)		2,466
Charge Offs		(6)		(154)		-		-		(147)		-		(308)		(615)
Recoveries		6		9		-		-		6		-		46		67
(Release of) Provision for credit losses		(24)		(2,422)		(4)		22		133		(41)		902		(1,434)
Ending balance, June 30, 2023	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483
Ending balance individually evaluated	$	-	$	—	$	-	$	-	$	—	$	-	$	-	$	—
Ending balance collectively evaluated	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483

(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		(120)		-		-		-		(15)		-		(134)		(269)
Recoveries		118		80		-		-		23		-		23		244
Provision for loan losses		567		(1,803)		218		109		1,006		112		391		600
Ending balance, June 30, 2022	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017
Ending balance individually evaluated ‎for impairment	$	-	$	-	$	-	$	-	$	—	$	-	$	—	$	—
Ending balance collectively evaluated ‎for impairment	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017

(In thousands)	Residential Real Estate		Commercial Real Estate			Farmland		Construction	Commercial			Other Agricultural	Consumer		Total
Beginning balance, March 31, 2023	$	1,359	$	13,725	$	121	$	703	$	1,158	$	82	$	2,297	$	19,445
Charge Offs		(6)		(42)		-		-		(97)		-		(106)		(251)
Recoveries		-		3		-		-		-		-		20		23
(Release of) Provision for credit losses		(89)		(2,433)		(66)		116		220		4		514		(1,734)
Ending balance, June 30, 2023	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483

(In thousands)	Residential Real Estate		Commercial Real Estate			Farmland		Construction	Commercial			Other Agricultural	Consumer		Total
Beginning balance, March 31, 2022	$	2,326	$	10,287	$	504	$	134	$	1,495	$	292	$	1,622	$	16,660
Charge Offs		(5)		—		-		—		—		-		(82)		(87)
Recoveries		116		6		-		—		14		-		8		144
Provision for loan losses		303		(1,138)		(286)		108		995		(180)		498		300
Ending balance, June 30, 2022	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017

The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company’s historical loss experience. The Company chose to apply qualitative factors based on “quantitative metrics” which link the quantifiable metrics to historical changes in the qualitative factor categories. The Company also chose to apply economic projections to the model. A select group of economic indicators was utilized which was then correlated to the historical loss experience of the Company and its peers. Based on the correlation results, the economic adjustments are then weighted for relevancy and applied to the individual loan pools.

The following table presents the carrying value of loans on nonaccrual status and loans past due over 90 days still accruing interest (in thousands):

		Nonaccrual		Nonaccrual				Loans Past Due
		with no		with		Total		Over 90 Days		Total
	ACL		ACL		Nonaccrual		Still Accruing		Nonperforming
June 30, 2023
Real Estate loans
Residential	$	572	$	-	$	572	$	-	$	572
Commercial		1,946		-		1,946		-		1,946
Agricultural		-		-		-		-		-
Construction		-		-		-		-		-
Commercial loans		116		-		116		-		116
Other agricultural loans		-		-		-		-		-
Consumer loans		589		-		589		-		589
Total	$	3,223	$	-	$	3,223	$	-	$	3,223

Based on the most recent analysis performed, the following table presents the recorded investment in non-homogenous pools by internal risk rating systems (in thousands):

														Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year													Loans		Loans
														Amortized		Converted
June 30, 2023		2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	42,820	$	132,576	$	115,797	$	71,807	$	75,625	$	204,184	$	16,172	$	-	$	658,981
Special Mention		1,000		417		243		1,351		-		4,486		-		-		7,497
Substandard		-		-		59		1,471		-		2,345		-		-		3,875
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	43,820	$	132,993	$	116,099	$	74,629	$	75,625	$	211,015	$	16,172	$	-	$	670,353
Commercial real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	112	$	42	$	-	$	-	$	154
Real Estate - Agriculture
Risk Rating
Pass	$	1,343	$	13,045	$	5,655	$	9,078	$	8,493	$	26,877	$	616	$	-	$	65,107
Special Mention		-		-		-		-		-		496		-		-		496
Substandard		-		541		-		1,067		-		193		325		-		2,126
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,343	$	13,586	$	5,655	$	10,145	$	8,493	$	27,566	$	941	$	-	$	67,729
Real Estate - Agriculture
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial loans
Risk Rating
Pass	$	41,554	$	49,515	$	27,604	$	21,117	$	13,043	$	20,061	$	34,156	$	-	$	207,050
Special Mention		601		1,528		315		186		49		211		1,344		-		4,234
Substandard		-		-		-		-		-		430		-		-		430
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	42,155	$	51,043	$	27,919	$	21,303	$	13,092	$	20,702	$	35,500	$	-	$	211,714
Commercial loans
Current period gross charge-offs	$	-	$	32	$	24	$	50	$	-	$	41	$	-	$	-	$	147
Other agricultural loans
Risk Rating
Pass	$	1,507	$	5,868	$	3,599	$	3,133	$	2,640	$	4,768	$	12,351	$	-	$	33,866
Special Mention		-		-		3		185		100		-		155		-		443
Substandard		-		-		-		-		413		-		-		-		413
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,507	$	5,868	$	3,602	$	3,318	$	3,153	$	4,768	$	12,506	$	-	$	34,722
Other agricultural loans
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total
Risk Rating
Pass	$	87,224	$	201,004	$	152,655	$	105,135	$	99,801	$	255,890	$	63,295	$	-	$	965,004
Special Mention		1,601		1,945		561		1,722		149		5,193		1,499		-		12,670
Substandard		-		541		59		2,538		413		2,968		325		-		6,844
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	88,825	$	203,490	$	153,275	$	109,395	$	100,363	$	264,051	$	65,119	$	-	$	984,518

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 (in thousands):

			Special				Doubtful
	Pass		Mention		Substandard		or 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

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due over 90 days and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the carrying value of residential and consumer loans based on payment activity (in thousands):

														Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year													Loans		Loans
														Amortized		Converted
June 30, 2023		2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	13,560	$	55,863	$	59,707	$	37,220	$	17,375	$	94,858	$	28,307	$	-	$	306,890
Nonperforming		-		-		-		-		58		463		51		-		572
Total	$	13,560	$	55,863	$	59,707	$	37,220	$	17,433	$	95,321	$	28,358	$	-	$	307,462
Residential real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	6	$	-	$	-	$	6
Construction										-
Payment Performance
Performing	$	5,220	$	21,705	$	6,786	$	1,528	$	1,911	$	788	$	307	$	-	$	38,245
Nonperforming		-		-		-		-		-		-		-		-		-
Total	$	5,220	$	21,705	$	6,786	$	1,528	$	1,911	$	788	$	307	$	-	$	38,245
Construction
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer loans to individuals										-
Payment Performance
Performing	$	81,233	$	89,832	$	30,125	$	18,044	$	14,013	$	12,800	$	1,122	$	-	$	247,169
Nonperforming		-		461		41		21		63		3		-		-		589
Total	$	81,233	$	90,293	$	30,166	$	18,065	$	14,076	$	12,803	$	1,122	$	-	$	247,758
Consumer loans to individuals
Current period gross charge-offs	$	3	$	146	$	98	$	28	$	15	$	7	$	11	$	-	$	308
Total										-
Payment Performance
Performing	$	100,013	$	167,400	$	96,618	$	56,792	$	33,299	$	108,446	$	29,736	$	-	$	592,304
Nonperforming		-		461		41		21		121		466		51		-		1,161
Total	$	100,013	$	167,861	$	96,659	$	56,813	$	33,420	$	108,912	$	29,787	$	-	$	593,465

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. The following table presents the recorded investment in the loan classes based on payment activity as of December 31, 2022 (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

Occasionally, the Bank modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Bank provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. During the period ended June 30, 2023, there were no modifications made to borrowers experiencing financial difficulty.

The Company’s primary business activity as of June 30 2023 was with customers located in northeastern Pennsylvania and the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates. Accordingly, the Company has extended credit primarily to commercial entities and individuals in this area whose ability to repay their loans is influenced by the region’s economy.

As of June 30, 2023, the Company considered its concentration of credit risk to be acceptable. The highest concentrations are in commercial rentals with $146.5 million of loans outstanding, or 9.3% of total loans outstanding, and residential rentals with loans outstanding of $121.8 million, or 7.7% of loans outstanding. For the six months ended June 30, 2023, the Company did not recognize any charge offs on loans in the named concentrations.

 

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Operating Leases

6 Months Ended

Jun. 30, 2023

Operating Leases [Abstract]

Operating Leases

9.           Operating Leases

The Company leases seven office locations and one back-office facility 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 six-month periods ended June 30, 2023 and 2022, amounted to $362,000 and $299,000 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 June 30, 2023.

	Operating
Weighted-average remaining term		9.8
Weighted-average discount rate		2.85%

The following table presents the undiscounted cash flows due related to operating leases as of June 30, 2023, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:

Undiscounted cash flows due (in thousands)		Operating
2023	$	327
2024		664
2025		680
2026		524
2027		401
2028 and thereafter		2,414
Total undiscounted cash flows		5,010
Discount on cash flows		739
Total lease liabilities	$	4,271

 

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Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2023

Fair Value of Assets and Liabilities [Abstract]

Fair Value of Assets and Liabilities

10.          Fair Value of Assets and Liabilities

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

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

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

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

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 16 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2023 and December 31, 2022 are as follows:

	Fair Value Measurement Using
	Reporting Date
Description	Total		Level 1		Level 2		Level 3
June 30, 2023	(In thousands)
ASSETS
Available for Sale:
U.S. Treasury securities	$	41,969	$	-	$	41,969	$	-
U.S. Government agencies		18,507		-		18,507		-
States and political subdivisions		126,519		-		126,519		-
Mortgage-backed securities-government
sponsored entities		216,626		-		216,626		-
Interest rate derivatives		1,447		-		1,447		-
LIABILITIES
Interest rate derivatives		1,447		-		1,447		-
Description	Total		Level 1		Level 2		Level 3
December 31, 2022	(In thousands)
ASSETS
Available for Sale:
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		-

Securities:

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

Interest Rate Swaps:

The fair value of interest rate swaps is based upon the present value of the expected future cash flows using the Secured Overnight Financing Rate (“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 June 30, 2023 and December 31, 2022 are as follows:

			Fair Value Measurement Using Reporting Date
(In thousands)
Description	Total		Level 1		Level 2		Level 3
June 30, 2023
Individually analyzed loans held for investment	$	490	$	-	$	-	$	490
Foreclosed Real Estate Owned		387		-		-		387
December 31, 2022
Impaired Loans	$	413	$	-	$	-	$	413
Foreclosed Real Estate Owned		346		-		-		346

Individually analyzed loans held for investment:

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

As of June 30, 2023, the fair value of individually analyzed loans held for investment was $490,000 which included three loan relationships that did not require an ACL since the estimated realizable value of the collateral exceeded the recorded investment in the loan. As of June 30, 2023, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans held for investment in the amount of $0.

As of December 31, 2022, the fair value investment in impaired loans totaled $413,000 which included three loan relationships that did not require a valuation allowance since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan. As of 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.

Foreclosed real estate owned:

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

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
June 30, 2023
Individually analyzed loans held for investment	$	490	Appraisal of collateral(1)	Appraisal adjustments(2)	10.0%-10.0% (10.0%)
Foreclosed real estate owned	$	387	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, 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%)

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

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

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

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2023 and December 31, 2022.

Loans receivable (carried at cost):

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

Mortgage servicing rights (generally carried at cost)

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

Deposit liabilities (carried at cost):

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

Other borrowings (carried at cost):

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

The estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at June 30, 2023 and December 31, 2022. (In thousands)

	Fair Value Measurements at June 30, 2023
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	33,089	$	33,089	$	33,089	$	-	$	-
Loans receivable, net		1,560,216		1,504,798		-		-		1,504,798
Mortgage servicing rights		189		497		-		-		497
Regulatory stock (1)		7,924		7,924		7,924		-		-
Bank owned life insurance (1)		45,806		45,806		45,806		-		-
Accrued interest receivable (1)		7,276		7,276		7,276		-		-
Financial liabilities:
Deposits		1,731,997		1,730,506		1,120,024		-		610,482
Short-term borrowings (1)		112,290		112,290		112,290		-		-
Other borrowings		99,687		98,689		-		-		98,689
Accrued interest payable (1)		7,101		7,101		7,101		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and ‎outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2022
	Carrying Amount		Fair 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		-		-		-		-		-

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

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Interest Rate Swaps

6 Months Ended

Jun. 30, 2023

Interest Rate Swaps [Abstract]

Interest Rate Swaps

11.          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 June 30, 2023 and 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. The fair value of the swaps as of June 30, 2023 and December 31, 2022 was $1,447,000 and $1,464,000, respectively.

Summary information regarding these derivatives is presented below

(Amounts in thousands)
	Notional Amount								Fair Value
		June 30, 2023		December 31, 2022		Interest Rate Paid		Interest Rate Received		June 30, 2023		December 31, 2022
Customer interest rate swap
Maturing November, 2030	$	6,330	$	6,513	Term SOFR + Margin			Fixed	$	880	$	889
Maturing December, 2030		4,166		4,297	Term SOFR + Margin			Fixed		567		575
Total	$	10,496	$	10,810					$	1,447	$	1,464
Third party interest rate swap
Maturing November, 2030	$	6,330	$	6,513		Fixed	Term SOFR + Margin		$	880	$	889
Maturing December, 2030		4,166		4,297		Fixed	Term SOFR + Margin			567		575
Total	$	10,496	$	10,810					$	1,447	$	1,464

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
June 30, 2023
Interest rate derivatives	Other assets	$	1,447	Other liabilities	$	1,447
December 31, 2022
Interest rate derivatives	Other assets		1,464	Other liabilities		1,464

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New and Recently Adopted Accounting Pronouncements

6 Months Ended

Jun. 30, 2023

New and Recently Adopted Accounting Pronouncements [Abstract]

New and Recently Adopted Accounting Pronouncements

12.           New and Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”. The ASU provided optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The ASU is effective as of March 12, 2020 through December 31, 2022. Furthermore, in December 2022, the FASB issued ASU 2022-06, “Deferral of the Sunset Date of Reference Rate Reform (Topic 848)”. This ASU extends the sunset date of ASC Topic 848 (Reference Rate Reform) to December 31, 2024, in response to the United Kingdom’s Financial Conduct Authority (FCA) extension of the intended cessation date of LIBOR in the United States. The Company evaluated the impact of this standard, and believes that its adoption will not have a material impact on the Company’s consolidated financial condition or results of operations.

In March 2023, the FASB issued ASU No. 2023-02, "Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)". The ASU allows entities to elect the proportional amortization method, on a tax-credit-program-by-tax-credit-program basis, for all equity investments in tax credit programs meeting the eligibility criteria in Accounting Standards Codification (ASC) 323-740-25-1. While the ASU does not significantly alter the existing eligibility criteria, it does provide clarifications to address existing interpretive issues. It also prescribes specific information reporting entities must disclose about tax credit investments each period. This ASU is effective for reporting periods beginning after December 15, 2023, for public business entities, or January 1, 2024 for the Company. The Company does not expect the adoption of this ASU to have a material impact on the Company's financial statements.

 

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2023

Basis of Presentation [Abstract]

Principles of Consolidation

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

Accounting Pronouncements Adopted in 2023

Accounting Pronouncements Adopted in 2023

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent related updates. This ASU replaces the incurred loss methodology for recognizing credit losses and requires the Company to measure the current expected credit losses (“CECL”) on financial assets measured at amortized cost, including loans, off-balance sheet credit exposures such as unfunded commitments, and other financial instruments. In addition, ASC 326 requires credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down when management does not intend to sell or believes that it is not more likely than not they will be required to sell. This guidance became effective on January 1, 2023 for the Bank. The results reported for periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

The Bank adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans, available-for-sale debt securities and unfunded commitments. On January 1, 2023, the Bank recorded a cumulative effect decrease to retained earnings of $1,751,000 related to loans, $260,000 related to unfunded commitments, and $0 related to available-for-sale securities.

The Bank adopted the provisions of ASC 326 related to financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30 using the prospective transition approach. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $250,000 of the allowance for credit losses (“ACL”).

The Bank adopted the provisions of ASC 326 related to presenting other-than-temporary impairment on available-for-sale debt securities prior to January 1, 2023 using the prospective transition approach, though no such charges had been recorded on the securities held by the Bank as of the date of adoption.

 The impact of the change from the incurred loss model to the current expected credit loss model is detailed below (in thousands).

			January 1, 2023
			Pre-adoption		Adoption Impact		As Reported
Assets
	ACL on debt securities available for sale	$	-	$	-	$	-
	ACL on loans
	Residential real estate		2,833		(1,545)		1,288
	Commercial real estate		8,293		5,527		13,820
	Agricultural		259		(200)		59
	Construction		409		388		797
	Commercial loans		2,445		(1,156)		1,289
	Other agricultural loans		124		3		127
	Consumer		2,636		(551)		2,085
Liabilities
	ACL for unfunded commitments		-		329		329
		$	16,999	$	2,795	$	19,794

Purchased Credit Deteriorated ("PCD") Loans

Purchased Credit Deteriorated (“PCD”) Loans

The Bank has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. A loan is considered a PCD loan if, at acquisition, it is probable that the Company will be unable to collect all contractually required payments receivable. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through credit loss expense.

Allowance for Credit Losses - Loans

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.  Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company’s loan portfolio is segmented by loan types that have similar risk characteristics and behave similarly during economic cycles.

Historical credit loss experience is the basis for the estimation of expected credit losses. We apply historical loss rates to pools of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on a preferred group of macroeconomic indicators used to create projections of economic conditions, obtained from the St. Louis Federal Reserve

economic database. The Company selected nine metrics which was correlated with the bank and its peer group’s historical loss patterns. The adjustments are then weighted for relevance before applying to each pool. Future macroeconomic forecast adjustments are then obtained using and eight-quarter moving average for each metric for the reasonable and supportable period. Each quarter, management reviews the recommended adjustment factors and applies any additional adjustments based on local and current conditions

The Bank has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and therefore, should be individually assessed. We evaluate all commercial loans that meet the following criteria: (1) when it is determined that foreclosure is probable, (2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, (3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Specific reserves are established based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition costs when appropriate. A specific reserve is established or a charge-off is taken if the fair value of the loan is less than the loan balance.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Bank estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Bank. The allowance for credit losses on off-balance sheet credit exposures is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Allowance for Credit Losses - Available for Sale Securities

Allowance for Credit Losses – Available for Sale Securities

The Bank measures expected credit losses on available-for-sale debt securities when the Bank does not intend to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Bank evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Bank considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Economic forecast data is utilized to calculate the present value of expected cash flows. The Bank obtains its forecast data through a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario, and utilizes a single scenario in the model. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

The allowance for credit losses on available-for-sale debt securities is included within Investment securities available-for-sale on the consolidated balance sheet. Changes in the allowance for credit losses are recorded within Provision for credit losses on the consolidated statement of income. Losses are charged against the allowance when the Bank believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $1,950,000 at June 30, 2023 and is included within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

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Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2023

Basis of Presentation [Abstract]

Changes from Incurred Loss Model to Expected Credit Loss Model

			January 1, 2023
			Pre-adoption		Adoption Impact		As Reported
Assets
	ACL on debt securities available for sale	$	-	$	-	$	-
	ACL on loans
	Residential real estate		2,833		(1,545)		1,288
	Commercial real estate		8,293		5,527		13,820
	Agricultural		259		(200)		59
	Construction		409		388		797
	Commercial loans		2,445		(1,156)		1,289
	Other agricultural loans		124		3		127
	Consumer		2,636		(551)		2,085
Liabilities
	ACL for unfunded commitments		-		329		329
		$	16,999	$	2,795	$	19,794

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2023

Revenue Recognition [Abstract]

Noninterest Income

	Three months ended
	June 30,
(dollars in thousands)
Noninterest Income	2023		2022
In-scope of Topic 606:
Service charges on deposit accounts	$	110	$	106
ATM fees		106		108
Overdraft fees		342		316
Safe deposit box rental		22		23
Loan related service fees		131		252
Debit card fees		576		627
Fiduciary activities		229		214
Commissions on mutual funds and annuities		36		26
Gains on sales of other real estate owned		—		—
Other income		174		351
Noninterest Income (in-scope of Topic 606)		1,726		2,023
Out-of-scope of Topic 606:
Net realized gains (losses) on sales of securities		(212)		—
Loan servicing fees		30		17
Gains on sales of loans		10		—
Earnings on and proceeds from bank-owned life insurance		229		449
Noninterest Income (out-of-scope of Topic 606)		57		466
Total Noninterest Income	$	1,783	$	2,489

	Six months ended
	June 30,
(dollars in thousands)
Noninterest Income	2023		2022
In-scope of Topic 606:
Service charges on deposit accounts	$	214	$	205
ATM fees		212		213
Overdraft fees		661		604
Safe deposit box rental		48		46
Loan related service fees		284		522
Debit card fees		1,135		1,255
Fiduciary activities		441		416
Commissions on mutual funds and annuities		61		66
Gains on sales of other real estate owned		—		427
Other income		346		1,414
Noninterest Income (in-scope of Topic 606)		3,402		5,168
Out-of-scope of Topic 606:
Net realized gains (losses) on sales of securities		(209)		—
Loan servicing fees		50		35
Gains on sales of loans		10		—
Earnings on and proceeds from bank-owned life insurance		442		625
Noninterest Income (out-of-scope of Topic 606)		293		660
Total Noninterest Income	$	3,695	$	5,828

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Schedule of Weighted Average Shares Outstanding used in the Computations of Basic and Diluted Earnings Per Share

(in thousands)	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
Weighted average shares outstanding	8,101	8,192	8,138	8,197
Less: Unvested restricted shares	(42)	(36)	(43)	(34)
Basic EPS weighted average shares outstanding	8,059	8,156	8,095	8,163
Basic EPS weighted average shares outstanding	8,059	8,156	8,095	8,163
Add: Dilutive effect of stock options and restricted shares	16	12	17	12
Diluted EPS weighted average shares outstanding	8,075	8,168	8,112	8,175

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2023

Stock-Based Compensation [Abstract]

Summary of Stock Option Activity

		Weighted
		Average Exercise		Weighted Average		Aggregate
		Price		Remaining		Intrinsic Value
	Options	Per Share		Contractual Term		($000)
Outstanding at January 1, 2023	218,975	$	28.70	6.8	Yrs.	$	1,100
Granted	2,500		29.60	9.8
Exercised	(14,250)		23.39	5.7
Forfeited	—		-	-
Outstanding at June 30, 2023	207,225	$	29.07	6.4	Yrs.	$	539
Exercisable at June 30, 2023	166,725	$	28.04	5.7	Yrs.	$	539

Summary of Restricted Stock Activity

	2023			2022
		Weighted-Average				Weighted-Average
	Number of	Grant Date		Number of	Grant Date
	Restricted Stock	Fair Value		Restricted Stock	Fair Value
Non-vested, January 1,	44,460	$	30.12	32,030	$	26.76
Granted	—		—	7,500		25.71
Vested	(3,000)		25.71	—		—
Forfeited	—		—	—		—
Non-vested, June 30,	41,460	$	30.44	39,530	$	28.99

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2023

Accumulated Other Comprehensive Income (Loss) [Abstract]

Summary of Changes In Accumulated Other Comprehensive Income (Loss)

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2022	$	(57,353)
Other comprehensive income before reclassification		2,939
Amount reclassified from accumulated other comprehensive loss		165
Total other comprehensive loss		3,104
Balance as of June 30, 2023	$	(54,249)
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of December 31, 2021	$	(256)
Other comprehensive loss before reclassification		(39,974)
Amount reclassified from accumulated other comprehensive income		-
Total other comprehensive loss		(39,974)
Balance as of June 30, 2022	$	(40,230)

	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of March 31, 2023	$	(49,963)
Other comprehensive loss before reclassification		(4,453)
Amount reclassified from accumulated other comprehensive loss		167
Total other comprehensive loss		(4,286)
Balance as of June 30, 2023	$	(54,249)
	Unrealized gains (losses) on
	available for sale
	securities (a)
Balance as of March 31, 2022	$	(23,725)
Other comprehensive loss before reclassification		(16,505)
Amount reclassified from accumulated other comprehensive loss		-
Total other comprehensive loss		(16,505)
Balance as of June 30, 2022	$	(40,230)

(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
	Other
	Comprehensive
	Income (Loss) (a)				Affected Line Item in
	Three months ended				Consolidated
	June 30,				Statements
Details about other comprehensive income	2023		2022		of Income
Unrealized losses on available for sale securities	$	(212)	$	—	Net realized (losses) gains on sales of securities
Tax effect		45		—	Income tax expense
	$	(167)	$	—
	Six months ended
	June 30,
	2023		2022
Unrealized losses on available for sale securities	$	(209)	$	—	Net realized (losses) gains on sales of securities
Tax effect		44		—	Income tax expense
	$	(165)	$	—

(a) Amounts in parentheses indicate debits to net income

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Off-Balance Sheet Financial Instruments and Guarantees (Tables)

6 Months Ended

Jun. 30, 2023

Off-Balance Sheet Financial Instruments and Guarantees [Abstract]

Schedule of Fair Value, Off-balance Sheet Risks

(in thousands)	June 30,
	2023		2022
Commitments to grant loans	$	96,514	$	93,304
Unfunded commitments under lines of credit		162,256		146,921
Standby letters of credit		13,809		12,995
	$	272,579	$	253,220

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Securities (Tables)

6 Months Ended

Jun. 30, 2023

Securities [Abstract]

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

	June 30, 2023
			Gross		Gross			Allowance
	Amortized		Unrealized		Unrealized			for Credit	Fair
	Cost		Gains		Losses			Losses	Value
	(In Thousands)
Available for Sale:
U.S. Treasury securities	$	45,147	$	-	$	(3,178)	$	-	$	41,969
U.S. Government agencies		21,325		-		(2,818)		-		18,507
States and political subdivisions		152,140		-		(25,621)		-		126,519
Mortgage-backed securities-
government sponsored entities		254,410		-		(37,784)		-		216,626
Total debt securities	$	473,022	$	-	$	(69,401)	$	-	$	403,621

	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

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

	June 30, 2023
	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	$	17,350	$	(415)	$	24,619	$	(2,763)	$	41,969	$	(3,178)
U.S. Government agencies		4,783		(112)		13,724		(2,706)		18,507		(2,818)
States and political subdivisions		8,013		(253)		118,016		(25,368)		126,029		(25,621)
Mortgage-backed securities-government sponsored entities		24,147		(1,630)		192,479		(36,154)		216,626		(37,784)
	$	54,293	$	(2,410)	$	348,838	$	(66,991)	$	403,131	$	(69,401)

	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)

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

	Available for Sale
	Amortized Cost		Fair Value
		(In Thousands)
Due in one year or less	$	11,727	$	11,588
Due after one year through five years		43,492		40,448
Due after five years through ten years		54,494		44,947
Due after ten years		108,899		90,012
		218,612		186,995
Mortgage-backed securities-government sponsored entities		254,410		216,626
	$	473,022	$	403,621

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

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2023		2022		2023		2022
Gross realized gains	$	—	$	—	$	4	$	—
Gross realized losses		(212)		—		(213)		—
Net realized gains (losses)	$	(212)	$	—	$	(209)	$	—
Proceeds from sales of securities	$	1,363	$	—	$	3,345	$	—

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Loans Receivable and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2023

Loans Receivable and Allowance for Loan Losses [Abstract]

Composition of the Loan Portfolio

	June 30, 2023				December 31, 2022
Real Estate Loans:
Residential	$	307,462	19.5	%	$	298,813	20.3	%
Commercial		670,353	42.5			651,544	44.2
Agricultural		67,729	4.3			68,915	4.7
Construction		38,245	2.4			32,469	2.2
Commercial loans		211,714	13.4			187,257	12.7
Other agricultural loans		34,722	2.2			35,277	2.4
Consumer loans to individuals		247,758	15.7			200,149	13.5
Total loans		1,577,983	100.0	%		1,474,424	100.0	%
Deferred fees, net		(284)				(479)
Total loans receivable		1,577,699				1,473,945
Allowance for credit losses		(17,483)				(16,999)
Net loans receivable	$	1,560,216			$	1,456,946

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
June 30, 2023	(In thousands)
Individually evaluated	$	—	$	423	$	—	$	—	$	67	$	—	$	—	$	490
Collectively evaluated		307,462		669,930		67,729		38,245		211,647		34,722		247,758		1,577,493
Total Loans	$	307,462	$	670,353	$	67,729	$	38,245	$	211,714	$	34,722	$	247,758	$	1,577,983

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

	Real Estate Loans
									Commercial			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

Impaired Loans and Related Interest Income by Loan Portfolio Class

	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

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

			Unpaid
	Recorded		Principal		Associated
	Investment		Balance		Allowance
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

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the three-month period ended June 30, 2022 (in thousands):

		Average Recorded		Interest Income
		Investment		Recognized
	2022		2022
Real Estate Loans:
Commercial	$	822	$	20
Commercial Loans		13		3
Total	$	835	$	23

Loan Portfolio Summarized by the Past Due Status

	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due and still accruing			Non-accrual	Total Past Due and Non-Accrual		Total Loans
June 30, 2023
Real Estate loans
Residential	$	306,101	$	741	$	48	$	-	$	572	$	1,361	$	307,462
Commercial		668,321		60		26		-		1,946		2,032		670,353
Agricultural		67,729		-		-		-		-		-		67,729
Construction		38,245		-		-		-		-		-		38,245
Commercial loans		211,168		430		-		-		116		546		211,714
Other agricultural loans		34,468		254				-		-		254		34,722
Consumer loans		246,219		770		180		-		589		1,539		247,758
Total	$	1,572,251	$	2,255	$	254	$	-	$	3,223	$	5,732	$	1,577,983

	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

Allowance for Loan Losses and Recorded Investment in Financing Receivables

(In thousands)	Residential Real Estate		Commercial Real Estate			Agricultural		Construction	Commercial			Other Agricultural	Consumer		Total
Beginning balance, December 31, 2022	$	2,833	$	8,293	$	259	$	409	$	2,445	$	124	$	2,636	$	16,999
Impact of adopting ASC 326		(1,545)		5,527		(200)		388		(1,156)		3		(551)		2,466
Charge Offs		(6)		(154)		-		-		(147)		-		(308)		(615)
Recoveries		6		9		-		-		6		-		46		67
(Release of) Provision for credit losses		(24)		(2,422)		(4)		22		133		(41)		902		(1,434)
Ending balance, June 30, 2023	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483
Ending balance individually evaluated	$	-	$	—	$	-	$	-	$	—	$	-	$	-	$	—
Ending balance collectively evaluated	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483

(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		(120)		-		-		-		(15)		-		(134)		(269)
Recoveries		118		80		-		-		23		-		23		244
Provision for loan losses		567		(1,803)		218		109		1,006		112		391		600
Ending balance, June 30, 2022	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017
Ending balance individually evaluated ‎for impairment	$	-	$	-	$	-	$	-	$	—	$	-	$	—	$	—
Ending balance collectively evaluated ‎for impairment	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017

(In thousands)	Residential Real Estate		Commercial Real Estate			Farmland		Construction	Commercial			Other Agricultural	Consumer		Total
Beginning balance, March 31, 2023	$	1,359	$	13,725	$	121	$	703	$	1,158	$	82	$	2,297	$	19,445
Charge Offs		(6)		(42)		-		-		(97)		-		(106)		(251)
Recoveries		-		3		-		-		-		-		20		23
(Release of) Provision for credit losses		(89)		(2,433)		(66)		116		220		4		514		(1,734)
Ending balance, June 30, 2023	$	1,264	$	11,253	$	55	$	819	$	1,281	$	86	$	2,725	$	17,483

(In thousands)	Residential Real Estate		Commercial Real Estate			Farmland		Construction	Commercial			Other Agricultural	Consumer		Total
Beginning balance, March 31, 2022	$	2,326	$	10,287	$	504	$	134	$	1,495	$	292	$	1,622	$	16,660
Charge Offs		(5)		—		-		—		—		-		(82)		(87)
Recoveries		116		6		-		—		14		-		8		144
Provision for loan losses		303		(1,138)		(286)		108		995		(180)		498		300
Ending balance, June 30, 2022	$	2,740	$	9,155	$	218	$	242	$	2,504	$	112	$	2,046	$	17,017

Summary of Recorded Investment by Internal Risk Rating Systems

Based on the most recent analysis performed, the following table presents the recorded investment in non-homogenous pools by internal risk rating systems (in thousands):

														Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year													Loans		Loans
														Amortized		Converted
June 30, 2023		2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	42,820	$	132,576	$	115,797	$	71,807	$	75,625	$	204,184	$	16,172	$	-	$	658,981
Special Mention		1,000		417		243		1,351		-		4,486		-		-		7,497
Substandard		-		-		59		1,471		-		2,345		-		-		3,875
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	43,820	$	132,993	$	116,099	$	74,629	$	75,625	$	211,015	$	16,172	$	-	$	670,353
Commercial real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	112	$	42	$	-	$	-	$	154
Real Estate - Agriculture
Risk Rating
Pass	$	1,343	$	13,045	$	5,655	$	9,078	$	8,493	$	26,877	$	616	$	-	$	65,107
Special Mention		-		-		-		-		-		496		-		-		496
Substandard		-		541		-		1,067		-		193		325		-		2,126
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,343	$	13,586	$	5,655	$	10,145	$	8,493	$	27,566	$	941	$	-	$	67,729
Real Estate - Agriculture
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial loans
Risk Rating
Pass	$	41,554	$	49,515	$	27,604	$	21,117	$	13,043	$	20,061	$	34,156	$	-	$	207,050
Special Mention		601		1,528		315		186		49		211		1,344		-		4,234
Substandard		-		-		-		-		-		430		-		-		430
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	42,155	$	51,043	$	27,919	$	21,303	$	13,092	$	20,702	$	35,500	$	-	$	211,714
Commercial loans
Current period gross charge-offs	$	-	$	32	$	24	$	50	$	-	$	41	$	-	$	-	$	147
Other agricultural loans
Risk Rating
Pass	$	1,507	$	5,868	$	3,599	$	3,133	$	2,640	$	4,768	$	12,351	$	-	$	33,866
Special Mention		-		-		3		185		100		-		155		-		443
Substandard		-		-		-		-		413		-		-		-		413
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,507	$	5,868	$	3,602	$	3,318	$	3,153	$	4,768	$	12,506	$	-	$	34,722
Other agricultural loans
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total
Risk Rating
Pass	$	87,224	$	201,004	$	152,655	$	105,135	$	99,801	$	255,890	$	63,295	$	-	$	965,004
Special Mention		1,601		1,945		561		1,722		149		5,193		1,499		-		12,670
Substandard		-		541		59		2,538		413		2,968		325		-		6,844
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	88,825	$	203,490	$	153,275	$	109,395	$	100,363	$	264,051	$	65,119	$	-	$	984,518

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 (in thousands):

			Special				Doubtful
	Pass		Mention		Substandard		or 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

Summary of Recorded Investment in Loan Classes Based on Payment Activity

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due over 90 days and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the carrying value of residential and consumer loans based on payment activity (in thousands):

														Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year													Loans		Loans
														Amortized		Converted
June 30, 2023		2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	13,560	$	55,863	$	59,707	$	37,220	$	17,375	$	94,858	$	28,307	$	-	$	306,890
Nonperforming		-		-		-		-		58		463		51		-		572
Total	$	13,560	$	55,863	$	59,707	$	37,220	$	17,433	$	95,321	$	28,358	$	-	$	307,462
Residential real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	6	$	-	$	-	$	6
Construction										-
Payment Performance
Performing	$	5,220	$	21,705	$	6,786	$	1,528	$	1,911	$	788	$	307	$	-	$	38,245
Nonperforming		-		-		-		-		-		-		-		-		-
Total	$	5,220	$	21,705	$	6,786	$	1,528	$	1,911	$	788	$	307	$	-	$	38,245
Construction
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer loans to individuals										-
Payment Performance
Performing	$	81,233	$	89,832	$	30,125	$	18,044	$	14,013	$	12,800	$	1,122	$	-	$	247,169
Nonperforming		-		461		41		21		63		3		-		-		589
Total	$	81,233	$	90,293	$	30,166	$	18,065	$	14,076	$	12,803	$	1,122	$	-	$	247,758
Consumer loans to individuals
Current period gross charge-offs	$	3	$	146	$	98	$	28	$	15	$	7	$	11	$	-	$	308
Total										-
Payment Performance
Performing	$	100,013	$	167,400	$	96,618	$	56,792	$	33,299	$	108,446	$	29,736	$	-	$	592,304
Nonperforming		-		461		41		21		121		466		51		-		1,161
Total	$	100,013	$	167,861	$	96,659	$	56,813	$	33,420	$	108,912	$	29,787	$	-	$	593,465

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. The following table presents the recorded investment in the loan classes based on payment activity as of December 31, 2022 (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

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Operating Leases (Tables)

6 Months Ended

Jun. 30, 2023

Operating Leases [Abstract]

Lease Cost

	Operating
Weighted-average remaining term		9.8
Weighted-average discount rate		2.85%

Undiscounted Cash Flows Due

Undiscounted cash flows due (in thousands)		Operating
2023	$	327
2024		664
2025		680
2026		524
2027		401
2028 and thereafter		2,414
Total undiscounted cash flows		5,010
Discount on cash flows		739
Total lease liabilities	$	4,271

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Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value of Assets and Liabilities [Abstract]

Fair Value, Assets Measured on Recurring Basis

	Fair Value Measurement Using
	Reporting Date
Description	Total		Level 1		Level 2		Level 3
June 30, 2023	(In thousands)
ASSETS
Available for Sale:
U.S. Treasury securities	$	41,969	$	-	$	41,969	$	-
U.S. Government agencies		18,507		-		18,507		-
States and political subdivisions		126,519		-		126,519		-
Mortgage-backed securities-government
sponsored entities		216,626		-		216,626		-
Interest rate derivatives		1,447		-		1,447		-
LIABILITIES
Interest rate derivatives		1,447		-		1,447		-
Description	Total		Level 1		Level 2		Level 3
December 31, 2022	(In thousands)
ASSETS
Available for Sale:
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		-

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis

			Fair Value Measurement Using Reporting Date
(In thousands)
Description	Total		Level 1		Level 2		Level 3
June 30, 2023
Individually analyzed loans held for investment	$	490	$	-	$	-	$	490
Foreclosed Real Estate Owned		387		-		-		387
December 31, 2022
Impaired Loans	$	413	$	-	$	-	$	413
Foreclosed Real Estate Owned		346		-		-		346

Additional Qualitative Information about Level 3 Assets

	Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
June 30, 2023
Individually analyzed loans held for investment	$	490	Appraisal of collateral(1)	Appraisal adjustments(2)	10.0%-10.0% (10.0%)
Foreclosed real estate owned	$	387	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, 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%)

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

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

Fair Value, by Balance Sheet Grouping

	Fair Value Measurements at June 30, 2023
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents (1)	$	33,089	$	33,089	$	33,089	$	-	$	-
Loans receivable, net		1,560,216		1,504,798		-		-		1,504,798
Mortgage servicing rights		189		497		-		-		497
Regulatory stock (1)		7,924		7,924		7,924		-		-
Bank owned life insurance (1)		45,806		45,806		45,806		-		-
Accrued interest receivable (1)		7,276		7,276		7,276		-		-
Financial liabilities:
Deposits		1,731,997		1,730,506		1,120,024		-		610,482
Short-term borrowings (1)		112,290		112,290		112,290		-		-
Other borrowings		99,687		98,689		-		-		98,689
Accrued interest payable (1)		7,101		7,101		7,101		-		-
Off-balance sheet financial instruments:
Commitments to extend credit and ‎outstanding letters of credit		-		-		-		-		-

	Fair Value Measurements at December 31, 2022
	Carrying Amount		Fair 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		-		-		-		-		-

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

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Interest Rate Swaps (Tables)

6 Months Ended

Jun. 30, 2023

Interest Rate Swaps [Abstract]

Summary of Derivatives

(Amounts in thousands)
	Notional Amount								Fair Value
		June 30, 2023		December 31, 2022		Interest Rate Paid		Interest Rate Received		June 30, 2023		December 31, 2022
Customer interest rate swap
Maturing November, 2030	$	6,330	$	6,513	Term SOFR + Margin			Fixed	$	880	$	889
Maturing December, 2030		4,166		4,297	Term SOFR + Margin			Fixed		567		575
Total	$	10,496	$	10,810					$	1,447	$	1,464
Third party interest rate swap
Maturing November, 2030	$	6,330	$	6,513		Fixed	Term SOFR + Margin		$	880	$	889
Maturing December, 2030		4,166		4,297		Fixed	Term SOFR + Margin			567		575
Total	$	10,496	$	10,810					$	1,447	$	1,464

Fair Value of Derivative Instruments

	(Amounts in thousands)
	Assets			Liabilities
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
June 30, 2023
Interest rate derivatives	Other assets	$	1,447	Other liabilities	$	1,447
December 31, 2022
Interest rate derivatives	Other assets		1,464	Other liabilities		1,464

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Basis of Presentation (Narrative) (Details) - USD ($) $ in Thousands	Jan. 01, 2023	Jun. 30, 2023	Dec. 31, 2022
Retained Earnings (Accumulated Deficit)		$ 135,583	$ 130,020
ACL on debt securities available for sale		0	$ 0
Accounting Standards Update 2016-13 [Member]
Retained Earnings (Accumulated Deficit)	$ 1,751
Provision for credit loss expense - loans	260
ACL on debt securities available for sale	0
Allowance for credit losses for PCD assets	$ 250
Accrued interest receivable		$ 1,950

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Basis of Presentation (Changes from Incurred Loss Model to Expected Credit Loss Model) (Details) - USD ($) $ in Thousands	Jan. 01, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on debt securities available for sale		$ 0		$ 0
ACL on loans		17,483	$ 19,445	16,999	$ 17,017	$ 16,660	$ 16,442
ACL	$ 19,794
Pre Adoption [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL	16,999
Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL	2,795
Unfunded Loan Commitment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL	329
Unfunded Loan Commitment [Member] | Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL	329
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	1,288	1,264	1,359	2,833	2,740	2,326	2,175
Residential Real Estate Loans [Member] | Pre Adoption [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	2,833
Residential Real Estate Loans [Member] | Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	(1,545)
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	13,820	11,253	13,725	8,293	9,155	10,287	10,878
Commercial Real Estate Loans [Member] | Pre Adoption [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	8,293
Commercial Real Estate Loans [Member] | Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	5,527
Agricultural Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	59
Agricultural Real Estate Loans [Member] | Pre Adoption [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	259
Agricultural Real Estate Loans [Member] | Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	(200)
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	797	819	703	409	242	134	133
Construction Real Estate Loans [Member] | Pre Adoption [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	409
Construction Real Estate Loans [Member] | Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	388
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	1,289	1,281	1,158	2,445	2,504	1,495	1,490
Commercial Loans [Member] | Pre Adoption [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	2,445
Commercial Loans [Member] | Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	(1,156)
Other Agricultural Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	127
Other Agricultural Loans [Member] | Pre Adoption [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	124
Other Agricultural Loans [Member] | Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	3
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	2,085	$ 2,725	$ 2,297	$ 2,636	$ 2,046	$ 1,622	$ 1,766
Consumer Loans [Member] | Pre Adoption [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	2,636
Consumer Loans [Member] | Adoption Impact [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
ACL on loans	$ (551)

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Revenue Recognition (Noninterest Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Noninterest Income (in scope of Topic 606)	$ 1,726	$ 2,023	$ 3,402	$ 5,168
Net realized (losses) gains on sales of securities	(212)		(209)
Loan servicing fees	30	17	50	35
Gain on sales of loans	10		10
Earnings on and proceeds from bank-owned life insurance	229	449	442	625
Noninterest Income (out-of-scope of Topic 606)	57	466	293	660
Total other income	1,783	2,489	3,695	5,828
Service Charges On Deposit Accounts [Member]
Noninterest Income (in scope of Topic 606)	110	106	214	205
ATM Fees [Member]
Noninterest Income (in scope of Topic 606)	106	108	212	213
Overdraft Fees [Member]
Noninterest Income (in scope of Topic 606)	342	316	661	604
Safe Deposit Box Rental [Member]
Noninterest Income (in scope of Topic 606)	22	23	48	46
Loan Related Service Fees [Member]
Noninterest Income (in scope of Topic 606)	131	252	284	522
Debit Card Fees[Member]
Noninterest Income (in scope of Topic 606)	576	627	1,135	1,255
Fiduciary Activities [Member]
Noninterest Income (in scope of Topic 606)	229	214	441	416
Commissions On Mutual Funds And Annuities [Member]
Noninterest Income (in scope of Topic 606)	36	26	61	66
Gains On Sales Of Other Real Estate Owned [Member]
Noninterest Income (in scope of Topic 606)				427
Other Income [Member]
Noninterest Income (in scope of Topic 606)	$ 174	$ 351	$ 346	$ 1,414

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Earnings Per Share (Narrative) (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	110,350	151,600	110,350	151,600
Share price	$ 29.53	$ 24.26	$ 29.53	$ 24.26	$ 33.44

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Earnings Per Share (Schedule of Weighted Average Shares Outstanding used in the Computations of Basic and Diluted Earnings Per Share) (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Weighted Average Number of Shares Outstanding, Basic [Abstract]
Weighted average shares outstanding	8,101	8,192	8,138	8,197
Less: Unvested restricted shares	(42)	(36)	(43)	(34)
Basic EPS weighted average shares outstanding	8,059	8,156	8,095	8,163
Basic EPS weighted average shares outstanding	8,059	8,156	8,095	8,163
Add: Dilutive effect of stock options and restricted shares	16	12	17	12
Diluted EPS weighted average shares outstanding	8,075	8,168	8,112	8,175

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Stock-Based Compensation (Narrative) (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Future compensation expense of non-vested restricted stock outstanding	$ 1,070,000
Non-vested restricted stock recognition period	4 years 6 months
Non-vested stock outstanding	41,460	39,530	44,460	32,030
Options, Granted	2,500
Compensation expense related to stock options	$ 191,000	$ 134,000
Share price	$ 29.53	$ 24.26	$ 33.44
Remaining Life, Years	6 years 4 months 24 days		6 years 9 months 18 days
Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Granted	2,500
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	$ 224,000	$ 171,000
Norwood Financial Corp 2014 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to non-vested options granted	$ 191,000

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Stock-Based Compensation (Summary of Stock Option Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Stock-Based Compensation [Abstract]
Options, beginning of year	218,975
Options, Granted	2,500
Options, Exercised	(14,250)
Options, end of year	207,225	218,975
Options, Exercisable, end of period	166,725
Weighted Average Exercise Price Per Share, Outstanding, beginning of period	$ 28.70
Weighted Average Exercise Price Per Share, Granted	29.60
Weighted Average Exercise Price Per Share, Exercised	23.39
Weighted Average Exercise Price Per Share, Outstanding, end of period	29.07	$ 28.70
Weighted Average Exercise Price Per Share, Exercisable, end of period	$ 28.04
Weighted Average Remaining Contractual Term, Outstanding	6 years 4 months 24 days	6 years 9 months 18 days
Weighted Average Remaining Contractual Term, Granted in Period	9 years 9 months 18 days
Weighted Average Remaining Contractual Term, Exercised During Period	5 years 8 months 12 days
Weighted Average Remaining Contractual Term, Exercisable at End of Period	5 years 8 months 12 days
Aggregate Intrinsic Value, Outstanding, beginning of period	$ 1,100
Aggregate Intrinsic Value, Outstanding, end of period	539	$ 1,100
Aggregate Intrinsic Value, Exercisable at end of period	$ 539

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Stock-Based Compensation (Summary of Restricted Stock Activity) (Details) - $ / shares	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Stock-Based Compensation [Abstract]
Restricted stock Non-vested, beginning balance	44,460	32,030
Restricted stock, granted		7,500
Restricted stock, vested	(3,000)
Restricted stock, forfeited
Restricted stock Non-vested, ending balance	41,460	39,530
Restricted stock Non-vested, weighted-average grant date fair value, beginning balance	$ 30.12	$ 26.76
Restricted stock, granted, weighted-average grant date fair value		25.71
Restricted stock, vested, weighted-average grant date fair value	25.71
Restricted stock, forfeited, weighted-average grant date fair value
Restricted stock Non-vested, weighted-average grant date fair value, ending balance	$ 30.44	$ 28.99

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Accumulated Other Comprehensive Income (Loss) (Summary Of Changes In Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance			$ (57,353)
Other comprehensive income (loss)	$ (4,286)	$ (16,505)	3,104	$ (39,974)
Ending balance	(54,249)		(54,249)
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss)	(4,286)	(16,505)	3,104	(39,974)
Amount Reclassified From Accumulated Other Comprehensive Income (Loss) [Member] | Unrealized Gains (Losses) On Available-For-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(49,963)	(23,725)	(57,353)	(256)
Other comprehensive loss before reclassification	(4,453)	(16,505)	2,939	(39,974)
Amount reclassified from accumulated other comprehensive (income) loss	167		165
Other comprehensive income (loss)	(4,286)	(16,505)	3,104	(39,974)
Ending balance	$ (54,249)	$ (40,230)	$ (54,249)	$ (40,230)

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Accumulated Other Comprehensive Income (Loss) (Significant Amounts Reclassified out of each Component of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Unrealized losses on available for sale securities	$ (212)		$ (209)
Income tax expense	(1,734)	$ (1,756)	(3,221)	$ (3,610)
NET INCOME	6,503	$ 6,855	12,285	$ 13,983
Amount Reclassified From Accumulated Other Comprehensive Income (Loss) [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Unrealized losses on available for sale securities	(212)		(209)
Income tax expense	45		44
NET INCOME	$ (167)		$ (165)

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Off-Balance Sheet Financial Instruments and Guarantees (Schedule of Fair Value, Off-balance Sheet Risks) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Loss Contingencies [Line Items]
Financial instrument commitments	$ 272,579	$ 253,220
Commitments to Grant Loans [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	96,514	93,304
Unfunded Commitments Under Lines of Credit [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	162,256	146,921
Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Financial instrument commitments	$ 13,809	$ 12,995

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Securities (Narrative) (Details) $ in Thousands	Jun. 30, 2023 USD ($) security	Dec. 31, 2022 USD ($)
Securities [Abstract]
Debt securities in unrealized loss position in the less than twelve months category	39
Debt securities in unrealized loss position in the twelve months or more category	302
Pledged Financial Instruments, Not Separately Reported, Securities | $	$ 362,977	$ 378,472

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Securities (Schedule of Amortized Cost Gross Unrealized Gains and Losses, and Fair Values of Securities) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	$ 473,022
Available for Sale, Fair Value	403,621	$ 418,927
Debt Securities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	473,022	492,256
Available for Sale, Gross Unrealized Gains		2
Available for Sale, Gross Unrealized Losses	(69,401)	(73,331)
Available for Sale, Fair Value	403,621	418,927
U.S. Treasury Securities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	45,147	45,066
Available for Sale, Gross Unrealized Losses	(3,178)	(3,212)
Available for Sale, Fair Value	41,969	41,854
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	21,325	21,266
Available for Sale, Gross Unrealized Losses	(2,818)	(2,943)
Available for Sale, Fair Value	18,507	18,323
States And Political Subdivisions [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	152,140	157,524
Available for Sale, Gross Unrealized Gains		2
Available for Sale, Gross Unrealized Losses	(25,621)	(29,674)
Available for Sale, Fair Value	126,519	127,852
Mortgage-backed Securities-Government Sponsored Entities [Member]
Schedule of Investments [Line Items]
Available for Sale, Amortized Cost, Total	254,410	268,400
Available for Sale, Gross Unrealized Losses	(37,784)	(37,502)
Available for Sale, Fair Value	$ 216,626	$ 230,898

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Securities (Schedule of Investments' Gross Unrealized Losses and Fair Value Aggregated by Security Type and Length of Time that Individual Securities have been in a Continuous Unrealized Loss Position) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Debt Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	$ 54,293	$ 203,095
Less than 12 Months, Unrealized Losses	(2,410)	(23,567)
12 Months or More, Fair Value	348,838	212,027
12 Months or More, Unrealized Losses	(66,991)	(49,764)
Total, Fair Value	403,131	415,122
Total, Unrealized Losses	(69,401)	(73,331)
U.S. Treasury Securities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	17,350	25,733
Less than 12 Months, Unrealized Losses	(415)	(849)
12 Months or More, Fair Value	24,619	16,121
12 Months or More, Unrealized Losses	(2,763)	(2,363)
Total, Fair Value	41,969	41,854
Total, Unrealized Losses	(3,178)	(3,212)
U.S. Government Agencies [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	4,783	8,321
Less than 12 Months, Unrealized Losses	(112)	(885)
12 Months or More, Fair Value	13,724	10,002
12 Months or More, Unrealized Losses	(2,706)	(2,058)
Total, Fair Value	18,507	18,323
Total, Unrealized Losses	(2,818)	(2,943)
States And Political Subdivisions [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	8,013	66,680
Less than 12 Months, Unrealized Losses	(253)	(11,194)
12 Months or More, Fair Value	118,016	57,367
12 Months or More, Unrealized Losses	(25,368)	(18,480)
Total, Fair Value	126,029	124,047
Total, Unrealized Losses	(25,621)	(29,674)
Mortgage-backed Securities-Government Sponsored Entities [Member]
Schedule of Investments [Line Items]
Less than 12 Months, Fair Value	24,147	102,361
Less than 12 Months, Unrealized Losses	(1,630)	(10,639)
12 Months or More, Fair Value	192,479	128,537
12 Months or More, Unrealized Losses	(36,154)	(26,863)
Total, Fair Value	216,626	230,898
Total, Unrealized Losses	$ (37,784)	$ (37,502)

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Securities (Schedule of Amortized Cost and Fair Value Of Debt Securities by Contractual Maturity) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Securities [Abstract]
Available for Sale, Amortized Cost, Due in one year or less	$ 11,727
Available for Sale, Amortized Cost, Due after one year through five years	43,492
Available for Sale, Amortized Cost, Due after five years through ten years	54,494
Available for Sale, Amortized Cost, Due after ten years	108,899
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Amortized Cost Basis, Total	218,612
Available for Sale, Amortized Cost, Mortgage-backed securities-government sponsored entities	254,410
Available for Sale, Amortized Cost, Total	473,022
Available for Sale, Fair Value, Due in one year or less	11,588
Available for Sale, Fair Value, Due after one year through five years	40,448
Available for Sale, Fair Value, Due after five years through ten years	44,947
Available for Sale, Fair Value, Due after ten years	90,012
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Total	186,995
Available for Sale, Fair Value, Mortgage-backed securities-government sponsored entities	216,626
Available for Sale, Fair Value, Total	$ 403,621	$ 418,927

XML

Securities (Gross Realized Gains and Losses on Sales of Securities Available-for-Sale) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023
Securities [Abstract]
Gross realized gains		$ 4
Gross realized losses	$ (212)	(213)
Net realized gains (losses)	(212)	(209)
Proceeds from sales of securities	$ 1,363	$ 3,345

XML

Loans Receivable and Allowance for Loan Losses (Narrative) (Details)	6 Months Ended
	Jun. 30, 2023 USD ($) property	Dec. 31, 2022 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real Estate Acquired Through Foreclosure	$ 387,000	$ 346,000
Financing Receivable, before Allowance for Credit Loss	1,577,983,000	1,474,424,000
Proceeds from Sale of Mortgage Loans Held-for-sale	$ 1,234,000
Single Property [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of property recognized write-down | property	1
Realizable Value Of Property Writedown	$ 54,000
Number Of Properties Under Foreclosure Proceedings | property	1
Mortgage Loans in Process of Foreclosure, Amount	$ 290,000
Multiple Properties [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number Of Properties Disposed By Sale | property	2
Real Estate Disposal Through Foreclosure	$ 195,000
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number Of Properties Under Foreclosure Proceedings | property	3
Mortgage Loans in Process of Foreclosure, Amount	$ 168,000
Financing Receivable, before Allowance for Credit Loss	307,462,000	298,813,000
Residential Real Estate Loans [Member] | Hospitality Lodging Industry [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	$ 121,800,000
Concentration Risk, Percentage	7.70%
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	$ 670,353,000	$ 651,544,000
Commercial Real Estate Loans [Member] | Commercial Rentals [Member] | Loans Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, before Allowance for Credit Loss	$ 146,500,000
Concentration Risk, Percentage	9.30%
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Annual Loan Review threshold, amount	$ 1,500,000

XML

Loans Receivable and Allowance for Loan Losses (Composition of the Loan Portfolio) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Mar. 31, 2023	Jan. 01, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 1,577,983			$ 1,474,424
Deferred fees, net	(284)			(479)
Total loans receivable	1,577,699			1,473,945
Allowance for credit losses	(17,483)	$ (19,445)		(16,999)	$ (17,017)	$ (16,660)	$ (16,442)
Net loans receivable	$ 1,560,216			$ 1,456,946
Percent of Loans	100.00%			100.00%
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 307,462			$ 298,813
Allowance for credit losses	$ (1,264)	(1,359)	$ (1,288)	$ (2,833)	(2,740)	(2,326)	(2,175)
Percent of Loans	19.50%			20.30%
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 670,353			$ 651,544
Allowance for credit losses	$ (11,253)	(13,725)	(13,820)	$ (8,293)	(9,155)	(10,287)	(10,878)
Percent of Loans	42.50%			44.20%
Agricultural Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 67,729			$ 68,915
Allowance for credit losses			(59)
Percent of Loans	4.30%			4.70%
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 38,245			$ 32,469
Allowance for credit losses	$ (819)	(703)	(797)	$ (409)	(242)	(134)	(133)
Percent of Loans	2.40%			2.20%
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 211,714			$ 187,257
Allowance for credit losses	$ (1,281)	(1,158)	(1,289)	$ (2,445)	(2,504)	(1,495)	(1,490)
Percent of Loans	13.40%			12.70%
Other Agricultural Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 34,722			$ 35,277
Allowance for credit losses			(127)
Percent of Loans	2.20%			2.40%
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 247,758			$ 200,149
Allowance for credit losses	$ (2,725)	$ (2,297)	$ (2,085)	$ (2,636)	$ (2,046)	$ (1,622)	$ (1,766)
Percent of Loans	15.70%			13.50%

XML

Loans Receivable and Allowance for Loan Losses (Summary of Amount of Loans in Each Category that were Individually and Collectively Evaluated for Impairment) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 490	$ 463
Loans acquired with deteriorated credit quality		6,290
Collectively evaluated for impairment	1,577,493	1,467,671
Total	1,577,983	1,474,424
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans acquired with deteriorated credit quality		567
Collectively evaluated for impairment	307,462	298,246
Total	307,462	298,813
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	423	402
Loans acquired with deteriorated credit quality		2,049
Collectively evaluated for impairment	669,930	649,093
Total	670,353	651,544
Agricultural Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans acquired with deteriorated credit quality		2,034
Collectively evaluated for impairment	67,729	66,881
Total	67,729	68,915
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	38,245	32,469
Total	38,245	32,469
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	67	61
Loans acquired with deteriorated credit quality		1,640
Collectively evaluated for impairment	211,647	185,556
Total	211,714	187,257
Other Agricultural Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	34,722	35,277
Total	34,722	35,277
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Collectively evaluated for impairment	247,758	200,149
Total	$ 247,758	$ 200,149

XML

Loans Receivable and Allowance for Loan Losses (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		$ 413
Impaired Financing Receivable, with Related Allowance, Recorded Investment		50
Impaired Financing Receivable, Recorded Investment		463
Unpaid Principal Balance, With no related allowance recorded		413
Unpaid Principal Balance, With an allowance recorded		50
Unpaid Principal Balance, Total		463
Associated Allowance		50
Average Recorded Investment, Total	$ 835
Interest Income Recognized, Total	23
Commercial Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		402
Impaired Financing Receivable, Recorded Investment		402
Unpaid Principal Balance, With no related allowance recorded		402
Unpaid Principal Balance, Total		402
Average Recorded Investment, Total	822
Interest Income Recognized, Total	20
Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		11
Impaired Financing Receivable, with Related Allowance, Recorded Investment		50
Impaired Financing Receivable, Recorded Investment		61
Unpaid Principal Balance, With no related allowance recorded		11
Unpaid Principal Balance, With an allowance recorded		50
Unpaid Principal Balance, Total		61
Associated Allowance		$ 50
Average Recorded Investment, Total	13
Interest Income Recognized, Total	$ 3

XML

Loans Receivable and Allowance for Loan Losses (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Loans	$ 1,577,983	$ 1,474,424
Non-Accrual	3,223	1,113
Total Past Due and Non-Accrual	5,732	3,221
Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Loans		6,290
Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	1,572,251	1,464,913
Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	2,255	1,646
Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	254	462
Residential Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Loans	307,462	298,813
Non-Accrual	572	486
Total Past Due and Non-Accrual	1,361	896
Residential Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Loans		567
Residential Real Estate Loans [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	306,101	297,350
Residential Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	741	187
Residential Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	48	223
Commercial Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Loans	670,353	651,544
Non-Accrual	1,946	402
Total Past Due and Non-Accrual	2,032	807
Commercial Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Loans		2,049
Commercial Real Estate Loans [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	668,321	648,688
Commercial Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	60	405
Commercial Real Estate Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	26
Agricultural Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Loans	67,729	68,915
Total Past Due and Non-Accrual		130
Agricultural Real Estate Loans [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Loans		2,034
Agricultural Real Estate Loans [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	67,729	66,751
Agricultural Real Estate Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans		130
Construction Real Estate Loans [Member]
Financing Receivable, Past Due [Line Items]
Loans	38,245	32,469
Construction Real Estate Loans [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	38,245	32,469
Commercial Loans [Member]
Financing Receivable, Past Due [Line Items]
Loans	211,714	187,257
Non-Accrual	116	61
Total Past Due and Non-Accrual	546	132
Commercial Loans [Member] | Purchased Credit-Impaired [Member]
Financing Receivable, Past Due [Line Items]
Loans		1,640
Commercial Loans [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	211,168	185,485
Commercial Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	430	71
Other Agricultural Loans [Member]
Financing Receivable, Past Due [Line Items]
Loans	34,722	35,277
Total Past Due and Non-Accrual	254
Other Agricultural Loans [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	34,468	35,277
Other Agricultural Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	254
Consumer Loans [Member]
Financing Receivable, Past Due [Line Items]
Loans	247,758	200,149
Non-Accrual	589	164
Total Past Due and Non-Accrual	1,539	1,256
Consumer Loans [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	246,219	198,893
Consumer Loans [Member] | Financing Receivables, 31 to 60 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	770	853
Consumer Loans [Member] | Financing Receivables, 61 to 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Loans	$ 180	$ 239

XML

Loans Receivable and Allowance for Loan Losses (Allowance for Loan Losses and Recorded Investment in Financing Receivables) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	$ 19,445	$ 16,660	$ 16,999	$ 16,442	$ 16,442
Impact of adopting ASC 326					2,466
Charge Offs	(251)	(87)	(615)	(269)
Recoveries	23	144	67	244
(Release of) Provision for credit losses	(1,734)	300	(1,434)	600
Ending balance,	17,483	17,017	17,483	17,017	16,999
Ending balance collectively evaluated for impairment	17,483	17,017	17,483	17,017
Residential Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	1,359	2,326	2,833	2,175	2,175
Impact of adopting ASC 326					(1,545)
Charge Offs	(6)	(5)	(6)	(120)
Recoveries		116	6	118
(Release of) Provision for credit losses	(89)	303	(24)	567
Ending balance,	1,264	2,740	1,264	2,740	2,833
Ending balance collectively evaluated for impairment	1,264	2,740	1,264	2,740
Commercial Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	13,725	10,287	8,293	10,878	10,878
Impact of adopting ASC 326					5,527
Charge Offs	(42)		(154)
Recoveries	3	6	9	80
(Release of) Provision for credit losses	(2,433)	(1,138)	(2,422)	(1,803)
Ending balance,	11,253	9,155	11,253	9,155	8,293
Ending balance collectively evaluated for impairment	11,253	9,155	11,253	9,155
Farmland [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	121	504	259
Impact of adopting ASC 326					(200)
(Release of) Provision for credit losses	(66)	(286)	(4)	218
Ending balance,	55	218	55	218	259
Ending balance collectively evaluated for impairment	55	218	55	218
Construction Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	703	134	409	133	133
Impact of adopting ASC 326					388
(Release of) Provision for credit losses	116	108	22	109
Ending balance,	819	242	819	242	409
Ending balance collectively evaluated for impairment	819	242	819	242
Commercial Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	1,158	1,495	2,445	1,490	1,490
Impact of adopting ASC 326					(1,156)
Charge Offs	(97)		(147)	(15)
Recoveries		14	6	23
(Release of) Provision for credit losses	220	995	133	1,006
Ending balance,	1,281	2,504	1,281	2,504	2,445
Ending balance collectively evaluated for impairment	1,281	2,504	1,281	2,504
Other Agricultural [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	82	292	124
Impact of adopting ASC 326					3
(Release of) Provision for credit losses	4	(180)	(41)	112
Ending balance,	86	112	86	112	124
Ending balance collectively evaluated for impairment	86	112	86	112
Consumer Loans [Member]
Financing Receivable, Allowance for Credit Loss [Line Items]
Beginning balance,	2,297	1,622	2,636	1,766	1,766
Impact of adopting ASC 326					(551)
Charge Offs	(106)	(82)	(308)	(134)
Recoveries	20	8	46	23
(Release of) Provision for credit losses	514	498	902	391
Ending balance,	2,725	2,046	2,725	2,046	$ 2,636
Ending balance collectively evaluated for impairment	$ 2,725	$ 2,046	$ 2,725	$ 2,046

XML

Loans Receivable and Allowance for Loan Losses (Summary of Carrying Value of Loan on Nonaccrual Status) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual with no ACL	$ 3,223
Non-Accrual	3,223	$ 1,113
Total Nonperforming	3,223
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual with no ACL	572
Non-Accrual	572	486
Total Nonperforming	572
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual with no ACL	1,946
Non-Accrual	1,946	402
Total Nonperforming	1,946
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual with no ACL	116
Non-Accrual	116	61
Total Nonperforming	116
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual with no ACL	589
Non-Accrual	589	$ 164
Total Nonperforming	$ 589

XML

Loans Receivable and Allowance for Loan Losses (Summary of Recorded Investment by Internal Risk Rating Systems) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 1,577,983	$ 1,474,424
Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	88,825
2022	203,490
2021	153,275
2020	109,395
2019	100,363
Prior	264,051
Revolving Loans Amortized Cost Basis	65,119
Total	984,518
Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			$ 942,993
Pass [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	87,224
2022	201,004
2021	152,655
2020	105,135
2019	99,801
Prior	255,890
Revolving Loans Amortized Cost Basis	63,295
Total	965,004
Pass [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			934,256
Special Mention [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	1,601
2022	1,945
2021	561
2020	1,722
2019	149
Prior	5,193
Revolving Loans Amortized Cost Basis	1,499
Total	12,670
Special Mention [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			2,187
Substandard [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2022	541
2021	59
2020	2,538
2019	413
Prior	2,968
Revolving Loans Amortized Cost Basis	325
Total	6,844
Substandard [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			6,550
Commercial Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	670,353	651,544
Commercial Real Estate Loans [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	43,820
2022	132,993
2021	116,099
2020	74,629
2019	75,625
Prior	211,015
Revolving Loans Amortized Cost Basis	16,172
Total	670,353
Current period gross charge-offs, 2019	112
Current period gross charge-offs, Prior	42
Current period gross charge-offs, Total	154
Commercial Real Estate Loans [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			651,544
Commercial Real Estate Loans [Member] | Pass [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	42,820
2022	132,576
2021	115,797
2020	71,807
2019	75,625
Prior	204,184
Revolving Loans Amortized Cost Basis	16,172
Total	658,981
Commercial Real Estate Loans [Member] | Pass [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			646,775
Commercial Real Estate Loans [Member] | Special Mention [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	1,000
2022	417
2021	243
2020	1,351
Prior	4,486
Total	7,497
Commercial Real Estate Loans [Member] | Special Mention [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			1,079
Commercial Real Estate Loans [Member] | Substandard [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2021	59
2020	1,471
Prior	2,345
Total	3,875
Commercial Real Estate Loans [Member] | Substandard [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			3,690
Agricultural Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	67,729	68,915
Agricultural Real Estate Loans [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	1,343
2022	13,586
2021	5,655
2020	10,145
2019	8,493
Prior	27,566
Revolving Loans Amortized Cost Basis	941
Total	67,729
Agricultural Real Estate Loans [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			68,915
Agricultural Real Estate Loans [Member] | Pass [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	1,343
2022	13,045
2021	5,655
2020	9,078
2019	8,493
Prior	26,877
Revolving Loans Amortized Cost Basis	616
Total	65,107
Agricultural Real Estate Loans [Member] | Pass [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			66,444
Agricultural Real Estate Loans [Member] | Special Mention [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Prior	496
Total	496
Agricultural Real Estate Loans [Member] | Special Mention [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			368
Agricultural Real Estate Loans [Member] | Substandard [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2022	541
2020	1,067
Prior	193
Revolving Loans Amortized Cost Basis	325
Total	2,126
Agricultural Real Estate Loans [Member] | Substandard [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			2,103
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	211,714	187,257
Commercial Loans [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	42,155
2022	51,043
2021	27,919
2020	21,303
2019	13,092
Prior	20,702
Revolving Loans Amortized Cost Basis	35,500
Total	211,714
Current period gross charge-offs, 2022	32
Current period gross charge-offs, 2021	24
Current period gross charge-offs, 2020	50
Current period gross charge-offs, Prior	41
Current period gross charge-offs, Total	147
Commercial Loans [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			187,257
Commercial Loans [Member] | Pass [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	41,554
2022	49,515
2021	27,604
2020	21,117
2019	13,043
Prior	20,061
Revolving Loans Amortized Cost Basis	34,156
Total	207,050
Commercial Loans [Member] | Pass [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			186,966
Commercial Loans [Member] | Special Mention [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	601
2022	1,528
2021	315
2020	186
2019	49
Prior	211
Revolving Loans Amortized Cost Basis	1,344
Total	4,234
Commercial Loans [Member] | Special Mention [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			184
Commercial Loans [Member] | Substandard [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Prior	430
Total	430
Commercial Loans [Member] | Substandard [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			107
Other Agricultural Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	34,722	$ 35,277
Other Agricultural Loans [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	1,507
2022	5,868
2021	3,602
2020	3,318
2019	3,153
Prior	4,768
Revolving Loans Amortized Cost Basis	12,506
Total	34,722
Other Agricultural Loans [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			35,277
Other Agricultural Loans [Member] | Pass [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	1,507
2022	5,868
2021	3,599
2020	3,133
2019	2,640
Prior	4,768
Revolving Loans Amortized Cost Basis	12,351
Total	33,866
Other Agricultural Loans [Member] | Pass [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			34,071
Other Agricultural Loans [Member] | Special Mention [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2021	3
2020	185
2019	100
Revolving Loans Amortized Cost Basis	155
Total	443
Other Agricultural Loans [Member] | Special Mention [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			556
Other Agricultural Loans [Member] | Substandard [Member] | Non-Homogenous Pools [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2019	413
Total	$ 413
Other Agricultural Loans [Member] | Substandard [Member] | Aggregate Pass and Criticized Categories [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total			$ 650

XML

Loans Receivable and Allowance for Loan Losses (Summary of Recorded investment in Loan Classes Based on Payment Activity) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 1,577,983	$ 1,474,424
Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	100,013
2022	167,861
2021	96,659
2020	56,813
2019	33,420
Prior	108,912
Revolving Loans Amortized Cost Basis	29,787
Total	593,465	531,431
Performing [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	100,013
2022	167,400
2021	96,618
2020	56,792
2019	33,299
Prior	108,446
Revolving Loans Amortized Cost Basis	29,736
Total	592,304	530,781
Nonperforming [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2022	461
2021	41
2020	21
2019	121
Prior	466
Revolving Loans Amortized Cost Basis	51
Total	1,161	650
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	307,462	298,813
Residential Real Estate Loans [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	13,560
2022	55,863
2021	59,707
2020	37,220
2019	17,433
Prior	95,321
Revolving Loans Amortized Cost Basis	28,358
Total	307,462	298,813
Current period gross charge-offs, Prior	6
Current period gross charge-offs, Total	6
Residential Real Estate Loans [Member] | Performing [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	13,560
2022	55,863
2021	59,707
2020	37,220
2019	17,375
Prior	94,858
Revolving Loans Amortized Cost Basis	28,307
Total	306,890	298,327
Residential Real Estate Loans [Member] | Nonperforming [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2019	58
Prior	463
Revolving Loans Amortized Cost Basis	51
Total	572	486
Construction Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	38,245	32,469
Construction Real Estate Loans [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	5,220
2022	21,705
2021	6,786
2020	1,528
2019	1,911
Prior	788
Revolving Loans Amortized Cost Basis	307
Total	38,245	32,469
Construction Real Estate Loans [Member] | Performing [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	5,220
2022	21,705
2021	6,786
2020	1,528
2019	1,911
Prior	788
Revolving Loans Amortized Cost Basis	307
Total	38,245	32,469
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	247,758	200,149
Consumer Loans [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	81,233
2022	90,293
2021	30,166
2020	18,065
2019	14,076
Prior	12,803
Revolving Loans Amortized Cost Basis	1,122
Total	247,758	200,149
Current period gross charge-offs, 2023	3
Current period gross charge-offs, 2022	146
Current period gross charge-offs, 2021	98
Current period gross charge-offs, 2020	28
Current period gross charge-offs, 2019	15
Current period gross charge-offs, Prior	7
Current period gross charge-offs, Revolving loans amortized cost basis	11
Current period gross charge-offs, Total	308
Consumer Loans [Member] | Performing [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2023	81,233
2022	89,832
2021	30,125
2020	18,044
2019	14,013
Prior	12,800
Revolving Loans Amortized Cost Basis	1,122
Total	247,169	199,985
Consumer Loans [Member] | Nonperforming [Member] | Based on Payment Activity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
2022	461
2021	41
2020	21
2019	63
Prior	3
Total	$ 589	$ 164

XML

Operating Leases (Narrative) (Details)	6 Months Ended
	Jun. 30, 2023 USD ($) item	Jun. 30, 2022 USD ($)
Operating Leases [Abstract]
Number of operating leases | item	7
Lease, Cost | $	$ 362,000	$ 299,000

XML

Operating Leases (Lease Cost) (Details)	Jun. 30, 2023
Operating Leases [Abstract]
Weighted-average remaining term	9 years 9 months 18 days
Weighted-average discount rate	2.85%

XML

Operating Leases (Undiscounted Cash Flows Due) (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Operating Leases [Abstract]
2023	$ 327
2024	664
2025	680
2026	524
2027	401
2028 and thereafter	2,414
Total undiscounted cash flows	5,010
Discount on cash flows	(739)
Total lease liabilities	$ 4,271

XML

Fair Value of Assets and Liabilities (Narrative) (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2023 USD ($)	Dec. 31, 2022 USD ($) loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Financing Receivable, Recorded Investment		$ 463
Impaired Financing Receivable, Related Allowance		50
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		413
Impaired Financing Receivable, with Related Allowance, Recorded Investment		$ 50
Number of impaired loans, with related allowance | loan		3
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 490	$ 413
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
Valuation allowance		50
Impaired Loans, Cumulative Charge-Offs		$ 0

XML

Fair Value of Assets and Liabilities (Fair Value, Assets Measured on Recurring Basis) (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
U.S. Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	$ 41,969	$ 41,854
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	41,969	41,854
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	18,507	18,323
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	18,507	18,323
States And Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	126,519	127,852
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	126,519	127,852
Mortgage-backed Securities-Government Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	216,626	230,898
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	216,626	230,898
Interest Rate Derivatives [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	1,447	1,464
LIABILITIES	1,447	1,464
Interest Rate Derivatives [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
ASSETS	1,447	1,464
LIABILITIES	$ 1,447	$ 1,464

XML

Fair Value of Assets and Liabilities (Fair Value, Assets and Liabilities Measured on Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 490	$ 413
Fair Value, Nonrecurring [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	490	413
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	490	413
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	387	346
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	$ 387	$ 346

XML

Fair Value of Assets and Liabilities (Additional Qualitative Information about Level 3 Assets) (Details) $ in Thousands	Jun. 30, 2023 USD ($) item	Dec. 31, 2022 USD ($) item
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure | $	$ 490	$ 413
Impaired Loans [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure | $	$ 490	$ 413
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	0.100	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	0.100	0.0892
Foreclosed Real Estate Owned [Member] | Appraisal of collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure | $	$ 387	$ 346
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]
Other Real Estate Owned, 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]
Other Real Estate Owned, Measurement Input	0.0700	0.0700

XML

Fair Value of Assets and Liabilities (Fair Value, by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022	Jun. 30, 2022	Dec. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Cash and cash equivalents, Fair Value Disclosure	$ 33,089	$ 31,866
Financial assets: Loans receivable, net, Fair Value Disclosure	1,504,798	1,418,300
Financial assets: Mortgage servicing rights, Fair Value Disclosure	497	498
Financial assets: Regulatory stock, Fair Value Disclosure	7,924	5,418
Financial assets: Bank owned life insurance, Fair Value Disclosure	45,806	43,364
Financial assets: Accrued interest receivable, Fair Value Disclosure	7,276	6,917
Financial liabilities: Deposits, Fair Value Disclosure	1,730,506	1,727,184
Financial liabilities: Short-term borrowings, Fair Value Disclosure	112,290	93,215
Financial liabilities: Other borrowings, Fair Value Disclosure	98,689	40,074
Financial liabilities: Accrued interest payable, Fair Value Disclosure	7,101	2,653
Financial assets: Cash and cash equivalents	33,089	31,866	$ 109,666	$ 206,681
Financial assets: Loans receivable, net	1,560,216	1,456,946
Financial assets: Mortgage servicing rights	189	213
Financial assets: Regulatory stock	7,924	5,418
Financial assets: Bank owned life insurance	45,806	43,364
Financial assets: Accrued interest receivable	7,276	6,917
Financial liabilities: Deposits	1,731,997	1,727,727
Financial liabilities: Short-term borrowings	112,290	93,215
Financial liabilities: Other borrowings	99,687	40,000
Financial liabilities: Accrued interest payable	7,101	2,653
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	33,089	31,866
Financial assets: Regulatory stock, Fair Value Disclosure	7,924	5,418
Financial assets: Bank owned life insurance, Fair Value Disclosure	45,806	43,364
Financial assets: Accrued interest receivable, Fair Value Disclosure	7,276	6,917
Financial liabilities: Deposits, Fair Value Disclosure	1,120,024	1,223,958
Financial liabilities: Short-term borrowings, Fair Value Disclosure	112,290	93,215
Financial liabilities: Accrued interest payable, Fair Value Disclosure	7,101	2,653
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets: Loans receivable, net, Fair Value Disclosure	1,504,798	1,418,300
Financial assets: Mortgage servicing rights, Fair Value Disclosure	497	498
Financial liabilities: Deposits, Fair Value Disclosure	610,482	503,226
Financial liabilities: Other borrowings, Fair Value Disclosure	$ 98,689	$ 40,074

XML

Interest Rate Swaps (Narrative) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
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
Interest Rate Contract [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Pledged cash as collateral	$ 350	$ 350
Derivative Asset	$ 1,447	$ 1,464

XML

Interest Rate Swaps (Summary of Derivatives) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Customer Interest Rate Swap [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	$ 10,496	$ 10,810
Fair Value	1,447	1,464
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	6,330	6,513
Fair Value	880	889
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	4,166	4,297
Fair Value	567	575
Third Party Interest Rate Swap [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, Notional Amount	10,496	10,810
Fair Value	1,447	1,464
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	6,330	6,513
Fair Value	880	889
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	4,166	4,297
Fair Value	$ 567	$ 575

XML

Interest Rate Swaps (Fair Value of Derivative Instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
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	$ 1,447	$ 1,464
Liabilities	$ 1,447	$ 1,464