10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

☑ Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended September 30, 2023. 

☐ Transition report pursuant to Section 13 or 15 (d) of the Exchange Act

For the Transition Period from                    to                   .

No. 0-17077

(Commission File Number)

PENNS WOODS BANCORP INC.

(Exact name of Registrant as specified in its charter) 

Pennsylvania	300 Market Street, P.O. Box 967	23-2226454
(State or other jurisdiction of	Williamsport	(I.R.S. Employer Identification No.)
incorporation or organization)	Pennsylvania	17703-0967
	(Address of principal executive offices)	(Zip Code)

(570) 322-1111

Registrant’s telephone number, including area code

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $5.55 par value	PWOD	The Nasdaq Global Select Market

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

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

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

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

If an emerging growth company, indicate by check mark if 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 ☒

On November 1, 2023 there were 7,163,550 shares of the Registrant’s common stock outstanding.

PENNS WOODS BANCORP, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

		Page
		Number
Part I	Financial Information
Item 1.	Financial Statements	3
Consolidated Balance Sheet (Unaudited) as of September 30, 2023 and December 31, 2022		3
Consolidated Statement of Income (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022		4
Consolidated Statement of Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022		5
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022		6
Consolidated Statement of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2023 and 2022		8
Notes to Consolidated Financial Statements (Unaudited)		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49
Part II	Other Information
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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Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

PENNS WOODS BANCORP, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	September 30,		December 31,
(In Thousands, Except Share And Per Share Data)	2023		2022
ASSETS:
Noninterest-bearing balances	$	26,651	$	27,390
Interest-bearing balances in other financial institutions	8,939		12,943
Total cash and cash equivalents	35,590		40,333
Investment debt securities, available for sale, at fair value	184,667		193,673
Investment equity securities, at fair value	1,072		1,142
Restricted investment in bank stock	25,289		19,171
Loans held for sale	4,083		3,298
Loans	1,818,461		1,639,731
Allowance for credit losses	(12,890)		(15,637)
Loans, net	1,805,571		1,624,094
Premises and equipment, net	30,746		31,844
Accrued interest receivable	10,500		9,481
Bank-owned life insurance	33,695		34,452
Investment in limited partnerships	8,275		8,656
Goodwill	16,450		16,450
Intangibles	235		327
Operating lease right-of-use asset	2,562		2,651
Deferred tax asset	6,961		6,868
Other assets	10,772		7,640
TOTAL ASSETS	$	2,176,468	$	2,000,080
LIABILITIES:
Interest-bearing deposits	$	1,095,760	$	1,037,397
Noninterest-bearing deposits	471,507		519,063
Total deposits	1,567,267		1,556,460
Short-term borrowings	193,746		153,349
Long-term borrowings	217,645		102,783
Accrued interest payable	2,716		603
Operating lease liability	2,619		2,708
Other liabilities	17,935		16,512
TOTAL LIABILITIES	2,001,928		1,832,415
SHAREHOLDERS’ EQUITY:
Preferred stock, no par value, 3,000,000 shares authorized; no shares issued	—		—
Common stock, par value $5.55, 22,500,000 shares authorized; 7,620,250 and 7,566,810 shares issued; 7,110,025 and 7,056,585 outstanding	42,335		42,039
Additional paid-in capital	55,890		54,252
Retained earnings	104,067		98,147
Accumulated other comprehensive loss:
Net unrealized loss on available for sale securities	(10,886)		(9,819)
Defined benefit plan	(4,051)		(4,139)
Treasury stock at cost, 510,225 shares	(12,815)		(12,815)
TOTAL SHAREHOLDERS' EQUITY	174,540		167,665
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,176,468	$	2,000,080

See accompanying notes to the unaudited consolidated financial statements.

3

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands, Except Share And Per Share Data)	2023		2022		2023		2022
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	21,720	$	15,051	$	59,571	$	41,709
Investment securities:
Taxable	1,365		949		3,870		2,550
Tax-exempt	114		236		410		594
Dividend and other interest income	722		628		1,827		1,470
TOTAL INTEREST AND DIVIDEND INCOME	23,921		16,864		65,678		46,323
INTEREST EXPENSE:
Deposits	6,463		693		14,686		2,191
Short-term borrowings	2,412		26		6,084		29
Long-term borrowings	1,714		613		3,892		1,871
TOTAL INTEREST EXPENSE	10,589		1,332		24,662		4,091
NET INTEREST INCOME	13,332		15,532		41,016		42,232
Provision for loan credit losses	1,331		855		726		1,335
Provision (recovery) for off balance sheet credit exposures	41		—		(463)		—
TOTAL PROVISION FOR CREDIT LOSSES	1,372		855		263		1,335
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	11,960		14,677		40,753		40,897
NON-INTEREST INCOME:
Service charges	545		559		1,557		1,563
Net debt securities losses, available for sale	(45)		(156)		(125)		(168)
Net equity securities losses	(36)		(55)		(35)		(158)
Bank-owned life insurance	170		170		892		501
Gain on sale of loans	257		294		732		905
Insurance commissions	136		109		416		386
Brokerage commissions	142		142		448		500
Loan broker commissions	241		438		728		1,350
Debit card income	320		344		995		1,080
Other	145		238		546		673
TOTAL NON-INTEREST INCOME	1,875		2,083		6,154		6,632
NON-INTEREST EXPENSE:
Salaries and employee benefits	6,290		6,016		18,778		18,421
Occupancy	784		730		2,422		2,380
Furniture and equipment	867		816		2,503		2,454
Software amortization	237		188		593		660
Pennsylvania shares tax	280		334		807		1,119
Professional fees	719		626		2,313		1,746
Federal Deposit Insurance Corporation deposit insurance	425		260		1,122		690
Marketing	167		151		594		435
Intangible amortization	25		34		92		119
Other	1,378		1,165		4,275		3,723
TOTAL NON-INTEREST EXPENSE	11,172		10,320		33,499		31,747
INCOME BEFORE INCOME TAX PROVISION	2,663		6,440		13,408		15,782
INCOME TAX PROVISION	439		1,190		2,355		2,869
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS'	$	2,224	$	5,250	$	11,053	$	12,913
EARNINGS PER SHARE - BASIC	$	0.31	$	0.74	$	1.56	$	1.83
EARNINGS PER SHARE - DILUTED	$	0.31	$	0.74	$	1.53	$	1.83
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC	7,072,440		7,051,228		7,064,336		7,060,871
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED	7,228,940		7,051,228		7,220,836		7,060,871

See accompanying notes to the unaudited consolidated financial statements.

4

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Net Income	$	2,224	$	5,250	$	11,053	$	12,913
Other comprehensive (loss) income:
Net unrealized loss on available for sale securities	(1,480)		(6,362)		(1,476)		(17,254)
Tax effect	311		1,336		310		3,623
Net realized loss on available for sale securities included in net income	45		156		125		168
Tax effect	(9)		(33)		(26)		(35)
Amortization of unrecognized pension loss	37		17		111		52
Tax effect	(8)		(3)		(23)		(11)
Total other comprehensive loss	(1,104)		(4,889)		(979)		(13,457)
Comprehensive income (loss)	$	1,120	$	361	$	10,074	$	(544)

See accompanying notes to the unaudited consolidated financial statements.

5

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

 Three months ended:

	COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE LOSS		TREASURY STOCK		TOTAL SHAREHOLDERS’ EQUITY
(In Thousands, Except Share And Per Share Data)	SHARES	AMOUNT
Balance, June 30, 2023	7,573,713	$	42,077	$	54,869	$	104,104	$	(13,833)	$	(12,815)	$	174,402
Net income						2,224						2,224
Other comprehensive loss								(1,104)				(1,104)
Stock-based compensation				229								229
Dividends declared ($0.32 per share)						(2,261)						(2,261)
Common shares issued for employee stock purchase plan	1,436	8		26								34
Director Compensation Plan	2,341	13		50								63
Registered at-the-market shares issuance, net proceeds	34,411	191		562								753
Dividend reinvestment plan	8,349	46		154								200
Balance, September 30, 2023	7,620,250	$	42,335	$	55,890	$	104,067	$	(14,937)	$	(12,815)	$	174,540

	COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE LOSS		TREASURY STOCK		TOTAL SHAREHOLDERS’ EQUITY
(In Thousands, Except Share And Per Share Data)	SHARES	AMOUNT
Balance, June 30, 2022	7,559,165	$	41,995	$	53,651	$	92,903	$	(9,680)	$	(12,815)	$	166,054
Net income						5,250						5,250
Other comprehensive loss								(4,889)				(4,889)
Stock-based compensation				236								236
Dividends declared ($0.32 per share)						(2,257)						(2,257)
Common shares issued for employee stock purchase plan	1,057	6		17								23
Director Compensation Plan	2,978	18		54								72
Balance, September 30, 2022	7,563,200	$	42,019	$	53,958	$	95,896	$	(14,569)	$	(12,815)	$	164,489

See accompanying notes to the unaudited consolidated financial statements.

6

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

Nine months ended:

	COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE LOSS		TREASURY STOCK		TOTAL SHAREHOLDERS’ EQUITY
(In Thousands, Except Share And Per Share Data)	SHARES	AMOUNT
Balance, December 31, 2022	7,566,810	$	42,039	$	54,252	$	98,147	$	(13,958)	$	(12,815)	$	167,665
Cumulative effect of adoption of ASU 2016-13						1,647						1,647
Net income						11,053						11,053
Other comprehensive loss								(979)				(979)
Stock-based compensation				715								715
Dividends declared ($0.96 per share)						(6,780)						(6,780)
Common shares issued for employee stock purchase plan	3,120	17		56								73
Director Compensation Plan	7,560	42		151								193
Registered at-the-market shares issuance, net proceeds	34,411	191		562								753
Dividend reinvestment plan	8,349	46		154								200
Balance, September 30, 2023	7,620,250	$	42,335	$	55,890	$	104,067	$	(14,937)	$	(12,815)	$	174,540

	COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE LOSS		TREASURY STOCK		TOTAL SHAREHOLDERS’ EQUITY
(In Thousands, Except Share And Per Share Data)	SHARES	AMOUNT
Balance, December 31, 2021	7,550,272	$	41,945	$	53,795	$	89,761	$	(1,112)	$	(12,115)	$	172,274
Net income						12,913						12,913
Other comprehensive loss								(13,457)				(13,457)
Stock-based compensation				1,004								1,004
Cash settlement of options				(1,074)								(1,074)
Dividends declared ($0.96 per share)						(6,778)						(6,778)
Common shares issued for employee stock purchase plan	2,960	17		50								67
Director Compensation Plan	9,968	57		183								240
Purchase of treasury stock (30,000 shares)										(700)		(700)
Balance, September 30, 2022	7,563,200	$	42,019	$	53,958	$	95,896	$	(14,569)	$	(12,815)	$	164,489

See accompanying notes to the unaudited consolidated financial statements.

7

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED) 

	Nine Months Ended September 30,
(In Thousands)	2023		2022
OPERATING ACTIVITIES:
Net Income	$	11,053	$	12,913
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,469		2,660
Loss on sale of premises and equipment	—		275
Amortization of intangible assets	92		119
Provision for credit losses	263		1,335
Stock based compensation	715		1,004
Accretion and amortization of investment security discounts and premiums	361		932
Net debt securities losses, available for sale	125		168
Originations of loans held for sale	(27,183)		(30,644)
Proceeds of loans held for sale	27,130		32,789
Gain on sale of loans	(732)		(905)
Net equity securities losses	35		158
Security trades payable	—		(111)
Earnings on bank-owned life insurance	(892)		(501)
Decrease (increase) in deferred tax asset	191		(653)
Other, net	570		(905)
Net cash provided by operating activities	14,197		18,634
INVESTING ACTIVITIES:
Proceeds from sales of available for sale securities	24,701		4,151
Proceeds from calls and maturities of available for sale securities	18,824		13,116
Proceeds from sales of equity securities	35		—
Purchases of available for sale securities	(36,356)		(57,239)
Net increase in loans	(181,784)		(168,950)
Acquisition of premises and equipment	(396)		(263)
Proceeds from the sale of premises and equipment	—		137
Proceeds from the sale of foreclosed assets	—		46
Purchase of bank-owned life insurance	(7)		(21)
Proceeds from bank-owned life insurance death benefit	1,656		2
Investment in limited partnership	—		(554)
Proceeds from redemption of regulatory stock	32,292		6,692
Purchases of regulatory stock	(38,410)		(6,700)
Net cash used for investing activities	(179,445)		(209,583)
FINANCING ACTIVITIES:
Net increase (decrease) in interest-bearing deposits	58,363		(73,943)
Net (decrease) increase in noninterest-bearing deposits	(47,556)		43,043
Proceeds from long-term borrowings	140,000		—
Repayment of long-term borrowings	(25,000)		(23,000)
Net increase in short-term borrowings	40,397		25,154
Finance lease principal payments	(138)		(134)
Dividends paid	(6,780)		(6,778)
Issuance of common stock	1,219		307
Purchases of treasury stock	—		(700)
Net cash provided by (used for) financing activities	160,505		(36,051)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(4,743)		(227,000)
CASH AND CASH EQUIVALENTS, BEGINNING	40,333		263,862
CASH AND CASH EQUIVALENTS, ENDING	$	35,590	$	36,862

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	22,549	$	4,315
Cash settlement of options	—		1,074
Income taxes paid	2,950		2,371
Non-cash investing and financing activities:
Transfer of loans to foreclosed real estate	770		97

See accompanying notes to the unaudited consolidated financial statements.

8

PENNS WOODS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.  Basis of Presentation

The consolidated financial statements include the accounts of Penns Woods Bancorp, Inc. (the “Company”) and its wholly-owned subsidiaries: Woods Investment Company, Inc., Woods Real Estate Development Company, Inc., United Insurance Solutions, LLC., Luzerne Bank, and Jersey Shore State Bank (Jersey Shore State Bank and Luzerne Bank are referred to together as the “Banks”) and Jersey Shore State Bank’s wholly-owned subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group (“The M Group”).  All significant inter-company balances and transactions have been eliminated in the consolidation.

The interim financial statements are unaudited, but in the opinion of management reflect all adjustments necessary for the fair presentation of results for such periods.  The results of operations for any interim period are not necessarily indicative of results for the full year.  These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

In reference to the attached financial statements, all adjustments are of a normal recurring nature pursuant to Rule 10-01(b) (8) of Regulation S-X.

CECL Adoption and Updated Significant Accounting Policy

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, and is referred to as CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities. It also applies to off-balance sheet (“OBS”) credit exposures (loan commitments, standby letters of credit, financial guarantees, and other similar instruments.

The Company adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, net of investments in leases and OBS credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology. The Company recorded an overall decrease of $3,789,000 to the Allowance for Credit Losses (“ACL”) on January 1, 2023 as a result of the adoption of CECL with an associated increase to retained earnings of $2,993,000 and decrease to deferred tax assets of $796,000. The Company also recorded a liability of $1,703,000 for OBS credit exposures that resulted in a decrease to retained earnings of $1,346,000 and an increase to deferred tax assets of $357,000.

Allowance for Credit Losses: The discussion that follows describes the methodology for determining the ACL under the CECL model that was adopted effective January 1, 2023. The allowance methodology for prior periods is disclosed in the Company’s 2022 Annual Report on Form 10-K.

The Company 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.

Loans: The ACL for loans is an estimate of the expected losses to be realized over the life of the loans in the portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated collectively for expected credit losses and 2) loans evaluated individually for expected credit losses. The ACL also includes certain qualitative adjustments to the CECL model.

Loans Evaluated Collectively: Management believes that internal credit ratings are the most relevant credit quality indicator for these types of loans, however; the Company does not assign internal credit ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, and consumer automobile loans. For these loans, the most relevant credit quality indicator is delinquency status and management evaluates credit quality based on the aging status of the loan. In order to determine the ACL:

• Loans aggregated into pools based on similar risk characteristics.

• The probability of default "PD" and loss given default rate "LGD" CECL model components are determined based on loss estimates driven by historical experience at the input level.

• The PD model component uses "through the economic cycle transition" matrices based on the Company's historical loan and transaction data across each pool of loans.

9

• The LGD model component calculates a lifetime LGD estimate across each pool of loans utilizing a nonparametric loss curve modeling approach.

• Reasonable and supportable forecasts are incorporated into the PD model component.

• Cash flow assumptions are established for each loan using maturity date, amortization schedule and interest rate.

• A constant prepayment rate is calculated for each loan pool in the CECL model.

Loans Evaluated Individually: Loans evaluated individually for expected credit losses include loans determined to be collateral-dependant.

Loans evaluated individually may have specific allocations assigned. For loans measured using the fair value of collateral, if the analysis determines that sufficient collateral value would be available for repayment of the debt, then no allocations would be assigned to those loans. Collateral could be in the form of real estate or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans.

For loans secured by real estate, estimated fair values are determined through appraisals performed by third-party appraisers or third party evaluations for commercial real estate loans and our internal appraisal department for 1-4 family real estate secured loans, discounted to arrive at expected net sale proceeds. For collateral dependent loans, estimated real estate fair values are also net of estimated selling costs. When a real estate secured loan is impaired, a decision is made regarding whether an updated appraisal of the real estate is necessary. This decision is based on various considerations, including: the age of the most recent appraisal; the loan-to-value ratio based on the original appraisal; the condition of the property; the Company’s experience and knowledge of the real estate market; the purpose of the loan; market factors; payment status; the strength of any guarantors; and the existence and age of other indications of value such as broker price opinions, among others. The Company generally obtains updated evaluations for collateral dependent loans secured predominantly by real estate every 12 months.

When updated evaluations are not obtained for loans secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and there has not been a significant deterioration in the collateral value since the original appraisal was performed.

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification. For commercial loans, commercial mortgages and construction loans to commercial borrowers, an internal credit rating process is used. The Company believes that internal credit ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal credit rating categories is a significant component of the ACL methodology for these loans, which bases the PD on this migration. Assigning credit ratings involves judgment. Credit ratings may be changed based on ongoing monitoring procedures, or if specific loan review assessments identify a deterioration or an improvement in the loan.

The following is a summary of the Company's internal credit rating categories:

• Pass: These loans do not currently pose undue credit risk and can range from the highest to average quality, depending on the degree of potential risk.

• Special Mention: These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in this category are currently acceptable, but are nevertheless potentially weak.

• Substandard or Lower: There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt.

The allocation of the ACL is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan portfolio. The Company considers risk factors such as: local and national economic conditions; trends in delinquencies and non-accrual loans; the diversity of borrower industry types; and the composition of the portfolio by loan type.

Qualitative and Other Adjustments to ACL: In addition to the quantitative credit loss estimates for loans evaluated collectively, qualitative factors that may not be fully captured in the quantitative results are also evaluated. These include changes in lending policy, volume of the portfolio, economy conditions, credit concentrations, level of problem loans, loan review, collateral value, and experience of credit staff. Qualitative adjustments are judgmental and are based on Management’s knowledge of the portfolio and the markets in which the Company operates. Qualitative adjustments are evaluated and approved on a quarterly basis.

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OBS Credit Exposures: The ACL for OBS credit exposures is recorded in other liabilities on the consolidated balance sheet. This ACL represents management’s estimate of expected losses in its unfunded loan commitments and other OBS credit exposures, such as letters of credit and credit recourse on sold residential mortgage loans. The ACL specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). The ACL for OBS credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses.

The impact from the adoption of CECL is shown below:

	January 1, 2023
(In Thousands)	Pre-Adoption		Adoption Impact		As Reported
Assets
ACL on loans
Commercial, financial, and agricultural	$	1,914	$	2,656	$	4,570
Real estate mortgage:
Residential	5,061		(3,893)		1,168
Commercial	6,110		(2,660)		3,450
Construction	188		(96)		92
Consumer automobile loans	1,617		240		1,857
Other consumer installment loans	109		602		711
Unallocated	638		(638)		—
Liabilities
ACL for unfunded commitments	143		1,703		1,846
	$	15,780	$	(2,086)	$	13,694

Note 2.  Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss by component shown net of tax and parenthesis indicating debits, as of September 30, 2023 and 2022 were as follows:

	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
(In Thousands)	Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total		Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total
Beginning balance	$	(9,753)	$	(4,080)	$	(13,833)	$	(6,222)	$	(3,458)	$	(9,680)
Other comprehensive loss before reclassifications	(1,169)		—		(1,169)		(5,026)		—		(5,026)
Amounts reclassified from accumulated other comprehensive gain	36		29		65		123		14		137
Net current-period other comprehensive (loss) income	(1,133)		29		(1,104)		(4,903)		14		(4,889)
Ending balance	$	(10,886)	$	(4,051)	$	(14,937)	$	(11,125)	$	(3,444)	$	(14,569)

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	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
(In Thousands)	Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total		Net Unrealized Gain (Loss) on Available for Sale Securities		Defined Benefit  Plan		Total
Beginning balance	$	(9,819)	$	(4,139)	$	(13,958)	$	2,373	$	(3,485)	$	(1,112)
Other comprehensive loss before reclassifications	(1,166)		—		(1,166)		(13,631)		—		(13,631)
Amounts reclassified from accumulated other comprehensive gain	99		88		187		133		41		174
Net current-period other comprehensive (loss) income	(1,067)		88		(979)		(13,498)		41		(13,457)
Ending balance	$	(10,886)	$	(4,051)	$	(14,937)	$	(11,125)	$	(3,444)	$	(14,569)

The reclassifications out of accumulated other comprehensive loss shown, net of tax and parenthesis indicating debits to net income, as of September 30, 2023 and 2022 were as follows:

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item  in the Consolidated  Statement of Income
	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022
Net unrealized loss on available for sale securities	$	(45)	$	(156)	Net debt securities losses, available for sale
Income tax effect	9		33		Income tax provision
Total reclassifications for the period	$	(36)	$	(123)
Net unrecognized pension costs	$	(37)	$	(17)	Other non-interest expense
Income tax effect	8		3		Income tax provision
Total reclassifications for the period	$	(29)	$	(14)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item  in the Consolidated  Statement of Income
	Nine months ended September 30, 2023		Nine months ended September 30, 2022
Net unrealized losses on available for sale securities	$	(125)	$	(168)	Net debt securities losses, available for sale
Income tax effect	26		35		Income tax provision
Total reclassifications for the period	$	(99)	$	(133)
Net unrecognized pension costs	$	(111)	$	(52)	Other non-interest expense
Income tax effect	23		11		Income tax provision
Total reclassifications for the period	$	(88)	$	(41)

Note 3.  Recent Accounting Pronouncements

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

Management has completed its implementation plan, segmentation and testing, and model validation. The implementation plan included drafting of additional controls and policies to govern data uploads to its third-party vendor, balancing and reconciling, testing and auditing of inputs, and review and decision-making surrounding segmentation, methodologies, qualitative factor adjustments, and reasonable and supportable forecasts and reversion techniques. Parallel runs were processed during 2022 and the results were consistent with management's expectations. The implementation plan is currently going through the Company's control structure and internal control testing is being performed.

As a result of adopting this standard, the Company recorded a decrease in its allowance effective January 1, 2023, of $2,086,000. As a result, the Company recorded a decrease in its loan allowance as of January 1, 2023, of $3,789,000; as well as

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an increase in its allowance for off-balance sheet credit exposures of $1,703,000. These estimates are subject to further refinements based on ongoing evaluations of our model, methodologies, and judgments, as well as prevailing economic conditions and forecasts as of the adoption date. The adoption of ASU 2016-13 is not expected to have a significant impact on our regulatory capital ratios.

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

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Update is effective for smaller reporting companies and all other entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

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

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument was issued at a substantial premium. This ASU requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The amendments in this ASU are effective for public business entities that are not smaller reporting companies, for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The guidance may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current-period gross writeoffs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. This Update did not have a significant impact on the Company’s financial statements.

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In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) – Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This amendment clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. It also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The amendments will be applied prospectively, with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2023, the FASB issued ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. This Update is not expected to have a significant impact on the Company’s financial statements.

In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718), which amends or supersedes various SEC paragraphs within the Codification to conform to past SEC announcements and guidance issued by the SEC. The ASU does not provide any new guidance so there is no transition or effective date associated with it. This ASU did not have a significant impact on the Company’s financial statements.

In August 2023, the FASB issued ASU 2023-04, Liabilities (Topic 405), which adds various SEC paragraphs to the Codification to reflect guidance included in SEC Staff Accounting Bulletin 121 on safeguarding crypto assets. The standard does not provide any new guidance so there is no transition or effective date associated with it. This ASU did not have a significant impact on the Company’s financial statements.

Note 4. Per Share Data

There are no convertible securities which would affect the denominator in calculating basic and dilutive earnings per share. There were a total of 1,000,000 stock options, with an average exercise price of $25.55, outstanding on September 30, 2023. A portion of these options were included, on a weighted average basis, in the computation of diluted earnings per share for the period due to the average market price of common shares of $25.08 for the periods being greater than the strike price. There were a total of 917,000 stock options, with an average exercise price of $25.35 that were excluded, on a weighted average basis, in the computation of diluted earnings per share for the period due to the average market price of common shares of $23.78 being less than the strike price for the period ending September 30, 2022.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted average common shares issued	7,582,665	7,561,453	7,574,561	7,557,250
Weighted average treasury stock shares	(510,225)	(510,225)	(510,225)	(496,379)
Weighted average common shares outstanding - basic	7,072,440	7,051,228	7,064,336	7,060,871
Dilutive effect of outstanding stock options	156,500	—	156,500	—
Weighted average common shares outstanding - diluted	7,228,940	7,051,228	7,220,836	7,060,871

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Note 5. Investment Securities

The amortized cost, gross unrealized gains and losses, and fair values of our investment securities portfolio at September 30, 2023 and December 31, 2022 are as follows:

	September 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In Thousands)	Cost		Gains		Losses		Value
Available for sale (AFS):
U.S. Government and agency securities	$	4,001	$	—	$	(137)	$	3,864
Mortgage-backed securities	12,101		—		(705)		11,396
State and political securities	129,024		—		(9,177)		119,847
Other debt securities	53,321		—		(3,761)		49,560
Total debt securities	$	198,447	$	—	$	(13,780)	$	184,667
Investment equity securities:
Equity securities	$	1,300	$	—	$	(228)	$	1,072

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In Thousands)	Cost		Gains		Losses		Value
Available for sale (AFS):
U.S. Government and agency securities	$	3,002	$	—	$	(106)	$	2,896
Mortgage-backed securities	1,496		—		(214)		1,282
State and political securities	151,426		157		(8,774)		142,809
Other debt securities	50,178		58		(3,550)		46,686
Total debt securities	$	206,102	$	215	$	(12,644)	$	193,673
Investment equity securities:
Equity securities	$	1,350	$	—	$	(208)	$	1,142

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual debt securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022.

	September 30, 2023
	Less than Twelve Months				Twelve Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In Thousands)	Value		Losses		Value		Losses		Value		Losses
Available for sale (AFS):
U.S. Government and agency securities	$	967	$	(33)	$	2,897	$	(104)	$	3,864	$	(137)
Mortgage-backed securities	10,263		(454)		1,125		(251)		11,388		(705)
State and political securities	19,050		(1,013)		97,522		(8,164)		116,572		(9,177)
Other debt securities	10,596		(348)		35,841		(3,413)		46,437		(3,761)
Total debt securities	$	40,876	$	(1,848)	$	137,385	$	(11,932)	$	178,261	$	(13,780)

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	December 31, 2022
	Less than Twelve Months				Twelve Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In Thousands)	Value		Losses		Value		Losses		Value		Losses
Available for sale (AFS):
U.S. Government and agency securities	$	2,896	$	(106)	$	—	$	—	$	2,896	$	(106)
Mortgage-backed securities	—		—		1,282		(214)		1,282		(214)
State and political securities	95,444		(4,797)		36,283		(3,977)		131,727		(8,774)
Other debt securities	16,896		(664)		25,144		(2,886)		42,040		(3,550)
Total debt securities	$	115,236	$	(5,567)	$	62,709	$	(7,077)	$	177,945	$	(12,644)

At September 30, 2023, there were a total of 43 securities in a continuous unrealized loss position for less than twelve months and 184 individual securities that were in a continuous unrealized loss position for twelve months or greater. No credit losses occurred for the period ended September 30, 2023.

The Company reviews its position quarterly and has determined that, at September 30, 2023, the declines outlined in the above table represent temporary non-credit declines and the Company does not intend to sell, and does not believe it will be required to sell, these securities before recovery of their cost basis, which may be at maturity.  The Company has concluded that the unrealized losses disclosed above are not credit-related but are the result of interest rate changes, sector credit ratings changes, or company-specific ratings changes that are not expected to result in the non-collection of principal and interest during the period.

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

(In Thousands)	Amortized Cost		Fair Value
Due in one year or less	$	39,163	$	38,246
Due after one year to five years	88,544		82,446
Due after five years to ten years	65,437		59,047
Due after ten years	5,303		4,928
Total	$	198,447	$	184,667

Total gross proceeds from sales of debt securities available for sale for the nine months ended September 30, 2023 was $24,701,000, compared to $4,151,000 for the corresponding 2022 period.

The following table represents gross realized gains and losses from the sales of debt securities available for sale:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Available for sale (AFS):
Gross realized gains:
State and political securities	$	1	$	—	$	146	$	14
Other debt securities	—		—		—		—
Total gross realized gains	$	1	$	—	$	146	$	14
Gross realized losses:
State and political securities	$	(46)	$	(156)	$	(271)	$	(182)

Investment securities with a carrying value of approximately $114,938,000 and $154,946,000 at September 30, 2023 and December 31, 2022, respectively, were pledged to secure certain deposits, repurchase agreements, and for other purposes as required by law.

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At September 30, 2023 and December 31, 2022, we had $1,072,000 and $1,142,000, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Net losses recognized in equity securities during the period	$	(37)	$	(55)	$	(36)	$	(158)
Less: Net losses realized on the sale of equity securities during the period	(1)		—		(1)		—
Unrealized losses recognized in equity securities held at reporting date	$	(36)	$	(55)	$	(35)	$	(158)

Note 6. Loans

Management segments the Banks' loan portfolio to a level that enables risk and performance monitoring according to similar risk characteristics.  Loans are segmented based on the underlying collateral characteristics.  Categories include commercial, financial, and agricultural, real estate, and installment loans.  Real estate loans are further segmented into three categories: residential, commercial, and construction, while installment loans are classified as either consumer automobile loans or other installment loans.

The following table presents the related aging categories of loans, by class, as of September 30, 2023 and December 31, 2022:

	September 30, 2023
	Past Due						Past Due 90
	30 To 89		Past Due 90				Days Or More
(In Thousands)	Days		Days Or More		Current		& Still Accruing		Total
Commercial, financial, and agricultural	$	255	$	33	$	211,185	$	8	$	211,473
Real estate mortgage:
Residential	5,013		1,151		767,618		1,434		773,782
Commercial	775		92		524,799		59		525,666
Construction	472		32		55,329		—		55,833
Consumer automobile loans	1,121		144		238,503		141		239,768
Other consumer installment loans	157		4		10,660		36		10,821
	$	7,793	$	1,456	$	1,808,094	$	1,678	$	1,817,343
Net deferred loan fees and discounts									1,118
Allowance for credit losses									(12,890)
Loans, net									$	1,805,571

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	December 31, 2022
	Past Due		Past Due 90
	30 To 89		Days Or More		Non-
(In Thousands)	Days		& Still Accruing		Accrual		Current		Total
Commercial, financial, and agricultural	$	94	$	—	$	432	$	189,935	$	190,461
Real estate mortgage:
Residential	5,472		1,120		524		701,093		708,209
Commercial	2,564		60		2,659		495,349		500,632
Construction	511		—		—		42,797		43,308
Consumer automobile loans	2,089		80		—		183,943		186,112
Other consumer installment loans	152		15		—		10,194		10,361
	$	10,882	$	1,275	$	3,615	$	1,623,311	1,639,083
Net deferred loan fees and discounts									648
Allowance for loan losses									(15,637)
Loans, net									$	1,624,094

The Allowance for Credit Losses ("ACL") related to loans consists of loans evaluated collectively and individually for expected credit losses. The ACL related to loans represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to net loans. The ACL for off balance sheet credit exposure includes estimated losses on unfunded loan commitments, letters of credit and other off balance sheet credit exposures and is recorded in other liabilities. The total ACL is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

The following table presents the components of the ACL as of September 30, 2023:

	September 30,
(In Thousands)	2023
ACL - loans	$	12,890
ACL - off balance sheet credit exposure	1,240
Total ACL	$	14,130

 

Non-Accrual Loans

	September 30, 2023						December 31, 2022
	Non-accrual Loans
(In Thousands)	With a Related ACL		Without a Related ACL		Total		Total Non-accrual loans
Commercial, financial, and agricultural	$	—	$	543	$	543	$	432
Real estate mortgage:
Residential	24		265		289		524
Commercial	947		226		1,173		2,659
Construction	—		—		—		—
Consumer automobile	—		—		—		—
Other consumer installment loans	—		—		—		—
	$	971	$	1,034	$	2,005	$	3,615

Total interest income recorded on non-accrual loans at September 30, 2023 totaled $104,000.

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The following table presents the recorded investment, unpaid principal balance, and related allowance of impaired loans by segment as of December 31, 2022:

	December 31, 2022
	Recorded		Unpaid Principal		Related
(In Thousands)	Investment		Balance		Allowance
With no related allowance recorded:
Commercial, financial, and agricultural	$	295	$	295	$	—
Real estate mortgage:
Residential	3,388		3,388		—
Commercial	2,588		2,588		—
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	—		—		—
	6,271		6,271		—
With an allowance recorded:
Commercial, financial, and agricultural	403		403		4
Real estate mortgage:
Residential	933		933		111
Commercial	3,607		3,607		827
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	19		—		19
	4,962		4,943		961
Total:
Commercial, financial, and agricultural	698		698		4
Real estate mortgage:
Residential	4,321		4,321		111
Commercial	6,195		6,195		827
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	19		—		19
	$	11,233	$	11,214	$	961

The following table presents outstanding loan balances of collateral-dependent loans by class as of September 30, 2023:

(In Thousands)	Real estate		Unsecured*		Total
Real estate mortgage:
Residential	$	238	$	—	$	238
Commercial	92		332		424
Total	$	330	$	332	$	662

* Loan considered unsecured due to lien position on property

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The following table presents the average recorded investment in impaired loans and related interest income recognized for the three and nine months ended September 30, 2022:

	Three Months Ended September 30,
		2022
(In Thousands)		Average Investment in Impaired Loans		Interest Income Recognized on an Accrual Basis on Impaired Loans		Interest Income Recognized on a Cash Basis on Impaired Loans
Commercial, financial, and agricultural		$	711	$	5	$	—
Real estate mortgage:
Residential		4,586		47		—
Commercial		7,227		50		—
Construction		—		—		—
Consumer automobile		7		—		—
Other consumer installment loans		10		—		—
		$	12,541	$	102	$	—

	Nine Months Ended September 30,
	2022
(In Thousands)	Average Investment in Impaired Loans		Interest Income Recognized on an Accrual Basis on Impaired Loans		Interest Income Recognized on a Cash Basis on Impaired Loans
Commercial, financial, and agricultural	$	782	$	15	$	—
Real estate mortgage:
Residential	4,765		141		—
Commercial	7,492		151		—
Construction	42		1		—
Consumer automobile	3		1		—
Other consumer installment loans	15		—		—
	$	13,099	$	309	$	—

Loan Modifications

On January 1, 2023, the Corporation adopted ASU 2022-02. Loan modifications reported below do not include modifications with insignificant payment delays. ASU 2022-02 lists the following factors when considering if the loan modification has insignificant payment delays: (1) the amount of the restructured payments subject to the delay is insignificant relative to the unpaid principal or collateral value of the debt and will result in an insignificant shortfall in the contractual amount due, and (2) the delay in timing of the restructured payment period is insignificant relative to the frequency of payments due under the debt, the debt’s original contractual maturity or the debt’s original expected duration.

The ACL incorporates an estimate of lifetime expected credit losses and is recorded upon asset origination or acquisition. The starting point for the estimate of the ACL is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Corporation uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

There were no loan modifications completed during the three and nine months ended September 30, 2023.

There were no loan modifications considered to be TDRs completed during the three and nine months ended September 30, 2022.

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There were no loan modifications made during the twelve months prior to September 30, 2023 that defaulted during the nine months ended September 30, 2023. There were no loan modifications considered to be a TDR made during the twelve months previous to September 30, 2022 that defaulted during the nine months ended September 30, 2022.

Loans considered modifications amounted to $5,233,000 and $7,468,000 as of September 30, 2023 and December 31, 2022, respectively.

The amount of foreclosed residential real estate held at September 30, 2023 and December 31, 2022, totaled $588,000 and $950,000, respectively. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at September 30, 2023 and December 31, 2022, totaled $328,000 and $890,000, respectively.

Internal Credit Ratings

Management uses a ten point internal credit rating system to monitor the credit quality of the overall loan portfolio. The first six 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 evaluated for substandard classification.  Loans in the doubtful category exhibit the same weaknesses found in the substandard loans; however, the weaknesses are more pronounced.  Such loans are static and collection in full is improbable.  However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.  Loans classified as loss are considered uncollectible and charge-off is imminent.

To help ensure that credit ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Banks have a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the pass category unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event.  An external semi-annual loan review of large commercial relationships is performed, as well as a sample of smaller transactions. The 2023 loan review will evaluate 55% of the Banks' average outstanding commercial portfolio which can consist of outstanding loans, commercial real estate mortgages and outstanding commitments. Detailed reviews, including plans for resolution, are performed on loans classified as substandard, doubtful, or loss on a quarterly basis.

21

The following table presents the credit quality categories identified above as of September 30, 2023 and December 31, 2022:

	September 30, 2023
(In Thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial, financial, and agricultural
Pass	$	34,288	$	53,560	$	42,363	$	33,239	$	9,224	$	6,756	$	29,212	$	114	$	208,756
Special Mention	—		201		42		—		—		168		223		—		634
Substandard or Lower	—		—		—		85		—		755		490		753		2,083
	$	34,288	$	53,761	$	42,405	$	33,324	$	9,224	$	7,679	$	29,925	$	867	$	211,473
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate mortgage:
Residential
Pass	$	117,468	$	218,678	$	120,137	$	70,364	$	45,930	$	17,038	$	51,814	$	129,802	$	771,231
Special Mention	—		409		274		—		—		—		—		—		683
Substandard or Lower	—		—		—		—		—		1,798		—		70		1,868
	$	117,468	$	219,087	$	120,411	$	70,364	$	45,930	$	18,836	$	51,814	$	129,872	$	773,782
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	9	$	72	$	—	$	81
Commercial
Pass	$	43,594	$	105,217	$	134,960	$	50,535	$	25,913	$	147,471	$	10,827	$	691	$	519,208
Special Mention	—		—		1,065		—		—		48		—		—		1,113
Substandard or Lower	—		—		—		—		63		5,282		—		—		5,345
	$	43,594	$	105,217	$	136,025	$	50,535	$	25,976	$	152,801	$	10,827	$	691	$	525,666
Current period gross write offs	$	59	$	—	$	—	$	—	$	—	$	3	$	—	$	—	$	62
Construction
Pass	$	21,093	$	13,072	$	15,045	$	1,417	$	402	$	4,452	$	261	$	—	$	55,742
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		91		—		—		91
	$	21,093	$	13,072	$	15,045	$	1,417	$	402	$	4,543	$	261	$	—	$	55,833
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer Automobile
Pass	$	101,214	$	85,276	$	21,969	$	17,486	$	8,716	$	5,107	$	—	$	—	$	239,768
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		—		—		—		—
	$	101,214	$	85,276	$	21,969	$	17,486	$	8,716	$	5,107	$	—	$	—	$	239,768
Current period gross write offs	$	—	$	247	$	136	$	112	$	6	$	7	$	—	$	—	$	508
Installment loans to individuals
Pass	$	2,609	$	2,406	$	1,291	$	558	$	427	$	3,486	$	—	$	44	$	10,821
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		—		—		—		—
	$	2,609	$	2,406	$	1,291	$	558	$	427	$	3,486	$	—	$	44	$	10,821
Current period gross write offs	$	179	$	28	$	20	$	6	$	6	$	19	$	13	$	11	$	282

22

The information presented in the table above is not required for periods prior to the adoption of CECL. The following table presents the most comparable required information for the prior period, internal credit ratings for the report loan segments as of December 31, 2022:

	December 31, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment loans
(In Thousands)			Residential		Commercial		Construction						Totals
Pass	$	184,783	$	705,515	$	488,993	$	43,209	$	186,112	$	10,361	$	1,618,973
Special Mention	125		266		4,526		—		—		—		4,917
Substandard	5,553		2,428		7,113		99		—		—		15,193
	$	190,461	$	708,209	$	500,632	$	43,308	$	186,112	$	10,361	$	1,639,083

Allowance for Credit Losses

Maintaining an appropriate Allowance for Credit Losses ("ACL") is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, residential construction, commercial and industrial, and commercial real estate, an internal credit rating process is used. Management believes that internal credit ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal credit rating categories is a significant component of the ACL methodology for these loans, which bases the probability of default on this migration. Assigning credit ratings involves judgment. The Company's loan review process provide a separate assessment of credit rating accuracy. Credit ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff or if specific loan review assessments identify a deterioration or an improvement in the loans.

Management considers the performance of the loan portfolio and its impact on the ACL. The Company does not assign internal Credit ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, and consumer automobile loans. For these loans, the most relevant credit quality indicator is delinquency status and management evaluates credit quality based on the aging status of the loan.

Historical loss trends are used in the estimation of losses in the current portfolio.  These historical loss amounts are modified by other qualitative factors.  A historical charge-off factor is calculated utilizing the charge-off and recovery data over the past ten years.  Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience.  The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management reviews the loan portfolio on a quarterly basis in order to make appropriate and timely adjustments to the ACL.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL.

23

Activity in the allowance is presented for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30, 2023
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	3,019	$	1,078	$	4,191	$	178	$	2,446	$	680	$	—	$	11,592
Charge-offs	—		—		—		—		(130)		(86)		—		(216)
Recoveries	106		22		1		—		27		27		—		183
Provision	788		68		131		20		241		83		—		1,331
Ending Balance	$	3,913	$	1,168	$	4,323	$	198	$	2,584	$	704	$	—	$	12,890

	Three Months Ended September 30, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	2,108	$	4,818	$	5,395	$	199	$	1,307	$	110	$	456	$	14,393
Charge-offs	(18)		—		—		—		(57)		(85)		—		(160)
Recoveries	93		1		1		—		10		18		—		123
Provision	(114)		376		140		11		325		75		42		855
Ending Balance	$	2,069	$	5,195	$	5,536	$	210	$	1,585	$	118	$	498	$	15,211

 

t	Nine Months Ended September 30, 2023
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	1,914	$	5,061	$	6,110	$	188	$	1,617	$	109	$	638	$	15,637
Impact of adopting ASC 326	2,656		(3,893)		(2,660)		(96)		240		602		(638)		(3,789)
Charge-offs	—		(81)		(62)		—		(507)		(283)		—		(933)
Recoveries	1,067		25		26		—		66		65		—		1,249
Provision	(1,724)		56		909		106		1,168		211		—		726
Ending Balance	$	3,913	$	1,168	$	4,323	$	198	$	2,584	$	704	$	—	$	12,890

	Nine Months Ended September 30, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	1,946	$	4,701	$	5,336	$	179	$	1,411	$	111	$	492	$	14,176
Charge-offs	(18)		(15)		(155)		—		(234)		(188)		—		(610)
Recoveries	138		46		3		28		32		63		—		310
Provision	3		463		352		3		376		132		6		1,335
Ending Balance	$	2,069	$	5,195	$	5,536	$	210	$	1,585	$	118	$	498	$	15,211

The shift in allocation and the changes in the provision for credit losses are primarily due to changes in the credit metrics within the loan portfolio coupled with the adoption of CECL on January 1, 2023. The decrease in provision for consumer automobile loans for the three month period was driven by increased net recoveries that offset the impact of increased loan volume, while the increase in provision for the nine month period ended September 30, 2023 was driven by loan volume coupled with increased net charge-offs. The increase in provision for commercial, financial, and agricultural for the three month period was primarily the result of loan volume, while the decrease in provision for the nine month period ended September 30, 2023 was the result of improving credit metrics coupled with a large recovery during the three month period ended June 30, 2023 which effected the historical loss rate calculations. The provision for commercial real estate remained steady for the three month period and increased for the nine month period ended September 30, 2023 primarily due to growth within this segment of the loan portfolio.

The Company grants commercial, industrial, residential, and installment loans to customers primarily throughout north-east and central Pennsylvania. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on the economic conditions within this region.

24

The Company has a concentration of the following to gross loans at September 30, 2023 and 2022: 

	September 30,
	2023		2022
Owners of residential rental properties	18.99	%	19.95	%
Owners of commercial rental properties	14.62	%	16.09	%

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of December 31, 2022:

	December 31, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer Automobile		Other consumer installment		Unallocated
(In Thousands)			Residential		Commercial		Construction								Totals
Allowance for Loan Losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4	$	111	$	827	$	—	$	—	$	19	$	—	$	961
Collectively evaluated for impairment	1,910		4,950		5,283		188		1,617		90		638		14,676
Total ending allowance balance	$	1,914	$	5,061	$	6,110	$	188	$	1,617	$	109	$	638	$	15,637
Loans:
Individually evaluated for impairment	$	698	$	4,321	$	6,195	$	—	$	—	$	19			$	11,233
Collectively evaluated for impairment	189,763		703,888		494,437		43,308		186,112		10,342				1,627,850
Total ending loans balance	$	190,461	$	708,209	$	500,632	$	43,308	$	186,112	$	10,361			$	1,639,083

Note 7. Net Periodic Benefit Cost-Defined Benefit Plans

For a detailed disclosure on the Company’s pension and employee benefits plans, please refer to Note 13 of the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2022.

The following sets forth the components of the net periodic expense/(gain) of the domestic non-contributory defined benefit plan for the three and nine months ended September 30, 2023 and 2022, respectively:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Interest cost	$	198	$	138	$	594	$	414
Expected return on plan assets	(326)		(412)		(978)		(1,237)
Amortization of net loss	37		17		111		52
Net periodic benefit	$	(91)	$	(257)	$	(273)	$	(771)

Employer Contributions

The Company previously disclosed in its consolidated financial statements, included in the Annual Report on Form 10-K for the year ended December 31, 2022, that it does not expect to contribute to its defined benefit plan in 2023.  As of September 30, 2023, there were no contributions made to the pension plan.

25

Note 8. Stock Purchase Plans

The Company maintains an Employee Stock Purchase Plan (“Plan”).  The Plan is intended to encourage employee participation in the ownership and economic progress of the Company.  The Plan allows for up to 1,500,000 shares to be purchased by employees.  The purchase price of the shares is 95% of market value with an employee eligible to purchase up to the lesser of 15% of base compensation or $12,000 in market value annually.  During the nine months ended September 30, 2023 and 2022, there were 3,120 and 2,960 shares issued under the Plan, respectively, for total proceeds of $73,000 and $67,000.

The Company maintains the 2020 Non-Employee Director Compensation Plan ("Director Plan"). Under this Director Plan, non-employee directors who have not attained specified stock ownership levels are required to receive a portion of their annual compensation in the form of common stock (currently 50% of total annual compensation), with the ability to elect to receive up to 100% of annual compensation in the form of common stock by making a written election prior to the calendar year to which the compensation relates. The Director Plan allows for up to 100,000 shares to be issued. As of September 30, 2023, the Company has issued a total of 42,191 shares of common stock to non-employee directors under the Director Plan in lieu of otherwise payable cash compensation with 7,560 and 9,968 shares issued, respectively, with an associated expense of $193,000 and $240,000 during the nine months ended September 30, 2023 and 2022.

Note 9. Off-Balance Sheet Risk

The Company 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 are primarily comprised of commitments to extend credit, standby letters of credit, and credit exposure from the sale of assets with recourse.  These instruments involve, to varying degrees, elements of credit, interest rate, or liquidity risk in excess of the amount recognized in the Consolidated Balance Sheet.  The contract amounts of these instruments express the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.  The Company may require collateral or other security to support financial instruments with off-balance sheet credit risk.

Financial instruments whose contract amounts represent credit risk are as follows at September 30, 2023 and December 31, 2022:

(In Thousands)	September 30, 2023		December 31, 2022
Commitments to extend credit	$	161,270	$	169,365
Standby letters of credit	9,467		9,915
Credit exposure from the sale of assets with recourse	7,274		7,358
	$	178,011	$	186,638
Allowance for credit losses	$	1,240	$	143

Commitments to extend credit are legally binding agreements to lend to customers.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements.  The Company evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company, on an extension of credit is based on management’s credit assessment of the counterparty.

Standby letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  These instruments are issued primarily to support bid or performance related contracts.  The coverage period for these instruments is typically a one year period with an annual renewal option subject to prior approval by management.  Fees earned from the issuance of these letters are recognized upon expiration of the coverage period.  For secured letters of credit, the collateral is typically Bank deposit instruments or customer business assets.

26

Note 10. Fair Value Measurements

The following disclosures show the hierarchical disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value.

Level I:	Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level II:	Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
Level III:	Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

This hierarchy requires the use of observable market data when available.

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value on a recurring basis as of September 30, 2023 and December 31, 2022, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	September 30, 2023
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
Investment securities, available for sale:
U.S. Government and agency securities	$	—	$	3,864	$	—	$	3,864
Mortgage-backed securities	—		11,396		—		11,396
State and political securities	—		119,847		—		119,847
Other debt securities	—		49,560		—		49,560
Investment equity securities:
Equity securities	1,072		—		—		1,072

	December 31, 2022
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
Investment securities, available for sale:
U.S. Government and agency securities	$	—	$	2,896	$	—	$	2,896
Mortgage-backed securities	—		1,282		—		1,282
State and political securities	—		142,809		—		142,809
Other debt securities	—		46,686		—		46,686
Investment equity securities:
Equity securities	1,142		—		—		1,142

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value on a non-recurring basis as of September 30, 2023 and December 31, 2022, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 

	September 30, 2023
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Collateral dependent loans	$	—	$	—	$	331	$	331
Other real estate owned	—		—		853		853

27

	December 31, 2022
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	—	$	—	$	1,923	$	1,923
Other real estate owned	—		—		83		83

The following tables present a listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques as of September 30, 2023 and December 31, 2022: 

	September 30, 2023
	Quantitative Information About Level III Fair Value Measurements
(In Thousands)	Fair Value		Valuation Technique(s)	Unobservable Inputs	Range	Weighted Average
Collateral dependent loans	$	331	Appraisal of collateral (1)	Appraisal adjustments (1)	(15)% to (24)%	(20)%
Other real estate owned	$	853	Appraisal of collateral (1)	Appraisal adjustments (1)	(20)%	(20)%

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

	December 31, 2022
	Quantitative Information About Level III Fair Value Measurements
(In Thousands)	Fair Value		Valuation Technique(s)	Unobservable Inputs	Range	Weighted Average
Impaired loans	$	1,923	Appraisal of collateral (1)	Appraisal adjustments (1)	0% to (34)%	(14)%
Other real estate owned	$	83	Appraisal of collateral (1)	Appraisal adjustments (1)	(20)%	(20)%

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The significant unobservable input used in the fair value measurement of the Company’s impaired loans using the appraisal of collateral valuation technique include appraisal adjustments, which are adjustments to appraisals by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The significant unobservable input used in the fair value measurement of the Company’s other real estate owned are the same inputs used to value impaired loans using the appraisal of collateral valuation technique. 

Note 11. Fair Value of Financial Instruments

The Company is required to disclose fair values for its financial instruments.  Fair values are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Also, it is the Company’s general practice and intention to hold most of its financial instruments to maturity and not to engage in trading or sales activities.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.  These fair values are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions can significantly affect the fair values.

Fair values have been determined by the Company using historical data and an estimation methodology suitable for each category of financial instruments.  The Company’s fair values are set forth below for the Company’s other financial instruments.

As certain assets and liabilities, such as deferred tax assets, premises and equipment, and many other operational elements of the Company, are not considered financial instruments but have value, this fair value of financial instruments would not represent the full market value of the Company.

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The fair values of the Company’s financial instruments not recorded at fair value on a recurring or nonrecurring basis are as follows at September 30, 2023 and December 31, 2022:

	Carrying		Fair		Fair Value Measurements at September 30, 2023
(In Thousands)	Value		Value		Level I		Level II		Level III
Financial assets:
Loans held for sale (1)	$	4,083	$	4,083	$	4,083	$	—	$	—
Loans, net	1,805,571		1,761,944		—		—		1,761,944
Financial liabilities:
Time deposits & brokered deposits	356,244		350,456		—		—		350,456
Short-term borrowings	193,746		193,746		193,746		—		—
Long-term borrowings	217,645		238,977		—		—		238,977

(1) The financial instrument is carried at cost at, September 30, 2023 which approximate the fair value of the instruments

	Carrying		Fair		Fair Value Measurements at December 31, 2022
(In Thousands)	Value		Value		Level I		Level II		Level III
Financial assets:
Loans held for sale (1)	$	3,298	$	3,298	$	3,298	$	—	$	—
Loans, net	1,624,094		1,594,073		—		—		1,594,073
Financial liabilities:
Time deposits & brokered deposits	146,282		137,559		—		—		137,559
Short-term borrowings	153,349		153,349		153,349		—		—
Long-term borrowings	102,783		99,118		—		—		99,118

(1) The financial instrument is carried at cost at, December 31, 2022 which approximate the fair value of the instruments

The methods and assumptions used by the Company in estimating fair values of financial instruments is in accordance with ASC Topic 825, Financial Instruments, as amended by ASU 2016-01 which requires public entities to use exit pricing in the calculation of the above tables.

Note 12. Stock Options

In 2020, the Company adopted the 2020 Equity Incentive Plan which replaced the 2014 Equity Incentive Plan that did not have any remaining shares available for issuance. The plans are designed to help the Company attract, retain, and motivate employees and non-employee directors. Incentive stock options, non-qualified stock options, restricted stock, restricted stock units, and other equity-based awards may be granted as part of the plan.

As of January 1, 2023, the Company had a total of 914,000 stock options outstanding. During the nine months ended as of September 30, 2023, the Company issued 89,000 stock options with a strike price of $27.77 to a group of employees. The options granted in 2023 all expire ten years from the grant date. Of the 89,000 grants awarded in 2023, 59,500 of the options vest in three years while the 29,500 remaining options vest in five years.

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Stock options outstanding as of September 30, 2023 are presented below:

Stock Options Granted
Date	Shares	Forfeited	Cash Settlement	Outstanding	Strike Price		Vesting Period	Expiration
January 20, 2023	59,500	—	—	59,500	$	27.77	3 years	10 years
January 20, 2023	29,500	—	—	29,500	27.77		5 years	10 years
January 18, 2022	156,000	—	—	156,000	24.10		3 years	10 years
January 18, 2022	78,000	—	—	78,000	24.10		5 years	10 years
April 9, 2021	156,500	—	—	156,500	24.23		3 years	10 years
April 9, 2021	78,000	—	—	78,000	24.23		5 years	10 years
March 11, 2020	119,300	—	—	119,300	25.34		3 years	10 years
March 11, 2020	119,200	—	—	119,200	25.34		5 years	10 years
March 15, 2019	120,900	(19,800)	—	101,100	28.01		3 years	10 years
March 15, 2019	119,100	(19,200)	—	99,900	28.01		5 years	10 years
August 27, 2015	58,125	(26,250)	(28,875)	3,000	28.02		5 years	10 years

A summary of stock option activity for the nine months ended September 30, 2023 is presented below:

	September 30, 2023
	Shares	Weighted Average Exercise Price
Outstanding, beginning of year	914,000	$	25.34
Granted	89,000	27.77
Forfeited	(3,000)	28.01
Expired	—	—
Outstanding, end of period	1,000,000	$	25.55
Exercisable, end of period	223,400	$	26.58

The estimated fair value of options, including the effect of estimated forfeitures, is recognized as expense on a straight line basis over the options’ vesting periods while ensuring that the cumulative amount of compensation cost recognized at least equals the value of the vested portion of the award at that date.

The fair value of stock options is estimated using the Black-Scholes option pricing model. The following is a summary of the assumptions used in this model for stock options granted for the nine months ended September 30, 2023:

	Nine months ended September 30,
	2023
Risk-free interest rate	3.76		%
Expected volatility	31		%
Expected Annual dividend	$	1.28
Expected life	6.84 years
Weighted average grant date fair value per option	$	6.11

Compensation expense for stock options is recognized using the fair value when the stock options are granted and is amortized over the options' vesting period. Compensation expense related to stock options was $229,000 and $715,000 for the three and nine months ended September 30, 2023 compared to $236,000 and $1,004,000 for the same periods of 2022. As of September 30, 2023, a total of 223,400 stock options were exercisable and the weighted average years to expiration of these options was 5.94 years. Total unrecognized compensation cost for non-vested options was $1,437,000 and will be recognized over their weighted average remaining vesting period of 1.08 years.

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Note 13.  Reclassification of Comparative Amounts

Certain comparative amounts for the prior period have been reclassified to conform to current period presentations. Such reclassifications had no effect on net income or shareholders’ equity

31

CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Report contains certain “forward-looking statements” including statements concerning plans, objectives, future events or performance and assumptions and other statements which are other than statements of historical fact.  The Company cautions readers that the following important factors, among others, may have affected and could in the future affect the Company’s actual results and could cause the Company’s actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company herein:  (i) the effect of changes in laws and regulations, including federal and state banking laws and regulations, with which the Company must comply, and the associated costs of compliance with such laws and regulations either currently or in the future as applicable; (ii) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as by the Financial Accounting Standards Board, or of changes in the Company’s organization, compensation and benefit plans; (iii) the effect on the Company’s competitive position within its market area of the  increasing consolidation within the banking and financial services industries, including the increased competition from larger regional and out-of-state banking organizations as well as non-bank providers of various financial services; (iv) the effect of changes in interest rates; (v) the effects of external events, including natural disasters, national or global health emergencies, and events of armed conflict in other countries; or (vi) the effect of changes in the business cycle and downturns in the local, regional or national economies, including the effects of inflation,; and (vii) the Risk Factors identified in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2022 and in other filings made by the Company under the Securities Exchange Act of 1934.

You should not put undue reliance on any forward-looking statements.  These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available by the Company on its website or otherwise.  The Company undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

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

EARNINGS SUMMARY

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

Summary Results

Net income for the three and nine months ended September 30, 2023 was $2.2 million and $11.1 million, compared to $5.3 million and $12.9 million for the same periods of 2022. Results for the three and nine months ended September 30, 2023 compared to 2022 were impacted by a decrease in net interest income of $2.2 million and $1.2 million as interest expense increased significantly due to the velocity and magnitude of the rate increases enacted by the Federal Open Market Committee ("FOMC"). In addition, results were impacted by a decrease in after-tax securities losses of $77,000 (from a loss of $167,000 to a loss of $90,000) for the three month period and a decrease in after-tax securities losses of $106,000 (from a loss of $258,000 to a loss of $152,000) for the nine month period. Bank-owned life insurance income increased due to a gain on death benefit of $380,000 during the nine months ended September 30, 2023, while an after-tax loss of $201,000 related to a branch closure negatively impacted the nine months ended September 30, 2022. The provision for credit losses increased $517,000 for the three months ended September 30, 2023 and decreased $1.1 million for the nine months ended September 30, 2023 due to a provision of $1.4 million and $263,000, respectively, for the 2023 periods compared to a provision of $835,000 and $1.3 million for the 2022 periods. The decrease for the nine month periods was due primarily to a recovery on a commercial loan during the second quarter of 2023. The increase in the provision for credit losses for the 2023 three month period was due primarily to loan portfolio growth as loan portfolio credit metrics continue to improve and loan net charge-offs remain at a low level. Basic earnings per share for the three and nine months ended September 30, 2023 were $0.31 and $1.56, while the diluted earnings per share were $0.31 and $1.53 for the periods. Basic and diluted earnings per share for the three and nine months ended September 30, 2022 were $0.74 and $1.83. Annualized return on average assets was 0.41% for three months ended September 30, 2023, compared to 1.09% for the corresponding period of 2022. Annualized return on average assets was 0.70% for the nine months ended September 30, 2023, compared to 0.89% for the corresponding period of 2022. Annualized return on average equity was 5.06% for the three months ended September 30, 2023, compared to 12.61% for the corresponding period of 2022. Annualized return on average equity was 8.58% for the nine months ended September 30, 2023, compared to 10.48% for the corresponding period of 2022. Net income from core operations (“core earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains or losses, was $2.3 million and $11.2 million for the three and nine months ended September 30, 2023 compared to $5.4 million and $13.2 million for the same periods of 2022. Basic core earnings per share for the three and nine months ended September 30, 2023 was $0.32 and $1.58, while the diluted core earnings per share was $0.32 and $1.55, compared to $0.77 and $1.87 basic and diluted core earnings per share for the same periods of 2022.

Management uses the non-GAAP measure of net income from core operations in its analysis of the Company’s performance.  This measure, as used by the Company, adjusts net income by excluding significant gains or losses that are unusual in nature.  Because certain of these items and their impact on the Company’s performance are difficult to predict, management believes the presentation of financial measures excluding the impact of such items provides useful supplemental information in evaluating the operating results of the Company’s core businesses.  For purposes of this Quarterly Report on Form 10-Q, net income from core operations means net income adjusted to exclude after-tax net securities gains or losses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Reconciliation of GAAP and Non-GAAP Financial Measures

(Dollars in Thousands, Except Per Share Data)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
GAAP net income	$	2,224	$	5,250	$	11,053	$	12,913
Net securities losses, net of tax	64		167		126		258
Non-GAAP core earnings	$	2,288	$	5,417	$	11,179	$	13,171

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	Three Months Ended September 30,					Nine Months Ended September 30,
	2023		2022			2023		2022
GAAP Return on average assets (ROA)	0.41	%	1.09	%		0.70	%	0.89	%
Net securities losses, net of tax	0.01	%	0.03	%	8	0.01	%	0.02	%
Non-GAAP core ROA	0.42	%	1.12	%		0.71	%	0.91	%

		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
GAAP Return on average equity (ROE)		5.06	%	12.61	%	8.58	%	10.48	%
Net securities losses, net of tax		0.14	%	0.41	%	0.09	%	0.21	%
Non-GAAP core ROE	.	5.20	%	13.02	%	8.67	%	10.69	%

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
GAAP Basic earnings per share (EPS)	$	0.31	$	0.74	$	1.56	$	1.83
Net securities losses, net of tax	0.01		0.03		0.02		0.04
Non-GAAP core operating EPS	$	0.32	$	0.77	$	1.58	$	1.87

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
GAAP Diluted EPS	$	0.31	$	0.74	$	1.53	$	1.83
Net securities losses, net of tax	0.01		0.03		0.02		0.04
Non-GAAP diluted core EPS	$	0.32	$	0.77	$	1.55	$	1.87

Interest and Dividend Income

Interest and dividend income for the three and nine months ended September 30, 2023 increased $7,057,000 and $19,355,00 compared to the same periods of 2022. The increase in loan portfolio income was due to an increase in the average loan portfolio balance coupled with an increase in average rate earned on the portfolio.  Investment securities income has been impacted primarily by an increase in the average rate earned on the portfolio as lower yielding legacy investments matured. The increase in dividend and other interest income is due primarily to an increase in dividends received on FHLB restricted stock.

Interest and dividend income composition for the three and nine months ended September 30, 2023 and 2022 was as follows:

	Three Months Ended
	September 30, 2023				September 30, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Loans including fees	$	21,720	90.80	%	$	15,051	89.25	%	$	6,669	44.31	%
Investment securities:
Taxable	1,365		5.71		949		5.63		416		43.84
Tax-exempt	114		0.48		236		1.40		(122)		(51.69)
Dividend and other interest income	722		3.01		628		3.72		94		14.97
Total interest and dividend income	$	23,921	100.00	%	$	16,864	100.00	%	$	7,057	41.85	%

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	Nine Months Ended
	September 30, 2023				September 30, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Loans including fees	$	59,571	90.70	%	$	41,709	90.04	%	$	17,862	42.83	%
Investment securities:
Taxable	3,870		5.89		2,550		5.50		1,320		51.76
Tax-exempt	410		0.62		594		1.28		(184)		(30.98)
Dividend and other interest income	1,827		2.79		1,470		3.18		357		24.29
Total interest and dividend income	$	65,678	100.00	%	$	46,323	100.00	%	$	19,355	41.78	%

Interest Expense

Interest expense for the three and nine months ended September 30, 2023 increased $9,257,000 and $20,571,000 compared to the same periods of 2022. Interest-bearing deposit interest expense increased significantly due a time deposit gathering campaign that generated funding for the increase in the loan portfolio. In addition, competition for deposits along with the impact of the rising rate environment contributed to the increase in deposit interest expense. Brokered deposits have also been utilized as a funding source to supplement in market deposit gathering efforts. Short and long-term borrowing interest expenses increased as borrowings were utilized to fund a portion of the growth in the loan portfolio.

Interest expense composition for the three and nine months ended September 30, 2023 and 2022 was as follows:

	Three Months Ended
	September 30, 2023				September 30, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Deposits	$	6,463	61.04	%	$	693	52.03	%	$	5,770	832.61	%
Short-term borrowings	2,412		22.78		26		1.95		2,386		n/m
Long-term borrowings	1,714		16.18		613		46.02		1,101		179.61
Total interest expense	$	10,589	100.00	%	$	1,332	100.00	%	$	9,257	694.97	%

	Nine Months Ended
	September 30, 2023				September 30, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Deposits	$	14,686	59.55	%	$	2,191	53.56	%	$	12,495	570.29	%
Short-term borrowings	6,084		24.67		29		0.71		6,055		n/m
Long-term borrowings	3,892		15.78		1,871		45.73		2,021		108.02
Total interest expense	$	24,662	100.00	%	$	4,091	100.00	%	$	20,571	502.84	%

Net Interest Margin

The net interest margin for the three and nine months ended September 30, 2023 was 2.65% and 2.82%, compared to 3.47% and 3.17% for the corresponding periods of 2022. The decrease in the net interest margin for the three and nine month periods was driven by an increase in the rate paid on interest-bearing liabilities of 239 and 189 basis points ("bps"), respectively. The FOMC rate increases during 2022 and 2023 contributed to the increases in rate paid on interest-bearing liabilities as the rate paid on short-term borrowings increased 429 bps and 467 bps for the three and nine month periods ended September 30, 2023 compared to the same periods of 2022. Short-term borrowings increased in volume and rate paid as this funding source was utilized to provide funding for the growth in the loan portfolio, resulting in an increase of $2.4 million and $6.1 million in expense for the three and nine month periods ended September 30, 2023 compared to the same periods of 2022. The rate paid on interest-bearing deposits increased 207 and 154 bps for the three and nine month periods ended September 30, 2023 compared to the corresponding periods of 2022 due to the FOMC rate actions and an increase in competition for deposits. The rates paid on time deposits significantly contributed to the increase in funding costs as rates paid for the three and nine month periods ended September 30, 2023 compared to the same periods of 2022 increased 328 bps and 259 bps, respectively, as deposit gathering campaigns initiated in the latter part of 2022 continued throughout 2023. In addition, the rate paid on brokered deposits increased 384 bps and 328 bps for the three and nine months ended September 30, 2023 compared to the same periods of 2022. The average balance of brokered deposits increased $97,366,000 and $50,212,000 over the three and nine month periods as they have been utilized to assist with the funding of the loan portfolio growth. Partially offsetting the

35

increase in funding cost was an increase in the yield on interest-earning assets and growth in the average balance of the earning asset portfolio compared to the same periods in 2022. The average loan portfolio balance increased $276.8 million and $278.2 million for the three and nine month periods, respectively, as the average yield on the portfolio increased 87 and 76 bps for the same periods. The three and nine month periods ended September 30, 2023 were impacted by an increase of 113 and 101 bps in the yield earned on the securities portfolio as legacy securities matured with the funds reinvested at higher rates.

The following is a schedule of average balances and associated yields for the three and nine months ended September 30, 2023 and 2022:

	AVERAGE BALANCES AND INTEREST RATES
	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
(In Thousands)	Average Balance (1)		Interest		Average Rate		Average Balance (1)		Interest		Average Rate
Assets:
Tax-exempt loans (3)	$	68,243	$	462	2.69	%	$	58,735	$	394	2.66	%
All other loans	1,730,669		21,355		4.90	%	1,463,330		14,740		4.00	%
Total loans (2)	1,798,912		21,817		4.81	%	1,522,065		15,134		3.94	%
Federal funds sold	—		—		—	%	33,641		218		2.57	%
Taxable securities	193,019		1,945		4.09	%	159,721		1,158		2.94	%
Tax-exempt securities (3)	20,777		144		2.81	%	49,177		299		2.47	%
Total securities	213,796		2,089		3.96	%	208,898		1,457		2.83	%
Interest-bearing balances in other financial institutions	11,868		142		4.75	%	34,202		201		2.33	%
Total interest-earning assets	2,024,576		24,048		4.72	%	1,798,806		17,010		3.76	%
Other assets	131,451						130,576
Total assets	$	2,156,027					$	1,929,382
Liabilities and shareholders’ equity:
Savings	$	225,357	181		0.32	%	$	249,083	26		0.04	%
Super Now deposits	244,387		1,174		1.91	%	405,173		287		0.28	%
Money market deposits	294,006		1,862		2.51	%	287,660		200		0.28	%
Time deposits	342,450		3,246		3.76	%	148,968		180		0.48	%
Total interest-bearing deposits	1,106,200		6,463		2.32	%	1,090,884		693		0.25	%
Short-term borrowings	173,364		2,412		5.52	%	8,062		26		1.23	%
Long-term borrowings	204,901		1,714		3.32	%	109,269		613		2.23	%
Total borrowings	378,265		4,126		4.33	%	117,331		639		2.16	%
Total interest-bearing liabilities	1,484,465		10,589		2.83	%	1,208,215		1,332		0.44	%
Demand deposits	471,494						533,681
Other liabilities	24,193						21,008
Shareholders’ equity	175,875						166,478
Total liabilities and shareholders’ equity	$	2,156,027					$	1,929,382
Interest rate spread (3)					1.89	%					3.32	%
Net interest income/margin (3)			$	13,459	2.65	%			$	15,678	3.47	%

1.    Information on this table has been calculated using average daily balance sheets to obtain average balances.

2.    Non-accrual loans have been included with loans for the purpose of analyzing net interest earnings.

3.    Income and rates on fully taxable equivalent basis include an adjustment for the difference between annual income     

from tax-exempt obligations and the taxable equivalent of such income at the standard tax rate of 21% and are reconciled to the equivalent GAAP

measure below the tables.

36

	AVERAGE BALANCES AND INTEREST RATES
	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
(In Thousands)	Average Balance (1)		Interest		Average Rate		Average Balance (1)		Interest		Average Rate
Assets:
Tax-exempt loans (3)	$	66,372	$	1,371	2.76	%	$	53,269	$	1,033	2.59	%
All other loans	1,668,596		58,488		4.69	%	1,403,504		40,893		3.90	%
Total loans (2)	1,734,968		59,859		4.61	%	1,456,773		41,926		3.85	%
Federal funds sold	—		—		—	%	43,938		465		1.41	%
Taxable securities	188,477		5,331		3.78	%	152,937		3,126		2.76	%
Tax-exempt securities (3)	25,837		519		2.69	%	45,357		752		2.24	%
Total securities	214,314		5,850		3.65	%	198,294		3,878		2.64	%
Interest-bearing balances in other financial institutions	10,619		366		4.61	%	97,520		429		0.59	%
Total interest-earning assets	1,959,901		66,075		4.41	%	1,796,525		46,698		3.48	%
Other assets	132,133						129,048
Total assets	$	2,092,034					$	1,925,573
Liabilities and shareholders’ equity:
Savings	$	233,784	456		0.26	%	$	246,063	72		0.04	%
Super Now deposits	293,636		3,026		1.38	%	388,149		721		0.25	%
Money market deposits	292,490		4,807		2.20	%	296,998		596		0.27	%
Time deposits	264,855		6,397		3.23	%	167,876		802		0.64	%
Total interest-bearing deposits	1,084,765		14,686		1.81	%	1,099,086		2,191		0.27	%
Short-term borrowings	155,136		6,084		5.26	%	6,308		29		0.59	%
Long-term borrowings	169,276		3,892		3.07	%	112,457		1,871		2.22	%
Total borrowings	324,412		9,976		4.12	%	118,765		1,900		2.14	%
Total interest-bearing liabilities	1,409,177		24,662		2.34	%	1,217,851		4,091		0.45	%
Demand deposits	484,662						519,599
Other liabilities	26,334						23,814
Shareholders’ equity	171,861						164,309
Total liabilities and shareholders’ equity	$	2,092,034					$	1,925,573
Interest rate spread (3)					2.07	%					3.03	%
Net interest income/margin (3)			$	41,413	2.82	%			$	42,607	3.17	%

1.    Information on this table has been calculated using average daily balance sheets to obtain average balances.

2.    Non-accrual loans have been included with loans for the purpose of analyzing net interest earnings.

3.    Income and rates on fully taxable equivalent basis include an adjustment for the difference between annual income     

from tax-exempt obligations and the taxable equivalent of such income at the standard tax rate of 21% and are reconciled to the equivalent GAAP

measure below the tables.

The following table presents the adjustment to convert net interest income to net interest income on a fully taxable equivalent basis for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Total interest income	$	23,921	$	16,864	$	65,678	$	46,323
Total interest expense	10,589		1,332		24,662		4,091
Net interest income (GAAP)	13,332		15,532		41,016		42,232
Tax equivalent adjustment	127		146		397		375
Net interest income (fully taxable equivalent) (NON-GAAP)	$	13,459	$	15,678	$	41,413	$	42,607

37

The following table sets forth the respective impact that both volume and rate changes have had on net interest income on a fully taxable equivalent basis for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,						Nine months ended September 30,
	2023 vs. 2022						2023 vs. 2022
	Increase (Decrease) Due to						Increase (Decrease) Due to
(In Thousands)	Volume		Rate		Net		Volume		Rate		Net
Interest income:
Tax-exempt loans	$	64	$	4	$	68	$	267	$	71	$	338
All other loans	2,964		3,651		6,615		8,490		9,105		17,595
Federal funds sold	(218)		—		(218)		(465)		—		(465)
Taxable investment securities	274		513		787		851		1,354		2,205
Tax-exempt investment securities	(193)		38		(155)		(297)		64		(233)
Interest bearing deposits	(182)		123		(59)		(325)		262		(63)
Total interest-earning assets	2,709		4,329		7,038		8,521		10,856		19,377
Interest expense:
Savings deposits	(2)		157		155		(1)		385		384
Super Now deposits	(155)		1,042		887		(104)		2,409		2,305
Money market deposits	4		1,658		1,662		(3)		4,214		4,211
Time deposits	489		2,577		3,066		699		4,896		5,595
Short-term borrowings	2,041		345		2,386		4,533		1,522		6,055
Long-term borrowings	706		395		1,101		1,150		872		2,022
Total interest-bearing liabilities	3,083		6,174		9,257		6,274		14,298		20,572
Change in net interest income	$	(374)	$	(1,845)	$	(2,219)	$	2,247	$	(3,442)	$	(1,195)

Provision for Credit Losses

The provision for credit losses is based upon management’s quarterly review of the loan portfolio.  The purpose of the review is to assess loan quality, identify impaired loans, analyze delinquencies, ascertain loan growth, evaluate potential charge-offs and recoveries, and assess general economic conditions in the markets served.  An external independent loan review is also performed annually for the Banks.  Management remains committed to an aggressive program of problem loan identification and resolution.

The allowance for credit losses is determined by applying loss factors to outstanding loans by type.  A historical charge-off factor is calculated utilizing the charge-off and recovery data over the past ten years. Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience.

Although management believes it uses the best information available to make such determinations and that the allowance for credit losses is adequate at September 30, 2023, future adjustments could be necessary if circumstances or economic conditions differ substantially from the assumptions used in making the initial determinations.  A downturn in the local economy, increased unemployment, and delays in receiving financial information from borrowers could result in increased levels of nonperforming assets, charge-offs, loan loss provisions, and reductions in income.  Additionally, as an integral part of the examination process, bank regulatory agencies periodically review the Banks' loan loss allowance.  The banking agencies could require the recognition of additions to the loan loss allowance based on their judgment of information available to them at the time of their examination.

When determining the appropriate allowance level, management has attributed the allowance for credit losses to various portfolio segments; however, the allowance is available for the entire portfolio as needed.

The allowance for credit losses decreased from $15,637,000 at December 31, 2022 to $12,890,000 at September 30, 2023. The decrease in allowance was primarily due to the adoption of CECL on January 1, 2023 coupled with net recoveries of $316,000 for the nine months ended September 30, 2023. At September 30, 2023 and December 31, 2022, the allowance for credit losses to total loans was 0.71% and 0.95%, respectively.

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The three and nine months ended September 30, 2023 had a provision for credit losses of $1,372,000 and $263,000, respectively, compared to a provision for credit losses of $855,000 and $1,335,000 for the corresponding 2022 periods. The decrease in the provision for credit losses for the nine month period was the result of improving credit metrics, net recoveries during 2023, and the adoption of CECL offset by loan portfolio growth. The increase for the three month period was primarily due to loan portfolio growth.

Nonperforming loans decreased to $3,683,000 at September 30, 2023 from $4,890,000 at December 31, 2022. The majority of nonperforming loans involve loans that are either in a secured position and have sureties with a strong underlying financial position or have been classified as impaired and have a specific allocation recorded within the allowance for credit losses. The ratio of nonperforming loans to total loans ratio decreased to 0.20% at September 30, 2023 from 0.37% at September 30, 2022 and as nonperforming loans have decreased to $3,683,000 from $5,743,000 at September 30, 2022. Net loan recoveries of $316,000 for the nine months ended September 30, 2023 impacted the allowance for credit losses, which was 0.71% of total loans at September 30 2023 compared to 0.97% at September 30, 2022.

The following is a table showing total nonperforming loans as of:

	Total Nonperforming Loans
(In Thousands)	90 Days Past Due		Non-accrual		Total
September 30, 2023	$	1,678	$	2,005	$	3,683
June 30, 2023	1,120		3,156		4,276
March 31, 2023	1,215		3,551		4,766
December 31, 2022	1,275		3,615		4,890
September 30, 2022	1,161		4,582		5,743

Additional allowance for credit losses and net (charge-offs) recoveries information is presented by loan portfolio segment in the tables below. The nine months ending September 30, 2023 was impacted by the CECL adoption reclassification entry disclosed in Note 6. Loans.

	September 30, 2023
	Amount of Allowance for Credit Losses Allocated			Total loans		Allowance for Credit Losses to Total Loans Ratio		Net (Charge-Offs) Recoveries		Average Loans		Ratio of Net (Charge-Offs) Recoveries to Average Loans
(In Thousands)
Commercial, financial, and agricultural	$	3,913		$	211,473	1.85	%	$	1,067	$	202,709	0.53	%
Real estate mortgage:
Residential	1,168			773,782		0.15	%	(56)		737,749		(0.01)	%
Commercial	4,323			525,666		0.82	%	(36)		513,035		(0.01)	%
Construction	198			55,833		0.35	%	—		49,358		—	%
Consumer automobiles	2,584			239,768		1.08	%	(441)		221,802		(0.20)	%
Other consumer installment loans	704			10,821		6.51	%	(218)		10,315		(2.11)	%
	$	12,890		$	1,817,343	0.71	%	$	316	$	1,734,968	0.02	%
Total non-accrual loans outstanding	$	2,005
Non-accrual loans to total loans outstanding	0.11		%
Allowance for credit losses to non-accrual loans	642.89		%

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	December 31, 2022
	Amount of Allowance for Loan Losses Allocated			Total loans		Allowance for Loan Losses to Total Loans Ratio		Net (Charge-Offs) Recoveries		Average Loans		Ratio of Net (Charge-Offs) Recoveries to Average Loans
(In Thousands)
Commercial, financial, and agricultural	$	1,914		$	190,461	1.00	%	$	165	$	173,433	0.10	%
Real estate mortgage:
Residential	5,061			708,209		0.71	%	26		649,989		—	%
Commercial	6,110			500,632		1.22	%	(150)		466,526		(0.03)	%
Construction	188			43,308		0.43	%	29		44,968		0.06	%
Consumer automobiles	1,617			186,112		0.87	%	(328)		150,261		(0.22)	%
Other consumer installment loans	109			10,361		1.05	%	(191)		9,737		(1.96)	%
Unallocated	638
	$	15,637		$	1,639,083	0.95	%	$	(449)	$	1,494,914	(0.03)	%
Total non-accrual loans outstanding	$	3,615
Non-accrual loans to total loans outstanding	0.22		%
Allowance for loan losses to non-accrual loans	432.56		%

Non-interest Income

Total non-interest income for the three and nine months ended September 30, 2023 compared to the same periods in 2022 decreased $208,000 and $478,000. Excluding net securities losses, non-interest income for the three and nine months ended September 30, 2023 decreased $338,000 and $644,000 compared to the same periods in 2022. Gain on sale of loans and loan broker commissions decreased as the volume of loan sales has declined as a reduction in housing inventory and higher rates has reduced mortgage activity. Bank-owned life insurance for the nine month period increased due to a gain on death benefit of $380,000 recognized during the first quarter of 2023. Debit card income declined due to volume.

Non-interest income composition for the three and nine months ended September 30, 2023 and 2022 was as follows:

	Three Months Ended
	September 30, 2023				September 30, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Service charges	$	545	29.07	%	$	559	26.84	%	$	(14)	(2.50)	%
Net debt securities losses, available for sale	(45)		(2.40)		(156)		(7.49)		111		71.15
Net equity securities losses	(36)		(1.92)		(55)		(2.64)		19		34.55
Bank-owned life insurance	170		9.07		170		8.16		—		—
Gain on sale of loans	257		13.71		294		14.11		(37)		(12.59)
Insurance commissions	136		7.25		109		5.23		27		24.77
Brokerage commissions	142		7.57		142		6.82		—		—
Loan broker commissions	241		12.85		438		21.03		(197)		(44.98)
Debit card income	320		17.07		344		16.51		(24)		(6.98)
Other	145		7.73		238		11.42		(93)		(39.08)
Total non-interest income	$	1,875	100.00	%	$	2,083	100.00	%	$	(208)	(9.99)	%

40

	Nine Months Ended
	September 30, 2023				September 30, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Service charges	$	1,557	25.30	%	$	1,563	23.57	%	$	(6)	(0.38)	%
Net debt securities losses, available for sale	(125)		(2.03)		(168)		(2.53)		43		25.60
Net equity securities losses	(35)		(0.57)		(158)		(2.38)		123		77.85
Bank-owned life insurance	892		14.49		501		7.55		391		78.04
Gain on sale of loans	732		11.89		905		13.65		(173)		(19.12)
Insurance commissions	416		6.76		386		5.82		30		7.77
Brokerage commissions	448		7.28		500		7.54		(52)		(10.40)
Loan broker commissions	728		11.83		1,350		20.36		(622)		(46.07)
Debit card income	995		16.17		1,080		16.28		(85)		(7.87)
Other	546		8.88		673		10.14		(127)		(18.87)
Total non-interest income	$	6,154	100.00	%	$	6,632	100.00	%	$	(478)	(7.21)	%

Non-interest Expense

Total non-interest expense increased $852,000 and $1,752,000 for the three and nine months ended September 30, 2023 compared to the same periods of 2022. The increase in salaries and employee benefits is attributable to the current employment environment and routine annual wage increases. Furniture and equipment expenses in addition to occupancy expenses have increased slightly as increased maintenance costs have been offset by a decrease in the level of depreciation. Software amortization decreases for the nine month period are due to changes in software licensing costs. Marketing costs increased as a time deposit gathering campaign was initiated during the latter part of 2022 and throughout 2023. Pennsylvania shares tax decreased as tax credits were purchased and charitable contributions were made to organizations that resulted in the obtainment of tax credits. Professional fees increased primarily due to legal fees. FDIC insurance expense increased due an increase in the assessment rate.

Non-interest expense composition for the three and nine months ended September 30, 2023 and 2022 was as follows:

	Three Months Ended
	September 30, 2023				September 30, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Salaries and employee benefits	$	6,290	56.30	%	$	6,016	58.29	%	$	274	4.55	%
Occupancy	784		7.02		730		7.07		54		7.40
Furniture and equipment	867		7.76		816		7.91		51		6.25
Software amortization	237		2.12		188		1.82		49		26.06
Pennsylvania shares tax	280		2.51		334		3.24		(54)		(16.17)
Professional fees	719		6.44		626		6.07		93		14.86
Federal Deposit Insurance Corporation deposit insurance	425		3.80		260		2.52		165		63.46
Marketing	167		1.49		151		1.46		16		10.60
Intangible amortization	25		0.22		34		0.33		(9)		(26.47)
Other	1,378		12.34		1,165		11.29		213		18.28
Total non-interest expense	$	11,172	100.00	%	$	10,320	100.00	%	$	852	8.26	%

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	Nine Months Ended
	September 30, 2023				September 30, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Salaries and employee benefits	$	18,778	56.06	%	$	18,421	58.02	%	$	357	1.94	%
Occupancy	2,422		7.23		2,380		7.50		42		1.76
Furniture and equipment	2,503		7.47		2,454		7.73		49		2.00
Software amortization	593		1.77		660		2.08		(67)		(10.15)
Pennsylvania shares tax	807		2.41		1,119		3.52		(312)		(27.88)
Professional fees	2,313		6.90		1,746		5.50		567		32.47
Federal Deposit Insurance Corporation deposit insurance	1,122		3.35		690		2.17		432		62.61
Marketing	594		1.77		435		1.37		159		36.55
Intangible amortization	92		0.27		119		0.37		(27)		(22.69)
Other	4,275		12.77		3,723		11.74		552		14.83
Total non-interest expense	$	33,499	100.00	%	$	31,747	100.00	%	$	1,752	5.52	%

Provision for Income Taxes

Income taxes decreased $751,000 and decreased $514,000 for the three and nine months ended September 30, 2023 compared to the same periods of 2022. The effective tax rate for the three and nine months ended September 30, 2023 was 16.49% and 17.56% compared to 18.48% and 18.18% for the same periods of 2022. The Company currently is in a deferred tax asset position. A valuation allowance was established on the $1,810,000 of capital loss carryforwards as of December 31, 2022, which remained unchanged during the third quarter of 2023.

ASSET/LIABILITY MANAGEMENT

Cash and Cash Equivalents

Cash and cash equivalents decreased $4,743,000 from $40,333,000 at December 31, 2022 to $35,590,000 at September 30, 2023, primarily as a result of the following activity during the nine months ended September 30, 2023.

Loans Held for Sale

Activity regarding loans held for sale resulted in sales proceeds being less than loan originations, less $732,000 in realized gains, by $785,000 for the nine months ended September 30, 2023.

Loans

Gross loans increased $178,730,000 since December 31, 2022 due primarily to an increase in both residential and commercial real estate mortgage categories in addition to consumer automobile loans.

42

The allocation of the loan portfolio, by category, as of September 30, 2023 and December 31, 2022 is presented below:

	September 30, 2023				December 31, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Commercial, financial, and agricultural	$	211,473	11.63	%	$	190,461	11.62	%	$	21,012	11.03	%
Real estate mortgage:
Residential	773,782		42.55		708,209		43.19		65,573		9.26	%
Commercial	525,666		28.91		500,632		30.53		25,034		5.00	%
Construction	55,833		3.07		43,308		2.64		12,525		28.92	%
Consumer automobile loans	239,768		13.19		186,112		11.35		53,656		28.83	%
Other consumer installment loans	10,821		0.60		10,361		0.63		460		4.44	%
Net deferred loan fees and discounts	1,118		0.05		648		0.04		470		72.53	%
Gross loans	$	1,818,461	100.00	%	$	1,639,731	100.00	%	$	178,730	10.90	%

Investments

The fair value of the investment debt securities portfolio at September 30, 2023 decreased $9,006,000 since December 31, 2022, while the amortized cost of the portfolio decreased $7,655,000.  The decrease in the investment portfolio amortized value occurred within the state and political segment of the portfolio as principal cash flow was partially reinvested with the majority of the cash flow funding loan portfolio growth. The mortgage-backed segment increased as bonds were purchased to provide future cash flow. The other debt segment balances increased slightly as bank subordinated debt was purchased and consists primarily of corporate bonds. The portfolio continues to be actively managed in order to reduce interest rate and market risk. The unrealized losses within the debt securities portfolio are the result of market activity, not credit issues/ratings, as approximately 81.26% of the debt securities portfolio on an amortized cost basis is currently rated A or higher by either S&P or Moody’s.

The Company considers various factors, which include examples from applicable accounting guidance, when analyzing the available for sale portfolio for possible other than temporary impairment.  The Company primarily considers the following factors in its analysis: length of time and severity of the fair value being less than carrying value; reduction of dividend paid (equities); continued payment of dividend/interest, credit rating, and financial condition of an issuer; intent and ability to hold until anticipated recovery (which may be maturity); and general outlook for the economy, specific industry, and entity in question.

The bond portion of the portfolio review is conducted with emphases on several factors.  Continued payment of principal and interest is given primary importance with credit rating and financial condition of the issuer following as the next most important.  Credit ratings were reviewed with the ratings of the bonds being satisfactory.  Bonds that were not currently rated were discussed with a third party and/or underwent an internal financial review. Each bond is reviewed to determine whether it is a general obligation bond, which is backed by the credit and taxing power of the issuing jurisdiction, or a revenue bond, which is only payable from specified revenues.  Based on the review undertaken by the Company, the Company determined that the decline in value of the various bond holdings were temporary and were the result of the general market downturns and interest rate/yield curve changes, not credit issues.  The fact that almost all of such bonds are general obligation bonds further solidified the Company’s determination that the decline in the value of these bond holdings is temporary.

The fair value of the equity portfolio continues to fluctuate as the economic and political environment continues to impact stock pricing. The amortized cost of the available for sale equity securities portfolio has remained flat at $1,300,000 for September 30, 2023 and December 31, 2022 while the fair value decreased $70,000 over the same time period.

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The distribution of credit ratings by amortized cost and fair values for the debt security portfolio at September 30, 2023 follows:

	A- to AAA					B- to BBB+				C- to CCC+				Not Rated				Total
(In Thousands)	Amortized Cost			Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for sale (AFS):
U.S. Government and agency securities	$	4,001		$	3,864	$	—	$	—	$	—	$	—	$	—	$	—	$	4,001	$	3,864
Mortgage-backed securities	12,101		7	11,396		—		—		—		—		—		—		12,101		11,396
State and political securities	124,922			115,817		—		—		—		—		4,102		4,030		129,024		119,847
Other debt securities	20,227			18,604		7,380		6,717		—		—		25,714		24,239		53,321		49,560
Total debt securities AFS	$	161,251		$	149,681	$	7,380	$	6,717	$	—	$	—	$	29,816	$	28,269	$	198,447	$	184,667

Financing Activities

Deposits

Total deposits decreased $10,807,000 from December 31, 2022 to September 30, 2023. Time deposits increased $111,601,000 over this period to a total of $249,550,000 as deposit gathering efforts focused on time deposits as customers sought a higher return on their deposit balances. Brokered deposits increased by $98,361,000 as usage provided an alternative to FHLB borrowings and supplemented funding for loan portfolio growth. Core deposits (deposits less time deposits) declined as deposit balances flowed from noninterest-bearing and lower rate products into higher rate products such as time deposit accounts. Emphasis has been on increasing the utilization of electronic (internet and mobile) deposit banking among our customers. Utilization of internet and mobile banking products has increased due to these efforts coupled with a change in consumer behavior over the past several years.

Deposit balances and their changes for the periods being discussed follow:

	September 30, 2023				December 31, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Demand deposits	$	471,507	30.08	%	$	519,063	33.35	%	$	(47,556)	(9.16)	%
NOW accounts	220,730		14.08		372,574		23.94		(151,844)		(40.76)
Money market deposits	291,889		18.62		270,589		17.38		21,300		7.87
Savings deposits	226,897		14.48		247,952		15.93		(21,055)		(8.49)
Time deposits	249,550		15.92		137,949		8.86		111,601		80.90
Brokered deposits	106,694		6.82		8,333		0.54		98,361		6.32
Total deposits	$	1,567,267	100.00	%	$	1,556,460	100.00	%	$	10,807	0.69	%

As of September 30, 2023 and December 31, 2022 the Company had $435,931,000 and $617,515,000, respectively, in uninsured deposits. Included in the total uninsured deposits is a concentration of public funds which were collateralized by the Banks in the amount of $83,144,000 and $180,252,000 at September 30, 2023 and December 31, 2022, respectively. Total uninsured deposits less collateralized public funds was $352,787,000 at September 30, 2023 and $437,263,000 at December 31, 2022.

Borrowed Funds

Total borrowed funds increased 60.62%, or $155,259,000, to $411,391,000 at September 30, 2023 compared to $256,132,000 at December 31, 2022. The increase in long term borrowings occurred as fixed rate borrowings were initiated to lock in interest rates and to provide matched funding for segments of the loan portfolio. Short term FHLB borrowings were utilized to provide short term funding for the loan portfolio growth. Securities sold under agreements to repurchase have decreased as customers balances have decreased.

44

	September 30, 2023				December 31, 2022				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		%
Short-term borrowings:
FHLB repurchase agreements	$	159,233	38.71	%	$	148,195	57.86	%	$	11,038	7.45
Short-term FHLB borrowings	30,000		7.29		—		—		30,000		n/a
Securities sold under agreement to repurchase	4,513		1.10		5,154		2.01		(641)		(12.44)
Total short-term borrowings	193,746		47.10		153,349		59.87		40,397		26.34
Long-term borrowings:
Long-term FHLB borrowings	210,000		51.04		95,000		37.09		115,000		121.05
Long-term finance lease	7,645		1.86		7,783		3.04		(138)		(1.77)
Total long-term borrowings	217,645		52.90		102,783		40.13		114,862		111.75
Total borrowed funds	$	411,391	100.00	%	$	256,132	100.00	%	$	155,259	60.62	%

Short-Term Borrowings

The following table provides further information in regards to secured borrowings that have been accounted for as repurchase agreements.

	Remaining Contractual Maturity Overnight and Continuous
(In Thousands)	September 30, 2023		December 31, 2022
Investment debt securities pledged, fair value	$	8,671	$	7,165
Repurchase agreements	4,513		5,154

Capital

The adequacy of the Company’s capital is reviewed on an ongoing basis with reference to the size, composition, and quality of the Company’s resources and regulatory guidelines.  Management seeks to maintain a level of capital sufficient to support existing assets and anticipated asset growth, maintain favorable access to capital markets, and preserve high quality credit ratings.

Banking institutions are generally required to comply with risk-based capital guidelines set by bank regulatory agencies.  The risk-based capital rules are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies and to minimize disincentives for holding liquid assets.  Specifically, each is required to maintain certain minimum dollar amounts and ratios of common equity tier I risk-based, tier I risk-based, total risk-based, and tier I leverage capital. In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvements Act ("FDICIA") established five capital categories for banks ranging from “well capitalized” to “critically undercapitalized” for purposes of the FDIC's prompt corrective action rules. To be classified as “well capitalized” under the prompt corrective action rules, common equity tier I risk-based, tier I risked-based, total risk-based, and tier I leverage capital ratios must be at least 6.5%, 8%, 10%, and 5%, respectively.

Under existing capital rules, the minimum capital to risk-adjusted assets requirements for banking organizations are a common equity tier 1 capital ratio of 4.5% (6.5% to be considered “well capitalized”), a tier 1 capital ratio of 6.0% (8.0% to be considered “well capitalized”), and total capital ratio of 8.0% (10.0% to be considered “well capitalized”).  Under existing capital rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity tier 1 capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets. 

45

The Company's capital ratios as of September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023				December 31, 2022
(In Thousands)	Amount		Ratio		Amount		Ratio
Common Equity Tier I Capital (to Risk-weighted Assets)
Actual	$	173,291	9.505	%	$	165,346	9.973	%
For Capital Adequacy Purposes	82,042		4.500		74,607		4.500
Minimum To Maintain Capital Conservation Buffer At Reporting Date	127,621		7.000		116,056		7.000
To Be Well Capitalized	118,505		6.500		107,766		6.500
Total Capital (to Risk-weighted Assets)
Actual	$	187,600	10.290	%	$	181,127	10.925	%
For Capital Adequacy Purposes	145,850		8.000		132,633		8.000
Minimum To Maintain Capital Conservation Buffer At Reporting Date	191,429		10.500		174,081		10.500
To Be Well Capitalized	182,313		10.000		165,791		10.000
Tier I Capital (to Risk-weighted Assets)
Actual	$	173,291	9.505	%	$	165,346	9.973	%
For Capital Adequacy Purposes	109,389		6.000		99,476		6.000
Minimum To Maintain Capital Conservation Buffer At Reporting Date	154,968		8.500		140,925		8.500
To Be Well Capitalized	145,852		8.000		132,635		8.000
Tier I Capital (to Average Assets)
Actual	$	173,291	8.160	%	$	165,346	8.636	%
For Capital Adequacy Purposes	84,947		4.000		76,585		4.000
To Be Well Capitalized	106,183		5.000		95,731		5.000

Jersey Shore State Bank's capital ratios as of September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023				December 31, 2022
(In Thousands)	Amount		Ratio		Amount		Ratio
Common Equity Tier I Capital (to Risk-weighted Assets)
Actual	$	124,883	9.396	%	$	119,783	9.781	%
For Capital Adequacy Purposes	59,810		4.500		55,109		4.500
Minimum To Maintain Capital Conservation Buffer At Reporting Date	93,038		7.000		85,725		7.000
To Be Well Capitalized	86,392		6.500		79,602		6.500
Total Capital (to Risk-weighted Assets)
Actual	$	136,641	10.281	%	$	131,379	10.728	%
For Capital Adequacy Purposes	106,325		8.000		97,971		8.000
Minimum To Maintain Capital Conservation Buffer At Reporting Date	139,552		10.500		128,587		10.500
To Be Well Capitalized	132,906		10.000		122,464		10.000
Tier I Capital (to Risk-weighted Assets)	-				-
Actual	$	124,883	9.396	%	$	119,783	9.781	%
For Capital Adequacy Purposes	79,746		6.000		73,479		6.000
Minimum To Maintain Capital Conservation Buffer At Reporting Date	112,974		8.500		104,095		8.500
To Be Well Capitalized	106,329		8.000		97,972		8.000
Tier I Capital (to Average Assets)
Actual	$	124,883	7.995	%	$	119,783	8.383	%
For Capital Adequacy Purposes	62,481		4.000		57,155		4.000
To Be Well Capitalized	78,101		5.000		71,444		5.000

46

Luzerne Bank's capital ratios as of September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023				December 31, 2022
(In Thousands)	Amount		Ratio		Amount		Ratio
Common Equity Tier I Capital (to Risk-weighted Assets)
Actual	$	47,865	9.687	%	$	43,364	9.877	%
For Capital Adequacy Purposes	22,235		4.500		19,757		4.500
Minimum To Maintain Capital Conservation Buffer At Reporting Date	34,588		7.000		30,733		7.000
To Be Well Capitalized	32,118		6.500		28,538		6.500
Total Capital (to Risk-weighted Assets)
Actual	$	50,416	10.204	%	$	47,549	10.830	%
For Capital Adequacy Purposes	39,526		8.000		35,124		8.000
Minimum To Maintain Capital Conservation Buffer At Reporting Date	51,878		10.500		46,100		10.500
To Be Well Capitalized	49,408		10.000		43,905		10.000
Tier I Capital (to Risk-weighted Assets)
Actual	$	47,865	9.687	%	$	43,364	9.877	%
For Capital Adequacy Purposes	29,647		6.000		26,342		6.000
Minimum To Maintain Capital Conservation Buffer At Reporting Date	42,000		8.500		37,318		8.500
To Be Well Capitalized	39,529		8.000		35,123		8.000
Tier I Capital (to Average Assets)
Actual	$	47,865	8.040	%	$	43,364	8.260	%
For Capital Adequacy Purposes	23,813		4.000		21,000		4.000
To Be Well Capitalized	29,767		5.000		26,249		5.000

During the three months ended September 30, 2023, the Company sold 34,411 shares of common stock in a registered at-the-market offering pursuant to the terms of an equity distribution agreement, dated September 13, 2023 (the “Distribution Agreement”), between D.A. Davidson & Co. (the “Distribution Agent”) and the Company. Under the terms of the Distribution Agreement, the Company paid the Distribution Agent a fee in the amount of 2.75% of the gross proceeds from the sale of such shares, and realized net proceeds of $753,000 from the sales of shares under the Distribution Agreement for the quarter ended September 30, 2023.

Liquidity; Interest Rate Sensitivity and Market Risk

The asset/liability committee addresses the liquidity needs of the Company to ensure that sufficient funds are available to meet credit demands and deposit withdrawals as well as to the placement of available funds in the investment portfolio.  In assessing liquidity requirements, equal consideration is given to the current position as well as the future outlook.

The following liquidity measures are monitored for compliance and were within the limits cited, with the exception of net loans to total deposits that was 115%, at September 30, 2023:

1.            Net Loans to Total Assets, 85% maximum

2.              Net Loans to Total Deposits, 100% maximum

3.              Cumulative 90 day Maturity GAP %, +/- 15% maximum

4.              Cumulative 1 Year Maturity GAP %, +/- 20% maximum

Fundamental objectives of the Company’s asset/liability management process are to maintain adequate liquidity while minimizing interest rate risk. The maintenance of adequate liquidity provides the Company with the ability to meet its financial obligations to depositors, loan customers, and shareholders. Additionally, it provides funds for normal operating expenditures and business opportunities as they arise.  The objective of interest rate sensitivity management is to increase net interest income by managing interest sensitive assets and liabilities in such a way that they can be repriced in response to changes in market interest rates.

The Banks, like other financial institutions, must have sufficient funds available to meet liquidity needs for deposit withdrawals, loan commitments and originations, and expenses. In order to control cash flow, the Banks estimate future cash flows from deposits, loan payments, and investment security payments. The primary sources of funds are deposits, principal and interest

47

payments on loans and investment securities, FHLB borrowings, and brokered deposits. Management believes the Banks have adequate resources to meet their normal funding requirements.

Management monitors the Company’s liquidity on both a long and short-term basis, thereby providing management necessary information to react to current balance sheet trends. Cash flow needs are assessed and sources of funds are determined. Funding strategies consider both customer needs and economical cost. Both short and long-term funding needs are addressed by maturities and sales of available for sale and trading investment securities, loan repayments and maturities, and liquidating money market investments such as federal funds sold. The use of these resources, in conjunction with access to credit, provides core funding to satisfy depositor, borrower, and creditor needs.

Management monitors and determines the desirable level of liquidity. Consideration is given to loan demand, investment opportunities, deposit pricing and growth potential, as well as the current cost of borrowing funds. The Company has a total current maximum borrowing capacity at the FHLB of $830,316,000. In addition to this credit arrangement, the Company has additional lines of credit with correspondent banks of $100,000,000. Management believes it has sufficient liquidity to satisfy estimated short-term and long-term funding needs. FHLB borrowings totaled $399,234,000 as of September 30, 2023.

Interest rate sensitivity, which is closely related to liquidity management, is a function of the repricing characteristics of the Company’s portfolio of assets and liabilities. Asset/liability management strives to match maturities and rates between loan and investment security assets with the deposit liabilities and borrowings that fund them. Successful asset/liability management results in a balance sheet structure which can cope effectively with market rate fluctuations. The matching process segments both assets and liabilities into future time periods (usually 12 months, or less) based upon when repricing can be effected. Repriceable assets are subtracted from repriceable liabilities for a specific time period to determine the “gap”, or difference. Once known, the gap is managed based on predictions about future market interest rates. Intentional mismatching, or gapping, can enhance net interest income if market rates move as predicted.  However, if market rates behave in a manner contrary to predictions, net interest income will suffer. Gaps, therefore, contain an element of risk and must be prudently managed. In addition to gap management, the Company has an asset/liability management policy which incorporates a market value at risk calculation which is used to determine the effects of interest rate movements on shareholders’ equity and a simulation analysis to monitor the effects of interest rate changes on the Company’s consolidated balance sheet.

The Company currently maintains a gap position of being asset sensitive.  The Company has strategically taken this position as it has previously decreased the duration of the earning asset portfolio by adding quality short and intermediate term loans such as home equity loans.  The Company has added certain longer-term earning assets due to the significant increase in interest rates. Lengthening of the liability portfolio, primarily time deposits, has been undertaken to build protection during the current rising rate environment.

A market value at risk calculation is utilized to monitor the effects of interest rate changes on the Company’s balance sheet and more specifically shareholders’ equity.  The Company does not manage the balance sheet structure in order to maintain compliance with this calculation.  The calculation serves as a guideline with greater emphasis placed on interest rate sensitivity.  Changes to calculation results from period to period are reviewed as changes in results could be a signal of future events.  As of the most recent analysis, the results of the market value at risk calculation were within established guidelines due to the strategic direction being taken.

Interest Rate Sensitivity

In this analysis the Company examines the result of a 100, 200, 300, and 400 basis point change in market interest rates and the effect on net interest income. It is assumed that the change is instantaneous and that all rates move in a parallel manner.  Assumptions are also made concerning prepayment speeds on mortgage loans and mortgage securities.

The following is a rate shock forecast for the twelve month period ending September 30, 2024 assuming a static balance sheet as of September 30, 2023.

				Parallel Rate Shock in Basis Points
(In Thousands)	-300			-200			-100			Static		+100			+200			+300			+400
Net interest income	$	60,604		$	62,477		$	64,050		$	65,448	$	66,448		$	67,194		$	67,910		$	68,645
Change from static	(4,844)			(2,971)			(1,398)			—		1,000			1,746			2,462			3,197
Percent change from static	-7.40		%	-4.54		%	-2.14		%	—		1.53		%	2.67		%	3.76		%	4.88		%

48

The model utilized to create the report presented above makes various estimates at each level of interest rate change regarding cash flow from principal repayment on loans and mortgage-backed securities and/or call activity on investment securities.  Actual results could differ significantly from these estimates which would result in significant differences in the calculated projected change.  In addition, the limits stated above do not necessarily represent the level of change under which management would undertake specific measures to realign its portfolio in order to reduce the projected level of change.  Generally, management believes the Company is well positioned to respond expeditiously when the market interest rate outlook changes.

Inflation

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

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Market risk for the Company is comprised primarily of interest rate risk exposure and liquidity risk.  Interest rate risk and liquidity risk management is performed at both the level of the Company and the Banks.  The Company’s interest rate sensitivity is monitored by management through selected interest rate risk measures produced by an independent third party.  There have been no substantial changes in the Company’s gap analysis or simulation analysis compared to the information provided in the Annual Report on Form 10-K for the period ended December 31, 2022.  Additional information and details are provided in the “Liquidity, Interest Rate Sensitivity, and Market Risk” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of that document.

Generally, management believes the Company is well positioned to respond in a timely manner when the market interest rate outlook changes.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An analysis was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2023 that 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

None.

Item 1A.  Risk Factors

Certain risk factors are set forth in Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented by the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 20, 2023, and as follows:

If we are unable to raise additional capital or generate earnings at current levels, our growth may be constrained and certain distributions, including discretionary dividend payments, by our subsidiary Banks to the holding company may be restricted.

Our gross loans increased $178,730,000 since December 31, 2022 to $1,818,461,000 at September 30, 2023, as we continue to emphasize commercial loan growth coupled with growth in indirect auto lending. We expect to continue to emphasize growth in our commercial and consumer loan portfolios, and additional regulatory capital generated through retained earnings and other sources will be necessary to support any such continued growth. At September 30, 2023, each of Jersey Shore State Bank and Luzerne Bank were “well capitalized” as defined by applicable bank regulatory standards. Applicable regulatory capital requirements also require each Bank to maintain a “capital conservation buffer,” consisting solely of tier 1 common equity, of 2.5% above the regulatory minimum capital requirements for each of the tier 1 common equity (“CET1”), tier 1 (“Tier 1”), and total capital (“Total Capital”) ratios. As a result of the capital conservation buffer requirements, if a bank does not maintain CET1, Tier 1 and Total Capital ratios of at least 7%, 8.5%, and 10.5%, respectively, determined as of the end of each calendar quarter, the bank’s ability to make certain discretionary payments, including discretionary dividend payments, are subject to a maximum payout ratio limitation unless the FDIC approves the distribution or payment. At September 30, 2023, each of Jersey Shore State Bank and Luzerne Bank exceeded the capital conservation buffer requirements for applicable capital ratios, except that the Total Capital to risk-weighted assets ratio for each Bank was slightly below the required 10.5% (10.281% for Jersey Shore State Bank and 10.204% for Luzerne Bank). After giving effect to the maximum payout ratio at September 30, 2023, each of Jersey Shore State Bank and Luzerne Bank was permitted to make discretionary dividend payments of up to approximately $6,532,000 and $2,776,000, respectively. As previously indicated, during the three months ended September 30, 2023, the Company sold 34,411 shares of common stock in a registered at-the-market offering resulting in net proceeds of $753,000, substantially all of which proceeds were contributed to the Banks as additional Tier 1 capital to support their lending activities and continued growth, and increase or maintain CET1, Tier 1, and Total Capital Levels to or at amounts required to exceed the 2.5% capital conservation buffer. If we are unable to generate retained earnings or raise capital in amounts necessary to avoid limitations on discretionary dividend payments by the Banks, our continued growth could be adversely affected.

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

The following table provides certain information with respect to the Company's repurchase of common stock during the quarter ended September 30, 2023.

Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Units) Purchased		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Month #1 (July 1 - July 31, 2023)	—	$	—	—	353,000
Month #2 (August 1 - August 31, 2023)	—	—		—	353,000
Month #3 (September 1 - September 30, 2023)	—	—		—	353,000

Item 3.                           Defaults Upon Senior Securities

None

Item 4.                           Mine Safety Disclosures

Not applicable.

Item 5.                           Other Information

None.

50

Item 6.                           Exhibits

3(i)	Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3(i) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2022).
3(ii)	Bylaws of the Registrant (incorporated by reference to Exhibit 3(ii) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2020).
31(i)	Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer.
31(ii)	Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer.
32(i)	Section 1350 Certification of Chief Executive Officer.
32(ii)	Section 1350 Certification of Chief Financial Officer.
101	Interactive data file containing the following financial statements formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheet at September 30, 2023 and December 31, 2022; (ii) the Consolidated Statement of Income for the three and nine months ended September 30, 2023 and 2022; (iii) Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022; (iv) the Consolidated Statement of Shareholders’ Equity for the three and nine months ended September 30, 2023 and 2022; (v) the Consolidated Statement of Cash Flows for the nine months ended September 30, 2023 and 2022 and (vi) the Notes to Consolidated Financial Statements. As provided in Rule 406T of Regulation S-T, this interactive data file shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed “filed” or part of any registration statement or prospectus for purposes of Section 11 or 12 under the Securities Act of 1933, or otherwise subject to liability under those sections.
104	Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101).

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.

		PENNS WOODS BANCORP, INC.
		(Registrant)
Date:	November 14, 2023	/s/ Richard A. Grafmyre
		Richard A. Grafmyre, Chief Executive Officer
		(Principal Executive Officer)
Date:	November 14, 2023	/s/ Brian L. Knepp
		Brian L. Knepp, President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting
		Officer)

52

EX-31.1

Exhibit 31(i)

Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer

I, Richard A. Grafmyre, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Penns Woods Bancorp, Inc.;

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 equivalent functions):

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

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

Date:	November 14, 2023	/s/ Richard A. Grafmyre
		Richard A. Grafmyre
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31(ii)

Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer

I, Brian L. Knepp, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Penns Woods Bancorp, Inc.;

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 equivalent functions):

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

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

Date:	November 14, 2023	/s/ Brian L. Knepp
		Brian L. Knepp
		President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32 (i)

CERTIFICATION SECTION 1350

In connection with the Quarterly Report of Penns Woods Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard A. Grafmyre, Chief Executive 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 result of operations of the Company.

/s/ Richard A. Grafmyre

Richard A. Grafmyre

Chief Executive Officer

November 14, 2023

EX-32.2

Exhibit 32 (ii)

CERTIFICATION SECTION 1350

In connection with the Quarterly Report of Penns Woods Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian L. Knepp, 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 result of operations of the Company.

/s/ Brian L. Knepp

Brian L. Knepp

President and Chief Financial Officer

November 14, 2023

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2023	Nov. 01, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	0-17077
Entity Registrant Name	PENNS WOODS BANCORP INC
Entity Incorporation, State or Country Code	PA
Entity Address, Address Line One	300 Market Street, P.O. Box 967
Entity Tax Identification Number	23-2226454
Entity Address, City or Town	Williamsport
Entity Address, State or Province	PA
Postal Zip Code	17703-0967
City Area Code	570
Local Phone Number	322-1111
Title of 12(b) Security	Common stock, $5.55 par value
Trading Symbol	PWOD
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Other Identification Type	Yes
Entity Filer Category	Non-accelerated Filer
Smaller Reporting Company	true
Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		7,163,550
Entity Central Index Key	0000716605
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3

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CONSOLIDATED BALANCE SHEET (UNAUDITED) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
ASSETS:
Noninterest-bearing balances	$ 26,651	$ 27,390
Interest-bearing balances in other financial institutions	8,939	12,943
Total cash and cash equivalents	35,590	40,333
Investment debt securities, available for sale, at fair value	184,667	193,673
Investment equity securities, at fair value	1,072	1,142
Restricted investment in bank stock	25,289	19,171
Loans held for sale	4,083	3,298
Loans	1,818,461	1,639,731
Allowance for credit losses	(12,890)	(15,637)
Loans, net	1,805,571	1,624,094
Premises and equipment, net	30,746	31,844
Accrued interest receivable	10,500	9,481
Bank-owned life insurance	33,695	34,452
Investment in limited partnerships	8,275	8,656
Goodwill	16,450	16,450
Intangibles	235	327
Operating lease right-of-use asset	2,562	2,651
Deferred tax asset	6,961	6,868
Other assets	10,772	7,640
TOTAL ASSETS	2,176,468	2,000,080
LIABILITIES:
Interest-bearing deposits	1,095,760	1,037,397
Noninterest-bearing deposits	471,507	519,063
Total deposits	1,567,267	1,556,460
Short-term borrowings	193,746	153,349
Long-term borrowings	217,645	102,783
Accrued interest payable	2,716	603
Operating lease liability	2,619	2,708
Other liabilities	17,935	16,512
TOTAL LIABILITIES	2,001,928	1,832,415
SHAREHOLDERS’ EQUITY:
Preferred stock, no par value, 3,000,000 shares authorized; no shares issued	0	0
Common stock, par value $5.55, 22,500,000 shares authorized; 7,620,250 and 7,566,810 shares issued; 7,110,025 and 7,056,585 outstanding	42,335	42,039
Additional paid-in capital	55,890	54,252
Retained earnings	104,067	98,147
Accumulated other comprehensive loss:
Net unrealized loss on available for sale securities	(10,886)	(9,819)
Defined benefit plan	(4,051)	(4,139)
Treasury stock at cost, 510,225 shares	(12,815)	(12,815)
TOTAL SHAREHOLDERS' EQUITY	174,540	167,665
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 2,176,468	$ 2,000,080

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CONSOLIDATED BALANCE SHEET (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	3,000,000	3,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 5.55	$ 5.55
Common stock, shares authorized (in shares)	22,500,000	22,500,000
Common stock, shares issued (in shares)	7,620,250	7,566,810
Common stock, shares outstanding (in shares)	7,110,025	7,056,585
Treasury stock (in shares)	510,225	510,225

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CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$ 21,720	$ 15,051	$ 59,571	$ 41,709
Investment securities:
Taxable	1,365	949	3,870	2,550
Tax-exempt	114	236	410	594
Dividend and other interest income	722	628	1,827	1,470
TOTAL INTEREST AND DIVIDEND INCOME	23,921	16,864	65,678	46,323
INTEREST EXPENSE:
Deposits	6,463	693	14,686	2,191
Short-term borrowings	2,412	26	6,084	29
Long-term borrowings	1,714	613	3,892	1,871
TOTAL INTEREST EXPENSE	10,589	1,332	24,662	4,091
NET INTEREST INCOME	13,332	15,532	41,016	42,232
Provision for loan credit losses	1,331	855	726	1,335
Provision (recovery) for off balance sheet credit exposures	41	0	(463)	0
TOTAL PROVISION FOR CREDIT LOSSES	1,372	855	263	1,335
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	11,960	14,677	40,753	40,897
NON-INTEREST INCOME:
Net debt securities losses, available for sale	(45)	(156)	(125)	(168)
Net equity securities losses	(36)	(55)	(35)	(158)
Bank-owned life insurance	170	170	892	501
Gain on sale of loans	257	294	732	905
Other	145	238	546	673
TOTAL NON-INTEREST INCOME	1,875	2,083	6,154	6,632
NON-INTEREST EXPENSE:
Salaries and employee benefits	6,290	6,016	18,778	18,421
Occupancy	784	730	2,422	2,380
Furniture and equipment	867	816	2,503	2,454
Software amortization	237	188	593	660
Pennsylvania shares tax	280	334	807	1,119
Professional fees	719	626	2,313	1,746
Federal Deposit Insurance Corporation deposit insurance	425	260	1,122	690
Marketing	167	151	594	435
Intangible amortization	25	34	92	119
Other	1,378	1,165	4,275	3,723
TOTAL NON-INTEREST EXPENSE	11,172	10,320	33,499	31,747
INCOME BEFORE INCOME TAX PROVISION	2,663	6,440	13,408	15,782
INCOME TAX PROVISION	439	1,190	2,355	2,869
Net Income	$ 2,224	$ 5,250	$ 11,053	$ 12,913
Earnings per share - basic (in dollars per share)	$ 0.31	$ 0.74	$ 1.56	$ 1.83
Earnings per share - diluted (in dollars per share)	$ 0.31	$ 0.74	$ 1.53	$ 1.83
Weighted average shares outstanding - basic (in shares)	7,072,440	7,051,228	7,064,336	7,060,871
Weighted average shares outstanding - diluted (in shares)	7,228,940	7,051,228	7,220,836	7,060,871
Service charges
NON-INTEREST INCOME:
Revenue from contract with customer	$ 545	$ 559	$ 1,557	$ 1,563
Insurance commissions
NON-INTEREST INCOME:
Revenue from contract with customer	136	109	416	386
Brokerage commissions
NON-INTEREST INCOME:
Revenue from contract with customer	142	142	448	500
Loan broker commissions
NON-INTEREST INCOME:
Revenue from contract with customer	241	438	728	1,350
Debit card income
NON-INTEREST INCOME:
Revenue from contract with customer	$ 320	$ 344	$ 995	$ 1,080

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Statement of Comprehensive Income [Abstract]
Net Income	$ 2,224	$ 5,250	$ 11,053	$ 12,913
Other comprehensive (loss) income:
Net unrealized loss on available for sale securities	(1,480)	(6,362)	(1,476)	(17,254)
Tax effect	311	1,336	310	3,623
Net realized loss on available for sale securities included in net income	45	156	125	168
Tax effect	(9)	(33)	(26)	(35)
Amortization of unrecognized pension loss	37	17	111	52
Tax effect	(8)	(3)	(23)	(11)
Total other comprehensive loss	(1,104)	(4,889)	(979)	(13,457)
Comprehensive income (loss)	$ 1,120	$ 361	$ 10,074	$ (544)

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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands	Total	Cumulative effect of adoption of ASU 2016-13	COMMON STOCK	ADDITIONAL PAID-IN CAPITAL	RETAINED EARNINGS	RETAINED EARNINGS Cumulative effect of adoption of ASU 2016-13	ACCUMULATED OTHER COMPREHENSIVE LOSS	TREASURY STOCK
Beginning balance (in shares) at Dec. 31, 2021			7,550,272
Beginning balance at Dec. 31, 2021	$ 172,274		$ 41,945	$ 53,795	$ 89,761		$ (1,112)	$ (12,115)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	12,913				12,913
Other comprehensive loss	(13,457)						(13,457)
Stock-based compensation	1,004			1,004
Cash settlement of options	(1,074)			(1,074)
Dividends declared	(6,778)				(6,778)
Common shares issued for employee stock purchase plan (in shares)			2,960
Common shares issued for employee stock purchase plan	67		$ 17	50
Director compensation plan (in shares)			9,968
Director Compensation Plan	240		$ 57	183
Purchase of treasury stock	(700)							(700)
Ending balance (in shares) at Sep. 30, 2022			7,563,200
Ending balance at Sep. 30, 2022	164,489		$ 42,019	53,958	95,896		(14,569)	(12,815)
Beginning balance (in shares) at Dec. 31, 2021			7,550,272
Beginning balance at Dec. 31, 2021	$ 172,274		$ 41,945	53,795	89,761		(1,112)	(12,115)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Accounting Standards Update [Extensible Enumeration]	Accounting Standards Update 2016-13 [Member]
Ending balance (in shares) at Dec. 31, 2022			7,566,810
Ending balance at Dec. 31, 2022	$ 167,665	$ 1,647	$ 42,039	54,252	98,147	$ 1,647	(13,958)	(12,815)
Beginning balance (in shares) at Jun. 30, 2022			7,559,165
Beginning balance at Jun. 30, 2022	166,054		$ 41,995	53,651	92,903		(9,680)	(12,815)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	5,250				5,250
Other comprehensive loss	(4,889)						(4,889)
Stock-based compensation	236			236
Dividends declared	(2,257)				(2,257)
Common shares issued for employee stock purchase plan (in shares)			1,057
Common shares issued for employee stock purchase plan	23		$ 6	17
Director compensation plan (in shares)			2,978
Director Compensation Plan	72		$ 18	54
Ending balance (in shares) at Sep. 30, 2022			7,563,200
Ending balance at Sep. 30, 2022	164,489		$ 42,019	53,958	95,896		(14,569)	(12,815)
Beginning balance (in shares) at Dec. 31, 2022			7,566,810
Beginning balance at Dec. 31, 2022	167,665	$ 1,647	$ 42,039	54,252	98,147	$ 1,647	(13,958)	(12,815)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	11,053				11,053
Other comprehensive loss	(979)						(979)
Stock-based compensation	715			715
Dividends declared	(6,780)				(6,780)
Common shares issued for employee stock purchase plan (in shares)			3,120
Common shares issued for employee stock purchase plan	73		$ 17	56
Director compensation plan (in shares)			7,560
Director Compensation Plan	193		$ 42	151
Registered at-the-market shares issuance, net proceeds (in shares)			34,411
Registered at-the-market shares issuance, net proceeds	753		$ 191	562
Dividend reinvestment plan (in shares)			8,349
Dividend reinvestment plan	200		$ 46	154
Ending balance (in shares) at Sep. 30, 2023			7,620,250
Ending balance at Sep. 30, 2023	174,540		$ 42,335	55,890	104,067		(14,937)	(12,815)
Beginning balance (in shares) at Jun. 30, 2023			7,573,713
Beginning balance at Jun. 30, 2023	174,402		$ 42,077	54,869	104,104		(13,833)	(12,815)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	2,224				2,224
Other comprehensive loss	(1,104)						(1,104)
Stock-based compensation	229			229
Dividends declared	(2,261)				(2,261)
Common shares issued for employee stock purchase plan (in shares)			1,436
Common shares issued for employee stock purchase plan	34		$ 8	26
Director compensation plan (in shares)			2,341
Director Compensation Plan	63		$ 13	50
Registered at-the-market shares issuance, net proceeds (in shares)			34,411
Registered at-the-market shares issuance, net proceeds	753		$ 191	562
Dividend reinvestment plan (in shares)			8,349
Dividend reinvestment plan	200		$ 46	154
Ending balance (in shares) at Sep. 30, 2023			7,620,250
Ending balance at Sep. 30, 2023	$ 174,540		$ 42,335	$ 55,890	$ 104,067		$ (14,937)	$ (12,815)

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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - $ / shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Statement of Stockholders' Equity [Abstract]
Dividends declared per share (in dollars per share)	$ 0.32	$ 0.32	$ 0.96	$ 0.96
Purchase of treasury stock (in shares)				30,000

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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
OPERATING ACTIVITIES:
Net Income	$ 11,053	$ 12,913
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,469	2,660
Loss on sale of premises and equipment	0	275
Amortization of intangible assets	92	119
Provision for credit losses	263	1,335
Stock based compensation	715	1,004
Accretion and amortization of investment security discounts and premiums	361	932
Net debt securities losses, available for sale	125	168
Originations of loans held for sale	(27,183)	(30,644)
Proceeds of loans held for sale	27,130	32,789
Gain on sale of loans	(732)	(905)
Net equity securities losses	35	158
Security trades payable	0	(111)
Earnings on bank-owned life insurance	(892)	(501)
Decrease (increase) in deferred tax asset	191	(653)
Other, net	570	(905)
Net cash provided by operating activities	14,197	18,634
INVESTING ACTIVITIES:
Proceeds from sales of available for sale securities	24,701	4,151
Proceeds from calls and maturities of available for sale securities	18,824	13,116
Proceeds from sales of equity securities	35	0
Purchases of available for sale securities	(36,356)	(57,239)
Net increase in loans	(181,784)	(168,950)
Acquisition of premises and equipment	(396)	(263)
Proceeds from the sale of premises and equipment	0	137
Proceeds from the sale of foreclosed assets	0	46
Purchase of bank-owned life insurance	(7)	(21)
Proceeds from bank-owned life insurance death benefit	1,656	2
Investment in limited partnership	0	(554)
Proceeds from redemption of regulatory stock	32,292	6,692
Purchases of regulatory stock	(38,410)	(6,700)
Net cash used for investing activities	(179,445)	(209,583)
FINANCING ACTIVITIES:
Net increase (decrease) in interest-bearing deposits	58,363	(73,943)
Net (decrease) increase in noninterest-bearing deposits	(47,556)	43,043
Proceeds from long-term borrowings	140,000	0
Repayment of long-term borrowings	(25,000)	(23,000)
Net increase in short-term borrowings	40,397	25,154
Finance lease principal payments	(138)	(134)
Dividends paid	(6,780)	(6,778)
Issuance of common stock	1,219	307
Purchases of treasury stock	0	(700)
Net cash provided by (used for) financing activities	160,505	(36,051)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(4,743)	(227,000)
CASH AND CASH EQUIVALENTS, BEGINNING	40,333	263,862
CASH AND CASH EQUIVALENTS, ENDING	35,590	36,862
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	22,549	4,315
Cash settlement of options	0	1,074
Income taxes paid	2,950	2,371
Non-cash investing and financing activities:
Transfer of loans to foreclosed real estate	$ 770	$ 97

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Basis of Presentation

9 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated financial statements include the accounts of Penns Woods Bancorp, Inc. (the “Company”) and its wholly-owned subsidiaries: Woods Investment Company, Inc., Woods Real Estate Development Company, Inc., United Insurance Solutions, LLC., Luzerne Bank, and Jersey Shore State Bank (Jersey Shore State Bank and Luzerne Bank are referred to together as the “Banks”) and Jersey Shore State Bank’s wholly-owned subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group (“The M Group”).  All significant inter-company balances and transactions have been eliminated in the consolidation.

The interim financial statements are unaudited, but in the opinion of management reflect all adjustments necessary for the fair presentation of results for such periods.  The results of operations for any interim period are not necessarily indicative of results for the full year.  These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

In reference to the attached financial statements, all adjustments are of a normal recurring nature pursuant to Rule 10-01(b) (8) of Regulation S-X.

CECL Adoption and Updated Significant Accounting Policy

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, and is referred to as CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities. It also applies to off-balance sheet (“OBS”) credit exposures (loan commitments, standby letters of credit, financial guarantees, and other similar instruments.

The Company adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, net of investments in leases and OBS credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology. The Company recorded an overall decrease of $3,789,000 to the Allowance for Credit Losses (“ACL”) on January 1, 2023 as a result of the adoption of CECL with an associated increase to retained earnings of $2,993,000 and decrease to deferred tax assets of $796,000. The Company also recorded a liability of $1,703,000 for OBS credit exposures that resulted in a decrease to retained earnings of $1,346,000 and an increase to deferred tax assets of $357,000.

Allowance for Credit Losses: The discussion that follows describes the methodology for determining the ACL under the CECL model that was adopted effective January 1, 2023. The allowance methodology for prior periods is disclosed in the Company’s 2022 Annual Report on Form 10-K.

The Company 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.

Loans: The ACL for loans is an estimate of the expected losses to be realized over the life of the loans in the portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated collectively for expected credit losses and 2) loans evaluated individually for expected credit losses. The ACL also includes certain qualitative adjustments to the CECL model.

Loans Evaluated Collectively: Management believes that internal credit ratings are the most relevant credit quality indicator for these types of loans, however; the Company does not assign internal credit ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, and consumer automobile loans. For these loans, the most relevant credit quality indicator is delinquency status and management evaluates credit quality based on the aging status of the loan. In order to determine the ACL:

• Loans aggregated into pools based on similar risk characteristics.

• The probability of default "PD" and loss given default rate "LGD" CECL model components are determined based on loss estimates driven by historical experience at the input level.

• The PD model component uses "through the economic cycle transition" matrices based on the Company's historical loan and transaction data across each pool of loans.

• The LGD model component calculates a lifetime LGD estimate across each pool of loans utilizing a nonparametric loss curve modeling approach.

• Reasonable and supportable forecasts are incorporated into the PD model component.

• Cash flow assumptions are established for each loan using maturity date, amortization schedule and interest rate.

• A constant prepayment rate is calculated for each loan pool in the CECL model.

Loans Evaluated Individually: Loans evaluated individually for expected credit losses include loans determined to be collateral-dependant.

Loans evaluated individually may have specific allocations assigned. For loans measured using the fair value of collateral, if the analysis determines that sufficient collateral value would be available for repayment of the debt, then no allocations would be assigned to those loans. Collateral could be in the form of real estate or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans.

For loans secured by real estate, estimated fair values are determined through appraisals performed by third-party appraisers or third party evaluations for commercial real estate loans and our internal appraisal department for 1-4 family real estate secured loans, discounted to arrive at expected net sale proceeds. For collateral dependent loans, estimated real estate fair values are also net of estimated selling costs. When a real estate secured loan is impaired, a decision is made regarding whether an updated appraisal of the real estate is necessary. This decision is based on various considerations, including: the age of the most recent appraisal; the loan-to-value ratio based on the original appraisal; the condition of the property; the Company’s experience and knowledge of the real estate market; the purpose of the loan; market factors; payment status; the strength of any guarantors; and the existence and age of other indications of value such as broker price opinions, among others. The Company generally obtains updated evaluations for collateral dependent loans secured predominantly by real estate every 12 months.

When updated evaluations are not obtained for loans secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and there has not been a significant deterioration in the collateral value since the original appraisal was performed.

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification. For commercial loans, commercial mortgages and construction loans to commercial borrowers, an internal credit rating process is used. The Company believes that internal credit ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal credit rating categories is a significant component of the ACL methodology for these loans, which bases the PD on this migration. Assigning credit ratings involves judgment. Credit ratings may be changed based on ongoing monitoring procedures, or if specific loan review assessments identify a deterioration or an improvement in the loan.

The following is a summary of the Company's internal credit rating categories:

• Pass: These loans do not currently pose undue credit risk and can range from the highest to average quality, depending on the degree of potential risk.

• Special Mention: These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in this category are currently acceptable, but are nevertheless potentially weak.

• Substandard or Lower: There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt.

The allocation of the ACL is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan portfolio. The Company considers risk factors such as: local and national economic conditions; trends in delinquencies and non-accrual loans; the diversity of borrower industry types; and the composition of the portfolio by loan type.

Qualitative and Other Adjustments to ACL: In addition to the quantitative credit loss estimates for loans evaluated collectively, qualitative factors that may not be fully captured in the quantitative results are also evaluated. These include changes in lending policy, volume of the portfolio, economy conditions, credit concentrations, level of problem loans, loan review, collateral value, and experience of credit staff. Qualitative adjustments are judgmental and are based on Management’s knowledge of the portfolio and the markets in which the Company operates. Qualitative adjustments are evaluated and approved on a quarterly basis.

OBS Credit Exposures: The ACL for OBS credit exposures is recorded in other liabilities on the consolidated balance sheet. This ACL represents management’s estimate of expected losses in its unfunded loan commitments and other OBS credit exposures, such as letters of credit and credit recourse on sold residential mortgage loans. The ACL specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). The ACL for OBS credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses.

The impact from the adoption of CECL is shown below:

	January 1, 2023
(In Thousands)	Pre-Adoption		Adoption Impact		As Reported
Assets
ACL on loans
Commercial, financial, and agricultural	$	1,914	$	2,656	$	4,570
Real estate mortgage:
Residential	5,061		(3,893)		1,168
Commercial	6,110		(2,660)		3,450
Construction	188		(96)		92
Consumer automobile loans	1,617		240		1,857
Other consumer installment loans	109		602		711
Unallocated	638		(638)		—
Liabilities
ACL for unfunded commitments	143		1,703		1,846
	$	15,780	$	(2,086)	$	13,694

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2023

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive LossThe changes in accumulated other comprehensive loss by component shown net of tax and parenthesis indicating debits, as of September 30, 2023 and 2022 were as follows:

	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
(In Thousands)	Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total		Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total
Beginning balance	$	(9,753)	$	(4,080)	$	(13,833)	$	(6,222)	$	(3,458)	$	(9,680)
Other comprehensive loss before reclassifications	(1,169)		—		(1,169)		(5,026)		—		(5,026)
Amounts reclassified from accumulated other comprehensive gain	36		29		65		123		14		137
Net current-period other comprehensive (loss) income	(1,133)		29		(1,104)		(4,903)		14		(4,889)
Ending balance	$	(10,886)	$	(4,051)	$	(14,937)	$	(11,125)	$	(3,444)	$	(14,569)

	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
(In Thousands)	Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total		Net Unrealized Gain (Loss) on Available for Sale Securities		Defined Benefit  Plan		Total
Beginning balance	$	(9,819)	$	(4,139)	$	(13,958)	$	2,373	$	(3,485)	$	(1,112)
Other comprehensive loss before reclassifications	(1,166)		—		(1,166)		(13,631)		—		(13,631)
Amounts reclassified from accumulated other comprehensive gain	99		88		187		133		41		174
Net current-period other comprehensive (loss) income	(1,067)		88		(979)		(13,498)		41		(13,457)
Ending balance	$	(10,886)	$	(4,051)	$	(14,937)	$	(11,125)	$	(3,444)	$	(14,569)

The reclassifications out of accumulated other comprehensive loss shown, net of tax and parenthesis indicating debits to net income, as of September 30, 2023 and 2022 were as follows:

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item  in the Consolidated  Statement of Income
	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022
Net unrealized loss on available for sale securities	$	(45)	$	(156)	Net debt securities losses, available for sale
Income tax effect	9		33		Income tax provision
Total reclassifications for the period	$	(36)	$	(123)
Net unrecognized pension costs	$	(37)	$	(17)	Other non-interest expense
Income tax effect	8		3		Income tax provision
Total reclassifications for the period	$	(29)	$	(14)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item  in the Consolidated  Statement of Income
	Nine months ended September 30, 2023		Nine months ended September 30, 2022
Net unrealized losses on available for sale securities	$	(125)	$	(168)	Net debt securities losses, available for sale
Income tax effect	26		35		Income tax provision
Total reclassifications for the period	$	(99)	$	(133)
Net unrecognized pension costs	$	(111)	$	(52)	Other non-interest expense
Income tax effect	23		11		Income tax provision
Total reclassifications for the period	$	(88)	$	(41)

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2023

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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

Management has completed its implementation plan, segmentation and testing, and model validation. The implementation plan included drafting of additional controls and policies to govern data uploads to its third-party vendor, balancing and reconciling, testing and auditing of inputs, and review and decision-making surrounding segmentation, methodologies, qualitative factor adjustments, and reasonable and supportable forecasts and reversion techniques. Parallel runs were processed during 2022 and the results were consistent with management's expectations. The implementation plan is currently going through the Company's control structure and internal control testing is being performed.

As a result of adopting this standard, the Company recorded a decrease in its allowance effective January 1, 2023, of $2,086,000. As a result, the Company recorded a decrease in its loan allowance as of January 1, 2023, of $3,789,000; as well as

an increase in its allowance for off-balance sheet credit exposures of $1,703,000. These estimates are subject to further refinements based on ongoing evaluations of our model, methodologies, and judgments, as well as prevailing economic conditions and forecasts as of the adoption date. The adoption of ASU 2016-13 is not expected to have a significant impact on our regulatory capital ratios.

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

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Update is effective for smaller reporting companies and all other entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

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

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument was issued at a substantial premium. This ASU requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The amendments in this ASU are effective for public business entities that are not smaller reporting companies, for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The guidance may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current-period gross writeoffs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. This Update did not have a significant impact on the Company’s financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) – Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This amendment clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. It also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The amendments will be applied prospectively, with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2023, the FASB issued ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. This Update is not expected to have a significant impact on the Company’s financial statements.

In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718), which amends or supersedes various SEC paragraphs within the Codification to conform to past SEC announcements and guidance issued by the SEC. The ASU does not provide any new guidance so there is no transition or effective date associated with it. This ASU did not have a significant impact on the Company’s financial statements.

In August 2023, the FASB issued ASU 2023-04, Liabilities (Topic 405), which adds various SEC paragraphs to the Codification to reflect guidance included in SEC Staff Accounting Bulletin 121 on safeguarding crypto assets. The standard does not provide any new guidance so there is no transition or effective date associated with it. This ASU did not have a significant impact on the Company’s financial statements.

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Per Share Data

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Per Share Data

Per Share Data

There are no convertible securities which would affect the denominator in calculating basic and dilutive earnings per share. There were a total of 1,000,000 stock options, with an average exercise price of $25.55, outstanding on September 30, 2023. A portion of these options were included, on a weighted average basis, in the computation of diluted earnings per share for the period due to the average market price of common shares of $25.08 for the periods being greater than the strike price. There were a total of 917,000 stock options, with an average exercise price of $25.35 that were excluded, on a weighted average basis, in the computation of diluted earnings per share for the period due to the average market price of common shares of $23.78 being less than the strike price for the period ending September 30, 2022.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted average common shares issued	7,582,665	7,561,453	7,574,561	7,557,250
Weighted average treasury stock shares	(510,225)	(510,225)	(510,225)	(496,379)
Weighted average common shares outstanding - basic	7,072,440	7,051,228	7,064,336	7,060,871
Dilutive effect of outstanding stock options	156,500	—	156,500	—
Weighted average common shares outstanding - diluted	7,228,940	7,051,228	7,220,836	7,060,871

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Investment Securities

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

The amortized cost, gross unrealized gains and losses, and fair values of our investment securities portfolio at September 30, 2023 and December 31, 2022 are as follows:

	September 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In Thousands)	Cost		Gains		Losses		Value
Available for sale (AFS):
U.S. Government and agency securities	$	4,001	$	—	$	(137)	$	3,864
Mortgage-backed securities	12,101		—		(705)		11,396
State and political securities	129,024		—		(9,177)		119,847
Other debt securities	53,321		—		(3,761)		49,560
Total debt securities	$	198,447	$	—	$	(13,780)	$	184,667
Investment equity securities:
Equity securities	$	1,300	$	—	$	(228)	$	1,072

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In Thousands)	Cost		Gains		Losses		Value
Available for sale (AFS):
U.S. Government and agency securities	$	3,002	$	—	$	(106)	$	2,896
Mortgage-backed securities	1,496		—		(214)		1,282
State and political securities	151,426		157		(8,774)		142,809
Other debt securities	50,178		58		(3,550)		46,686
Total debt securities	$	206,102	$	215	$	(12,644)	$	193,673
Investment equity securities:
Equity securities	$	1,350	$	—	$	(208)	$	1,142

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual debt securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022.

	September 30, 2023
	Less than Twelve Months				Twelve Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In Thousands)	Value		Losses		Value		Losses		Value		Losses
Available for sale (AFS):
U.S. Government and agency securities	$	967	$	(33)	$	2,897	$	(104)	$	3,864	$	(137)
Mortgage-backed securities	10,263		(454)		1,125		(251)		11,388		(705)
State and political securities	19,050		(1,013)		97,522		(8,164)		116,572		(9,177)
Other debt securities	10,596		(348)		35,841		(3,413)		46,437		(3,761)
Total debt securities	$	40,876	$	(1,848)	$	137,385	$	(11,932)	$	178,261	$	(13,780)

	December 31, 2022
	Less than Twelve Months				Twelve Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In Thousands)	Value		Losses		Value		Losses		Value		Losses
Available for sale (AFS):
U.S. Government and agency securities	$	2,896	$	(106)	$	—	$	—	$	2,896	$	(106)
Mortgage-backed securities	—		—		1,282		(214)		1,282		(214)
State and political securities	95,444		(4,797)		36,283		(3,977)		131,727		(8,774)
Other debt securities	16,896		(664)		25,144		(2,886)		42,040		(3,550)
Total debt securities	$	115,236	$	(5,567)	$	62,709	$	(7,077)	$	177,945	$	(12,644)

At September 30, 2023, there were a total of 43 securities in a continuous unrealized loss position for less than twelve months and 184 individual securities that were in a continuous unrealized loss position for twelve months or greater. No credit losses occurred for the period ended September 30, 2023.

The Company reviews its position quarterly and has determined that, at September 30, 2023, the declines outlined in the above table represent temporary non-credit declines and the Company does not intend to sell, and does not believe it will be required to sell, these securities before recovery of their cost basis, which may be at maturity.  The Company has concluded that the unrealized losses disclosed above are not credit-related but are the result of interest rate changes, sector credit ratings changes, or company-specific ratings changes that are not expected to result in the non-collection of principal and interest during the period.

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

(In Thousands)	Amortized Cost		Fair Value
Due in one year or less	$	39,163	$	38,246
Due after one year to five years	88,544		82,446
Due after five years to ten years	65,437		59,047
Due after ten years	5,303		4,928
Total	$	198,447	$	184,667

Total gross proceeds from sales of debt securities available for sale for the nine months ended September 30, 2023 was $24,701,000, compared to $4,151,000 for the corresponding 2022 period.

The following table represents gross realized gains and losses from the sales of debt securities available for sale:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Available for sale (AFS):
Gross realized gains:
State and political securities	$	1	$	—	$	146	$	14
Other debt securities	—		—		—		—
Total gross realized gains	$	1	$	—	$	146	$	14
Gross realized losses:
State and political securities	$	(46)	$	(156)	$	(271)	$	(182)

Investment securities with a carrying value of approximately $114,938,000 and $154,946,000 at September 30, 2023 and December 31, 2022, respectively, were pledged to secure certain deposits, repurchase agreements, and for other purposes as required by law.

At September 30, 2023 and December 31, 2022, we had $1,072,000 and $1,142,000, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Net losses recognized in equity securities during the period	$	(37)	$	(55)	$	(36)	$	(158)
Less: Net losses realized on the sale of equity securities during the period	(1)		—		(1)		—
Unrealized losses recognized in equity securities held at reporting date	$	(36)	$	(55)	$	(35)	$	(158)

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Loans

9 Months Ended

Sep. 30, 2023

Loans and Leases Receivable Disclosure [Abstract]

Loans

Loans

Management segments the Banks' loan portfolio to a level that enables risk and performance monitoring according to similar risk characteristics.  Loans are segmented based on the underlying collateral characteristics.  Categories include commercial, financial, and agricultural, real estate, and installment loans.  Real estate loans are further segmented into three categories: residential, commercial, and construction, while installment loans are classified as either consumer automobile loans or other installment loans.

The following table presents the related aging categories of loans, by class, as of September 30, 2023 and December 31, 2022:

	September 30, 2023
	Past Due						Past Due 90
	30 To 89		Past Due 90				Days Or More
(In Thousands)	Days		Days Or More		Current		& Still Accruing		Total
Commercial, financial, and agricultural	$	255	$	33	$	211,185	$	8	$	211,473
Real estate mortgage:
Residential	5,013		1,151		767,618		1,434		773,782
Commercial	775		92		524,799		59		525,666
Construction	472		32		55,329		—		55,833
Consumer automobile loans	1,121		144		238,503		141		239,768
Other consumer installment loans	157		4		10,660		36		10,821
	$	7,793	$	1,456	$	1,808,094	$	1,678	$	1,817,343
Net deferred loan fees and discounts									1,118
Allowance for credit losses									(12,890)
Loans, net									$	1,805,571

	December 31, 2022
	Past Due		Past Due 90
	30 To 89		Days Or More		Non-
(In Thousands)	Days		& Still Accruing		Accrual		Current		Total
Commercial, financial, and agricultural	$	94	$	—	$	432	$	189,935	$	190,461
Real estate mortgage:
Residential	5,472		1,120		524		701,093		708,209
Commercial	2,564		60		2,659		495,349		500,632
Construction	511		—		—		42,797		43,308
Consumer automobile loans	2,089		80		—		183,943		186,112
Other consumer installment loans	152		15		—		10,194		10,361
	$	10,882	$	1,275	$	3,615	$	1,623,311	1,639,083
Net deferred loan fees and discounts									648
Allowance for loan losses									(15,637)
Loans, net									$	1,624,094

The Allowance for Credit Losses ("ACL") related to loans consists of loans evaluated collectively and individually for expected credit losses. The ACL related to loans represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to net loans. The ACL for off balance sheet credit exposure includes estimated losses on unfunded loan commitments, letters of credit and other off balance sheet credit exposures and is recorded in other liabilities. The total ACL is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

The following table presents the components of the ACL as of September 30, 2023:

	September 30,
(In Thousands)	2023
ACL - loans	$	12,890
ACL - off balance sheet credit exposure	1,240
Total ACL	$	14,130

 

Non-Accrual Loans

	September 30, 2023						December 31, 2022
	Non-accrual Loans
(In Thousands)	With a Related ACL		Without a Related ACL		Total		Total Non-accrual loans
Commercial, financial, and agricultural	$	—	$	543	$	543	$	432
Real estate mortgage:
Residential	24		265		289		524
Commercial	947		226		1,173		2,659
Construction	—		—		—		—
Consumer automobile	—		—		—		—
Other consumer installment loans	—		—		—		—
	$	971	$	1,034	$	2,005	$	3,615

Total interest income recorded on non-accrual loans at September 30, 2023 totaled $104,000.

The following table presents the recorded investment, unpaid principal balance, and related allowance of impaired loans by segment as of December 31, 2022:

	December 31, 2022
	Recorded		Unpaid Principal		Related
(In Thousands)	Investment		Balance		Allowance
With no related allowance recorded:
Commercial, financial, and agricultural	$	295	$	295	$	—
Real estate mortgage:
Residential	3,388		3,388		—
Commercial	2,588		2,588		—
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	—		—		—
	6,271		6,271		—
With an allowance recorded:
Commercial, financial, and agricultural	403		403		4
Real estate mortgage:
Residential	933		933		111
Commercial	3,607		3,607		827
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	19		—		19
	4,962		4,943		961
Total:
Commercial, financial, and agricultural	698		698		4
Real estate mortgage:
Residential	4,321		4,321		111
Commercial	6,195		6,195		827
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	19		—		19
	$	11,233	$	11,214	$	961

The following table presents outstanding loan balances of collateral-dependent loans by class as of September 30, 2023:

(In Thousands)	Real estate		Unsecured*		Total
Real estate mortgage:
Residential	$	238	$	—	$	238
Commercial	92		332		424
Total	$	330	$	332	$	662

* Loan considered unsecured due to lien position on property

The following table presents the average recorded investment in impaired loans and related interest income recognized for the three and nine months ended September 30, 2022:

	Three Months Ended September 30,
		2022
(In Thousands)		Average Investment in Impaired Loans		Interest Income Recognized on an Accrual Basis on Impaired Loans		Interest Income Recognized on a Cash Basis on Impaired Loans
Commercial, financial, and agricultural		$	711	$	5	$	—
Real estate mortgage:
Residential		4,586		47		—
Commercial		7,227		50		—
Construction		—		—		—
Consumer automobile		7		—		—
Other consumer installment loans		10		—		—
		$	12,541	$	102	$	—

	Nine Months Ended September 30,
	2022
(In Thousands)	Average Investment in Impaired Loans		Interest Income Recognized on an Accrual Basis on Impaired Loans		Interest Income Recognized on a Cash Basis on Impaired Loans
Commercial, financial, and agricultural	$	782	$	15	$	—
Real estate mortgage:
Residential	4,765		141		—
Commercial	7,492		151		—
Construction	42		1		—
Consumer automobile	3		1		—
Other consumer installment loans	15		—		—
	$	13,099	$	309	$	—

Loan Modifications

On January 1, 2023, the Corporation adopted ASU 2022-02. Loan modifications reported below do not include modifications with insignificant payment delays. ASU 2022-02 lists the following factors when considering if the loan modification has insignificant payment delays: (1) the amount of the restructured payments subject to the delay is insignificant relative to the unpaid principal or collateral value of the debt and will result in an insignificant shortfall in the contractual amount due, and (2) the delay in timing of the restructured payment period is insignificant relative to the frequency of payments due under the debt, the debt’s original contractual maturity or the debt’s original expected duration.

The ACL incorporates an estimate of lifetime expected credit losses and is recorded upon asset origination or acquisition. The starting point for the estimate of the ACL is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Corporation uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

There were no loan modifications completed during the three and nine months ended September 30, 2023.

There were no loan modifications considered to be TDRs completed during the three and nine months ended September 30, 2022.

There were no loan modifications made during the twelve months prior to September 30, 2023 that defaulted during the nine months ended September 30, 2023. There were no loan modifications considered to be a TDR made during the twelve months previous to September 30, 2022 that defaulted during the nine months ended September 30, 2022.

Loans considered modifications amounted to $5,233,000 and $7,468,000 as of September 30, 2023 and December 31, 2022, respectively.

The amount of foreclosed residential real estate held at September 30, 2023 and December 31, 2022, totaled $588,000 and $950,000, respectively. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at September 30, 2023 and December 31, 2022, totaled $328,000 and $890,000, respectively.

Internal Credit Ratings

Management uses a ten point internal credit rating system to monitor the credit quality of the overall loan portfolio. The first six 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 evaluated for substandard classification.  Loans in the doubtful category exhibit the same weaknesses found in the substandard loans; however, the weaknesses are more pronounced.  Such loans are static and collection in full is improbable.  However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.  Loans classified as loss are considered uncollectible and charge-off is imminent.

To help ensure that credit ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Banks have a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the pass category unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event.  An external semi-annual loan review of large commercial relationships is performed, as well as a sample of smaller transactions. The 2023 loan review will evaluate 55% of the Banks' average outstanding commercial portfolio which can consist of outstanding loans, commercial real estate mortgages and outstanding commitments. Detailed reviews, including plans for resolution, are performed on loans classified as substandard, doubtful, or loss on a quarterly basis.

The following table presents the credit quality categories identified above as of September 30, 2023 and December 31, 2022:

	September 30, 2023
(In Thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial, financial, and agricultural
Pass	$	34,288	$	53,560	$	42,363	$	33,239	$	9,224	$	6,756	$	29,212	$	114	$	208,756
Special Mention	—		201		42		—		—		168		223		—		634
Substandard or Lower	—		—		—		85		—		755		490		753		2,083
	$	34,288	$	53,761	$	42,405	$	33,324	$	9,224	$	7,679	$	29,925	$	867	$	211,473
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate mortgage:
Residential
Pass	$	117,468	$	218,678	$	120,137	$	70,364	$	45,930	$	17,038	$	51,814	$	129,802	$	771,231
Special Mention	—		409		274		—		—		—		—		—		683
Substandard or Lower	—		—		—		—		—		1,798		—		70		1,868
	$	117,468	$	219,087	$	120,411	$	70,364	$	45,930	$	18,836	$	51,814	$	129,872	$	773,782
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	9	$	72	$	—	$	81
Commercial
Pass	$	43,594	$	105,217	$	134,960	$	50,535	$	25,913	$	147,471	$	10,827	$	691	$	519,208
Special Mention	—		—		1,065		—		—		48		—		—		1,113
Substandard or Lower	—		—		—		—		63		5,282		—		—		5,345
	$	43,594	$	105,217	$	136,025	$	50,535	$	25,976	$	152,801	$	10,827	$	691	$	525,666
Current period gross write offs	$	59	$	—	$	—	$	—	$	—	$	3	$	—	$	—	$	62
Construction
Pass	$	21,093	$	13,072	$	15,045	$	1,417	$	402	$	4,452	$	261	$	—	$	55,742
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		91		—		—		91
	$	21,093	$	13,072	$	15,045	$	1,417	$	402	$	4,543	$	261	$	—	$	55,833
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer Automobile
Pass	$	101,214	$	85,276	$	21,969	$	17,486	$	8,716	$	5,107	$	—	$	—	$	239,768
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		—		—		—		—
	$	101,214	$	85,276	$	21,969	$	17,486	$	8,716	$	5,107	$	—	$	—	$	239,768
Current period gross write offs	$	—	$	247	$	136	$	112	$	6	$	7	$	—	$	—	$	508
Installment loans to individuals
Pass	$	2,609	$	2,406	$	1,291	$	558	$	427	$	3,486	$	—	$	44	$	10,821
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		—		—		—		—
	$	2,609	$	2,406	$	1,291	$	558	$	427	$	3,486	$	—	$	44	$	10,821
Current period gross write offs	$	179	$	28	$	20	$	6	$	6	$	19	$	13	$	11	$	282

The information presented in the table above is not required for periods prior to the adoption of CECL. The following table presents the most comparable required information for the prior period, internal credit ratings for the report loan segments as of December 31, 2022:

	December 31, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment loans
(In Thousands)			Residential		Commercial		Construction						Totals
Pass	$	184,783	$	705,515	$	488,993	$	43,209	$	186,112	$	10,361	$	1,618,973
Special Mention	125		266		4,526		—		—		—		4,917
Substandard	5,553		2,428		7,113		99		—		—		15,193
	$	190,461	$	708,209	$	500,632	$	43,308	$	186,112	$	10,361	$	1,639,083

Allowance for Credit Losses

Maintaining an appropriate Allowance for Credit Losses ("ACL") is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, residential construction, commercial and industrial, and commercial real estate, an internal credit rating process is used. Management believes that internal credit ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal credit rating categories is a significant component of the ACL methodology for these loans, which bases the probability of default on this migration. Assigning credit ratings involves judgment. The Company's loan review process provide a separate assessment of credit rating accuracy. Credit ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff or if specific loan review assessments identify a deterioration or an improvement in the loans.

Management considers the performance of the loan portfolio and its impact on the ACL. The Company does not assign internal Credit ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, and consumer automobile loans. For these loans, the most relevant credit quality indicator is delinquency status and management evaluates credit quality based on the aging status of the loan.

Historical loss trends are used in the estimation of losses in the current portfolio.  These historical loss amounts are modified by other qualitative factors.  A historical charge-off factor is calculated utilizing the charge-off and recovery data over the past ten years.  Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience.  The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management reviews the loan portfolio on a quarterly basis in order to make appropriate and timely adjustments to the ACL.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL.

Activity in the allowance is presented for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30, 2023
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	3,019	$	1,078	$	4,191	$	178	$	2,446	$	680	$	—	$	11,592
Charge-offs	—		—		—		—		(130)		(86)		—		(216)
Recoveries	106		22		1		—		27		27		—		183
Provision	788		68		131		20		241		83		—		1,331
Ending Balance	$	3,913	$	1,168	$	4,323	$	198	$	2,584	$	704	$	—	$	12,890

	Three Months Ended September 30, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	2,108	$	4,818	$	5,395	$	199	$	1,307	$	110	$	456	$	14,393
Charge-offs	(18)		—		—		—		(57)		(85)		—		(160)
Recoveries	93		1		1		—		10		18		—		123
Provision	(114)		376		140		11		325		75		42		855
Ending Balance	$	2,069	$	5,195	$	5,536	$	210	$	1,585	$	118	$	498	$	15,211

 

t	Nine Months Ended September 30, 2023
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	1,914	$	5,061	$	6,110	$	188	$	1,617	$	109	$	638	$	15,637
Impact of adopting ASC 326	2,656		(3,893)		(2,660)		(96)		240		602		(638)		(3,789)
Charge-offs	—		(81)		(62)		—		(507)		(283)		—		(933)
Recoveries	1,067		25		26		—		66		65		—		1,249
Provision	(1,724)		56		909		106		1,168		211		—		726
Ending Balance	$	3,913	$	1,168	$	4,323	$	198	$	2,584	$	704	$	—	$	12,890

	Nine Months Ended September 30, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	1,946	$	4,701	$	5,336	$	179	$	1,411	$	111	$	492	$	14,176
Charge-offs	(18)		(15)		(155)		—		(234)		(188)		—		(610)
Recoveries	138		46		3		28		32		63		—		310
Provision	3		463		352		3		376		132		6		1,335
Ending Balance	$	2,069	$	5,195	$	5,536	$	210	$	1,585	$	118	$	498	$	15,211

The shift in allocation and the changes in the provision for credit losses are primarily due to changes in the credit metrics within the loan portfolio coupled with the adoption of CECL on January 1, 2023. The decrease in provision for consumer automobile loans for the three month period was driven by increased net recoveries that offset the impact of increased loan volume, while the increase in provision for the nine month period ended September 30, 2023 was driven by loan volume coupled with increased net charge-offs. The increase in provision for commercial, financial, and agricultural for the three month period was primarily the result of loan volume, while the decrease in provision for the nine month period ended September 30, 2023 was the result of improving credit metrics coupled with a large recovery during the three month period ended June 30, 2023 which effected the historical loss rate calculations. The provision for commercial real estate remained steady for the three month period and increased for the nine month period ended September 30, 2023 primarily due to growth within this segment of the loan portfolio.

The Company grants commercial, industrial, residential, and installment loans to customers primarily throughout north-east and central Pennsylvania. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on the economic conditions within this region.

The Company has a concentration of the following to gross loans at September 30, 2023 and 2022: 

	September 30,
	2023		2022
Owners of residential rental properties	18.99	%	19.95	%
Owners of commercial rental properties	14.62	%	16.09	%

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of December 31, 2022:

	December 31, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer Automobile		Other consumer installment		Unallocated
(In Thousands)			Residential		Commercial		Construction								Totals
Allowance for Loan Losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4	$	111	$	827	$	—	$	—	$	19	$	—	$	961
Collectively evaluated for impairment	1,910		4,950		5,283		188		1,617		90		638		14,676
Total ending allowance balance	$	1,914	$	5,061	$	6,110	$	188	$	1,617	$	109	$	638	$	15,637
Loans:
Individually evaluated for impairment	$	698	$	4,321	$	6,195	$	—	$	—	$	19			$	11,233
Collectively evaluated for impairment	189,763		703,888		494,437		43,308		186,112		10,342				1,627,850
Total ending loans balance	$	190,461	$	708,209	$	500,632	$	43,308	$	186,112	$	10,361			$	1,639,083

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Net Periodic Benefit Cost-Defined Benefit Plans

9 Months Ended

Sep. 30, 2023

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

Net Periodic Benefit Cost-Defined Benefit Plans

Net Periodic Benefit Cost-Defined Benefit Plans

For a detailed disclosure on the Company’s pension and employee benefits plans, please refer to Note 13 of the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2022.

The following sets forth the components of the net periodic expense/(gain) of the domestic non-contributory defined benefit plan for the three and nine months ended September 30, 2023 and 2022, respectively:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Interest cost	$	198	$	138	$	594	$	414
Expected return on plan assets	(326)		(412)		(978)		(1,237)
Amortization of net loss	37		17		111		52
Net periodic benefit	$	(91)	$	(257)	$	(273)	$	(771)

Employer Contributions

The Company previously disclosed in its consolidated financial statements, included in the Annual Report on Form 10-K for the year ended December 31, 2022, that it does not expect to contribute to its defined benefit plan in 2023.  As of September 30, 2023, there were no contributions made to the pension plan.

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Stock Purchase Plans	9 Months Ended
	Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]
Stock Purchase Plans	Stock Purchase PlansThe Company maintains an Employee Stock Purchase Plan (“Plan”).  The Plan is intended to encourage employee participation in the ownership and economic progress of the Company.  The Plan allows for up to 1,500,000 shares to be purchased by employees.  The purchase price of the shares is 95% of market value with an employee eligible to purchase up to the lesser of 15% of base compensation or $12,000 in market value annually.  During the nine months ended September 30, 2023 and 2022, there were 3,120 and 2,960 shares issued under the Plan, respectively, for total proceeds of $73,000 and $67,000.The Company maintains the 2020 Non-Employee Director Compensation Plan ("Director Plan"). Under this Director Plan, non-employee directors who have not attained specified stock ownership levels are required to receive a portion of their annual compensation in the form of common stock (currently 50% of total annual compensation), with the ability to elect to receive up to 100% of annual compensation in the form of common stock by making a written election prior to the calendar year to which the compensation relates. The Director Plan allows for up to 100,000 shares to be issued. As of September 30, 2023, the Company has issued a total of 42,191 shares of common stock to non-employee directors under the Director Plan in lieu of otherwise payable cash compensation with 7,560 and 9,968 shares issued, respectively, with an associated expense of $193,000 and $240,000 during the nine months ended September 30, 2023 and 2022.

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Off-Balance Sheet Risk

9 Months Ended

Sep. 30, 2023

Off Balance Sheet Risk

Off-Balance Sheet Risk

Off-Balance Sheet Risk

The Company 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 are primarily comprised of commitments to extend credit, standby letters of credit, and credit exposure from the sale of assets with recourse.  These instruments involve, to varying degrees, elements of credit, interest rate, or liquidity risk in excess of the amount recognized in the Consolidated Balance Sheet.  The contract amounts of these instruments express the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.  The Company may require collateral or other security to support financial instruments with off-balance sheet credit risk.

Financial instruments whose contract amounts represent credit risk are as follows at September 30, 2023 and December 31, 2022:

(In Thousands)	September 30, 2023		December 31, 2022
Commitments to extend credit	$	161,270	$	169,365
Standby letters of credit	9,467		9,915
Credit exposure from the sale of assets with recourse	7,274		7,358
	$	178,011	$	186,638
Allowance for credit losses	$	1,240	$	143

Commitments to extend credit are legally binding agreements to lend to customers.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements.  The Company evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company, on an extension of credit is based on management’s credit assessment of the counterparty.

Standby letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  These instruments are issued primarily to support bid or performance related contracts.  The coverage period for these instruments is typically a one year period with an annual renewal option subject to prior approval by management.  Fees earned from the issuance of these letters are recognized upon expiration of the coverage period.  For secured letters of credit, the collateral is typically Bank deposit instruments or customer business assets.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following disclosures show the hierarchical disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value.

Level I:	Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level II:	Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
Level III:	Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

This hierarchy requires the use of observable market data when available.

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value on a recurring basis as of September 30, 2023 and December 31, 2022, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	September 30, 2023
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
Investment securities, available for sale:
U.S. Government and agency securities	$	—	$	3,864	$	—	$	3,864
Mortgage-backed securities	—		11,396		—		11,396
State and political securities	—		119,847		—		119,847
Other debt securities	—		49,560		—		49,560
Investment equity securities:
Equity securities	1,072		—		—		1,072

	December 31, 2022
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
Investment securities, available for sale:
U.S. Government and agency securities	$	—	$	2,896	$	—	$	2,896
Mortgage-backed securities	—		1,282		—		1,282
State and political securities	—		142,809		—		142,809
Other debt securities	—		46,686		—		46,686
Investment equity securities:
Equity securities	1,142		—		—		1,142

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value on a non-recurring basis as of September 30, 2023 and December 31, 2022, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 

	September 30, 2023
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Collateral dependent loans	$	—	$	—	$	331	$	331
Other real estate owned	—		—		853		853

	December 31, 2022
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	—	$	—	$	1,923	$	1,923
Other real estate owned	—		—		83		83

The following tables present a listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques as of September 30, 2023 and December 31, 2022: 

	September 30, 2023
	Quantitative Information About Level III Fair Value Measurements
(In Thousands)	Fair Value		Valuation Technique(s)	Unobservable Inputs	Range	Weighted Average
Collateral dependent loans	$	331	Appraisal of collateral (1)	Appraisal adjustments (1)	(15)% to (24)%	(20)%
Other real estate owned	$	853	Appraisal of collateral (1)	Appraisal adjustments (1)	(20)%	(20)%

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

	December 31, 2022
	Quantitative Information About Level III Fair Value Measurements
(In Thousands)	Fair Value		Valuation Technique(s)	Unobservable Inputs	Range	Weighted Average
Impaired loans	$	1,923	Appraisal of collateral (1)	Appraisal adjustments (1)	0% to (34)%	(14)%
Other real estate owned	$	83	Appraisal of collateral (1)	Appraisal adjustments (1)	(20)%	(20)%

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The significant unobservable input used in the fair value measurement of the Company’s impaired loans using the appraisal of collateral valuation technique include appraisal adjustments, which are adjustments to appraisals by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The significant unobservable input used in the fair value measurement of the Company’s other real estate owned are the same inputs used to value impaired loans using the appraisal of collateral valuation technique.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company is required to disclose fair values for its financial instruments.  Fair values are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Also, it is the Company’s general practice and intention to hold most of its financial instruments to maturity and not to engage in trading or sales activities.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.  These fair values are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions can significantly affect the fair values.

Fair values have been determined by the Company using historical data and an estimation methodology suitable for each category of financial instruments.  The Company’s fair values are set forth below for the Company’s other financial instruments.

As certain assets and liabilities, such as deferred tax assets, premises and equipment, and many other operational elements of the Company, are not considered financial instruments but have value, this fair value of financial instruments would not represent the full market value of the Company.

The fair values of the Company’s financial instruments not recorded at fair value on a recurring or nonrecurring basis are as follows at September 30, 2023 and December 31, 2022:

	Carrying		Fair		Fair Value Measurements at September 30, 2023
(In Thousands)	Value		Value		Level I		Level II		Level III
Financial assets:
Loans held for sale (1)	$	4,083	$	4,083	$	4,083	$	—	$	—
Loans, net	1,805,571		1,761,944		—		—		1,761,944
Financial liabilities:
Time deposits & brokered deposits	356,244		350,456		—		—		350,456
Short-term borrowings	193,746		193,746		193,746		—		—
Long-term borrowings	217,645		238,977		—		—		238,977

(1) The financial instrument is carried at cost at, September 30, 2023 which approximate the fair value of the instruments

	Carrying		Fair		Fair Value Measurements at December 31, 2022
(In Thousands)	Value		Value		Level I		Level II		Level III
Financial assets:
Loans held for sale (1)	$	3,298	$	3,298	$	3,298	$	—	$	—
Loans, net	1,624,094		1,594,073		—		—		1,594,073
Financial liabilities:
Time deposits & brokered deposits	146,282		137,559		—		—		137,559
Short-term borrowings	153,349		153,349		153,349		—		—
Long-term borrowings	102,783		99,118		—		—		99,118

(1) The financial instrument is carried at cost at, December 31, 2022 which approximate the fair value of the instruments

The methods and assumptions used by the Company in estimating fair values of financial instruments is in accordance with ASC Topic 825, Financial Instruments, as amended by ASU 2016-01 which requires public entities to use exit pricing in the calculation of the above tables.

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Stock Options

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock Options

Stock Options

In 2020, the Company adopted the 2020 Equity Incentive Plan which replaced the 2014 Equity Incentive Plan that did not have any remaining shares available for issuance. The plans are designed to help the Company attract, retain, and motivate employees and non-employee directors. Incentive stock options, non-qualified stock options, restricted stock, restricted stock units, and other equity-based awards may be granted as part of the plan.

As of January 1, 2023, the Company had a total of 914,000 stock options outstanding. During the nine months ended as of September 30, 2023, the Company issued 89,000 stock options with a strike price of $27.77 to a group of employees. The options granted in 2023 all expire ten years from the grant date. Of the 89,000 grants awarded in 2023, 59,500 of the options vest in three years while the 29,500 remaining options vest in five years.

Stock options outstanding as of September 30, 2023 are presented below:

Stock Options Granted
Date	Shares	Forfeited	Cash Settlement	Outstanding	Strike Price		Vesting Period	Expiration
January 20, 2023	59,500	—	—	59,500	$	27.77	3 years	10 years
January 20, 2023	29,500	—	—	29,500	27.77		5 years	10 years
January 18, 2022	156,000	—	—	156,000	24.10		3 years	10 years
January 18, 2022	78,000	—	—	78,000	24.10		5 years	10 years
April 9, 2021	156,500	—	—	156,500	24.23		3 years	10 years
April 9, 2021	78,000	—	—	78,000	24.23		5 years	10 years
March 11, 2020	119,300	—	—	119,300	25.34		3 years	10 years
March 11, 2020	119,200	—	—	119,200	25.34		5 years	10 years
March 15, 2019	120,900	(19,800)	—	101,100	28.01		3 years	10 years
March 15, 2019	119,100	(19,200)	—	99,900	28.01		5 years	10 years
August 27, 2015	58,125	(26,250)	(28,875)	3,000	28.02		5 years	10 years

A summary of stock option activity for the nine months ended September 30, 2023 is presented below:

	September 30, 2023
	Shares	Weighted Average Exercise Price
Outstanding, beginning of year	914,000	$	25.34
Granted	89,000	27.77
Forfeited	(3,000)	28.01
Expired	—	—
Outstanding, end of period	1,000,000	$	25.55
Exercisable, end of period	223,400	$	26.58

The estimated fair value of options, including the effect of estimated forfeitures, is recognized as expense on a straight line basis over the options’ vesting periods while ensuring that the cumulative amount of compensation cost recognized at least equals the value of the vested portion of the award at that date.

The fair value of stock options is estimated using the Black-Scholes option pricing model. The following is a summary of the assumptions used in this model for stock options granted for the nine months ended September 30, 2023:

	Nine months ended September 30,
	2023
Risk-free interest rate	3.76		%
Expected volatility	31		%
Expected Annual dividend	$	1.28
Expected life	6.84 years
Weighted average grant date fair value per option	$	6.11

Compensation expense for stock options is recognized using the fair value when the stock options are granted and is amortized over the options' vesting period. Compensation expense related to stock options was $229,000 and $715,000 for the three and nine months ended September 30, 2023 compared to $236,000 and $1,004,000 for the same periods of 2022. As of September 30, 2023, a total of 223,400 stock options were exercisable and the weighted average years to expiration of these options was 5.94 years. Total unrecognized compensation cost for non-vested options was $1,437,000 and will be recognized over their weighted average remaining vesting period of 1.08 years.

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Reclassification of Comparative Amounts	9 Months Ended
	Sep. 30, 2023
Reclassification of Comparative Amounts
Reclassification of Comparative Amounts	Reclassification of Comparative AmountsCertain comparative amounts for the prior period have been reclassified to conform to current period presentations. Such reclassifications had no effect on net income or shareholders’ equity

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The consolidated financial statements include the accounts of Penns Woods Bancorp, Inc. (the “Company”) and its wholly-owned subsidiaries: Woods Investment Company, Inc., Woods Real Estate Development Company, Inc., United Insurance Solutions, LLC., Luzerne Bank, and Jersey Shore State Bank (Jersey Shore State Bank and Luzerne Bank are referred to together as the “Banks”) and Jersey Shore State Bank’s wholly-owned subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group (“The M Group”).  All significant inter-company balances and transactions have been eliminated in the consolidation.

The interim financial statements are unaudited, but in the opinion of management reflect all adjustments necessary for the fair presentation of results for such periods.  The results of operations for any interim period are not necessarily indicative of results for the full year.  These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

CECL Adoption and Updated Significant Accounting Policy

CECL Adoption and Updated Significant Accounting Policy

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, and is referred to as CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities. It also applies to off-balance sheet (“OBS”) credit exposures (loan commitments, standby letters of credit, financial guarantees, and other similar instruments.

The Company adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, net of investments in leases and OBS credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology. The Company recorded an overall decrease of $3,789,000 to the Allowance for Credit Losses (“ACL”) on January 1, 2023 as a result of the adoption of CECL with an associated increase to retained earnings of $2,993,000 and decrease to deferred tax assets of $796,000. The Company also recorded a liability of $1,703,000 for OBS credit exposures that resulted in a decrease to retained earnings of $1,346,000 and an increase to deferred tax assets of $357,000.

Allowance for Credit Losses: The discussion that follows describes the methodology for determining the ACL under the CECL model that was adopted effective January 1, 2023. The allowance methodology for prior periods is disclosed in the Company’s 2022 Annual Report on Form 10-K.

The Company 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.

Loans: The ACL for loans is an estimate of the expected losses to be realized over the life of the loans in the portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated collectively for expected credit losses and 2) loans evaluated individually for expected credit losses. The ACL also includes certain qualitative adjustments to the CECL model.

Loans Evaluated Collectively: Management believes that internal credit ratings are the most relevant credit quality indicator for these types of loans, however; the Company does not assign internal credit ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, and consumer automobile loans. For these loans, the most relevant credit quality indicator is delinquency status and management evaluates credit quality based on the aging status of the loan. In order to determine the ACL:

• Loans aggregated into pools based on similar risk characteristics.

• The probability of default "PD" and loss given default rate "LGD" CECL model components are determined based on loss estimates driven by historical experience at the input level.

• The PD model component uses "through the economic cycle transition" matrices based on the Company's historical loan and transaction data across each pool of loans.

• The LGD model component calculates a lifetime LGD estimate across each pool of loans utilizing a nonparametric loss curve modeling approach.

• Reasonable and supportable forecasts are incorporated into the PD model component.

• Cash flow assumptions are established for each loan using maturity date, amortization schedule and interest rate.

• A constant prepayment rate is calculated for each loan pool in the CECL model.

Loans Evaluated Individually: Loans evaluated individually for expected credit losses include loans determined to be collateral-dependant.

Loans evaluated individually may have specific allocations assigned. For loans measured using the fair value of collateral, if the analysis determines that sufficient collateral value would be available for repayment of the debt, then no allocations would be assigned to those loans. Collateral could be in the form of real estate or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans.

For loans secured by real estate, estimated fair values are determined through appraisals performed by third-party appraisers or third party evaluations for commercial real estate loans and our internal appraisal department for 1-4 family real estate secured loans, discounted to arrive at expected net sale proceeds. For collateral dependent loans, estimated real estate fair values are also net of estimated selling costs. When a real estate secured loan is impaired, a decision is made regarding whether an updated appraisal of the real estate is necessary. This decision is based on various considerations, including: the age of the most recent appraisal; the loan-to-value ratio based on the original appraisal; the condition of the property; the Company’s experience and knowledge of the real estate market; the purpose of the loan; market factors; payment status; the strength of any guarantors; and the existence and age of other indications of value such as broker price opinions, among others. The Company generally obtains updated evaluations for collateral dependent loans secured predominantly by real estate every 12 months.

When updated evaluations are not obtained for loans secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and there has not been a significant deterioration in the collateral value since the original appraisal was performed.

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification. For commercial loans, commercial mortgages and construction loans to commercial borrowers, an internal credit rating process is used. The Company believes that internal credit ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal credit rating categories is a significant component of the ACL methodology for these loans, which bases the PD on this migration. Assigning credit ratings involves judgment. Credit ratings may be changed based on ongoing monitoring procedures, or if specific loan review assessments identify a deterioration or an improvement in the loan.

The following is a summary of the Company's internal credit rating categories:

• Pass: These loans do not currently pose undue credit risk and can range from the highest to average quality, depending on the degree of potential risk.

• Special Mention: These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in this category are currently acceptable, but are nevertheless potentially weak.

• Substandard or Lower: There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt.

The allocation of the ACL is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan portfolio. The Company considers risk factors such as: local and national economic conditions; trends in delinquencies and non-accrual loans; the diversity of borrower industry types; and the composition of the portfolio by loan type.

Qualitative and Other Adjustments to ACL: In addition to the quantitative credit loss estimates for loans evaluated collectively, qualitative factors that may not be fully captured in the quantitative results are also evaluated. These include changes in lending policy, volume of the portfolio, economy conditions, credit concentrations, level of problem loans, loan review, collateral value, and experience of credit staff. Qualitative adjustments are judgmental and are based on Management’s knowledge of the portfolio and the markets in which the Company operates. Qualitative adjustments are evaluated and approved on a quarterly basis.

OBS Credit Exposures: The ACL for OBS credit exposures is recorded in other liabilities on the consolidated balance sheet. This ACL represents management’s estimate of expected losses in its unfunded loan commitments and other OBS credit exposures, such as letters of credit and credit recourse on sold residential mortgage loans. The ACL specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). The ACL for OBS credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses.

The impact from the adoption of CECL is shown below:

	January 1, 2023
(In Thousands)	Pre-Adoption		Adoption Impact		As Reported
Assets
ACL on loans
Commercial, financial, and agricultural	$	1,914	$	2,656	$	4,570
Real estate mortgage:
Residential	5,061		(3,893)		1,168
Commercial	6,110		(2,660)		3,450
Construction	188		(96)		92
Consumer automobile loans	1,617		240		1,857
Other consumer installment loans	109		602		711
Unallocated	638		(638)		—
Liabilities
ACL for unfunded commitments	143		1,703		1,846
	$	15,780	$	(2,086)	$	13,694

Recent Accounting Pronouncements

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

Management has completed its implementation plan, segmentation and testing, and model validation. The implementation plan included drafting of additional controls and policies to govern data uploads to its third-party vendor, balancing and reconciling, testing and auditing of inputs, and review and decision-making surrounding segmentation, methodologies, qualitative factor adjustments, and reasonable and supportable forecasts and reversion techniques. Parallel runs were processed during 2022 and the results were consistent with management's expectations. The implementation plan is currently going through the Company's control structure and internal control testing is being performed.

As a result of adopting this standard, the Company recorded a decrease in its allowance effective January 1, 2023, of $2,086,000. As a result, the Company recorded a decrease in its loan allowance as of January 1, 2023, of $3,789,000; as well as

an increase in its allowance for off-balance sheet credit exposures of $1,703,000. These estimates are subject to further refinements based on ongoing evaluations of our model, methodologies, and judgments, as well as prevailing economic conditions and forecasts as of the adoption date. The adoption of ASU 2016-13 is not expected to have a significant impact on our regulatory capital ratios.

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

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Update is effective for smaller reporting companies and all other entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

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

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument was issued at a substantial premium. This ASU requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The amendments in this ASU are effective for public business entities that are not smaller reporting companies, for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The guidance may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current-period gross writeoffs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. This Update did not have a significant impact on the Company’s financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) – Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This amendment clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. It also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The amendments will be applied prospectively, with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2023, the FASB issued ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. This Update is not expected to have a significant impact on the Company’s financial statements.

In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718), which amends or supersedes various SEC paragraphs within the Codification to conform to past SEC announcements and guidance issued by the SEC. The ASU does not provide any new guidance so there is no transition or effective date associated with it. This ASU did not have a significant impact on the Company’s financial statements.

In August 2023, the FASB issued ASU 2023-04, Liabilities (Topic 405), which adds various SEC paragraphs to the Codification to reflect guidance included in SEC Staff Accounting Bulletin 121 on safeguarding crypto assets. The standard does not provide any new guidance so there is no transition or effective date associated with it. This ASU did not have a significant impact on the Company’s financial statements.

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Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Impact of CECL

The impact from the adoption of CECL is shown below:

	January 1, 2023
(In Thousands)	Pre-Adoption		Adoption Impact		As Reported
Assets
ACL on loans
Commercial, financial, and agricultural	$	1,914	$	2,656	$	4,570
Real estate mortgage:
Residential	5,061		(3,893)		1,168
Commercial	6,110		(2,660)		3,450
Construction	188		(96)		92
Consumer automobile loans	1,617		240		1,857
Other consumer installment loans	109		602		711
Unallocated	638		(638)		—
Liabilities
ACL for unfunded commitments	143		1,703		1,846
	$	15,780	$	(2,086)	$	13,694

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2023

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

Schedule of changes in accumulated other comprehensive income by component

The changes in accumulated other comprehensive loss by component shown net of tax and parenthesis indicating debits, as of September 30, 2023 and 2022 were as follows:

	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
(In Thousands)	Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total		Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total
Beginning balance	$	(9,753)	$	(4,080)	$	(13,833)	$	(6,222)	$	(3,458)	$	(9,680)
Other comprehensive loss before reclassifications	(1,169)		—		(1,169)		(5,026)		—		(5,026)
Amounts reclassified from accumulated other comprehensive gain	36		29		65		123		14		137
Net current-period other comprehensive (loss) income	(1,133)		29		(1,104)		(4,903)		14		(4,889)
Ending balance	$	(10,886)	$	(4,051)	$	(14,937)	$	(11,125)	$	(3,444)	$	(14,569)

	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
(In Thousands)	Net Unrealized (Loss) Gain on Available for Sale Securities		Defined Benefit  Plan		Total		Net Unrealized Gain (Loss) on Available for Sale Securities		Defined Benefit  Plan		Total
Beginning balance	$	(9,819)	$	(4,139)	$	(13,958)	$	2,373	$	(3,485)	$	(1,112)
Other comprehensive loss before reclassifications	(1,166)		—		(1,166)		(13,631)		—		(13,631)
Amounts reclassified from accumulated other comprehensive gain	99		88		187		133		41		174
Net current-period other comprehensive (loss) income	(1,067)		88		(979)		(13,498)		41		(13,457)
Ending balance	$	(10,886)	$	(4,051)	$	(14,937)	$	(11,125)	$	(3,444)	$	(14,569)

Schedule of reclassifications out of accumulated other comprehensive income

The reclassifications out of accumulated other comprehensive loss shown, net of tax and parenthesis indicating debits to net income, as of September 30, 2023 and 2022 were as follows:

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item  in the Consolidated  Statement of Income
	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022
Net unrealized loss on available for sale securities	$	(45)	$	(156)	Net debt securities losses, available for sale
Income tax effect	9		33		Income tax provision
Total reclassifications for the period	$	(36)	$	(123)
Net unrecognized pension costs	$	(37)	$	(17)	Other non-interest expense
Income tax effect	8		3		Income tax provision
Total reclassifications for the period	$	(29)	$	(14)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item  in the Consolidated  Statement of Income
	Nine months ended September 30, 2023		Nine months ended September 30, 2022
Net unrealized losses on available for sale securities	$	(125)	$	(168)	Net debt securities losses, available for sale
Income tax effect	26		35		Income tax provision
Total reclassifications for the period	$	(99)	$	(133)
Net unrecognized pension costs	$	(111)	$	(52)	Other non-interest expense
Income tax effect	23		11		Income tax provision
Total reclassifications for the period	$	(88)	$	(41)

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Per Share Data (Tables)

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Schedule of weighted average common shares (denominator) used in the basic and dilutive earnings per share computation

There were a total of 917,000 stock options, with an average exercise price of $25.35 that were excluded, on a weighted average basis, in the computation of diluted earnings per share for the period due to the average market price of common shares of $23.78 being less than the strike price for the period ending September 30, 2022.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted average common shares issued	7,582,665	7,561,453	7,574,561	7,557,250
Weighted average treasury stock shares	(510,225)	(510,225)	(510,225)	(496,379)
Weighted average common shares outstanding - basic	7,072,440	7,051,228	7,064,336	7,060,871
Dilutive effect of outstanding stock options	156,500	—	156,500	—
Weighted average common shares outstanding - diluted	7,228,940	7,051,228	7,220,836	7,060,871

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of amortized cost, gross unrealized gains and losses, and fair values of equity and trading investment securities

The amortized cost, gross unrealized gains and losses, and fair values of our investment securities portfolio at September 30, 2023 and December 31, 2022 are as follows:

	September 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In Thousands)	Cost		Gains		Losses		Value
Available for sale (AFS):
U.S. Government and agency securities	$	4,001	$	—	$	(137)	$	3,864
Mortgage-backed securities	12,101		—		(705)		11,396
State and political securities	129,024		—		(9,177)		119,847
Other debt securities	53,321		—		(3,761)		49,560
Total debt securities	$	198,447	$	—	$	(13,780)	$	184,667
Investment equity securities:
Equity securities	$	1,300	$	—	$	(228)	$	1,072

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In Thousands)	Cost		Gains		Losses		Value
Available for sale (AFS):
U.S. Government and agency securities	$	3,002	$	—	$	(106)	$	2,896
Mortgage-backed securities	1,496		—		(214)		1,282
State and political securities	151,426		157		(8,774)		142,809
Other debt securities	50,178		58		(3,550)		46,686
Total debt securities	$	206,102	$	215	$	(12,644)	$	193,673
Investment equity securities:
Equity securities	$	1,350	$	—	$	(208)	$	1,142

Schedule of gross unrealized losses and fair value

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual debt securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022.

	September 30, 2023
	Less than Twelve Months				Twelve Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In Thousands)	Value		Losses		Value		Losses		Value		Losses
Available for sale (AFS):
U.S. Government and agency securities	$	967	$	(33)	$	2,897	$	(104)	$	3,864	$	(137)
Mortgage-backed securities	10,263		(454)		1,125		(251)		11,388		(705)
State and political securities	19,050		(1,013)		97,522		(8,164)		116,572		(9,177)
Other debt securities	10,596		(348)		35,841		(3,413)		46,437		(3,761)
Total debt securities	$	40,876	$	(1,848)	$	137,385	$	(11,932)	$	178,261	$	(13,780)

	December 31, 2022
	Less than Twelve Months				Twelve Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In Thousands)	Value		Losses		Value		Losses		Value		Losses
Available for sale (AFS):
U.S. Government and agency securities	$	2,896	$	(106)	$	—	$	—	$	2,896	$	(106)
Mortgage-backed securities	—		—		1,282		(214)		1,282		(214)
State and political securities	95,444		(4,797)		36,283		(3,977)		131,727		(8,774)
Other debt securities	16,896		(664)		25,144		(2,886)		42,040		(3,550)
Total debt securities	$	115,236	$	(5,567)	$	62,709	$	(7,077)	$	177,945	$	(12,644)

Schedule of amortized cost and fair value of debt securities by contractual maturity

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

(In Thousands)	Amortized Cost		Fair Value
Due in one year or less	$	39,163	$	38,246
Due after one year to five years	88,544		82,446
Due after five years to ten years	65,437		59,047
Due after ten years	5,303		4,928
Total	$	198,447	$	184,667

Schedule of gross realized gains and losses

The following table represents gross realized gains and losses from the sales of debt securities available for sale:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Available for sale (AFS):
Gross realized gains:
State and political securities	$	1	$	—	$	146	$	14
Other debt securities	—		—		—		—
Total gross realized gains	$	1	$	—	$	146	$	14
Gross realized losses:
State and political securities	$	(46)	$	(156)	$	(271)	$	(182)

Schedule of unrealized and realized gains and losses recognized in net income

The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Net losses recognized in equity securities during the period	$	(37)	$	(55)	$	(36)	$	(158)
Less: Net losses realized on the sale of equity securities during the period	(1)		—		(1)		—
Unrealized losses recognized in equity securities held at reporting date	$	(36)	$	(55)	$	(35)	$	(158)

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Loans (Tables)

9 Months Ended

Sep. 30, 2023

Loans and Leases Receivable Disclosure [Abstract]

Schedule of related aging categories of loans by segment

The following table presents the related aging categories of loans, by class, as of September 30, 2023 and December 31, 2022:

	September 30, 2023
	Past Due						Past Due 90
	30 To 89		Past Due 90				Days Or More
(In Thousands)	Days		Days Or More		Current		& Still Accruing		Total
Commercial, financial, and agricultural	$	255	$	33	$	211,185	$	8	$	211,473
Real estate mortgage:
Residential	5,013		1,151		767,618		1,434		773,782
Commercial	775		92		524,799		59		525,666
Construction	472		32		55,329		—		55,833
Consumer automobile loans	1,121		144		238,503		141		239,768
Other consumer installment loans	157		4		10,660		36		10,821
	$	7,793	$	1,456	$	1,808,094	$	1,678	$	1,817,343
Net deferred loan fees and discounts									1,118
Allowance for credit losses									(12,890)
Loans, net									$	1,805,571

	December 31, 2022
	Past Due		Past Due 90
	30 To 89		Days Or More		Non-
(In Thousands)	Days		& Still Accruing		Accrual		Current		Total
Commercial, financial, and agricultural	$	94	$	—	$	432	$	189,935	$	190,461
Real estate mortgage:
Residential	5,472		1,120		524		701,093		708,209
Commercial	2,564		60		2,659		495,349		500,632
Construction	511		—		—		42,797		43,308
Consumer automobile loans	2,089		80		—		183,943		186,112
Other consumer installment loans	152		15		—		10,194		10,361
	$	10,882	$	1,275	$	3,615	$	1,623,311	1,639,083
Net deferred loan fees and discounts									648
Allowance for loan losses									(15,637)
Loans, net									$	1,624,094

Schedule of components of and activity in the allowance

The following table presents the components of the ACL as of September 30, 2023:

	September 30,
(In Thousands)	2023
ACL - loans	$	12,890
ACL - off balance sheet credit exposure	1,240
Total ACL	$	14,130

Activity in the allowance is presented for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30, 2023
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	3,019	$	1,078	$	4,191	$	178	$	2,446	$	680	$	—	$	11,592
Charge-offs	—		—		—		—		(130)		(86)		—		(216)
Recoveries	106		22		1		—		27		27		—		183
Provision	788		68		131		20		241		83		—		1,331
Ending Balance	$	3,913	$	1,168	$	4,323	$	198	$	2,584	$	704	$	—	$	12,890

	Three Months Ended September 30, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	2,108	$	4,818	$	5,395	$	199	$	1,307	$	110	$	456	$	14,393
Charge-offs	(18)		—		—		—		(57)		(85)		—		(160)
Recoveries	93		1		1		—		10		18		—		123
Provision	(114)		376		140		11		325		75		42		855
Ending Balance	$	2,069	$	5,195	$	5,536	$	210	$	1,585	$	118	$	498	$	15,211

 

t	Nine Months Ended September 30, 2023
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	1,914	$	5,061	$	6,110	$	188	$	1,617	$	109	$	638	$	15,637
Impact of adopting ASC 326	2,656		(3,893)		(2,660)		(96)		240		602		(638)		(3,789)
Charge-offs	—		(81)		(62)		—		(507)		(283)		—		(933)
Recoveries	1,067		25		26		—		66		65		—		1,249
Provision	(1,724)		56		909		106		1,168		211		—		726
Ending Balance	$	3,913	$	1,168	$	4,323	$	198	$	2,584	$	704	$	—	$	12,890

	Nine Months Ended September 30, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment
(In Thousands)			Residential		Commercial		Construction						Unallocated		Totals
Beginning Balance	$	1,946	$	4,701	$	5,336	$	179	$	1,411	$	111	$	492	$	14,176
Charge-offs	(18)		(15)		(155)		—		(234)		(188)		—		(610)
Recoveries	138		46		3		28		32		63		—		310
Provision	3		463		352		3		376		132		6		1,335
Ending Balance	$	2,069	$	5,195	$	5,536	$	210	$	1,585	$	118	$	498	$	15,211

Schedule of non-accrual loans

Non-Accrual Loans

	September 30, 2023						December 31, 2022
	Non-accrual Loans
(In Thousands)	With a Related ACL		Without a Related ACL		Total		Total Non-accrual loans
Commercial, financial, and agricultural	$	—	$	543	$	543	$	432
Real estate mortgage:
Residential	24		265		289		524
Commercial	947		226		1,173		2,659
Construction	—		—		—		—
Consumer automobile	—		—		—		—
Other consumer installment loans	—		—		—		—
	$	971	$	1,034	$	2,005	$	3,615

Schedule of recorded investment, unpaid principal balance, and related allowance of impaired loans by segment

The following table presents the recorded investment, unpaid principal balance, and related allowance of impaired loans by segment as of December 31, 2022:

	December 31, 2022
	Recorded		Unpaid Principal		Related
(In Thousands)	Investment		Balance		Allowance
With no related allowance recorded:
Commercial, financial, and agricultural	$	295	$	295	$	—
Real estate mortgage:
Residential	3,388		3,388		—
Commercial	2,588		2,588		—
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	—		—		—
	6,271		6,271		—
With an allowance recorded:
Commercial, financial, and agricultural	403		403		4
Real estate mortgage:
Residential	933		933		111
Commercial	3,607		3,607		827
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	19		—		19
	4,962		4,943		961
Total:
Commercial, financial, and agricultural	698		698		4
Real estate mortgage:
Residential	4,321		4,321		111
Commercial	6,195		6,195		827
Construction	—		—		—
Consumer automobile loans	—		—		—
Installment loans to individuals	19		—		19
	$	11,233	$	11,214	$	961

Schedule of collateral dependent loans

The following table presents outstanding loan balances of collateral-dependent loans by class as of September 30, 2023:

(In Thousands)	Real estate		Unsecured*		Total
Real estate mortgage:
Residential	$	238	$	—	$	238
Commercial	92		332		424
Total	$	330	$	332	$	662

* Loan considered unsecured due to lien position on property

Schedule of average recorded investment in impaired loans and related interest income recognized

The following table presents the average recorded investment in impaired loans and related interest income recognized for the three and nine months ended September 30, 2022:

	Three Months Ended September 30,
		2022
(In Thousands)		Average Investment in Impaired Loans		Interest Income Recognized on an Accrual Basis on Impaired Loans		Interest Income Recognized on a Cash Basis on Impaired Loans
Commercial, financial, and agricultural		$	711	$	5	$	—
Real estate mortgage:
Residential		4,586		47		—
Commercial		7,227		50		—
Construction		—		—		—
Consumer automobile		7		—		—
Other consumer installment loans		10		—		—
		$	12,541	$	102	$	—

	Nine Months Ended September 30,
	2022
(In Thousands)	Average Investment in Impaired Loans		Interest Income Recognized on an Accrual Basis on Impaired Loans		Interest Income Recognized on a Cash Basis on Impaired Loans
Commercial, financial, and agricultural	$	782	$	15	$	—
Real estate mortgage:
Residential	4,765		141		—
Commercial	7,492		151		—
Construction	42		1		—
Consumer automobile	3		1		—
Other consumer installment loans	15		—		—
	$	13,099	$	309	$	—

Schedule of credit quality categories

The following table presents the credit quality categories identified above as of September 30, 2023 and December 31, 2022:

	September 30, 2023
(In Thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial, financial, and agricultural
Pass	$	34,288	$	53,560	$	42,363	$	33,239	$	9,224	$	6,756	$	29,212	$	114	$	208,756
Special Mention	—		201		42		—		—		168		223		—		634
Substandard or Lower	—		—		—		85		—		755		490		753		2,083
	$	34,288	$	53,761	$	42,405	$	33,324	$	9,224	$	7,679	$	29,925	$	867	$	211,473
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate mortgage:
Residential
Pass	$	117,468	$	218,678	$	120,137	$	70,364	$	45,930	$	17,038	$	51,814	$	129,802	$	771,231
Special Mention	—		409		274		—		—		—		—		—		683
Substandard or Lower	—		—		—		—		—		1,798		—		70		1,868
	$	117,468	$	219,087	$	120,411	$	70,364	$	45,930	$	18,836	$	51,814	$	129,872	$	773,782
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	9	$	72	$	—	$	81
Commercial
Pass	$	43,594	$	105,217	$	134,960	$	50,535	$	25,913	$	147,471	$	10,827	$	691	$	519,208
Special Mention	—		—		1,065		—		—		48		—		—		1,113
Substandard or Lower	—		—		—		—		63		5,282		—		—		5,345
	$	43,594	$	105,217	$	136,025	$	50,535	$	25,976	$	152,801	$	10,827	$	691	$	525,666
Current period gross write offs	$	59	$	—	$	—	$	—	$	—	$	3	$	—	$	—	$	62
Construction
Pass	$	21,093	$	13,072	$	15,045	$	1,417	$	402	$	4,452	$	261	$	—	$	55,742
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		91		—		—		91
	$	21,093	$	13,072	$	15,045	$	1,417	$	402	$	4,543	$	261	$	—	$	55,833
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer Automobile
Pass	$	101,214	$	85,276	$	21,969	$	17,486	$	8,716	$	5,107	$	—	$	—	$	239,768
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		—		—		—		—
	$	101,214	$	85,276	$	21,969	$	17,486	$	8,716	$	5,107	$	—	$	—	$	239,768
Current period gross write offs	$	—	$	247	$	136	$	112	$	6	$	7	$	—	$	—	$	508
Installment loans to individuals
Pass	$	2,609	$	2,406	$	1,291	$	558	$	427	$	3,486	$	—	$	44	$	10,821
Special Mention	—		—		—		—		—		—		—		—		—
Substandard or Lower	—		—		—		—		—		—		—		—		—
	$	2,609	$	2,406	$	1,291	$	558	$	427	$	3,486	$	—	$	44	$	10,821
Current period gross write offs	$	179	$	28	$	20	$	6	$	6	$	19	$	13	$	11	$	282

The information presented in the table above is not required for periods prior to the adoption of CECL. The following table presents the most comparable required information for the prior period, internal credit ratings for the report loan segments as of December 31, 2022:

	December 31, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer automobile		Other consumer installment loans
(In Thousands)			Residential		Commercial		Construction						Totals
Pass	$	184,783	$	705,515	$	488,993	$	43,209	$	186,112	$	10,361	$	1,618,973
Special Mention	125		266		4,526		—		—		—		4,917
Substandard	5,553		2,428		7,113		99		—		—		15,193
	$	190,461	$	708,209	$	500,632	$	43,308	$	186,112	$	10,361	$	1,639,083

Schedule of concentration of loan

The Company has a concentration of the following to gross loans at September 30, 2023 and 2022: 

	September 30,
	2023		2022
Owners of residential rental properties	18.99	%	19.95	%
Owners of commercial rental properties	14.62	%	16.09	%

Schedule of allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of December 31, 2022:

	December 31, 2022
	Commercial, Financial, and Agricultural		Real Estate Mortgages						Consumer Automobile		Other consumer installment		Unallocated
(In Thousands)			Residential		Commercial		Construction								Totals
Allowance for Loan Losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4	$	111	$	827	$	—	$	—	$	19	$	—	$	961
Collectively evaluated for impairment	1,910		4,950		5,283		188		1,617		90		638		14,676
Total ending allowance balance	$	1,914	$	5,061	$	6,110	$	188	$	1,617	$	109	$	638	$	15,637
Loans:
Individually evaluated for impairment	$	698	$	4,321	$	6,195	$	—	$	—	$	19			$	11,233
Collectively evaluated for impairment	189,763		703,888		494,437		43,308		186,112		10,342				1,627,850
Total ending loans balance	$	190,461	$	708,209	$	500,632	$	43,308	$	186,112	$	10,361			$	1,639,083

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Net Periodic Benefit Cost-Defined Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2023

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

Schedule of components of the net periodic benefit/cost of the domestic non-contributory defined benefit plan

The following sets forth the components of the net periodic expense/(gain) of the domestic non-contributory defined benefit plan for the three and nine months ended September 30, 2023 and 2022, respectively:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2023		2022		2023		2022
Interest cost	$	198	$	138	$	594	$	414
Expected return on plan assets	(326)		(412)		(978)		(1,237)
Amortization of net loss	37		17		111		52
Net periodic benefit	$	(91)	$	(257)	$	(273)	$	(771)

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Off-Balance Sheet Risk (Tables)

9 Months Ended

Sep. 30, 2023

Off Balance Sheet Risk

Schedule of Financial instruments whose contract amounts represent credit risk

Financial instruments whose contract amounts represent credit risk are as follows at September 30, 2023 and December 31, 2022:

(In Thousands)	September 30, 2023		December 31, 2022
Commitments to extend credit	$	161,270	$	169,365
Standby letters of credit	9,467		9,915
Credit exposure from the sale of assets with recourse	7,274		7,358
	$	178,011	$	186,638
Allowance for credit losses	$	1,240	$	143

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

Schedule of assets reported on the balance sheet at their fair value on a recurring basis

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value on a recurring basis as of September 30, 2023 and December 31, 2022, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	September 30, 2023
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
Investment securities, available for sale:
U.S. Government and agency securities	$	—	$	3,864	$	—	$	3,864
Mortgage-backed securities	—		11,396		—		11,396
State and political securities	—		119,847		—		119,847
Other debt securities	—		49,560		—		49,560
Investment equity securities:
Equity securities	1,072		—		—		1,072

	December 31, 2022
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
Investment securities, available for sale:
U.S. Government and agency securities	$	—	$	2,896	$	—	$	2,896
Mortgage-backed securities	—		1,282		—		1,282
State and political securities	—		142,809		—		142,809
Other debt securities	—		46,686		—		46,686
Investment equity securities:
Equity securities	1,142		—		—		1,142

Schedule of assets reported on the consolidated balance sheet at their fair value on a non-recurring basis

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value on a non-recurring basis as of September 30, 2023 and December 31, 2022, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 

	September 30, 2023
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Collateral dependent loans	$	—	$	—	$	331	$	331
Other real estate owned	—		—		853		853

	December 31, 2022
(In Thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	—	$	—	$	1,923	$	1,923
Other real estate owned	—		—		83		83

Schedule of listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques

The following tables present a listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques as of September 30, 2023 and December 31, 2022: 

	September 30, 2023
	Quantitative Information About Level III Fair Value Measurements
(In Thousands)	Fair Value		Valuation Technique(s)	Unobservable Inputs	Range	Weighted Average
Collateral dependent loans	$	331	Appraisal of collateral (1)	Appraisal adjustments (1)	(15)% to (24)%	(20)%
Other real estate owned	$	853	Appraisal of collateral (1)	Appraisal adjustments (1)	(20)%	(20)%

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

	December 31, 2022
	Quantitative Information About Level III Fair Value Measurements
(In Thousands)	Fair Value		Valuation Technique(s)	Unobservable Inputs	Range	Weighted Average
Impaired loans	$	1,923	Appraisal of collateral (1)	Appraisal adjustments (1)	0% to (34)%	(14)%
Other real estate owned	$	83	Appraisal of collateral (1)	Appraisal adjustments (1)	(20)%	(20)%

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

Schedule of fair value of financial instruments

The fair values of the Company’s financial instruments not recorded at fair value on a recurring or nonrecurring basis are as follows at September 30, 2023 and December 31, 2022:

	Carrying		Fair		Fair Value Measurements at September 30, 2023
(In Thousands)	Value		Value		Level I		Level II		Level III
Financial assets:
Loans held for sale (1)	$	4,083	$	4,083	$	4,083	$	—	$	—
Loans, net	1,805,571		1,761,944		—		—		1,761,944
Financial liabilities:
Time deposits & brokered deposits	356,244		350,456		—		—		350,456
Short-term borrowings	193,746		193,746		193,746		—		—
Long-term borrowings	217,645		238,977		—		—		238,977

(1) The financial instrument is carried at cost at, September 30, 2023 which approximate the fair value of the instruments

	Carrying		Fair		Fair Value Measurements at December 31, 2022
(In Thousands)	Value		Value		Level I		Level II		Level III
Financial assets:
Loans held for sale (1)	$	3,298	$	3,298	$	3,298	$	—	$	—
Loans, net	1,624,094		1,594,073		—		—		1,594,073
Financial liabilities:
Time deposits & brokered deposits	146,282		137,559		—		—		137,559
Short-term borrowings	153,349		153,349		153,349		—		—
Long-term borrowings	102,783		99,118		—		—		99,118

(1) The financial instrument is carried at cost at, December 31, 2022 which approximate the fair value of the instruments

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Stock Options (Tables)

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Share-based Compensation, Stock Options Granted

Stock options outstanding as of September 30, 2023 are presented below:

Stock Options Granted
Date	Shares	Forfeited	Cash Settlement	Outstanding	Strike Price		Vesting Period	Expiration
January 20, 2023	59,500	—	—	59,500	$	27.77	3 years	10 years
January 20, 2023	29,500	—	—	29,500	27.77		5 years	10 years
January 18, 2022	156,000	—	—	156,000	24.10		3 years	10 years
January 18, 2022	78,000	—	—	78,000	24.10		5 years	10 years
April 9, 2021	156,500	—	—	156,500	24.23		3 years	10 years
April 9, 2021	78,000	—	—	78,000	24.23		5 years	10 years
March 11, 2020	119,300	—	—	119,300	25.34		3 years	10 years
March 11, 2020	119,200	—	—	119,200	25.34		5 years	10 years
March 15, 2019	120,900	(19,800)	—	101,100	28.01		3 years	10 years
March 15, 2019	119,100	(19,200)	—	99,900	28.01		5 years	10 years
August 27, 2015	58,125	(26,250)	(28,875)	3,000	28.02		5 years	10 years

A summary of stock option activity for the nine months ended September 30, 2023 is presented below:

	September 30, 2023
	Shares	Weighted Average Exercise Price
Outstanding, beginning of year	914,000	$	25.34
Granted	89,000	27.77
Forfeited	(3,000)	28.01
Expired	—	—
Outstanding, end of period	1,000,000	$	25.55
Exercisable, end of period	223,400	$	26.58

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The following is a summary of the assumptions used in this model for stock options granted for the nine months ended September 30, 2023:

	Nine months ended September 30,
	2023
Risk-free interest rate	3.76		%
Expected volatility	31		%
Expected Annual dividend	$	1.28
Expected life	6.84 years
Weighted average grant date fair value per option	$	6.11

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Basis of Presentation - Narrative (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Assets
Allowance for credit losses	$ 12,890	$ 11,592	$ 15,637	$ 15,211	$ 14,393	$ 14,176
Stockholders' equity	174,540	174,402	167,665	164,489	166,054	172,274
Deferred tax asset	6,961		6,868
ACL - off balance sheet credit exposure	1,240		143
RETAINED EARNINGS
Assets
Stockholders' equity	$ 104,067	$ 104,104	98,147	$ 95,896	$ 92,903	$ 89,761
Adoption Impact
Assets
Allowance for credit losses			(3,789)
Stockholders' equity			1,647
ACL - off balance sheet credit exposure			1,703
Adoption Impact | Financing Receivable Credit Loss Impact
Assets
Deferred tax asset			(796)
Adoption Impact | Off Balance Sheet Credit Exposure Impact
Assets
Deferred tax asset			357
Adoption Impact | RETAINED EARNINGS
Assets
Stockholders' equity			1,647
Adoption Impact | RETAINED EARNINGS | Financing Receivable Credit Loss Impact
Assets
Stockholders' equity			2,993
Adoption Impact | RETAINED EARNINGS | Off Balance Sheet Credit Exposure Impact
Assets
Stockholders' equity			$ (1,346)

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Basis of Presentation - Summary of Impact of CECL (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Assets
Allowance for credit losses	$ 12,890	$ 11,592	$ 15,637	$ 15,211	$ 14,393	$ 14,176
Liabilities
ACL - off balance sheet credit exposure	1,240		143
Total ACL	14,130		15,780
Adoption Impact
Assets
Allowance for credit losses			(3,789)
Liabilities
ACL - off balance sheet credit exposure			1,703
Total ACL			(2,086)
As Reported
Liabilities
ACL - off balance sheet credit exposure			1,846
Total ACL			13,694
Commercial, financial, and agricultural
Assets
Allowance for credit losses	3,913	3,019	1,914	2,069	2,108	1,946
Commercial, financial, and agricultural | Adoption Impact
Assets
Allowance for credit losses			2,656
Commercial, financial, and agricultural | As Reported
Assets
Allowance for credit losses			4,570
Consumer automobile loans
Assets
Allowance for credit losses	2,584	2,446	1,617	1,585	1,307	1,411
Consumer automobile loans | Adoption Impact
Assets
Allowance for credit losses			240
Consumer automobile loans | As Reported
Assets
Allowance for credit losses			1,857
Other consumer installment loans
Assets
Allowance for credit losses	704	680	109	118	110	111
Other consumer installment loans | Adoption Impact
Assets
Allowance for credit losses			602
Other consumer installment loans | As Reported
Assets
Allowance for credit losses			711
Unallocated
Assets
Allowance for credit losses	0	0	638	498	456	492
Unallocated | Adoption Impact
Assets
Allowance for credit losses			(638)
Unallocated | As Reported
Assets
Allowance for credit losses			0
Residential | Real Estate Mortgages
Assets
Allowance for credit losses	1,168	1,078	5,061	5,195	4,818	4,701
Residential | Real Estate Mortgages | Adoption Impact
Assets
Allowance for credit losses			(3,893)
Residential | Real Estate Mortgages | As Reported
Assets
Allowance for credit losses			1,168
Commercial | Real Estate Mortgages
Assets
Allowance for credit losses	4,323	4,191	6,110	5,536	5,395	5,336
Commercial | Real Estate Mortgages | Adoption Impact
Assets
Allowance for credit losses			(2,660)
Commercial | Real Estate Mortgages | As Reported
Assets
Allowance for credit losses			3,450
Construction | Real Estate Mortgages
Assets
Allowance for credit losses	$ 198	$ 178	188	$ 210	$ 199	$ 179
Construction | Real Estate Mortgages | Adoption Impact
Assets
Allowance for credit losses			(96)
Construction | Real Estate Mortgages | As Reported
Assets
Allowance for credit losses			$ 92

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Accumulated Other Comprehensive Loss - Schedule of AOCI (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	$ 174,402	$ 166,054	$ 167,665	$ 172,274
Other comprehensive loss before reclassifications	(1,169)	(5,026)	(1,166)	(13,631)
Amounts reclassified from accumulated other comprehensive gain	65	137	187	174
Net current-period other comprehensive (loss) income	(1,104)	(4,889)	(979)	(13,457)
Ending balance	174,540	164,489	174,540	164,489
Total
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(13,833)	(9,680)	(13,958)	(1,112)
Ending balance	(14,937)	(14,569)	(14,937)	(14,569)
Net Unrealized (Loss) Gain on Available for Sale Securities
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(9,753)	(6,222)	(9,819)	2,373
Other comprehensive loss before reclassifications	(1,169)	(5,026)	(1,166)	(13,631)
Amounts reclassified from accumulated other comprehensive gain	36	123	99	133
Net current-period other comprehensive (loss) income	(1,133)	(4,903)	(1,067)	(13,498)
Ending balance	(10,886)	(11,125)	(10,886)	(11,125)
Defined Benefit  Plan
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(4,080)	(3,458)	(4,139)	(3,485)
Other comprehensive loss before reclassifications	0	0	0	0
Amounts reclassified from accumulated other comprehensive gain	29	14	88	41
Net current-period other comprehensive (loss) income	29	14	88	41
Ending balance	$ (4,051)	$ (3,444)	$ (4,051)	$ (3,444)

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Accumulated Other Comprehensive Loss - Schedule of Reclassifications out of AOCI (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Reclassifications out of accumulated other comprehensive income
Net unrealized loss on available for sale securities	$ (45)	$ (156)	$ (125)	$ (168)
Net unrecognized pension costs	(1,378)	(1,165)	(4,275)	(3,723)
Income tax effect	(439)	(1,190)	(2,355)	(2,869)
Net Income	2,224	5,250	11,053	12,913
Amount Reclassified from Accumulated Other Comprehensive Loss | Net Unrealized (Loss) Gain on Available for Sale Securities
Reclassifications out of accumulated other comprehensive income
Net unrealized loss on available for sale securities	(45)	(156)	(125)	(168)
Income tax effect	9	33	26	35
Net Income	(36)	(123)	(99)	(133)
Amount Reclassified from Accumulated Other Comprehensive Loss | Defined Benefit  Plan
Reclassifications out of accumulated other comprehensive income
Net unrecognized pension costs	(37)	(17)	(111)	(52)
Income tax effect	8	3	23	11
Net Income	$ (29)	$ (14)	$ (88)	$ (41)

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Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Assets
Net impact of adoption	$ 14,130		$ 15,780
Allowance for credit losses	12,890	$ 11,592	15,637	$ 15,211	$ 14,393	$ 14,176
ACL - off balance sheet credit exposure	$ 1,240		143
Adoption Impact
Assets
Net impact of adoption			(2,086)
Allowance for credit losses			(3,789)
ACL - off balance sheet credit exposure			$ 1,703

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Per Share Data - Narrative (Details) - $ / shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Aug. 27, 2015
Earnings Per Share [Abstract]
Convertible securities which would affect denominator in calculating basic and dilutive earnings per share (in shares)	0
Options, outstanding (in shares)	1,000,000	917,000	914,000	3,000
Outstanding, weighted average exercise price (in dollars per share)	$ 25.55	$ 25.35	$ 25.34
Average share price (in dollars per share)	$ 25.08	$ 23.78

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Per Share Data - Composition of Weighted Average Common Shares Used in Earnings per Share Computation (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Earnings Per Share [Abstract]
Weighted average common shares issued (in shares)	7,582,665	7,561,453	7,574,561	7,557,250
Weighted average treasury stock shares (in shares)	(510,225)	(510,225)	(510,225)	(496,379)
Weighted average shares outstanding - basic (in shares)	7,072,440	7,051,228	7,064,336	7,060,871
Dilutive effect of outstanding stock options (in shares)	156,500	0	156,500	0
Weighted average shares outstanding - diluted (in shares)	7,228,940	7,051,228	7,220,836	7,060,871

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Investment Securities - Amortized Cost and Fair Values of Investment Securities Available for Sale (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Available for sale (AFS):
Amortized Cost	$ 198,447
Fair value	184,667	$ 193,673
Investment equity securities:
Fair value	1,072	1,142
Total debt securities
Available for sale (AFS):
Amortized Cost	198,447	206,102
Gross unrealized gains	0	215
Gross unrealized losses	(13,780)	(12,644)
Fair value	184,667	193,673
U.S. Government and agency securities
Available for sale (AFS):
Amortized Cost	4,001	3,002
Gross unrealized gains	0	0
Gross unrealized losses	(137)	(106)
Fair value	3,864	2,896
Mortgage-backed securities
Available for sale (AFS):
Amortized Cost	12,101	1,496
Gross unrealized gains	0	0
Gross unrealized losses	(705)	(214)
Fair value	11,396	1,282
State and political securities
Available for sale (AFS):
Amortized Cost	129,024	151,426
Gross unrealized gains	0	157
Gross unrealized losses	(9,177)	(8,774)
Fair value	119,847	142,809
Other debt securities
Available for sale (AFS):
Amortized Cost	53,321	50,178
Gross unrealized gains	0	58
Gross unrealized losses	(3,761)	(3,550)
Fair value	49,560	46,686
Equity securities
Investment equity securities:
Amortized Cost	1,300	1,350
Gross unrealized gains	0	0
Gross unrealized losses	(228)	(208)
Fair value	$ 1,072	$ 1,142

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Investment Securities - Gross Unrealized Losses and Fair Value by Investment Category (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Total debt securities
Debt and Equity Securities, FV-NI [Line Items]
Fair value, less than twelve months	$ 40,876	$ 115,236
Gross unrealized losses, less than twelve months	(1,848)	(5,567)
Fair value, twelve months or greater	137,385	62,709
Gross unrealized losses, twelve months or greater	(11,932)	(7,077)
Fair value, total	178,261	177,945
Gross unrealized losses, total	(13,780)	(12,644)
U.S. Government and agency securities
Debt and Equity Securities, FV-NI [Line Items]
Fair value, less than twelve months	967	2,896
Gross unrealized losses, less than twelve months	(33)	(106)
Fair value, twelve months or greater	2,897	0
Gross unrealized losses, twelve months or greater	(104)	0
Fair value, total	3,864	2,896
Gross unrealized losses, total	(137)	(106)
Mortgage-backed securities
Debt and Equity Securities, FV-NI [Line Items]
Fair value, less than twelve months	10,263	0
Gross unrealized losses, less than twelve months	(454)	0
Fair value, twelve months or greater	1,125	1,282
Gross unrealized losses, twelve months or greater	(251)	(214)
Fair value, total	11,388	1,282
Gross unrealized losses, total	(705)	(214)
State and political securities
Debt and Equity Securities, FV-NI [Line Items]
Fair value, less than twelve months	19,050	95,444
Gross unrealized losses, less than twelve months	(1,013)	(4,797)
Fair value, twelve months or greater	97,522	36,283
Gross unrealized losses, twelve months or greater	(8,164)	(3,977)
Fair value, total	116,572	131,727
Gross unrealized losses, total	(9,177)	(8,774)
Other debt securities
Debt and Equity Securities, FV-NI [Line Items]
Fair value, less than twelve months	10,596	16,896
Gross unrealized losses, less than twelve months	(348)	(664)
Fair value, twelve months or greater	35,841	25,144
Gross unrealized losses, twelve months or greater	(3,413)	(2,886)
Fair value, total	46,437	42,040
Gross unrealized losses, total	$ (3,761)	$ (3,550)

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Investment Securities - Narrative (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2023 USD ($) security	Sep. 30, 2023 USD ($) security	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)
Investments, Debt and Equity Securities [Abstract]
Number of individual securities that were in a continuous unrealized loss position for less than twelve months (in securities) | security	43	43
Number of individual securities that were in a continuous unrealized loss position for greater than twelve months (in securities) | security	184	184
Credit losses	$ 0
Gross proceeds from sales of securities		$ 24,701,000	$ 4,151,000
Carrying value of investment securities pledged	114,938,000	114,938,000		$ 154,946,000
Investment equity securities, at fair value	$ 1,072,000	$ 1,072,000		$ 1,142,000

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Investment Securities - Amortized Cost and Fair Value of Debt Securities (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Amortized Cost
Due in one year or less	$ 39,163
Due after one year to five years	88,544
Due after five years to ten years	65,437
Due after ten years	5,303
Amortized Cost	198,447
Fair Value
Due in one year or less	38,246
Due after one year to five years	82,446
Due after five years to ten years	59,047
Due after ten years	4,928
Total	$ 184,667

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Investment Securities - Total Gross Proceeds from Sales of Securities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Available for sale (AFS):
Available-for-sale securities, gross realized gains	$ 1	$ 0	$ 146	$ 14
State and political securities
Available for sale (AFS):
Available-for-sale securities, gross realized gains	1	0	146	14
Available-for-sale securities, gross realized losses	(46)	(156)	(271)	(182)
Other debt securities
Available for sale (AFS):
Available-for-sale securities, gross realized gains	$ 0	$ 0	$ 0	$ 0

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Investment Securities - Unrealized and Realized Gains and Losses Recognized in Net Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Equity Securities, FV-NI, Gain (Loss) [Abstract]
Net losses recognized in equity securities during the period	$ (37)	$ (55)	$ (36)	$ (158)
Less: Net losses realized on the sale of equity securities during the period	(1)	0	(1)	0
Unrealized losses recognized in equity securities held at reporting date	$ (36)	$ (55)	$ (35)	$ (158)

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Loans - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2023 USD ($) category	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) category	Sep. 30, 2022 USD ($) contract	Dec. 31, 2022 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans interest income			$ 104,000
Loan modifications	$ 0	$ 0	0	$ 0
Loan modifications, subsequent default			0
Number of TDRs that defaulted (in contracts) | contract				0
Financing receivable, excluding accrued interest, modified, accumulated	5,233,000		5,233,000		$ 7,468,000
Real estate acquired through foreclosure	588,000		588,000		950,000
Mortgage loans in process of foreclosure, amount	$ 328,000		$ 328,000		$ 890,000
Number of categories considered not criticized and rated as pass (in categories) | category	6		6
Minimum period after which loans are considered as substandard (in days)			90 days
Percentage of loan review evaluated			0.55
Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of categories in which real estate loans segmented (in categories) | category			3

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Loans - Aging Categories of Loans by Segment (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Aging categories of loans by segment
Non-Accrual	$ 2,005		$ 3,615
Total ending loans balance	1,817,343		1,639,083
Past due 90 days or more & still accruing	1,678		1,275
Net deferred loan fees and discounts	1,118		648
Allowance for credit losses	(12,890)	$ (11,592)	(15,637)	$ (15,211)	$ (14,393)	$ (14,176)
Loans, net	1,805,571		1,624,094
Past Due 30 to 89 Days
Aging categories of loans by segment
Total ending loans balance	7,793		10,882
Past Due 90 Days or More
Aging categories of loans by segment
Total ending loans balance	1,456
Current
Aging categories of loans by segment
Total ending loans balance	1,808,094		1,623,311
Commercial, financial, and agricultural
Aging categories of loans by segment
Non-Accrual	543		432
Total ending loans balance	211,473		190,461
Past due 90 days or more & still accruing	8		0
Allowance for credit losses	(3,913)	(3,019)	(1,914)	(2,069)	(2,108)	(1,946)
Commercial, financial, and agricultural | Past Due 30 to 89 Days
Aging categories of loans by segment
Total ending loans balance	255		94
Commercial, financial, and agricultural | Past Due 90 Days or More
Aging categories of loans by segment
Total ending loans balance	33
Commercial, financial, and agricultural | Current
Aging categories of loans by segment
Total ending loans balance	211,185		189,935
Real Estate Mortgages | Residential
Aging categories of loans by segment
Non-Accrual	289		524
Total ending loans balance	773,782		708,209
Past due 90 days or more & still accruing	1,434		1,120
Allowance for credit losses	(1,168)	(1,078)	(5,061)	(5,195)	(4,818)	(4,701)
Real Estate Mortgages | Residential | Past Due 30 to 89 Days
Aging categories of loans by segment
Total ending loans balance	5,013		5,472
Real Estate Mortgages | Residential | Past Due 90 Days or More
Aging categories of loans by segment
Total ending loans balance	1,151
Real Estate Mortgages | Residential | Current
Aging categories of loans by segment
Total ending loans balance	767,618		701,093
Real Estate Mortgages | Commercial
Aging categories of loans by segment
Non-Accrual	1,173		2,659
Total ending loans balance	525,666		500,632
Past due 90 days or more & still accruing	59		60
Allowance for credit losses	(4,323)	(4,191)	(6,110)	(5,536)	(5,395)	(5,336)
Real Estate Mortgages | Commercial | Past Due 30 to 89 Days
Aging categories of loans by segment
Total ending loans balance	775		2,564
Real Estate Mortgages | Commercial | Past Due 90 Days or More
Aging categories of loans by segment
Total ending loans balance	92
Real Estate Mortgages | Commercial | Current
Aging categories of loans by segment
Total ending loans balance	524,799		495,349
Real Estate Mortgages | Construction
Aging categories of loans by segment
Non-Accrual	0		0
Total ending loans balance	55,833		43,308
Past due 90 days or more & still accruing	0		0
Allowance for credit losses	(198)	(178)	(188)	(210)	(199)	(179)
Real Estate Mortgages | Construction | Past Due 30 to 89 Days
Aging categories of loans by segment
Total ending loans balance	472		511
Real Estate Mortgages | Construction | Past Due 90 Days or More
Aging categories of loans by segment
Total ending loans balance	32
Real Estate Mortgages | Construction | Current
Aging categories of loans by segment
Total ending loans balance	55,329		42,797
Consumer automobile loans
Aging categories of loans by segment
Non-Accrual	0		0
Total ending loans balance	239,768		186,112
Past due 90 days or more & still accruing	141		80
Allowance for credit losses	(2,584)	(2,446)	(1,617)	(1,585)	(1,307)	(1,411)
Consumer automobile loans | Past Due 30 to 89 Days
Aging categories of loans by segment
Total ending loans balance	1,121		2,089
Consumer automobile loans | Past Due 90 Days or More
Aging categories of loans by segment
Total ending loans balance	144
Consumer automobile loans | Current
Aging categories of loans by segment
Total ending loans balance	238,503		183,943
Other consumer installment loans
Aging categories of loans by segment
Non-Accrual	0		0
Total ending loans balance	10,821		10,361
Past due 90 days or more & still accruing	36		15
Allowance for credit losses	(704)	$ (680)	(109)	$ (118)	$ (110)	$ (111)
Other consumer installment loans | Past Due 30 to 89 Days
Aging categories of loans by segment
Total ending loans balance	157		152
Other consumer installment loans | Past Due 90 Days or More
Aging categories of loans by segment
Total ending loans balance	4
Other consumer installment loans | Current
Aging categories of loans by segment
Total ending loans balance	$ 10,660		$ 10,194

XML

Loans - Components of the Allowance (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Other Income and Expenses [Abstract]
Allowance for credit losses	$ 12,890	$ 11,592	$ 15,637	$ 15,211	$ 14,393	$ 14,176
ACL - off balance sheet credit exposure	1,240		143
Total ACL	$ 14,130		$ 15,780

XML

Loans - Non-accrual Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financing Receivable, Nonaccrual [Line Items]
With a Related ACL	$ 971
Without a Related ACL	1,034
Non-accrual Loans, Total	2,005	$ 3,615
Commercial, financial, and agricultural
Financing Receivable, Nonaccrual [Line Items]
With a Related ACL	0
Without a Related ACL	543
Non-accrual Loans, Total	543	432
Real Estate Mortgages | Residential
Financing Receivable, Nonaccrual [Line Items]
With a Related ACL	24
Without a Related ACL	265
Non-accrual Loans, Total	289	524
Real Estate Mortgages | Commercial
Financing Receivable, Nonaccrual [Line Items]
With a Related ACL	947
Without a Related ACL	226
Non-accrual Loans, Total	1,173	2,659
Real Estate Mortgages | Construction
Financing Receivable, Nonaccrual [Line Items]
With a Related ACL	0
Without a Related ACL	0
Non-accrual Loans, Total	0	0
Consumer automobile loans
Financing Receivable, Nonaccrual [Line Items]
With a Related ACL	0
Without a Related ACL	0
Non-accrual Loans, Total	0	0
Other consumer installment loans
Financing Receivable, Nonaccrual [Line Items]
With a Related ACL	0
Without a Related ACL	0
Non-accrual Loans, Total	$ 0	$ 0

XML

Loans - Recorded Investment, Unpaid Principal Balance, Related Allowance of Impaired Loans (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Credit Quality and Related Allowance for Loan Losses
Recorded investment, with no related allowance recorded	$ 6,271
Recorded investment, with an allowance recorded	4,962
Recorded investment	11,233
Unpaid principal balance, with no related allowance recorded	6,271
Unpaid principal balance, with an allowance recorded	4,943
Unpaid principal balance	11,214
Related allowance	961
Commercial, financial, and agricultural
Credit Quality and Related Allowance for Loan Losses
Recorded investment, with no related allowance recorded	295
Recorded investment, with an allowance recorded	403
Recorded investment	698
Unpaid principal balance, with no related allowance recorded	295
Unpaid principal balance, with an allowance recorded	403
Unpaid principal balance	698
Related allowance	4
Real Estate Mortgages | Residential
Credit Quality and Related Allowance for Loan Losses
Recorded investment, with no related allowance recorded	3,388
Recorded investment, with an allowance recorded	933
Recorded investment	4,321
Unpaid principal balance, with no related allowance recorded	3,388
Unpaid principal balance, with an allowance recorded	933
Unpaid principal balance	4,321
Related allowance	111
Real Estate Mortgages | Commercial
Credit Quality and Related Allowance for Loan Losses
Recorded investment, with no related allowance recorded	2,588
Recorded investment, with an allowance recorded	3,607
Recorded investment	6,195
Unpaid principal balance, with no related allowance recorded	2,588
Unpaid principal balance, with an allowance recorded	3,607
Unpaid principal balance	6,195
Related allowance	827
Real Estate Mortgages | Construction
Credit Quality and Related Allowance for Loan Losses
Recorded investment, with no related allowance recorded	0
Recorded investment, with an allowance recorded	0
Recorded investment	0
Unpaid principal balance, with no related allowance recorded	0
Unpaid principal balance, with an allowance recorded	0
Unpaid principal balance	0
Related allowance	0
Consumer automobile loans
Credit Quality and Related Allowance for Loan Losses
Recorded investment, with no related allowance recorded	0
Recorded investment, with an allowance recorded	0
Recorded investment	0
Unpaid principal balance, with no related allowance recorded	0
Unpaid principal balance, with an allowance recorded	0
Unpaid principal balance	0
Related allowance	0
Installment loans to individuals
Credit Quality and Related Allowance for Loan Losses
Recorded investment, with no related allowance recorded	0
Recorded investment, with an allowance recorded	19
Recorded investment	19
Unpaid principal balance, with no related allowance recorded	0
Unpaid principal balance, with an allowance recorded	0
Unpaid principal balance	0
Related allowance	$ 19

XML

Loans - Schedule of Collateral Dependent Loans (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Assets
Collateral dependent loans	$ 662
Real Estate
Assets
Collateral dependent loans	330
Unsecured
Assets
Collateral dependent loans	332
Residential | Real Estate Mortgages
Assets
Collateral dependent loans	238
Residential | Real Estate | Real Estate Mortgages
Assets
Collateral dependent loans	238
Residential | Unsecured | Real Estate Mortgages
Assets
Collateral dependent loans	0
Commercial | Real Estate Mortgages
Assets
Collateral dependent loans	424
Commercial | Real Estate | Real Estate Mortgages
Assets
Collateral dependent loans	92
Commercial | Unsecured | Real Estate Mortgages
Assets
Collateral dependent loans	$ 332

XML

Loans - Average Recorded Investment - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022
Credit Quality and Related Allowance for Loan Losses
Average Investment in Impaired Loans	$ 12,541	$ 13,099
Interest Income Recognized on an Accrual Basis on Impaired Loans	102	309
Interest Income Recognized on a Cash Basis on Impaired Loans	0	0
Commercial, financial, and agricultural
Credit Quality and Related Allowance for Loan Losses
Average Investment in Impaired Loans	711	782
Interest Income Recognized on an Accrual Basis on Impaired Loans	5	15
Interest Income Recognized on a Cash Basis on Impaired Loans	0	0
Real Estate Mortgages | Residential
Credit Quality and Related Allowance for Loan Losses
Average Investment in Impaired Loans	4,586	4,765
Interest Income Recognized on an Accrual Basis on Impaired Loans	47	141
Interest Income Recognized on a Cash Basis on Impaired Loans	0	0
Real Estate Mortgages | Commercial
Credit Quality and Related Allowance for Loan Losses
Average Investment in Impaired Loans	7,227	7,492
Interest Income Recognized on an Accrual Basis on Impaired Loans	50	151
Interest Income Recognized on a Cash Basis on Impaired Loans	0	0
Real Estate Mortgages | Construction
Credit Quality and Related Allowance for Loan Losses
Average Investment in Impaired Loans	0	42
Interest Income Recognized on an Accrual Basis on Impaired Loans	0	1
Interest Income Recognized on a Cash Basis on Impaired Loans	0	0
Consumer automobile loans
Credit Quality and Related Allowance for Loan Losses
Average Investment in Impaired Loans	7	3
Interest Income Recognized on an Accrual Basis on Impaired Loans	0	1
Interest Income Recognized on a Cash Basis on Impaired Loans	0	0
Other consumer installment loans
Credit Quality and Related Allowance for Loan Losses
Average Investment in Impaired Loans	10	15
Interest Income Recognized on an Accrual Basis on Impaired Loans	0	0
Interest Income Recognized on a Cash Basis on Impaired Loans	$ 0	$ 0

XML

Loans - Credit Quality Indicators (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Credit quality categories
Total ending loans balance	$ 1,817,343		$ 1,817,343		$ 1,639,083
Current period gross write offs
Total	216	$ 160	933	$ 610
Pass
Credit quality categories
Total ending loans balance					1,618,973
Special Mention
Credit quality categories
Total ending loans balance					4,917
Substandard
Credit quality categories
Total ending loans balance					15,193
Commercial, financial, and agricultural
Credit quality categories
2023	34,288		34,288
2022	53,761		53,761
2021	42,405		42,405
2020	33,324		33,324
2019	9,224		9,224
Prior	7,679		7,679
Revolving Loans	29,925		29,925
Revolving Loans Converted to Term	867		867
Total ending loans balance	211,473		211,473		190,461
Current period gross write offs
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans			0
Revolving Loans Converted to Term			0
Total	0	18	0	18
Commercial, financial, and agricultural | Pass
Credit quality categories
2023	34,288		34,288
2022	53,560		53,560
2021	42,363		42,363
2020	33,239		33,239
2019	9,224		9,224
Prior	6,756		6,756
Revolving Loans	29,212		29,212
Revolving Loans Converted to Term	114		114
Total ending loans balance	208,756		208,756		184,783
Commercial, financial, and agricultural | Special Mention
Credit quality categories
2023	0		0
2022	201		201
2021	42		42
2020	0		0
2019	0		0
Prior	168		168
Revolving Loans	223		223
Revolving Loans Converted to Term	0		0
Total ending loans balance	634		634		125
Commercial, financial, and agricultural | Substandard
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	85		85
2019	0		0
Prior	755		755
Revolving Loans	490		490
Revolving Loans Converted to Term	753		753
Total ending loans balance	2,083		2,083		5,553
Real Estate Mortgages | Residential
Credit quality categories
2023	117,468		117,468
2022	219,087		219,087
2021	120,411		120,411
2020	70,364		70,364
2019	45,930		45,930
Prior	18,836		18,836
Revolving Loans	51,814		51,814
Revolving Loans Converted to Term	129,872		129,872
Total ending loans balance	773,782		773,782		708,209
Current period gross write offs
Total	0	0	81	15
Real Estate Mortgages | Residential | Pass
Credit quality categories
2023	117,468		117,468
2022	218,678		218,678
2021	120,137		120,137
2020	70,364		70,364
2019	45,930		45,930
Prior	17,038		17,038
Revolving Loans	51,814		51,814
Revolving Loans Converted to Term	129,802		129,802
Total ending loans balance	771,231		771,231		705,515
Real Estate Mortgages | Residential | Special Mention
Credit quality categories
2023	0		0
2022	409		409
2021	274		274
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	683		683		266
Real Estate Mortgages | Residential | Substandard
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	1,798		1,798
Revolving Loans	0		0
Revolving Loans Converted to Term	70		70
Total ending loans balance	1,868		1,868		2,428
Current period gross write offs
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			9
Revolving Loans			72
Revolving Loans Converted to Term			0
Total			81
Real Estate Mortgages | Commercial
Credit quality categories
2023	43,594		43,594
2022	105,217		105,217
2021	136,025		136,025
2020	50,535		50,535
2019	25,976		25,976
Prior	152,801		152,801
Revolving Loans	10,827		10,827
Revolving Loans Converted to Term	691		691
Total ending loans balance	525,666		525,666		500,632
Current period gross write offs
Total	0	0	62	155
Real Estate Mortgages | Commercial | Pass
Credit quality categories
2023	43,594		43,594
2022	105,217		105,217
2021	134,960		134,960
2020	50,535		50,535
2019	25,913		25,913
Prior	147,471		147,471
Revolving Loans	10,827		10,827
Revolving Loans Converted to Term	691		691
Total ending loans balance	519,208		519,208		488,993
Real Estate Mortgages | Commercial | Special Mention
Credit quality categories
2023	0		0
2022	0		0
2021	1,065		1,065
2020	0		0
2019	0		0
Prior	48		48
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	1,113		1,113		4,526
Real Estate Mortgages | Commercial | Substandard
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	63		63
Prior	5,282		5,282
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	5,345		5,345		7,113
Current period gross write offs
2023			59
2022			0
2021			0
2020			0
2019			0
Prior			3
Revolving Loans			0
Revolving Loans Converted to Term			0
Total			62
Real Estate Mortgages | Construction
Credit quality categories
2023	21,093		21,093
2022	13,072		13,072
2021	15,045		15,045
2020	1,417		1,417
2019	402		402
Prior	4,543		4,543
Revolving Loans	261		261
Revolving Loans Converted to Term	0		0
Total ending loans balance	55,833		55,833		43,308
Current period gross write offs
Total	0	0	0	0
Real Estate Mortgages | Construction | Pass
Credit quality categories
2023	21,093		21,093
2022	13,072		13,072
2021	15,045		15,045
2020	1,417		1,417
2019	402		402
Prior	4,452		4,452
Revolving Loans	261		261
Revolving Loans Converted to Term	0		0
Total ending loans balance	55,742		55,742		43,209
Real Estate Mortgages | Construction | Special Mention
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	0		0		0
Real Estate Mortgages | Construction | Substandard
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	91		91
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	91		91		99
Current period gross write offs
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans			0
Revolving Loans Converted to Term			0
Total			0
Consumer automobile loans
Credit quality categories
2023	101,214		101,214
2022	85,276		85,276
2021	21,969		21,969
2020	17,486		17,486
2019	8,716		8,716
Prior	5,107		5,107
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	239,768		239,768		186,112
Current period gross write offs
Total	130	57	507	234
Consumer automobile loans | Pass
Credit quality categories
2023	101,214		101,214
2022	85,276		85,276
2021	21,969		21,969
2020	17,486		17,486
2019	8,716		8,716
Prior	5,107		5,107
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	239,768		239,768		186,112
Consumer automobile loans | Special Mention
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	0		0		0
Consumer automobile loans | Substandard
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	0		0		0
Current period gross write offs
2023			0
2022			247
2021			136
2020			112
2019			6
Prior			7
Revolving Loans			0
Revolving Loans Converted to Term			0
Total			508
Other consumer installment loans
Credit quality categories
2023	2,609		2,609
2022	2,406		2,406
2021	1,291		1,291
2020	558		558
2019	427		427
Prior	3,486		3,486
Revolving Loans	0		0
Revolving Loans Converted to Term	44		44
Total ending loans balance	10,821		10,821		10,361
Current period gross write offs
Total	86	$ 85	283	$ 188
Other consumer installment loans | Pass
Credit quality categories
2023	2,609		2,609
2022	2,406		2,406
2021	1,291		1,291
2020	558		558
2019	427		427
Prior	3,486		3,486
Revolving Loans	0		0
Revolving Loans Converted to Term	44		44
Total ending loans balance	10,821		10,821		10,361
Current period gross write offs
2023			179
2022			28
2021			20
2020			6
2019			6
Prior			19
Revolving Loans			13
Revolving Loans Converted to Term			11
Total			282
Other consumer installment loans | Special Mention
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	0		0		0
Other consumer installment loans | Substandard
Credit quality categories
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans	0		0
Revolving Loans Converted to Term	0		0
Total ending loans balance	$ 0		$ 0		$ 0

XML

Loans - Allowance for Credit Losses on Financing Receivables (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Allowance for Loan Losses:
Beginning Balance	$ 11,592	$ 14,393	$ 15,637	$ 14,176
Charge-offs	(216)	(160)	(933)	(610)
Recoveries	183	123	1,249	310
Provision for credit losses	1,331	855	726	1,335
Ending Balance	12,890	15,211	12,890	15,211
Adoption Impact
Allowance for Loan Losses:
Beginning Balance			(3,789)
Commercial, financial, and agricultural
Allowance for Loan Losses:
Beginning Balance	3,019	2,108	1,914	1,946
Charge-offs	0	(18)	0	(18)
Recoveries	106	93	1,067	138
Provision for credit losses	788	(114)	(1,724)	3
Ending Balance	3,913	2,069	3,913	2,069
Commercial, financial, and agricultural | Adoption Impact
Allowance for Loan Losses:
Beginning Balance			2,656
Real Estate Mortgages | Residential
Allowance for Loan Losses:
Beginning Balance	1,078	4,818	5,061	4,701
Charge-offs	0	0	(81)	(15)
Recoveries	22	1	25	46
Provision for credit losses	68	376	56	463
Ending Balance	1,168	5,195	1,168	5,195
Real Estate Mortgages | Residential | Adoption Impact
Allowance for Loan Losses:
Beginning Balance			(3,893)
Real Estate Mortgages | Commercial
Allowance for Loan Losses:
Beginning Balance	4,191	5,395	6,110	5,336
Charge-offs	0	0	(62)	(155)
Recoveries	1	1	26	3
Provision for credit losses	131	140	909	352
Ending Balance	4,323	5,536	4,323	5,536
Real Estate Mortgages | Commercial | Adoption Impact
Allowance for Loan Losses:
Beginning Balance			(2,660)
Real Estate Mortgages | Construction
Allowance for Loan Losses:
Beginning Balance	178	199	188	179
Charge-offs	0	0	0	0
Recoveries	0	0	0	28
Provision for credit losses	20	11	106	3
Ending Balance	198	210	198	210
Real Estate Mortgages | Construction | Adoption Impact
Allowance for Loan Losses:
Beginning Balance			(96)
Consumer automobile loans
Allowance for Loan Losses:
Beginning Balance	2,446	1,307	1,617	1,411
Charge-offs	(130)	(57)	(507)	(234)
Recoveries	27	10	66	32
Provision for credit losses	241	325	1,168	376
Ending Balance	2,584	1,585	2,584	1,585
Consumer automobile loans | Adoption Impact
Allowance for Loan Losses:
Beginning Balance			240
Other consumer installment loans
Allowance for Loan Losses:
Beginning Balance	680	110	109	111
Charge-offs	(86)	(85)	(283)	(188)
Recoveries	27	18	65	63
Provision for credit losses	83	75	211	132
Ending Balance	704	118	704	118
Other consumer installment loans | Adoption Impact
Allowance for Loan Losses:
Beginning Balance			602
Unallocated
Allowance for Loan Losses:
Beginning Balance	0	456	638	492
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision for credit losses	0	42	0	6
Ending Balance	$ 0	$ 498	0	$ 498
Unallocated | Adoption Impact
Allowance for Loan Losses:
Beginning Balance			$ (638)

XML

Loans - Schedule of Concentration Risk (Details) - Owners of rental properties - Financing receivable	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Residential
Concentration Risk [Line Items]
Concentration of loans (as a percent)	18.99%	19.95%
Commercial
Concentration Risk [Line Items]
Concentration of loans (as a percent)	14.62%	16.09%

XML

Loans - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Ending allowance balance attributable to loans:
Individually evaluated for impairment			$ 961
Collectively evaluated for impairment			14,676
Total ending allowance balance	$ 12,890	$ 11,592	15,637	$ 15,211	$ 14,393	$ 14,176
Loans:
Individually evaluated for impairment			11,233
Collectively evaluated for impairment			1,627,850
Total ending loans balance	1,817,343		1,639,083
Commercial, financial, and agricultural
Ending allowance balance attributable to loans:
Individually evaluated for impairment			4
Collectively evaluated for impairment			1,910
Total ending allowance balance	3,913	3,019	1,914	2,069	2,108	1,946
Loans:
Individually evaluated for impairment			698
Collectively evaluated for impairment			189,763
Total ending loans balance	211,473		190,461
Real Estate Mortgages | Residential
Ending allowance balance attributable to loans:
Individually evaluated for impairment			111
Collectively evaluated for impairment			4,950
Total ending allowance balance	1,168	1,078	5,061	5,195	4,818	4,701
Loans:
Individually evaluated for impairment			4,321
Collectively evaluated for impairment			703,888
Total ending loans balance	773,782		708,209
Real Estate Mortgages | Commercial
Ending allowance balance attributable to loans:
Individually evaluated for impairment			827
Collectively evaluated for impairment			5,283
Total ending allowance balance	4,323	4,191	6,110	5,536	5,395	5,336
Loans:
Individually evaluated for impairment			6,195
Collectively evaluated for impairment			494,437
Total ending loans balance	525,666		500,632
Real Estate Mortgages | Construction
Ending allowance balance attributable to loans:
Individually evaluated for impairment			0
Collectively evaluated for impairment			188
Total ending allowance balance	198	178	188	210	199	179
Loans:
Individually evaluated for impairment			0
Collectively evaluated for impairment			43,308
Total ending loans balance	55,833		43,308
Consumer automobile loans
Ending allowance balance attributable to loans:
Individually evaluated for impairment			0
Collectively evaluated for impairment			1,617
Total ending allowance balance	2,584	2,446	1,617	1,585	1,307	1,411
Loans:
Individually evaluated for impairment			0
Collectively evaluated for impairment			186,112
Total ending loans balance	239,768		186,112
Other consumer installment loans
Ending allowance balance attributable to loans:
Individually evaluated for impairment			19
Collectively evaluated for impairment			90
Total ending allowance balance	704	680	109	118	110	111
Loans:
Individually evaluated for impairment			19
Collectively evaluated for impairment			10,342
Total ending loans balance	10,821		10,361
Unallocated
Ending allowance balance attributable to loans:
Individually evaluated for impairment			0
Collectively evaluated for impairment			638
Total ending allowance balance	$ 0	$ 0	$ 638	$ 498	$ 456	$ 492

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Net Periodic Benefit Cost-Defined Benefit Plans (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Net periodic benefit cost of the domestic non-contributory defined benefit plan
Interest cost	$ 198,000	$ 138,000	$ 594,000	$ 414,000
Expected return on plan assets	(326,000)	(412,000)	(978,000)	(1,237,000)
Amortization of net loss	37,000	17,000	111,000	52,000
Net periodic benefit	$ (91,000)	$ (257,000)	(273,000)	$ (771,000)
Employer contributions made to the defined benefit plan			$ 0

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Stock Purchase Plans (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Aug. 27, 2015
Stock Purchase Plans
Common shares issued for employee stock purchase plan	$ 34,000	$ 23,000	$ 73,000	$ 67,000
Options, outstanding (in shares)	1,000,000	917,000	1,000,000	917,000	914,000	3,000
Director compensation plan, expense	$ 63,000	$ 72,000	$ 193,000	$ 240,000
Non-Employee Director Compensation Plan
Stock Purchase Plans
Number of shares allowed to be purchased (in shares)	100,000		100,000
Maximum percentage of base compensation			100.00%
Current percentage of base compensation			50.00%
Options, outstanding (in shares)	42,191		42,191
Director compensation plan (in shares)			7,560	9,968
Director compensation plan, expense			$ 193,000	$ 240,000
Employee Stock
Stock Purchase Plans
Number of shares allowed to be purchased (in shares)	1,500,000		1,500,000
Purchase price of the shares with respect to market value (as a percent)			95.00%
Maximum percentage of base compensation			15.00%
Maximum market value			$ 12,000
Number of shares issued under the plan (in shares)			3,120	2,960

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Off-Balance Sheet Risk (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Off Balance Sheet Risk
Contract amounts representing credit risk	$ 178,011	$ 186,638
Allowance for credit losses	1,240	143
Commitments to extend credit
Off Balance Sheet Risk
Contract amounts representing credit risk	161,270	169,365
Standby letters of credit
Off Balance Sheet Risk
Contract amounts representing credit risk	$ 9,467	9,915
Coverage period for instrument (in years)	1 year
Credit exposure from the sale of assets with recourse
Off Balance Sheet Risk
Contract amounts representing credit risk	$ 7,274	$ 7,358

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Fair Value Measurements - Recurring Assets (Details) - Recurring - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
U.S. Government and agency securities
Fair Value Measurements [Abstract]
Total assets, fair value	$ 3,864	$ 2,896
Mortgage-backed securities
Fair Value Measurements [Abstract]
Total assets, fair value	11,396	1,282
State and political securities
Fair Value Measurements [Abstract]
Total assets, fair value	119,847	142,809
Other debt securities
Fair Value Measurements [Abstract]
Total assets, fair value	49,560	46,686
Equity securities
Fair Value Measurements [Abstract]
Total assets, fair value	1,072	1,142
Level I | U.S. Government and agency securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level I | Mortgage-backed securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level I | State and political securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level I | Other debt securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level I | Equity securities
Fair Value Measurements [Abstract]
Total assets, fair value	1,072	1,142
Level II | U.S. Government and agency securities
Fair Value Measurements [Abstract]
Total assets, fair value	3,864	2,896
Level II | Mortgage-backed securities
Fair Value Measurements [Abstract]
Total assets, fair value	11,396	1,282
Level II | State and political securities
Fair Value Measurements [Abstract]
Total assets, fair value	119,847	142,809
Level II | Other debt securities
Fair Value Measurements [Abstract]
Total assets, fair value	49,560	46,686
Level II | Equity securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level III | U.S. Government and agency securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level III | Mortgage-backed securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level III | State and political securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level III | Other debt securities
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Level III | Equity securities
Fair Value Measurements [Abstract]
Total assets, fair value	$ 0	$ 0

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Fair Value Measurements - Non-Recurring Assets (Details) - Nonrecurring - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Collateral dependent loans
Fair Value Measurements [Abstract]
Total assets, fair value	$ 331
Collateral dependent loans | Level I
Fair Value Measurements [Abstract]
Total assets, fair value	0
Collateral dependent loans | Level II
Fair Value Measurements [Abstract]
Total assets, fair value	0
Collateral dependent loans | Level III
Fair Value Measurements [Abstract]
Total assets, fair value	331
Other real estate owned
Fair Value Measurements [Abstract]
Total assets, fair value	853	$ 83
Other real estate owned | Level I
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Other real estate owned | Level II
Fair Value Measurements [Abstract]
Total assets, fair value	0	0
Other real estate owned | Level III
Fair Value Measurements [Abstract]
Total assets, fair value	$ 853	83
Impaired loans
Fair Value Measurements [Abstract]
Total assets, fair value		1,923
Impaired loans | Level I
Fair Value Measurements [Abstract]
Total assets, fair value		0
Impaired loans | Level II
Fair Value Measurements [Abstract]
Total assets, fair value		0
Impaired loans | Level III
Fair Value Measurements [Abstract]
Total assets, fair value		$ 1,923

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Fair Value Measurements - Significant Unobservable Inputs (Details) - Nonrecurring - Level III - Appraisal of collateral $ in Thousands	Sep. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques
Impaired loans, fair value		$ 1,923
Collateral dependent loans, fair value	$ 331
Other real estate owned, fair value	$ 853	$ 83
Measurement input, appraised value
Listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques
Other real estate owned, measurement input percentage	(0.20)	(0.20)
Measurement input, appraised value | Minimum
Listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques
Impaired loans, measurement input percentage		0
Collateral dependent loans, measurement input	(0.15)
Measurement input, appraised value | Maximum
Listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques
Impaired loans, measurement input percentage		(0.34)
Collateral dependent loans, measurement input	(0.24)
Measurement input, appraised value | Weighted Average
Listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques
Impaired loans, measurement input percentage		(0.14)
Collateral dependent loans, measurement input	(0.20)
Other real estate owned, measurement input percentage	(0.20)	(0.20)

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Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Level I
Financial assets:
Loans held for sale	$ 4,083	$ 3,298
Loans, net	0	0
Financial liabilities:
Time deposits & brokered deposits	0	0
Short-term borrowings	193,746	153,349
Long-term borrowings	0	0
Level II
Financial assets:
Loans held for sale	0	0
Loans, net	0	0
Financial liabilities:
Time deposits & brokered deposits	0	0
Short-term borrowings	0	0
Long-term borrowings	0	0
Level III
Financial assets:
Loans held for sale	0	0
Loans, net	1,761,944	1,594,073
Financial liabilities:
Time deposits & brokered deposits	350,456	137,559
Short-term borrowings	0	0
Long-term borrowings	238,977	99,118
Carrying Value
Financial assets:
Loans held for sale	4,083	3,298
Loans, net	1,805,571	1,624,094
Financial liabilities:
Time deposits & brokered deposits	356,244	146,282
Short-term borrowings	193,746	153,349
Long-term borrowings	217,645	102,783
Fair Value
Financial assets:
Loans held for sale	4,083	3,298
Loans, net	1,761,944	1,594,073
Financial liabilities:
Time deposits & brokered deposits	350,456	137,559
Short-term borrowings	193,746	153,349
Long-term borrowings	$ 238,977	$ 99,118

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Stock Options - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands							3 Months Ended		9 Months Ended
	Jan. 20, 2023	Jan. 18, 2022	Apr. 09, 2021	Mar. 11, 2020	Mar. 15, 2019	Aug. 27, 2015	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Jan. 01, 2023	Dec. 31, 2022
Employee Stock Purchase Plan
Options, outstanding (in shares)						3,000	1,000,000	917,000	1,000,000	917,000		914,000
Granted (in shares)						58,125			89,000
Granted (in dollars per share)						$ 28.02			$ 27.77
Exercisable period (in years)						5 years
Tranche One
Employee Stock Purchase Plan
Options, outstanding (in shares)	59,500	156,000	156,500	119,300	101,100
Granted (in shares)	59,500	156,000	156,500	119,300	120,900				59,500
Granted (in dollars per share)	$ 27.77	$ 24.10	$ 24.23	$ 25.34	$ 28.01
Exercisable period (in years)	3 years	3 years	3 years	3 years	3 years
Tranche Two
Employee Stock Purchase Plan
Options, outstanding (in shares)	29,500	78,000	78,000	119,200	99,900
Granted (in shares)	29,500	78,000	78,000	119,200	119,100				29,500
Granted (in dollars per share)	$ 27.77	$ 24.10	$ 24.23	$ 25.34	$ 28.01
Exercisable period (in years)	5 years	5 years	5 years	5 years	5 years
Employee Stock Option
Employee Stock Purchase Plan
Options, outstanding (in shares)											914,000
Exercisable period (in years)									10 years
Compensation expense							$ 229	$ 236	$ 715	$ 1,004
Number of exercisable options (in shares)							223,400		223,400
Weighted average remaining contractual term (in years)									5 years 11 months 8 days
Unrecognized compensation cost for non-vested shares							$ 1,437		$ 1,437
Period for recognition (in years)									1 year 29 days
Employee Stock Option | Tranche One
Employee Stock Purchase Plan
Exercisable period (in years)									3 years
Employee Stock Option | Tranche Two
Employee Stock Purchase Plan
Exercisable period (in years)									5 years

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Stock Options - Schedule of Stock Options Granted (Details) - $ / shares							9 Months Ended
	Jan. 20, 2023	Jan. 18, 2022	Apr. 09, 2021	Mar. 11, 2020	Mar. 15, 2019	Aug. 27, 2015	Sep. 30, 2023	Dec. 31, 2022	Sep. 30, 2022
Employee Stock Purchase Plan
Shares (in shares)						58,125	89,000
Forfeited (in shares)						(26,250)	(3,000)
Exercised (in shares)						(28,875)
Outstanding (in shares)						3,000	1,000,000	914,000	917,000
Strike price (in dollars per share)						$ 28.02	$ 27.77
Vesting period (in years)						5 years
Expiration (in years)						10 years
Tranche One
Employee Stock Purchase Plan
Shares (in shares)	59,500	156,000	156,500	119,300	120,900		59,500
Forfeited (in shares)	0	0	0	0	(19,800)
Exercised (in shares)	0	0	0	0	0
Outstanding (in shares)	59,500	156,000	156,500	119,300	101,100
Strike price (in dollars per share)	$ 27.77	$ 24.10	$ 24.23	$ 25.34	$ 28.01
Vesting period (in years)	3 years	3 years	3 years	3 years	3 years
Expiration (in years)	10 years	10 years	10 years	10 years	10 years
Tranche Two
Employee Stock Purchase Plan
Shares (in shares)	29,500	78,000	78,000	119,200	119,100		29,500
Forfeited (in shares)	0	0	0	0	(19,200)
Exercised (in shares)	0	0	0	0	0
Outstanding (in shares)	29,500	78,000	78,000	119,200	99,900
Strike price (in dollars per share)	$ 27.77	$ 24.10	$ 24.23	$ 25.34	$ 28.01
Vesting period (in years)	5 years	5 years	5 years	5 years	5 years
Expiration (in years)	10 years	10 years	10 years	10 years	10 years

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Stock Options - Schedule of Options Outstanding (Details) - $ / shares		9 Months Ended
	Aug. 27, 2015	Sep. 30, 2023
Shares
Outstanding, beginning of year (in shares)		914,000
Granted (in shares)	58,125	89,000
Forfeited (in shares)	(26,250)	(3,000)
Expired (in shares)		0
Outstanding, end of period (in shares)	3,000	1,000,000
Exercisable, end of period (in shares)		223,400
Weighted Average Exercise Price
Outstanding, weighted average exercise price (in dollars per share)		$ 25.34
Granted (in dollars per share)	$ 28.02	27.77
Forfeited (in dollars per share)		28.01
Expired (in dollars per share)		0
Outstanding, weighted average exercise price (in dollars per share)		25.55
Exercisable, end of period (in dollars per share)		$ 26.58

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Stock Options - Fair Value Assumptions (Details)	9 Months Ended
	Sep. 30, 2023 $ / shares
Share-Based Payment Arrangement [Abstract]
Risk-free interest rate	3.76%
Expected volatility	31.00%
Expected Annual dividend (in dollars per share)	$ 1.28
Expected life	6 years 10 months 2 days
Weighted average grant date fair value per option (in dollars per share)	$ 6.11

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Reclassification of Comparative Amounts (Details)	9 Months Ended
	Sep. 30, 2023 USD ($)
Reclassification of Comparative Amounts
Effect of reclassification adjustment on net income or shareholders' equity	$ 0