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

Or

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

EXCHANGE ACT OF 1934

For the transition period from_____________________ to ___________________

Commission file number 0-13222

CITIZENS FINANCIAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

PENNSYLVANIA	23-2265045
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

15 South Main Street

Mansfield, Pennsylvania 16933

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (570) 662‑2121

N/A

(Former Name, former address and former fiscal year, if changed since last report)

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

Common Stock, Par value $1.0 per share	CZFS	The Nasdaq Stock Market, LLC
Title of Each Class	Trading Symbol (s)	Name of Each Exchange on Which Registered

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

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

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

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

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

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

The number of outstanding shares of the Registrant’s Common Stock, as of November 1, 2023, was 4,706,111.

Citizens Financial Services, Inc.

Form 10-Q

INDEX

		PAGE
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Consolidated Balance Sheet as of September 30, 2023 and December 31, 2022	1
	Consolidated Statement of Income for the Three and Nine Months Ended September 30, 2023 and 2022	2
	Consolidated Statement of Comprehensive Income (Loss) for the Three and Nine Months ended September 30, 2023 and 2022	3
	Consolidated Statement of Changes in Stockholders’ Equity for  the Three and Nine Months ended September 30, 2023 and 2022	4
	Consolidated Statement of Cash Flows for the Nine Months ended September 30, 2023 and 2022	5
	Notes to Consolidated Financial Statements	6-38
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39-63
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	64
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64-65
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	66
	Signatures	67

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(in thousands except share data)	September 30, 2023			December 31, 2022
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	25,267		$	24,814
Interest-bearing		18,069			1,397
Total cash and cash equivalents		43,336			26,211
Interest bearing time deposits with other banks		4,566			6,055
Equity securities		1,858			2,208
Available-for-sale securities		417,807			439,506
Loans held for sale		14,155			725
Loans (net of allowance for credit losses - loans: 2023 $21,455 and 2022, $18,552)		2,224,941			1,706,447
Premises and equipment		21,421			17,619
Accrued interest receivable		10,327			7,332
Goodwill		84,758			31,376
Bank owned life insurance		49,586			39,355
Other intangibles		3,866			1,272
Fair value of derivative instruments		18,144			16,599
Deferred tax asset		21,384			12,886
Other assets		43,067			25,802
TOTAL ASSETS	$	2,959,216		$	2,333,393
LIABILITIES:
Deposits:
Noninterest-bearing	$	542,144		$	396,260
Interest-bearing		1,792,991			1,447,948
Total deposits		2,335,135			1,844,208
Borrowed funds		316,151			257,278
Accrued interest payable		2,726			1,232
Fair value of derivative instruments - liability		10,694			9,726
Other liabilities		31,824			20,802
TOTAL LIABILITIES		2,696,530			2,133,246
STOCKHOLDERS’ EQUITY:
Preferred Stock
$1.00 par value; authorized 3,000,000 shares at September 30, 2023 and December 31, 2022; none issued in 2023 or 2022		-			-
Common Stock
$1.00 par value; authorized 25,000,000 shares at September 30, 2023 and December 31, 2022; issued 5,160,754 at September 30, 2023 and 4,427,687 at December 31, 2022		5,161			4,428
Additional paid-in capital		143,302			80,911
Retained earnings		167,740			164,922
Accumulated other comprehensive loss		(36,643	)		(33,141	)
Treasury stock, at cost: 454,643 shares at September 30, 2023 and 456,478 shares at December 31, 2022		(16,874	)		(16,973	)
TOTAL STOCKHOLDERS’ EQUITY		262,686			200,147
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,959,216		$	2,333,393

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1

CITIZENS FINANCIAL SERVICES, 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 INCOME:
Interest and fees on loans	$	33,772	$	19,396		$	80,438		$	52,436
Interest-bearing deposits with banks		264		61			462			333
Investment securities:
Taxable		1,734		1,514			4,973			4,050
Nontaxable		540		630			1,729			1,830
Dividends		379		182			1,004			356
TOTAL INTEREST INCOME		36,689		21,783			88,606			59,005
INTEREST EXPENSE:
Deposits		10,100		1,838			19,519			4,469
Borrowed funds		4,185		1,099			10,682			1,699
TOTAL INTEREST EXPENSE		14,285		2,937			30,201			6,168
NET INTEREST INCOME		22,404		18,846			58,405			52,837
Provision for credit losses		475		725			737			1,425
Provision for credit losses - acquisition day 1 non-PCD		-		-			4,591			-
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		21,929		18,121			53,077			51,412
NON-INTEREST INCOME:
Service charges		1,692		1,509			4,196			4,081
Trust		172		187			583			620
Brokerage and insurance		473		446			1,429			1,428
Gains on loans sold		460		95			674			241
Equity security gains (losses), net		69		(19	)		(223	)		(198	)
Available for sale security gains (losses), net		-		(6	)		(51	)		(6	)
Earnings on bank owned life insurance		489		216			941			635
Other		307		264			567			626
TOTAL NON-INTEREST INCOME		3,662		2,692			8,116			7,427
NON-INTEREST EXPENSES:
Salaries and employee benefits		10,005		6,933			25,598			20,964
Occupancy		1,221		779			2,870			2,327
Furniture and equipment		255		122			568			416
Professional fees		506		588			1,274			1,321
FDIC insurance		375		160			1,000			440
Pennsylvania shares tax		297		339			893			1,017
Amortization of intangibles		157		40			219			120
Merger and acquisition		623		-			9,269			-
Software expenses		551		370			1,274			1,069
ORE expenses (income)		111		122			126			(125	)
Other		2,343		2,161			5,811			5,496
TOTAL NON-INTEREST EXPENSES		16,444		11,614			48,902			33,045
Income before provision for income taxes		9,147		9,199			12,291			25,794
Provision for income taxes		1,599		1,655			2,020			4,609
NET INCOME	$	7,548	$	7,544		$	10,271		$	21,185
PER COMMON SHARE DATA:
Net Income - Basic	$	1.61	$	1.88		$	2.40		$	5.28
Net Income - Diluted	$	1.61	$	1.88		$	2.40		$	5.28
Cash Dividends Paid	$	0.490	$	0.475		$	1.451		$	1.407
Number of shares used in computation - basic		4,699,952		4,006,794			4,275,259			4,009,855
Number of shares used in computation - diluted		4,699,952		4,007,028			4,275,259			4,009,857

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended, September 30,
(in thousands)	2023			2022			2023			2022
Net income	$	7,548		$	7,544		$	10,271		$	21,185
Other comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities		(7,627	)		(13,578	)		(4,645	)		(50,581	)
Income tax effect		1,602			2,851			976			10,622
Change in unrecognized pension cost		7			24			21			72
Income tax effect		(1	)		(5	)		(4	)		(15	)
Change in unrealized loss on interest rate swaps		450			1,781			140			5,314
Income tax effect		(94	)		(374	)		(29	)		(1,117	)
Less:  Reclassification adjustment for investment security gains included in net income		-			6			51			6
Income tax effect		-			(1	)		(12	)		(1	)
Other comprehensive income (loss), net of tax		(5,663	)		(9,296	)		(3,502	)		(35,700	)
Comprehensive income (loss)	$	1,885		$	(1,752	)	$	6,769		$	(14,515	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock				Additional Paid-in			Retained			Accumulated Other Comprehensive			Treasury
(in thousands, except share data)	Shares		Amount		Capital			Earnings			Income (Loss)			Stock			Total
Balance, June 30, 2023		5,160,754		5,161		143,351			162,499			(30,980	)		(16,803	)		263,228
Comprehensive income:
Net income									7,548									7,548
Net other comprehensive income (loss)												(5,663	)					(5,663	)
Purchase of treasury stock (2,772 shares)															(264	)		(264	)
Restricted stock, executive and Board of Director awards (2,167 shares)						(86	)								168			82
Restricted stock vesting						34									-			34
Sale of treasury stock to employees (410 shares)						-									28			28
Forfeited restricted stock (52 shares)						3									(3	)		-
Cash dividends, $0.490 per share									(2,307	)								(2,307	)
Balance, September 30, 2023		5,160,754	$	5,161	$	143,302		$	167,740		$	(36,643	)	$	(16,874	)	$	262,686
Balance, December 31, 2022		4,427,687	$	4,428	$	80,911		$	164,922		$	(33,141	)	$	(16,973	)	$	200,147
Comprehensive income:
Net income									10,271									10,271
Net other comprehensive income (loss)												(3,502	)					(3,502	)
Stock dividend		39,209		39		2,982			(3,021	)								-
Issuance of Common stock		693,858		694		59,443												60,137
Purchase of treasury stock (2,772 shares)															(264	)		(264	)
Restricted stock, executive and Board of Director awards (2,242 shares)						(231	)								348			117
Restricted stock vesting						184												184
Sale of treasury stock to employees (410 shares)						-									28			28
Forfeited restricted stock (213 shares)						13									(13	)		-
Change in Accounting policy for allowance for credit losses									1,766			-						1,766
Cash dividends, $1.451 per share									(6,198	)								(6,198	)
Balance, September 30, 2023		5,160,754	$	5,161	$	143,302		$	167,740		$	(36,643	)	$	(16,874	)	$	262,686
Balance, June 30, 2022		4,427,687		4,428		80,892			153,315			(26,559	)		(17,044	)		195,032
Comprehensive income:
Net income									7,544									7,544
Net other comprehensive income (loss)												(9,296	)					(9,296	)
Purchase of treasury stock (18,584 shares)															-			-
Restricted stock, executive and Board of Director awards (769 shares)						(52	)								52			-
Restricted stock vesting						16												16
Sale of treasury stock to employees (540 shares)						5									35			40
Forfeited restricted stock (120 shares)						8									(8	)		-
Cash dividends, $0.475 per share									(1,906	)								(1,906	)
Balance, September 30, 2022		4,427,687	$	4,428	$	80,869		$	158,953		$	(35,855	)	$	(16,965	)	$	191,430
Balance, December 31, 2021		4,388,901	$	4,389	$	78,395		$	146,010		$	(155	)	$	(16,147	)	$	212,492
Comprehensive income:
Net income									21,185									21,185
Net other comprehensive income (loss)												(35,700	)					(35,700	)
Stock dividend		38,786		39		2,521			(2,560	)								-
Purchase of treasury stock (18,697 shares)															(1,279	)		(1,279	)
Restricted stock, executive and Board of Director awards (5,392 shares)						(221	)								365			144
Restricted stock vesting						158												158
Sale of treasury stock to employees (1,600 shares)						6									106			112
Forfeited restricted stock (159 shares)						10									(10	)		-
Cash dividends, $1.407 per share									(5,682	)								(5,682	)
Balance, September 30, 2022		4,427,687	$	4,428	$	80,869		$	158,953		$	(35,855	)	$	(16,965	)	$	191,430

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
(in thousands)	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	10,271		$	21,185
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		5,328			1,425
Depreciation and amortization		1,022			773
Amortization and accretion of loans and other assets		(2,392	)		(1,386	)
Amortization and accretion of investment securities		1,197			1,467
Deferred income taxes		355			86
Investment securities losses, net		274			204
Earnings on bank owned life insurance		(941	)		(635	)
Vesting of restricted stock		184			158
Originations of loans held for sale		(53,510	)		(9,447	)
Proceeds from sales of loans held for sale		51,428			12,864
Realized gains on loans sold		(674	)		(241	)
Increase in accrued interest receivable		(769	)		(1,309	)
Gain on sale of foreclosed assets held for sale		(98	)		(481	)
Increase in accrued interest payable		609			211
Other, net		(1,955	)		(536	)
Net cash provided by operating activities		10,329			24,338
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Proceeds from sales		86,504			4,492
Proceeds from maturity and principal repayments		18,847			28,553
Purchase of securities		(10,246	)		(117,913	)
Purchase of equity securities		-			(218	)
Proceeds from sale of equity securities		127			33
Purchase of interest bearing time deposits with other banks		-			(3,720	)
Proceeds from sale of interest bearing time deposits with other banks		-			2,733
Proceeds from life insurance		1,097			-
Proceeds from matured interest bearing time deposits with other banks		1,489			5,954
Proceeds from redemption of regulatory stock		19,936			3,811
Purchase of regulatory stock		(22,105	)		(12,081	)
Net increase in loans		(42,162	)		(295,059	)
Purchase of premises and equipment		(2,308	)		(1,150	)
Investments in low income housing partnerships		(616	)		(949	)
Proceeds from sale of foreclosed assets held for sale		314			845
Acquisition, net of cash paid		4,905			-
Net cash provided by (used in) investing activities		55,782			(384,669	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits		(42,438	)		32,559
Proceeds from long-term borrowings		20,000			-
Repayments of long-term borrowings		-			(4,725	)
Net (decrease) increase in short-term borrowed funds		(20,115	)		189,661
Purchase of treasury stock		(264	)		(1,279	)
Sale of treasury stock to employees		28			112
Dividends paid		(6,197	)		(5,682	)
Net cash (used in) provided by financing activities		(48,986	)		210,646
Net  increase (decrease) in cash and cash equivalents		17,125			(149,685	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		26,211			172,833
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	43,336		$	23,148
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	28,707		$	5,957
Income taxes paid	$	4,600		$	4,600
Loans transferred to foreclosed property	$	147		$	61
Right of use asset and liability	$	5		$	1,518
Stock Dividend	$	3,021		$	2,560
CECL adjustment	$	3,300		$	-

Acquisition of	HV Bancorp, Inc.
Non-cash assets acquired
Available-for-sale securities	$	79,248
Interest bearing time deposits with other banks		-
Loans held for sale		10,750
Loans		475,338
Premises and equipment		2,310
Accrued interest receivable		2,226
Bank owned life insurance		10,387
Intangibles		2,972
Deferred tax asset		8,392
Other assets		18,213
Goodwill		53,382
		663,218
Liabilities assumed
Noninterest-bearing deposits		197,549
Interest-bearing deposits		335,815
Accrued interest payable		885
Borrowed funds		58,647
Other liabilities		11,674
		604,570
Net non-cash assets acquired		58,648
Cash and cash equivalents acquired	$	18,017

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

CITIZENS FINANCIAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

Citizens Financial Services, Inc. (individually and collectively with its direct and indirect subsidiaries, the “Company”) is a Pennsylvania corporation and its wholly owned subsidiary is CZFS Acquisition Company, LLC. CZFS Acquisition Company, LLC is the holding company of its wholly owned subsidiary, First Citizens Community Bank (the “Bank”), and of the Bank’s wholly owned subsidiaries, First Citizens Insurance Agency, Inc. (“First Citizens Insurance”) and 1^st Realty of PA LLC (“Realty”).

The accompanying consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with U.S. generally accepted accounting principles.  Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  Certain of the prior year amounts have been reclassified to conform with the current year presentation.  Such reclassifications had no effect on net income or stockholders’ equity.  All material inter‑company balances and transactions have been eliminated in consolidation.

In the opinion of management of the Company, the accompanying interim consolidated financial statements at September 30, 2023 and for the periods ended September 30, 2023 and 2022 include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition and the results of operations at the dates and for the periods presented. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and of revenues and expenses for the periods covered by the Consolidated Statement of Income. The financial performance reported for the Company for the nine month period ended September 30, 2023 is not necessarily indicative of the results to be expected for the full year.  This information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Accounting Pronouncements Adopted in 2023

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

The Company adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans and held-to-maturity debt securities, available-for-sale debt securities and unfunded commitments. On January 1, 2023, the Bank recorded a cumulative effect increase to retained earnings of $1.8 million, net of tax, of which $3.3 million related to loans and ($1.1) million related to unfunded commitments.

The Company adopted the provisions of ASC 326 related to financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired (PCI) and accounted for under ASC 310-30 using the prospective transition approach. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

6

The Company expanded the pooling utilized under the legacy incurred loss method to include additional segmentation based on risk. The impact of the change from the incurred loss model to the current expected credit loss model is detailed below (in thousands):

	January 1, 2023
	Pre-adoption		Adoption Impact			As Reported
Assets
Allowance for credit losses - loans
Real estate loans:
Residential	$	1,056	$	79		$	1,135
Commercial		10,120		(3,070	)		7,050
Agricultural		4,589		(1,145	)		3,444
Construction		801		(103	)		698
Consumer		135		1,040			1,175
Other commercial loans		1,040		(328	)		712
Other agricultural loans		489		(219	)		270
State and political subdivision loans		322		(280	)		42
Unallocated		-		726			726
Total	$	18,552	$	(3,300	)	$	15,252
Liabilities
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	$	165	$	1,064		$	1,229

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

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for modifications of receivables made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investment in leases in the existing vintage disclosures. This ASU became effective on January 1, 2023 for the Corporation. The adoption of this ASU resulted in updated disclosures within our financial statements but otherwise did not have a material impact on the Company’s consolidated financial statements.

Loans

 A loan is classified as a modified loan to a borrower experiencing financial difficulty when a contractual loan modification in the form of principal forgiveness, an interest rate reduction, an other-than-significant payment delay or a term extension (or a combination thereof) has been granted to an existing borrower experiencing financial difficulties. The goal when modifying a credit is to establish a reasonable period of time to provide cash flow relief to customers experiencing cash flow difficulties. Accruing modified loans to borrowers experiencing financial difficulty are primarily comprised of loans on which interest is being accrued under the modified terms, and the loans are current or less than 90 days past due.

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Loans and Leases - Prior to ASU No. 2022-02 Adoption

In situations where, for economic or legal reasons related to a borrower’s financial difficulties, management granted a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a Troubled Debt Restructuring (TDR). Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans.

Allowance for Credit losses – Loans

The allowance for credit losses (ACL) on loans and leases is a valuation account that is used to present the net amount expected to be collected on a loan or lease. The ACL for loans and leases is adjusted through provision for credit losses as a charge against, or credit to, earnings. Loans and leases deemed to be uncollectible are charged against the ACL on loans and leases, and any subsequent recoveries are credited to the ACL. Management evaluates the ACL on a quarterly basis. When changes in the reserve are necessary, an adjustment is made.

Management utilizes a discounted cash flow (DCF) model to calculate the present value of the expected cash flows for pools of loans and leases that share similar risk characteristics and compares the results of this calculation to the amortized cost basis to determine its allowance for credit loss balance.

Management uses relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts in calculating its ACL. Historical credit loss experience provides the basis for the estimation of expected credit losses. Management determines whether there is a need to make qualitative adjustments to historical loss information by monitoring certain factors including differences in current loan-specific risk characteristics as well as for changes in external or environmental conditions, or other relevant factors.

The contractual term used in projecting the cash flows of a loan is based on the maturity date of a loan, and is adjusted for prepayment or curtailment assumptions which may shorten that contractual time period. Options to extend are considered by management in determining the contractual term.

The key inputs to the DCF model are (1) probability of default, (2) loss given default, (3) prepayment and curtailment rates, (4) reasonable and supportable economic forecasts, (5) forecast reversion period, (6) expected recoveries on charged off loans, and (7) discount rate.

Probability of Default (PD)

In order to incorporate economic factors into forecasting within the DCF model, management elected to use the Loss Driver method to generate the PD rate inputs. The Loss Driver method analyzes how one or more economic factors change the default rate using a statistical regression analysis. Management selected economic factors that had strong correlations to historical default rates.

Loss Given Default (LGD)

Management elected to use the Frye Jacobs parameter for determining the LGD input, which is an estimation technique that derives a LGD input from segment specific risk curves that correlates LGD with PD.

Prepayment and Curtailment Rates

Prepayment Rates: Loan level transaction data is used to calculate a semi-annual prepayment rate. Those semi-annual rates are annualized and the average of the annualized rates is used in the DCF calculation for fixed payment or term loans. Rates are calculated for each pool.

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Curtailment Rates: Loan level transaction data is used to calculate annual curtailment rates using any available historical loan level data. The average of the historical rates is used in the DCF model for interest only payment or line of credit type loans. Rates are calculated for each pool.

Reasonable and Supportable Forecasts

The forecast data used in the DCF model is obtained via a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario.

Forecast Reversion Period

Management uses forecasts to predict how economic factors will perform and has determined to use a four quarter forecast period as well as a four quarter straight-line reversion period to historical averages (also commonly referred to as the mean reversion period).

Expected Recoveries on Charged-off Loans

Management performs an analysis to estimate recoveries that could be reasonably expected based on historical experience in order to account for expected recoveries on loans that have already been fully charged-off and are not included in the ACL calculation.

Discount Rate

The effective interest rate of the underlying loans and leases of the Company serves as the discount rate applied to the expected periodic cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

Individual Evaluation

Management evaluates individual instruments for expected credit losses when those instruments do not share similar risk characteristics with instruments evaluated using a collective (pooled) basis. Instruments will not be included in both collective and individual analyses. Individual analysis will establish a specific reserve for instruments in scope.

Management considers a financial asset as collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral, based on management’s assessment as of the reporting date.

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $7.8 million at September 30, 2023 and is included within Accrued interest receivable. This amount is excluded from the estimate of expected credit losses.

Reserve for Unfunded Commitments

The Company maintains a reserve in other liabilities for off-balance sheet credit exposures such as unfunded commitments that are currently unfunded in categories with historical loss experience. Management calculates funding rates annually using loan level data history at the portfolio level. The applicable pool level loss rates for the is then applied to calculate the reserve for unfunded commitments liability each period.

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Note 2 – Acquisition of HV Bancorp, Inc.

In the fourth quarter of 2022, the Company announced the signing of a definitive merger agreement to acquire 100% of the outstanding equity interest of HV Bancorp, Inc. (“HVBC”) for $30.50 per share in cash and stock. HVBC was a Pennsylvania corporation that conducted its business primarily through its wholly owned subsidiary Huntingdon Valley Bank (“HVB”), which operated from a main office in Doylestown, Pennsylvania, and had five service branches, four mortgage production office and one business banking office.

The transaction closed on June 16, 2023, with HVB having been merged into First Citizens Community Bank, with First Citizens Community Bank as the surviving entity. The acquisition established the Company’s presence in the Montgomery, Bucks and Philadelphia counties markets.

Under the terms of the merger agreement, the Company acquired all of the outstanding shares of HVBC for a total purchase price of approximately $76,665,000.  As a result of the acquisition, the Company issued 693,858 common shares and $16.5 million in cash to the former shareholders of HVBC. The shares were issued with a value of $86.67 per share, which was based on the closing price of the Company’s stock on June 16, 2023.

The following table summarizes the purchase of HVBC as of June 16, 2023:

(In Thousands, Except Per Share Data)
Purchase Price Consideration in Common Stock
Citizens Financial Services, Inc. shares issued		693,858
Value assigned to Citizens Financial Services, Inc. common share	$	86.67
Purchase price assigned to HVBC common shares exchanged for Citizens Financial Services, Inc.				$	60,137
Purchase Price Consideration - Cash for Common Stock
Purchase price assigned to HVBC’s common shares exchanged for cash					13,112
Purchase Price Related to Cash Payout of Stock Options					3,416
Total Purchase Price					76,665
Net Assets Acquired:
HVBC shareholders’ equity	$	40,630
Adjustments to reflect assets acquired at fair value:
Investments		31
Loans
Interest rate		(24,097	)
General credit		(1,834	)
Credit - PCD Loans		(2,042	)
Core deposit intangible		2,770
Owned premises		67
Other assets		(193	)
Deferred tax assets		3,737
Adjustments to reflect liabilities acquired at fair value:
Time deposits		586
Borrowings		3,017
Other liabilities		611
					23,283
Goodwill resulting from merger				$	53,382

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The following condensed statement reflects the amounts recognized as of the acquisition date for each major class of asset acquired and liability assumed:

(In Thousands, Except Per Share Data)
Total purchase price		76,665
Fair value of assets acquired
Cash and due from banks	18,017
Investment securities	79,248
Loans held for sale	10,750
Loans	475,338
Premises and equipment	2,310
Intangible assets	2,972
Bank owned life insurance	10,387
Interest receivable	2,226
Deferred taxes	8,392
Other assets	18,213
Total assets acquired	627,853
Fair value of liabilities assumed
Deposits	533,364
Borrowings	58,647
Accrued interest payable	885
Other liabilities	11,674
Total liabilities assumed	604,570
Total fair value of identifiable net assets		23,283
Goodwill resulting from merger		53,382

The Company determined that this acquisition constitutes a business combination and therefore was accounted for using the acquisition method of accounting. Accordingly, as of the date of the acquisition, the Company recorded the assets acquired, liabilities assumed and consideration paid at fair value. The $53.4 million excess of the consideration paid over the fair value of assets acquired was recorded as goodwill and is not amortizable or deductible for tax purposes. The amount of goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company with HVBC.

The fair value of the 693,858 common shares issued was determined based on the $86.67 closing market price of the Company’s common shares on the acquisition date, June 16, 2023. While the valuation of the acquired assets and liabilities is substantially complete, fair value estimates are subject to adjustment during the provisional period, which may last up to twelve months subsequent to the acquisition date. During this period, the Company may obtain additional information to refine the valuations and adjust the recorded fair value, although such adjustments are not expected to be significant. Valuations subject to adjustments include, but are not limited to, the fair value of acquired loans, deposits, land and building, core deposit intangible and other assets and liabilities.

The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed. The Company used an independent valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities.

• Cash and due from banks - The estimated fair value was determined to approximate the carrying amount of these assets.

• Investment securities - The estimated fair value of the investment portfolio was based on quoted market prices, dealer quotes, and pricing obtained from independent pricing services.

• Loans - The estimated fair value of loans were based on a discounted cash flow methodology applied on a pooled basis for nonpurchased credit-deteriorated (“non-PCD”) loans, accruing purchased credit-deteriorated loans and on an individual basis for nonaccruing purchased credit-deteriorated (“PCD”) loans. The valuation considered underlying characteristics including loan type, term, rate, payment schedule and credit rating. The discounted cash flow methodology involved assumptions and judgements as to credit risk, expected lifetime losses, environmental factors, collateral values, discount rates, expected payments and expected prepayments.

• Premises and equipment - The estimated fair value of land and buildings were determined by independent market-based appraisals.

• Core deposit intangible - The core deposit intangible was valued utilizing a discounting cash flow method approach, which recognizes the cost savings represented by the expense of maintaining the core deposit base (net of deposit fee income) versus the cost of an alternative funding source. The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.

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• Time deposits - The estimated fair value of time deposits was determined using a discounted cash flow approach incorporating a discount rate equal to current market interest rates offered on time deposits with similar terms and maturities.

• Borrowings - The estimated fair value of short-term borrowings was determined to approximate stated value. The estimated fair value of long-term borrowings from the FHLB were determined using a discounted cash flow approach incorporating a discount rate equal to current market interest rates offered on borrowings with similar terms and maturities. Subordinated debentures were valued using a discounted cash flow approach incorporating a discount rate that incorporated similar terms, maturity and credit rating.

Accounting for Acquired Loans

Acquired loans are classified into two categories: PCD loans and non-PCD loans. PCD loans are defined as a loan or group of loans that have experienced more than insignificant credit deterioration since origination. Non-PCD loans will have an allowance established on acquisition date, which is recognized as an expense through provision for credit losses. For PCD loans, an allowance is recognized on day 1 by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no provision for credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan.

A Day 1 allowance for credit losses on non-PCD loans of $4.6 million was recorded through the provision for credit losses within the Consolidated Statements of Income. At the date of acquisition, of the $506.9 million of loans acquired from HVB, $18.0 million, or 3.6%, of HVB’s loan portfolio, was accounted for as PCD loans.

The following table provides details related to the fair value of acquired PCD loans (in thousands):

	Unpaid principal balance		PCD Allowance for Credit Loss at Acquisition			(Discount) Premium on Acquired Loans			Fair Value of PCD Loans at Acquisition
Real estate loans:
Mortgages	$	2,398	$	(108	)	$	-		$	2,290
Home Equity		34		-			(4	)		30
Commercial		4,774		(39	)		(507	)		4,228
Construction		4,278		(37	)		(293	)		3,948
Consumer		1,343		(677	)		(271	)		395
Other commercial loans		5,214		(828	)		(48	)		4,338
	$	18,041	$	(1,689	)	$	(1,123	)	$	15,229

The following table provides details related to the fair value and Day 1 provision related to the acquired non-PCD loans (in thousands):

	Unpaid principal balance		(Discount)Premium on Acquired Loans			Fair Value of Non-PCD Loans at Acquisition		Day 1 Provision for Credit Losses- Non-PCD Loans
Real estate loans:
Mortgages	$	155,799	$	(17,506	)	$	138,293	$	1,015
Home Equity		2,165		(55	)		2,110		15
Commercial		203,638		(9,226	)		194,412		1,968
Construction		76,703		(1,420	)		75,283		747
Consumer		2,794		(222	)		2,572		159
Other commercial loans		47,753		(314	)		47,439		687
	$	488,852	$	(28,743	)	$	460,109	$	4,591

Amounts recognized separately from the acquisition include primarily legal fees, investment banking fees, system conversion costs, severance costs and contract termination costs. These costs were included in merger and acquisition expenses within non-interest expenses on the Consolidated Statement of Income and amounted to approximately $9,269,000 for the nine months ended September 30, 2023.

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Results of operations for HVBC prior to the acquisition date are not included in the Consolidated Statement of Income for the quarter ended September 30, 2023.

The following table presents financial information regarding the former HVBC operations included in our Consolidated Statement of Income from the date of acquisition through September 30, 2023 under the column “Actual from Acquisition Date through September 30, 2023”.  In addition, the following table presents unaudited pro forma information as if the acquisition of HVBC had occurred on January 1, 2022 under the “Pro Forma” columns.  The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited proforma information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings as a result of the integration and consolidation of the acquisition.  Merger and acquisition integration costs and amortization of fair value adjustments are included in the numbers below.

	Actual from Acquisition Date Through September 30, 2023		Unaudited Pro Forma for
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
(In Thousands, Except Per Share Data)			2023		2022		2023		2022
Net interest income	$	8,046	$	21,775	$	25,369	$	68,025	$	70,329
Non-interest income		600		3,797		4,372		10,502		14,638
Net income		3,140		7,061		9,070		8,008		22,652
Pro forma earnings per share:
Basic			$	1.31	$	1.93		1.61	$	4.82
Diluted			$	1.31	$	1.93	$	1.61	$	4.82

Note 3 – Revenue Recognition

In accordance with ASC 606, Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, loan servicing, gains on loans sold, earnings on bank owned life insurances, gains and losses from derivative instruments and changes in the fair of loans held for sale  are not within the scope of ASC 606. The main types of noninterest income within the scope of the standard are as follows:

• Service charges on deposit accounts – The Company has contracts with its deposit customers where fees are charged if certain parameters are not met. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific transactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time upon the completion of the requested service/transaction.

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• Trust fees – Typical contracts for trust services are based on a fixed percentage of the assets earned ratably over a defined period and billed on a monthly basis. Fees charged to customers’ accounts are recognized as revenue over the period during which the Company fulfills its performance obligation under the contract (i.e., holding client asset in a managed fiduciary trust account). For these accounts, the performance obligation of the Company is typically satisfied by holding and managing the customer’s assets over time. Other fees related to specific customer requests are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time, upon completion of the requested service/transaction.

• Gains and losses on sale of other real estate owned – Gains and losses are recognized at the completion of the property sale when the buyer obtains control of the real estate and all of the performance obligations of the Company have been satisfied. Evidence of the buyer obtaining control of the asset include transfer of the property title, physical possession of the asset, and the buyer obtaining control of the risks and rewards related to the asset. In situations where the Company agrees to provide financing to facilitate the sale, additional analysis is performed to ensure that the contract for sale identifies the buyer and seller, the asset to be transferred, payment terms, and that the contract has a true commercial substance and that collection of amounts due from the buyer are reasonable. In situations where financing terms are not reflective of current market terms, the transaction price is discounted impacting the gain/loss and the carrying value of the asset.

• Brokerage and insurance – Fees includes commissions from the sales of investments and insurance products recognized on a trade date basis as the performance obligation is satisfied at the point in time in which the trade is processed. Additional fees are based on a percentage of the market value of customer accounts and billed on a monthly or quarterly basis. The Company’s performance obligation under the contracts with certain customers is generally satisfied through the passage of time as the Company monitors and manages the assets in the customer’s portfolio and is not dependent on certain return or performance level of the customer’s portfolio. Fees for these services are billed monthly and are recorded as revenue at the end of the month for which the wealth management service has been performed. Other performance obligations (such as the delivery of account statements to customers) are generally considered immaterial to the overall transaction price.

The following table depicts the disaggregation of revenue derived from contracts with customers to depict the nature, amount, timing, and uncertainty of revenue and cash flows for the three and nine months ended September 30, 2023 and 2022 (in thousands). All revenue in the table below relates to goods and services transferred at a point in time.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Revenue stream	2023		2022		2023		2022
Service charges on deposit accounts
Overdraft fees	$	408		374	$	1,138	$	993
Statement fees		47		51		153		158
Interchange revenue		1,008		953		2,469		2,495
ATM income		35		39		107		194
Other service charges		194		92		329		241
Total Service Charges		1,692		1,509		4,196		4,081
Trust		172		187		583		620
Brokerage and insurance		473		446		1,429		1,428
Other		260		125		494		387
Total	$	2,597	$	2,267	$	6,702	$	6,516

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Note 4 – Earnings per Share

The following table sets forth the computation of earnings per share.

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net income applicable to common stock	$	7,548,000	$	7,544,000	$	10,271,000	$	21,185,000
Basic earnings per share computation
Weighted average common shares outstanding		4,699,952		4,006,794		4,275,259		4,009,855
Earnings per share - basic	$	1.61	$	1.88	$	2.40	$	5.28
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,699,952		4,006,794		4,275,259		4,009,855
Add: Dilutive effects of restricted stock		-		234		-		2
Weighted average common shares outstanding for dilutive earnings per share		4,699,952		4,007,028		4,275,259		4,009,857
Earnings per share - diluted	$	1.61	$	1.88	$	2.40	$	5.28

For the three months ended September 30, 2023 and 2022, there were 5,535 and 356 shares, respectively, related to the restricted stock plan that were excluded from the diluted earnings per share calculations since they were anti-dilutive. These anti-dilutive shares had per share prices ranging from $44.93-$83.38 for the three month period ended September 30, 2023 and per share prices ranging from $57.36-$74.27 for the three month period ended September 30, 2022. For the nine months ended September 30, 2023 and 2022, 5,535 and 5,811 shares, respectively, related to the restricted stock plan were excluded from the diluted earnings per share calculations since they were anti-dilutive. These anti-dilutive shares had prices ranging from $44.93-$83.38 for the nine month period ended September 30, 2023 and prices ranging from $44.93-$74.27 for the nine month period ended September 30, 2022.

Note 5 – Investments

The amortized cost, gross unrealized gains and losses, and fair value of investment securities at September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses			Fair Value
Available-for-sale securities:
U.S. agency securities	$	71,567	$	-	$	(7,920	)	$	63,647
U.S. treasury securities		160,426		-		(12,995	)		147,431
Obligations of state and political subdivisions		108,569		5		(12,552	)		96,022
Corporate obligations		13,381		229		(1,490	)		12,120
Mortgage-backed securities in government sponsored entities		115,945		9		(17,367	)		98,587
Total available-for-sale securities	$	469,888	$	243	$	(52,324	)	$	417,807

December 31, 2022
Available-for-sale securities:
U.S. agency securities	$	78,556	$	-	$	(7,879	)	$	70,677
U.S. treasury securities		162,236		-		(13,666	)		148,570
Obligations of state and political subdivisions		120,562		35		(10,297	)		110,300
Corporate obligations		10,335		-		(952	)		9,383
Mortgage-backed securities in government sponsored entities		115,304		15		(14,743	)		100,576
Total available-for-sale securities	$	486,993	$	50	$	(47,537	)	$	439,506

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The following table shows the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time, which individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022 (in thousands). As of September 30, 2023, the Company owned 338 securities whose fair value was less than their cost basis.

September 30, 2023	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. agency securities	$	-	$	-		$	61,646	$	(7,920	)	$	61,646	$	(7,920	)
U.S. treasury securities		-		-			147,431		(12,995	)		147,431		(12,995	)
Obligations of state and  political subdivisions		4,731		(130	)		89,094		(12,422	)		93,825		(12,552	)
Corporate obligations		1,458		(289	)		8,102		(1,201	)		9,560		(1,490	)
Mortgage-backed securities in government sponsored entities		9,207		(293	)		86,820		(17,074	)		96,027		(17,367	)
Total securities	$	15,396	$	(712	)	$	393,093	$	(51,612	)	$	408,489	$	(52,324	)

December 31, 2022
U.S. agency securities	$	39,729	$	(1,892	)	$	30,948	$	(5,987	)	$	70,677	$	(7,879	)
U.S. treasury securities		32,673		(1,337	)		115,897		(12,329	)		148,570		(13,666	)
Obligations of states and political subdivisions		66,725		(4,887	)		35,782		(5,410	)		102,507		(10,297	)
Corporate obligations		2,165		(165	)		6,218		(787	)		8,383		(952	)
Mortgage-backed securities in government sponsored entities		40,270		(3,367	)		57,319		(11,376	)		97,589		(14,743	)
Total securities	$	181,562	$	(11,648	)	$	246,164	$	(35,889	)	$	427,726	$	(47,537	)

Allowance for Credit Losses – Available for Sale Securities

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

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

Accrued interest receivable on available-for-sale debt securities totaled $2,145,000 at September 30, 2023 and is included within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

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Credit Losses on Investment Securities – Prior to adopting ASU 2016-13

The Company adopted ASU No. 2016-13 effective January 1, 2023. Financial statement amounts related to Investment Securities recorded as of December 31, 2022 and for the periods ending December 31, 2022 are presented in accordance with the accounting policies described in the following sections. The following sections were carried forward from the Annual Report on Form 10-K for the year ended December 31, 2022.

Securities are evaluated on at least a quarterly basis, and more frequently when market conditions warrant such an evaluation, to determine whether a decline in their value is other than temporary. To determine whether a loss is other than temporary, management utilizes criteria such as the reasons underlying the decline, the magnitude and duration of the decline, and whether or not management intends to sell or expects that it is more likely than not that it will be required to sell the security prior to an anticipated recovery of the fair value. The term “other than temporary” is not intended to indicate that the decline is permanent but indicates that the prospects for a near-term recovery of value are not necessarily favorable or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss), and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive (loss) income.

Proceeds from sales of securities available-for-sale for the nine months ended September 30, 2023 and 2022 were $86,504,000 and $4,492,000, respectively. Proceeds from sales of securities available-for-sale for the three months ended September 30, 2022 were $4,492,000. There were no sales of available for sale securities during the three months ended September 30, 2023.

The gross gains and losses were as follows (in thousands):

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2023			2022				2023				2022
Gross gains on available for sale securities		$	-		$	-			$	38			$	-
Gross losses on available for sale securities			-			(6	)			(89	)			(6	)
Net gains		$	-		$	(6	)		$	(51	)		$	(6	)

The following table presents the net gains (losses) on the Company’s equity investments recognized in earnings during the three and nine month periods ended September 30, 2023 and 2022, and the portion of unrealized gains for the period that relates to equity investments held at September 30, 2023 and 2022 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
Equity securities	2023		2022			2023			2022
Net gains (losses) recognized in equity securities during the period	$	69	$	(19	)	$	(223	)	$	(198	)
Less: Net gains realized on the sale of equity securities during the period		9		4			14			4
Net unrealized  gains (losses)	$	60	$	(23	)	$	(237	)	$	(202	)

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Investment securities with an approximate carrying value of $353.2 million and $311.8 million at September 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds, certain other deposits and borrowing lines.

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

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	44,257	$	43,316
Due after one year through five years		170,521		155,161
Due after five years through ten years		98,835		86,730
Due after ten years		156,275		132,600
Total	$	469,888	$	417,807

Note 6 – Loans

The Company grants commercial, industrial, agricultural, residential, and consumer loans primarily to customers throughout north central, central and south central Pennsylvania, southern New York and Wilmington and Dover, Delaware. The recently completed HVBC acquisition has expanded our lending market further into southeast Pennsylvania, including Montgomery, Bucks and Philadelphia Counties as well as Burlington County, New Jersey. Although the Company had a diversified loan portfolio at September 30, 2023 and December 31, 2022, a substantial portion of its debtors’ ability to honor their contracts is dependent on the economic conditions within these regions. The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for credit losses - loans as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023		December 31, 2022
Real estate loans:
Residential	$	356,381	$	210,213
Commercial		1,081,123		876,569
Agricultural		314,164		313,614
Construction		175,320		80,691
Consumer		115,753		86,650
Other commercial loans		120,347		63,222
Other agricultural loans		26,648		34,832
State and political subdivision loans		56,660		59,208
Total		2,246,396		1,724,999
Allowance for credit losses - loans		21,455		18,552
Net loans	$	2,224,941	$	1,706,447

Allowance for Credit Losses, effective January 1, 2023

As discussed in Note 1 “Basis of Presentation”, the Company adopted CECL effective January 1, 2023. CECL requires estimated credit losses on loans to be determined based on an expected life of loan model, as compared to an incurred loss model (in effect for periods prior to 2023). Accordingly, allowance for losses disclosures subsequent to January 1, 2023 are not always comparable to prior dates. In addition, certain new disclosures required under CECL are not applicable to prior periods. As a result, the following tables present disclosures separately for each period, where appropriate. New disclosures required under CECL are only shown for the current period and are noted. See Note 1, “Basis of Presentation”, for a summary of the impact of adopting CECL on January 1, 2023.

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Under CECL, loans evaluated for impairment consist of non-accrual commercial loans and recently modified loans that were experiencing financial difficulty at the time of the modification. Under the incurred loss model in effect prior to the adoption of CECL, loans evaluated individually for impairment were referred to as impaired loans.

The allowance for credit losses related to loans consists of loans evaluated collectively and individually for expected credit losses. It represents an estimate of 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 allowance for credit losses for off-balance sheet credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other off-balance sheet credit exposures. The total allowance for credit losses 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 allowance for credit losses as of September 30, 2023 (in thousands):

	September 30, 2023
Allowance for Credit Losses - Loans	$	21,455
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,265
Total allowance for credit losses	$	22,720

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2023 (in thousands):

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off- Balance Sheet credit Exposure			Total
Balance at June 30, 2023	$	21,652		$	1,391		$	23,043
Loans charge-off		(808	)		-			(808	)
Recoveries of loans previously charged-off		10			-			10
Net loans charged-off		(798	)		-			(798	)
Provision for credit losses		601			(126	)		475
Balance at September 30, 2023	$	21,455		$	1,265		$	22,720

	Allowance for Credit Losses -Loans			Allowance for Credit Losses - Off- Balance Sheet credit Exposure		Total
Balance at December 31, 2022	$	18,552		$	165	$	18,717
Impact of adopting CECL		(3,300	)		1,064		(2,236	)
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(819	)		-		(819	)
Recoveries of loans previously charged-off		41			-		41
Net loans charged-off		(778	)		-		(778	)
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		701			36		737
Balance at September 30, 2023	$	21,455		$	1,265	$	22,720

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The following tables presents the activity in the allowance for credit losses – loans, by portfolio segment, for the three and nine months ended September 30, 2023 (in thousands).

	For the three months ended September 30, 2023
	Balance at June 30, 2023		Charge-offs			Recoveries		Provision			Balance at September 30, 2023
Real estate loans:
Residential	$	2,675	$	-		$	-	$	(110	)	$	2,565
Commercial		9,274		-			2		(91	)		9,185
Agricultural		3,579		-			-		(104	)		3,475
Construction		1,667		-			-		166			1,833
Consumer		1,259		(45	)		3		503			1,720
Other commercial loans		2,477		(763	)		5		353			2,072
Other agricultural loans		268		-			-		(39	)		229
State and political subdivision loans		52		-			-		(4	)		48
Unallocated		401		-			-		(73	)		328
Total	$	21,652	$	(808	)	$	10	$	601		$	21,455

	For the nine months ended September 30, 2023
	Balance at December 31, 2022		Impact of adopting CECL			Allowance for credit loss on PCD acquired loans		Charge-offs			Recoveries		Provision			Balance at September 30, 2023
Real estate loans:
Residential	$	1,056	$	79		$	108	$	(1	)	$	-	$	1,323		$	2,565
Commercial		10,120		(3,070	)		39		-			2		2,094			9,185
Agricultural		4,589		(1,145	)		37		-			-		(6	)		3,475
Construction		801		(103	)				-			-		1,135			1,833
Consumer		135		1,040			677		(55	)		30		(107	)		1,720
Other commercial loans		1,040		(328	)		828		(763	)		9		1,286			2,072
Other agricultural loans		489		(219	)		-		-			-		(41	)		229
State and political subdivision loans		322		(280	)		-		-			-		6			48
Unallocated		-		726			-		-			-		(398	)		328
Total	$	18,552	$	(3,300	)	$	1,689	$	(819	)	$	41	$	5,292		$	21,455

The following table presents the allowance for credit losses – loans and amortized cost basis of loans under CECL methodology as of September 30, 2023 (in thousands):

	Allowance for Credit Losses - Loans						Loans
September 30, 2023	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,484	$	81	$	2,565	$	355,129	$	1,252	$	356,381
Commercial		9,030		155		9,185		1,078,360		2,763		1,081,123
Agricultural		3,456		19		3,475		310,507		3,657		314,164
Construction		1,547		286		1,833		172,963		2,357		175,320
Consumer		1,316		404		1,720		114,613		1,140		115,753
Other commercial loans		1,697		375		2,072		118,419		1,928		120,347
Other agricultural loans		229		-		229		26,349		299		26,648
State and political subdivision loans		48		-		48		56,660		-		56,660
Unallocated		328		-		328		-		-		-
Total	$	20,135	$	1,320	$	21,455	$	2,233,000	$	13,396	$	2,246,396

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Allowance for Credit Losses, prior to January 1, 2023

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to net loans. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in unfunded commitments and letters of credit, and is recorded in other liabilities on the consolidated balance sheet. The allowance for credit losses 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 allowance for credit losses as of December 31, 2022 (in thousands):

	December 31, 2022
Allowance for loan Losses	$	18,552
Reserve for unfunded commitments		165
Total allowance for credit losses	$	18,717

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2022 (in thousands):

	Allowance for Credit Losses - Loans			Reserve for unfunded commitments		Total
Balance at June 30, 2022	$	17,570		$	165	$	17,735
Loans charge-off		(13	)		-		(13	)
Recoveries of loans previously charged-off		9			-		9
Net loans charged-off		(4	)		-		(4	)
Provision for credit losses		725			-		725
Balance at September 30, 2022	$	18,291		$	165	$	18,456
Balance at December 31, 2021	$	17,304		$	165	$	17,469
Loans charge-off		(464	)		-		(464	)
Recoveries of loans previously charged-off		26			-		26
Net loans charged-off		(438	)		-		(438	)
Provision for credit losses		1,425			-		1,425
Balance at September 30, 2022	$	18,291		$	165	$	18,456

The following table presents the activity in the allowance for loan losses, by portfolio segment, for the three and nine months ended September 30, 2022 (in thousands).

	For the three months ended September 30, 2022
	Balance at June 30, 2022			Charge-offs			Recoveries		Provision			Balance at September 30, 2022
Real estate loans:
Residential	$	1,015		$	-		$	-	$	(10	)	$	1,005
Commercial		9,216			-			-		721			9,937
Agricultural		4,484			-			-		54			4,538
Construction		563			-			-		115			678
Consumer		464			(13	)		5		(224	)		232
Other commercial loans		1,173			-			4		(784	)		393
Other agricultural loans		446			-			-		913			1,359
State and political subdivision loans		323			-			-		2			325
Unallocated		(114	)		-			-		(62	)		(176	)
Total	$	17,570		$	(13	)	$	9	$	725		$	18,291

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	For the nine months ended September 30, 2022
	Balance at December 31, 2021		Charge-offs			Recoveries		Provision			Balance at September 30, 2022
Real estate loans:
Residential	$	1,147	$	-		$	-	$	(142	)	$	1,005
Commercial		8,099		-			-		1,838			9,937
Agricultural		4,729		-			-		(191	)		4,538
Construction		434		-			-		244			678
Consumer		262		(30	)		15		(15	)		232
Other commercial loans		1,023		(434	)		11		(207	)		393
Other agricultural loans		558		-			-		801			1,359
State and political subdivision loans		281		-			-		44			325
Unallocated		771		-			-		(947	)		(176	)
Total	$	17,304	$	(464	)	$	26	$	1,425		$	18,291

The following table presents loans and their related allowance for loan losses, by portfolio segment, as of December 31, 2022 (in thousands):

	Allowance for loan losses						Loans
	Collectively evaluated for impairment		Individually evaluated for impairment		Total allowance for loan losses		Collectively evaluated for impairment		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Total Loans
Real estate loans:
Residential	$	4	$	1,052	$	1,056	$	209,869	$	335	$	9	$	210,213
Commercial		57		10,063		10,120		869,038		5,675		1,856		876,569
Agricultural		24		4,565		4,589		306,793		5,380		1,441		313,614
Construction		-		801		801		80,691		-		-		80,691
Consumer		4		131		135		86,646		4		-		86,650
Other commercial loans		13		1,027		1,040		63,120		102		-		63,222
Other agricultural loans		-		489		489		34,359		473		-		34,832
State and political subdivision loans		-		322		322		59,208		-		-		59,208
Total	$	102	$	18,450	$	18,552	$	1,709,724	$	11,969	$	3,306	$	1,724,999

Non-performing Loans

Non-performing loans include those loans that are considered nonaccrual, described in more detail below and all loans past due 90 or more days. Loans are considered for non-accrual status upon reaching 90 days delinquency, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans, or if full payment of principal and interest is not expected. Additionally, if management is made aware of other information including bankruptcy, repossession, death, or legal proceedings, the loan may be placed on non-accrual status. If a loan is 90 days or more past due and is well secured and in the process of collection, it may still be considered accruing.

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The following table reflects the non-performing loan receivables, as well as those on non-accrual status as of September 30, 2023 and December 31, 2022, respectively. The balances are presented by class of loan receivable (in thousands):

	September 30, 2023								December 31, 2022
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	318	$	2,517	$	-	$	2,835	$	562	$	-	$	562
Home Equity		-		121		-		121		29		-		29
Commercial		260		1,337		-		1,597		2,778		-		2,778
Agricultural		182		2,803		-		2,985		3,222		-		3,222
Construction		2,357		-		-		2,357		-		-		-
Consumer		1,007		10		8		1,025		-		7		7
Other commercial loans		526		1,402		-		1,928		62		-		62
Other agricultural loans		-		299		-		299		285		-		285
	$	4,650	$	8,489	$	8	$	13,147	$	6,938	$	7	$	6,945

As of September 30, 2023, there were $8.5 million of non-accrual loans that did not have a related allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charge down to the realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

The following table presents, by class of loans and leases, the amortized cost basis of collateral-dependent nonaccrual loans and leases and type of collateral as of  September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	2,835	$	-	$	-	$	2,835
Home Equity		121		-		-		121
Commercial		1,597		-		-		1,597
Agricultural		2,985		-		-		2,985
Construction		2,357		-		-		2,357
Consumer		-		-		1,017		1,017
Other commercial loans		-		1,928		-		1,928
Other agricultural loans		-		299		-		299
	$	9,895	$	2,227	$	1,017	$	13,139

December 31, 2022
Real estate loans:
Mortgages	$	562	$	-	$	-	$	562
Home Equity		29		-		-		29
Commercial		2,778		-		-		2,778
Agricultural		3,222		-		-		3,222
Construction		-		-		-		-
Consumer		-		-		-		-
Other commercial loans		-		62		-		62
Other agricultural loans		-		285		-		285
	$	6,591	$	347	$	-	$	6,938

Credit Quality Information

For commercial real estate, agricultural real estate, construction, other commercial, other agricultural, and state and political subdivision loans, management uses a internal risk rating system to monitor and assess credit quality. During the third quarter of 2023, this rating system was expanded from a nine grade rating system to a ten grade rating system. The first six categories under the revised system are considered not criticized and are aggregated as “Pass” rated. Under the prior system, the first five categories were considered not criticized and aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The definitions of each rating are defined below:

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• Pass (Grades 1-6) – These loans are to customers with credit quality ranging from an acceptable to very high quality and are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

• Special Mention (Grade 7) – This loan grade is in accordance with regulatory guidance and includes loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

• Substandard (Grade 8) – This loan grade is in accordance with regulatory guidance and includes loans that have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

• Doubtful (Grade 9) – This loan grade is in accordance with regulatory guidance and includes loans that have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

• Loss (Grade 10) – This loan grade is in accordance with regulatory guidance and includes loans that are considered uncollectible, or of such value that continuance as an asset is not warranted.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay the loan as agreed, the Company’s loan rating process includes several layers of internal and external oversight. The Company’s loan officers are responsible for the timely and accurate risk rating of the loans in each of their portfolios at origination and on an ongoing basis under the supervision of management.  All commercial, agricultural and state and political relationships over $500,000 are reviewed annually to ensure the appropriateness of the loan grade. In addition, the Company engages an external consultant on at least an annual basis to: 1) review a minimum of 50% of the dollar volume of the commercial, agricultural and municipal loan portfolios on an annual basis, 2) review a sample of new loans originated for over $1.0 million in the last year, 3) review a sample of borrowers with commitments greater than or equal to $1.0 million,  4) review selected loan relationships over $750,000 which are over 30 days past due or classified Special Mention, Substandard, Doubtful, or Loss, and 5) such other loans which management or the consultant deems appropriate.

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The following tables represent credit exposures by internally assigned grades, by origination year, as of September 30, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	65,893	$	333,600	$	215,198	$	123,779	$	82,640	$	195,576	$	29,476	$	1,166	$	1,047,328
Special Mention		-		8,824		3,412		1,563		7,659		9,391		123		-		30,972
Substandard		-		233		6		-		161		1,686		729		8		2,823
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	65,893	$	342,657	$	218,616	$	125,342	$	90,460	$	206,653	$	30,328	$	1,174	$	1,081,123
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	16,361	$	54,306	$	29,828	$	32,559	$	26,760	$	123,598	$	12,926	$	1,689	$	298,027
Special Mention		149		1,915		1,211		-		-		6,702		94		-		10,071
Substandard		-		-		-		-		103		5,645		75		243		6,066
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	16,510	$	56,221	$	31,039	$	32,559	$	26,863	$	135,945	$	13,095	$	1,932	$	314,164
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	37,135	$	92,252	$	35,486	$	-	$	-	$	385	$	-	$	-	$	165,258
Special Mention		2,130		1,165		4,410		-		-		-		-		-		7,705
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	39,265	$	93,417	$	42,253	$	-	$	-	$	385	$	-	$	-	$	175,320
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	5,227	$	12,057	$	9,234	$	5,487	$	5,291	$	4,213	$	71,633	$	99	$	113,241
Special Mention		-		81		1,555		216		286		22		1,214		1,708		5,082
Substandard		-		100		-		-		186		1,202		294		-		1,782
Doubtful		-		-		-		-		-		-		218		24		242
Total	$	5,227	$	12,238	$	10,789	$	5,703	$	5,763	$	5,437	$	73,359	$	1,831	$	120,347
Current period gross charge-offs	$	-	$	-	$	-	$	763	$	-	$	-	$	-	$	-	$	763
Other agricultural loans										-
Risk Rating
Pass	$	3,464	$	1,645	$	7,005	$	1,154	$	666	$	521	$	10,554	$	-	$	25,009
Special Mention		-		491		223		45		8		42		500		-		1,309
Substandard		-		-		-		-		6		265		25		34		330
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,464	$	2,136	$	7,228	$	1,199	$	680	$	828	$	11,079	$	34	$	26,648
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	1,426	$	14,207	$	10,984	$	4,363	$	2	$	25,678	$	-	$	-	$	56,660
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,426	$	14,207	$	10,984	$	4,363	$	2	$	25,678	$	-	$	-	$	56,660
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	129,506	$	508,067	$	307,735	$	167,342	$	115,359	$	349,971	$	124,589	$	2,954	$	1,705,523
Special Mention		2,279		12,476		10,811		1,824		7,953		16,157		1,931		1,708		55,139
Substandard		-		333		2,363		-		456		8,798		1,123		285		13,358
Doubtful		-		-		-		-		-		-		218		24		242
Total	$	131,785	$	520,876	$	320,909	$	169,166	$	123,768	$	374,926	$	127,861	$	4,971	$	1,774,262

Information presented in the table above is not required for periods prior to adoption of CECL. The following table presents the most comparable information for the prior period, internal credit risk ratings for the indicated loan class segments as of December 31, 2022 (in thousands).

December 31, 2022	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	842,912	$	28,047	$	5,610	$	-	$	-	$	876,569
Agricultural		295,443		11,960		6,211		-		-		313,614
Construction		75,703		2,642		2,346		-		-		80,691
Other commercial loans		59,902		2,953		337		30		-		63,222
Other agricultural loans		32,708		1,307		817		-		-		34,832
State and political
subdivision loans		59,208		-		-		-		-		59,208
Total	$	1,365,876	$	46,909	$	15,321	$	30	$	-	$	1,428,136

25

For residential real estate mortgage loans, home equity loans, and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail above, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loan classes based on payment activity, by origination year, as of September 30, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	15,478	$	89,640	$	48,451	$	30,300	$	19,086	$	101,162	$	-	$	-	$	304,117
Nonperforming		-		406		771		399		-		1,259		-		-		2,835
Total	$	15,478	$	90,046	$	49,222	$	30,699	$	19,086	$	102,421	$	-	$	-	$	306,952
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity										-
Payment Performance
Performing	$	3,188	$	3,105	$	1,980	$	2,142	$	2,593	$	8,412	$	27,613	$	275	$	49,308
Nonperforming		-		-		-		-		-		53		68		-		121
Total	$	3,188	$	3,105	$	1,980	$	2,142	$	2,593	$	8,465	$	27,681	$	275	$	49,429
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	1,742	$	1,115	$	598	$	509	$	570	$	3,024	$	107,168	$	2	$	114,728
Nonperforming		-		18		-		-		-		1,007		-		-		1,025
Total	$	1,742	$	1,133	$	598	$	509	$	570	$	4,031	$	107,168	$	2	$	115,753
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	38	$	16	$	-	$	55
Total										-
Payment Performance
Performing	$	20,408	$	93,860	$	51,029	$	32,951	$	22,249	$	112,593	$	134,781	$	277	$	468,148
Nonperforming		-		424		771		399		-		2,324		68		-		3,986
Total	$	20,408	$	94,284	$	51,800	$	33,350	$	22,249	$	114,917	$	134,849	$	277	$	472,134

Information presented in the table above is not required for periods prior to adoption of CECL. The following table presents the most comparable information for the prior period, internal credit risk ratings for the indicated loan class segments as of December 31, 2022 (in thousands).

December 31, 2022	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	161,998	$	562	$	9	$	162,569
Home Equity		47,615		29		-		47,644
Consumer		86,643		7		-		86,650
Total	$	296,256	$	598	$	9	$	296,863

26

Aging Analysis of Past Due Loan Receivables

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table includes an aging analysis of the recorded investment of past due loan receivables as of September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	836	$	282	$	2,335	$	3,453	$	303,499	$	306,952	$	-
Home Equity		130		77		100		307		49,122		49,429		-
Commercial		1,797		514		1,003		3,314		1,077,809		1,081,123		-
Agricultural		299		-		1,367		1,666		312,498		314,164		-
Construction		677		-		2,357		3,034		172,286		175,320		-
Consumer		647		124		1,025		1,796		113,957		115,753		8
Other commercial loans		633		59		-		692		119,655		120,347		-
Other agricultural loans		-		224		-		224		26,424		26,648		-
State and political subdivision loans		-		-		-		-		56,660		56,660		-
Total	$	5,019	$	1,280	$	8,187	$	14,486	$	2,231,910	$	2,246,396	$	8
Loans considered non-accrual	$	241	$	98	$	8,179	$	8,518	$	4,621	$	13,139
Loans still accruing		4,778		1,182		8		5,968		2,227,289		2,233,257
Total	$	5,019	$	1,280	$	8,187	$	14,486	$	2,231,910	$	2,246,396

December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		PCI		Total Loan Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	356	$	132	$	229	$	717	$	161,843	$	9	$	162,569	$	-
Home Equity		48		9		29		86		47,558		-		47,644		-
Commercial		1,065		115		1,788		2,968		871,745		1,856		876,569		-
Agricultural		-		-		1,368		1,368		310,805		1,441		313,614		-
Construction		-		-		-		-		80,691		-		80,691		-
Consumer		147		-		7		154		86,496		-		86,650		7
Other commercial loans		1,660		35		32		1,727		61,495		-		63,222		-
Other agricultural loans		-		-		-		-		34,832		-		34,832		-
State and political subdivision loans		-		-		-		-		59,208		-		59,208		-
Total	$	3,276	$	291	$	3,453	$	7,020	$	1,714,673	$	3,306	$	1,724,999	$	7
Loans considered non-accrual	$	46	$	76	$	3,446	$	3,568	$	3,370	$	-	$	6,938
Loans still accruing		3,230		215		7		3,452		1,711,303		3,306		1,718,061
Total	$	3,276	$	291	$	3,453	$	7,020	$	1,714,673	$	3,306	$	1,724,999

Modifications to Borrowers Experiencing Financial Difficulty

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

27

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

The following table shows, the amortized cost basis by class of loans receivable, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023 (dollars in thousands):

	Three months ended September 30, 2023
	Number of loans		Amortized Cost Basis			% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1		$	42		0.00	%
Agricultural		2			673		0.21	%
Other commercial loans		5			1,378		1.15	%
Total		8		$	2,093

	Nine months ended September 30, 2023
	Number of loans		Amortized Cost Basis		% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	$	129		0.04	%
Commercial		7		1,969		0.18	%
Agricultural		3		728		0.23	%
Other commercial loans		5		1,378		1.15	%
Total		16	$	4,204
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	$	86		0.01	%
Total		1	$	86

The following table shows, by class of loans receivable, information regarding the financial effect on accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023:

Three months ended September 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the weighted average loan maturity 6 months
Agricultural		2	Extended the weighted average loan maturity 3 months
Consumer		5	Extended the loan maturity 10 months
Total		8

28

Nine months ended September 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	Extended the loan maturity 4 months
Commercial		7	Extended the weighted average loan maturity 22 months
Agricultural		3	Extended the weighted average loan maturity 5 months
Other commercial loans		5	Extended the loan maturity 10 months
Total		16
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the loan maturity 6 months
Total		1

There were no accruing or nonaccrual modified loans to borrowers experiencing financial difficulty for which there were payment defaults after the modification date for the three and nine months ended September 30, 2023.

The following presents, by class of loans, the amortized cost and payment status of accruing and nonaccrual modified loans to borrowers experiencing financial difficulty at September 30, 2023 (in thousands):

	September 30, 2023
			30-89 Days		90 Days
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty	Current		Past Due		Or Greater		Total
Real estate loans:
Mortgages	$	129	$	-	$	-	$	129
Commercial		1,969		-		-		1,969
Agricultural		728		-		-		728
Total	$	4,204	$	-	$	-	$	4,204
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial	$	86	$	-	$	-	$	86
Total	$	86	$	-	$	-	$	86

Foreclosed Assets Held For Sale

Foreclosed assets acquired in settlement of loans are carried at fair value, less estimated costs to sell, and are included in other assets on the Consolidated Balance Sheet. As of September 30, 2023 and December 31, 2022, included within other assets are $474,000 and $543,000, respectively, of foreclosed assets. As of September 30, 2023, included within the foreclosed assets are $176,000 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end. As of September 30, 2023, the Company had initiated formal foreclosure proceedings on $241,000 of residential mortgage loans, the collateral properties which have not yet been transferred into foreclosed assets.

Note 7 – Goodwill and Other Intangible Assets

The following table provides the gross carrying value and accumulated amortization of intangible assets as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023							December 31, 2022
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,607	$	(1,590	)	$	1,017	$	2,336	$	(1,362	)	$	974
Core deposit intangibles		4,713		(1,864	)		2,849		1,943		(1,645	)		298
Total amortized intangible assets	$	7,320	$	(3,454	)	$	3,866	$	4,279	$	(3,007	)	$	1,272
Unamortized intangible assets:
Goodwill	$	84,758						$	31,376

(1) Excludes fully amortized intangible assets

The following table provides the current year and estimated future amortization expense for amortized intangible assets for the next five years (in thousands). The Company based its projections of amortization expense shown below on existing asset balances at September 30, 2023. Future amortization expense may vary from these projections:

	MSRs		Core deposit intangibles		Total
Three months ended September 30, 2023 (actual)	$	80	$	157	$	237
Nine months ended September 30, 2023 (actual)		228		219		447
Three months ended September 30, 2022 (actual)		74		40		114
Nine months ended September 30, 2022 (actual)		234		120		354
Estimate for year ending December 31,
Remaining 2023		76		154		230
2024		277		564		841
2025		226		478		704
2026		174		395		569
2027		118		339		457
Thereafter		146		919		1,065
Total	$	1,017	$	2,849	$	3,866

Note 8 – Employee Benefit Plans

For additional detailed disclosure on the Company’s pension and employee benefits plans, please refer to Note 11 of the Company’s Audited Consolidated Financial Statements included in the 2022 Annual Report on Form 10-K.

Noncontributory Defined Benefit Pension Plan

The Bank sponsors a trusteed noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all employees and officers hired prior to January 1, 2007. The Bank’s funding policy is to make annual contributions, if needed, based upon the funding formula developed by the plan’s actuary. Any employee with a hire date of January 1, 2007 or later is not eligible to participate in the Pension Plan.

In lieu of the Pension Plan, employees with a hire date of January 1, 2007 or later are eligible to receive, after meeting certain length of service requirements, an annual discretionary 401(k) plan contribution from the Bank equal to a percentage of an employee’s base compensation.  The contribution amount, if any, is placed in a separate account within the 401(k) plan and is subject to a vesting requirement.

For employees who are eligible to participate in the Pension Plan, the Pension Plan requires benefits to be paid to eligible employees based primarily upon age and compensation rates during employment.  Upon retirement or other termination of employment, employees can elect either an annuity benefit or a lump sum distribution of vested benefits in the Pension Plan.

29

The following sets forth the components of net periodic benefit costs of the Pension Plan and the line item on the Consolidated Statement of Income where such amounts are included, for the three and nine months ended September 30, 2023 and 2022, respectively (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022			Affected line item on the Consolidated Statement of Income (Loss)
Service cost	$	75		$	89		$	230		$	267		Salary and Employee Benefits
Interest cost		104			69			324			207		Other Expenses
Expected return on plan assets		(183	)		(234	)		(577	)		(701	)	Other Expenses
Partial Settlement		-			144			-			144		Other Expenses
Net amortization and deferral		17			24			31			72		Other Expenses
Net periodic benefit cost	$	13		$	92		$	8		$	(11	)

The Bank does not expect to contribute to the Pension Plan during 2023.

Restricted Stock Plan

The Company maintains a Restricted Stock Plan (the “Plan”) whereby employees and non-employee corporate directors are eligible to receive awards of restricted stock based upon performance related requirements.  Awards granted under the Plan are in the form of the Company’s common stock and are subject to certain vesting requirements including continuous employment or service with the Company.  In April 2016, the Company’s stockholders authorized a total of 150,000 shares of the Company’s common stock to be made available under the Plan. As of September 30, 2023, 113,449 shares remain available to be issued under the Plan.  The Plan assists the Company in attracting, retaining and motivating employees to make substantial contributions to the success of the Company and to increase the emphasis on the use of equity as a key component of compensation.

The following table details the vesting, awarding and forfeiting of restricted stock during the three and nine months ended September 30, 2023:

	Three months						Nine months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,254		$	71.61			6,622		$	63.63
Granted		367			81.58			2,609			83.13
Forfeited		(52	)		(63.09	)		(213	)		(63.12	)
Vested		(499	)		(67.37	)		(2,948	)		(62.39	)
Outstanding, end of period		6,070		$	72.63			6,070		$	72.63

Compensation expense related to restricted stock is recognized, based on the market price of the stock at the grant date, over the vesting period. Compensation expense related to restricted stock was $178,000 and $210,000 for the nine months ended September 30, 2023 and 2022, respectively. For the three months ended September 30, 2023 and 2022, compensation expense totaled $62,000 and $68,000, respectively. At September 30, 2023, the total compensation cost related to nonvested awards that had not yet been recognized was $441,000, which is expected to be recognized over the next three years.

30

Note 9 – Accumulated Other Comprehensive Loss

The following tables present the changes in accumulated other comprehensive income by component, net of tax, for the three and nine months ended September 30, 2023 and 2022 (in thousands):

	Three months ended September 30, 2023
	Unrealized gain (loss) on available for sale  securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)
Other comprehensive income (loss) before reclassifications (net of tax)		(6,025	)		-			823			(5,202	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			6			(467	)		(461	)
Net current period other comprehensive income (loss)		(6,025	)		6			356			(5,663	)
Balance as of September 30, 2023	$	(41,144	)	$	(1,039	)	$	5,540		$	(36,643	)

	Nine months ended September 30, 2023
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of December 31, 2022	$	(37,514	)	$	(1,056	)	$	5,429		$	(33,141	)
Other comprehensive income (loss) before reclassifications (net of tax)		(3,669	)		-			1,352			(2,317	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			17			(1,241	)		(1,185	)
Net current period other comprehensive income (loss)		(3,630	)		17			111			(3,502	)
Balance as of September 30, 2023	$	(41,144	)	$	(1,039	)	$	5,540		$	(36,643	)

	Three months ended September 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299		$	(26,559	)
Other comprehensive income (loss) before reclassifications (net of tax)		(10,727	)		-			1,444			(9,283	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		5			19			(37	)		(13	)
Net current period other comprehensive income (loss)		(10,722	)		19			1,407			(9,296	)
Balance as of September 30, 2022	$	(39,650	)	$	(1,911	)	$	5,706		$	(35,855	)

	Nine months ended September 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)		Total
Balance as of December 31, 2021	$	304		$	(1,968	)	$	1,509	$	(155	)
Other comprehensive income (loss) before reclassifications (net of tax)		(39,959	)		-			4,185		(35,774	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		5			57			12		74
Net current period other comprehensive income (loss)		(39,954	)		57			4,197		(35,700	)
Balance as of September 30, 2022	$	(39,650	)	$	(1,911	)	$	5,706	$	(35,855	)

(a) Amounts in parentheses indicate debits on the Consolidated Balance Sheet.

31

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

Details about accumulated other comprehensive income (loss)	Amount reclassified from accumulated comprehensive income (loss) (a)						Affected line item in the Consolidated Statement of Income
	Three Months Ended September 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	-		$	(6	)	Available for sale securities gains, net
		-			1		Provision for income taxes
	$	-		$	(5	)	Net of tax
Defined benefit pension items
	$	(7	)	$	(24	)	Other expenses
		1			5		Provision for income taxes
	$	(6	)	$	(19	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	591		$	47		Interest expense
		(124	)		(10	)	Provision for income taxes
	$	467		$	37		Net of tax
Total reclassifications	$	461		$	13

Nine Months Ended September 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	(6	)	Available for sale securities gains, net
		12			1		Provision for income taxes
	$	(39	)	$	(5	)	Net of tax
Defined benefit pension items
	$	(21	)	$	(72	)	Other expenses
		4			15		Provision for income taxes
	$	(17	)	$	(57	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	1,571		$	(15	)	Interest expense
		(330	)		3		Provision for income taxes
	$	1,241		$	(12	)	Net of tax
Total reclassifications	$	1,185		$	(74	)

(a) Amounts in parentheses indicate expenses and other amounts indicate income on the Consolidated Statement of Income

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Note 10 – Fair Value Measurements

The Company has established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by this hierarchy are as follows:

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.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterly valuation process.

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

The fair values of equity securities and securities available for sale are determined by quoted prices in active markets, when available, and classified as Level I. If quoted market prices are not available, the fair value is determined by a matrix pricing, which is a mathematical technique, widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities and classified as Level II. The fair values consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

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The following tables present the assets and liabilities 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 (in thousands). 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	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,858	$	-		$	-	$	1,858
Available for sale securities:
U.S. Agency securities		-		63,647			-		63,647
U.S. Treasury securities		147,431		-			-		147,431
Obligations of state and political subdivisions		-		96,022			-		96,022
Corporate obligations		-		12,120			-		12,120
Mortgage-backed securities in government sponsored entities		-		98,587			-		98,587
Loans held for sale		-		14,155			-		14,155
Other Assets
Derivative instruments		-		17,707			437		18,144
Liabilities
Derivative instruments		-		(10,694	)		-		(10,694	)

December 31, 2022	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets:
Equity securities	$	2,208	$	-		$	-	$	2,208
Available for sale securities:
U.S. Agency securities		-		70,677			-		70,677
U.S. Treasuries securities		148,570		-			-		148,570
Obligations of state and political subdivisions		-		110,300			-		110,300
Corporate obligations		-		9,383			-		9,383
Mortgage-backed securities in government sponsored entities		-		100,576			-		100,576
Derivative instruments		-		16,599			-		16,599
Liabilities:
Derivative instruments		-		(9,726	)		-		(9,726	)

The following tables represent the change in the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2023 (in thousands):

	IRLC- Asset
Balance: June 30, 2023	$	529
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(92	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: September 30, 2023	$	437
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of September 30, 2023	$	(92	)

	IRLC- Asset
Beginning Balance: June 16, 2023	$	657
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(220	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: September 30, 2023	$	437
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of September 30, 2023	$	(220	)

At September 30, 2023, the Company had classified as Level 3 $437,000 of net derivative assets and liabilities related to IRLC. The fair value of IRLCs is based on prices obtained for loans with similar characteristics from third parties, adjusted by the pull-through rate, which represents the Company’s best estimate of the probability that a committed loan will fund. The weighted average pull-through rates applied ranged from 75.39% to 99.64% at September 30, 2023.

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Significant unobservable inputs for assets measured at fair value on a recurring basis at September 30, 2023 (in thousands):

	Quantitative Information about Level 3 Fair Value Measurements at September 30, 2023
	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	437	Discounted cash flows	Pull-through rates		75.39%-99.64	%		90.40	%

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

Assets measured at fair value on a nonrecurring basis as of September 30, 2023 and December 31, 2022 are included in the table below (in thousands):

September 30, 2023	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	3,980	$	3,980
Other real estate owned		-		-		97		97
December 31, 2022	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	496	$	496
Other real estate owned		-		-		297		297

• Individually analyzed loans held for investment - The Company has measured impairment on impaired loans generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed.   Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value.  If the fair value of the collateral dependent loan is less than the carrying amount of the loan a specific reserve for the loan is made in the allowance for credit losses - loans or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the table above as a Level III measurement.  If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the table above as it is not currently being carried at its fair value. The fair values above excluded estimated selling costs of $393,000 and $50,000 at September 30, 2023 and December 31, 2022, respectively.

• Other Real Estate Owned (OREO) – OREO is carried at the lower of cost or fair value, less estimated costs to sell, which is measured at the date of foreclosure.  If the fair value of the collateral exceeds the carrying amount of the loan, no charge-off or adjustment is necessary, the loan is not considered to be carried at fair value, and is therefore not included in the table above. If the fair value of the collateral is less than the carrying amount of the loan, management will charge the loan down to its estimated realizable value. The fair value of OREO is based on the appraised value of the property, which is generally unadjusted by management and is based on comparable sales for similar properties in the same geographic region as the subject property, and is included in the above table as a Level II measurement.  In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed.  In these cases, the loans are categorized in the above table as a Level III measurement since these adjustments are considered to be unobservable inputs. Income and expenses from operations and further declines in the fair value of the collateral subsequent to foreclosure are included in net expenses from OREO.

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The following table provides a listing of the significant unobservable inputs used in the fair value measurement process for items valued utilizing Level III techniques (dollars in thousands).

Quantitative Information about Level III Fair Value Measurements

September 30, 2023	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Individually analyzed loans held for investment	$	3,980	Appraised Collateral Values	Discount for time since appraisal		0-100	%		26.55	%
				Selling costs		8%-10	%		9.89	%
				Holding period	0 - 12 months			6.70 months
Other real estate owned		97	Appraised Collateral Values	Discount for time since appraisal		32	%		32.00	%

December 31, 2022	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Individually analyzed loans held for investment		496	Appraised Collateral Values	Discount for time since appraisal		0-100	%		25.16	%
				Selling costs		8%-10	%		8.41	%
				Holding period	6 - 12 months			11.51 months
Other real estate owned		297	Appraised Collateral Values	Discount for time since appraisal		20-84	%		39.84	%

Financial Instruments Not Required to be Measured or Reported at Fair Value

The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis are as follows (in thousands):

September 30, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,566	$	4,566	$	-	$	-	$	4,566
Net loans		2,224,941		2,145,060		-		-		2,080,817
Financial liabilities:
Deposits		2,335,135		2,324,624		1,958,842		-		365,782
Borrowed funds		316,151		298,617		-		-		298,617
December 31, 2022
Financial assets:
Interest bearing time deposits with other banks	$	6,055	$	6,055	$	-	$	-	$	6,055
Loans held for sale		725		725		-		-		725
Net loans		1,706,447		1,662,514		-		-		1,662,514
Financial liabilities:
Deposits		1,844,208		1,832,037		1,566,517		-		265,520
Borrowed funds		257,278		246,288		-		-		246,288

The carrying amounts for cash and due from banks, bank owned life insurance, regulatory stock, accrued interest receivable and payable approximate fair value and are considered Level I measurements.

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Note 11 – Recent Accounting Pronouncements

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

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which added to ASU 2020-04 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 onetime election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company has identified our loan receivables that have an interest rate indexed to LIBOR and is currently assessing the appropriate transition path. As such, the Company does not have an estimate of the financial impact of this update but does not expect the impact to be material to the financial statements of the Company.

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

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

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

Forward-Looking Statements

We have made forward-looking statements in this document, and in documents that we incorporate by reference, that are subject to risks and uncertainties. Forward-looking statements include information concerning possible or expected future results of operations of Citizens Financial Services, Inc., CZFS Acquisition Company, LLC, First Citizens Community Bank, First Citizens Insurance Agency, Inc., 1^st Realty of PA LLC or the combined Company. When we use words such as “believes,” “expects,” “anticipates,” or similar expressions, we are making forward-looking statements. For a variety of reasons, actual results could differ materially from those contained in or implied by forward-looking statements.  The Company cautions readers that the following important factors, among others, 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:

• Interest rates could change more rapidly or more significantly than we expect.

• The economy could change significantly in an unexpected way, which would cause the demand for new loans and the ability of borrowers to repay outstanding loans to change in ways that our models do not anticipate.

• The financial markets could suffer a significant disruption, which may have a negative effect on our financial condition and that of our borrowers, and on our ability to raise money by issuing new securities.

• It could take us longer than we anticipate to implement strategic initiatives, including expansions, designed to increase revenues or manage expenses, or we may be unable to implement those initiatives at all.

• Acquisitions and dispositions of assets could affect us in ways that management has not anticipated.

• We may become subject to new legal obligations or the resolution of litigation may have a negative effect on our financial condition or operating results.

• We may become subject to new and unanticipated accounting, tax, regulatory or compliance practices or requirements. Failure to comply with any one or more of these requirements could have an adverse effect on our operations.

• We could experience greater loan delinquencies than anticipated, adversely affecting our earnings and financial condition.

• We could experience greater losses than expected due to the ever increasing volume of information theft and fraudulent scams impacting our customers and the banking industry.

• We could lose the services of some or all of our key personnel, which would negatively impact our business because of their business development skills, financial expertise, lending experience, technical expertise and market area knowledge.

• The agricultural economy is subject to extreme swings in both the costs of resources and the prices received from the sale of products as a result of forces of nature like weather and various viruses, government regulations, international trade agreements and consumer tastes, which could negatively impact certain of our customers.

• Loan concentrations in certain industries could negatively impact our results, if financial results or economic conditions deteriorate.

• Companies providing support services related to the exploration and drilling of the natural gas reserves in our market area may be affected by federal, state and local laws and regulations such as restrictions on production, permitting, changes in taxes and environmental protection, which could negatively impact our customers and, as a result, negatively impact our loan and deposit volume and loan quality. Additionally, the activities the companies providing support services related to the exploration and drilling of the natural gas reserves may be dependent on the market price of natural gas.  As a result, decreases in the market price of natural gas could also negatively impact these companies, our customers.

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Additional factors that may affect our results are discussed under “Part II – Item 1A – Risk Factors” in this report and in the Company’s 2022 Annual Report on Form 10-K under “Item 1.A/ Risk Factors.”  Except as required by applicable law and regulation, we assume no obligation to update or revise any forward-looking statements after the date on which they are made.

Critical Accounting Policies

See Note 1, “Basis of Presentation” for additional information on the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans and investment securities, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses to be a critical accounting policy.

Introduction

The following is management’s discussion and analysis of the financial condition and results of operations at the dates and for the periods presented in the accompanying consolidated financial statements for the Company.  Our consolidated financial condition and results of operations consist almost entirely of the Bank’s financial condition and results of operations. Management’s discussion and analysis should be read in conjunction with the preceding financial statements presented under Part I.  The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results you may expect for the full year.

The Company engages in the general business of banking throughout our service area of Potter, Tioga, Clinton, Bradford and Centre counties in north central Pennsylvania, Lebanon, Berks, Schuylkill, Lancaster and Chester counties in south central Pennsylvania and Allegany County in southern New York and with the MidCoast acquisition, the Cities of Wilmington and Dover, Delaware. We also have a limited branch office in Union county, Pennsylvania, which primarily serves agricultural and commercial customers in the central Pennsylvania market. With the recently completed HVBC acquisition, we have expanded further into southeast Pennsylvania, including Montgomery, Bucks and Philadelphia Counties as well as Burlington County, New Jersey through the acquisition of five full service branaches, four mortgage centers and one business banking facility. We maintain our central office in Mansfield, Pennsylvania. Presently we operate 47 banking facilities, 38 of which operate as bank branches.  In Pennsylvania, the Company has full service offices located in Mansfield, Blossburg, Ulysses, Genesee, Wellsboro, Troy, Sayre, Canton, Gillett, Millerton, LeRaysville, Towanda, Rome, the Mansfield Wal-Mart Super Center, Mill Hall, Schuylkill Haven, Friedensburg, Mt. Aetna, Fredericksburg, Mount Joy, Ephrata, Fivepointville, State College, Kennett Square, Warrington, Plumsteadville, Philadelphia, two branches near the city of Lebanon and two branches in Huntington Valley. The limited branch office is located in Winfield, Pennsylvania. In New York, our office is in Wellsville. In Delaware, we have three branches in Wilmington and one in Dover. The mortgage centers acquired as part of the acquisition are located  in Montgomeryville, PA, Huntington Valley, PA, Philadelphia, PA and Mount Laurel, NJ. The business banking facility is located in Philadelphia, PA. We have received approval to open a branch in Williamsport, Pennsylvania, which we expect to open in the fourth quarter of 2023.

Risk Management

Risk identification and management are essential elements for the successful management of the Company.  In the normal course of business, the Company is subject to various types of risk, including interest rate, credit, liquidity, reputational and regulatory risk.

Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the direction, frequency and magnitude of changes in market interest rates.  Interest rate risk results from various re-pricing frequencies and the maturity structure of the financial instruments owned by the Company.  The Company uses its asset/liability and funds management policy to control and manage interest rate risk.

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Credit risk represents the possibility that a customer may not perform in accordance with contractual terms.  Credit risk results from loans with customers and the purchasing of securities.  The Company’s primary credit risk is in the loan portfolio.  The Company manages credit risk by adhering to an established credit policy and through a disciplined evaluation of the adequacy of the allowance for credit losses.  Also, the investment policy limits the amount of credit risk that may be taken in the investment portfolio.

Liquidity risk represents the inability to generate or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers and obligations to depositors.  The Company has established guidelines within its asset/liability and funds management policy to manage liquidity risk.  These guidelines include, among other things, contingent funding alternatives.

Reputational risk, or the risk to our business, earnings, liquidity, and capital from negative public opinion, could result from our actual or alleged conduct in a variety of areas, including legal and regulatory compliance, lending practices, corporate governance, litigation, ethical issues, or inadequate protection of customer information, including fraudulent activity outside the Company’s control. We expend significant resources to comply with regulatory requirements. Failure to comply could result in reputational harm or significant legal or remedial costs. Damage to our reputation could adversely affect our ability to retain and attract new customers, and adversely impact our earnings and liquidity.

Regulatory and compliance risk represents the possibility that a change in law, regulations or regulatory policy may have a material effect on the business of the Company. We cannot predict what legislation might be enacted or what regulations might be adopted, or if adopted, the effect thereof on our operations.

Competition

The banking industry in the Bank’s service areas continue to be extremely competitive, both among commercial banks and with other financial service providers such as consumer finance companies, thrifts, investment firms, mutual funds, insurance companies, credit unions, agricultural cooperatives and internet entities for loans and deposits. Competition in our north central Pennsylvania market has increased as a result of other financial institutions looking to expand into new markets. With larger population centers in our central, south central and south east Pennsylvania markets, as well as in our Delaware market, we experience more competition to gather deposits and to make loans. Mortgage banking firms, financial companies, financial affiliates of industrial companies, brokerage firms, retirement fund management firms and even government agencies provide additional competition for loans, deposits and other financial services. Fintech and blockchain entities offering crypto services are also increasing competition for the Company’s financial services. The Bank is generally competitive with all competing financial institutions in its service areas with respect to interest rates paid on time and savings deposits, service charges on deposit accounts and interest rates charged on loans.

Trust and Investment Services; Oil and Gas Lease Services

Our Investment and Trust Services Division offers professional trust administration, investment management services, estate planning and administration, and custody of securities.  In addition to traditional trust and investment services offered, we assist our customers through various oil and gas specific leasing matters from lease negotiations to establishing a successful approach to personal wealth management. Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the Consolidated Balance Sheets since such items are not assets of the Company.  Revenues and fees of the Trust Department are reflected in trust income in the Consolidated Statement of Income. As of September 30, 2023 and December 31, 2022, the Trust Department had $164.0 million and $150.0 million of assets under management, respectively.

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Our Investment Representatives offer full service brokerage services and financial planning throughout the Bank’s market area. Products such as mutual funds, annuities, health and life insurance are made available through our insurance subsidiary, First Citizens Insurance Agency, Inc.  The assets associated with these products are not included in the Consolidated Balance Sheets since such items are not assets of the Company. Assets owned and invested by customers of the Bank through the Bank’s Investment Representatives increased from $283.5 million at December 31, 2022 to $306.0 million at September 30, 2023. Fee income from the sale of these products is reflected in brokerage and insurance income in the Consolidated Statement of Income. Management believes that there are opportunities to increase non-interest income through these products and services, especially in our central south central and south eastern Pennsylvania markets.

Results of Operations

Overview of the Income Statement

The Company had net income of $10,271,000 for the first nine months of 2023 compared to $21,185,000 for last year’s comparable period, a decrease of $10,914,000, or 51.5%, primarily due to the one-time costs associated with the HVBC acquisition. Basic earnings per share for the first nine months of 2023 were $2.40, compared to $5.28 for last year’s comparable period, representing a 54.6% decrease.  Annualized return on assets and return on equity for the nine months of 2023 were 0.53% and 5.21%, respectively, compared with 1.27% and 12.77% for last year’s comparable period.

Net income for the three months ended September 30, 2023 was $7,548,000 compared to net income of $7,544,000 in the comparable 2022 period, an increase of $4,000. Basic earnings per share for the three months ended September 30, 2023 were $1.61, compared to $1.88 for last year’s comparable period, representing a 14.4% decrease due to the shares issued as part of the acquisition and consistent net income. Annualized return on assets and return on equity for the quarter ended September 30, 2023 was 1.02% and 10.10%, respectively, compared with 1.31% and 13.34% for the same 2022 period.

Net Interest Income

Net interest income, the most significant component of the Company’s earnings, is the amount by which interest income generated from interest-earning assets exceeds interest expense paid on interest-bearing liabilities.

Net interest income for the first nine months of 2023 was $58,405,000, an increase of $5,568,000, or 10.5%, compared to the same period in 2022.  For the first nine months of 2023 the provision for credit losses was $5,328,000, including $4,591,000 for non-PCD loans acquired as part of the acquisition. Excluding the $4,591,000 related to the acquisition, the provision for credit losses decreased $688,000. Consequently, net interest income after the provision for credit losses was $53,077,000 in the first nine months of 2023 compared to $51,412,000 during the first nine months of 2022.

For the three months ended September 30, 2023, net interest income was $22,404,000 compared to $18,846,000, an increase of $3,558,000, or 18.9%, over the comparable period in 2022. The provision for credit losses in the third quarter was $475,000, a decreased of $250,000 to the third quarter of 2022. Consequently, net interest income after the provision for credit losses was $21,929,000 for the quarter ended September 30, 2023 compared to $18,121,000 in 2022.

The following table sets forth the average balances of, and the interest earned or incurred on, for each principal category of assets, liabilities and stockholders’ equity, the related rates, net interest income and interest rate spread created for the three and nine months ended September 30, 2023 and 2022 on a tax equivalent basis (dollars in thousands):

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	Analysis of Average Balances and Interest Rates
	Nine Months Ended
	September 30, 2023							September 30, 2022
	Average				Average			Average				Average
	Balance (1)		Interest		Rate			Balance (1)		Interest		Rate
(dollars in thousands)		$	$			%			$	$			%
ASSETS
Short-term investments:
Interest-bearing deposits at banks		21,772		333		2.04			65,727		150		0.31
Total short-term investments		21,772		333		2.04			65,727		150		0.31
Interest bearing time deposits at banks		5,540		129		3.11			9,126		183		2.70
Investment securities:
Taxable		385,246		5,977		2.07			368,702		4,406		1.59
Tax-exempt (3)		114,307		2,188		2.55			120,107		2,316		2.57
Total investment securities		499,553		8,165		2.18			488,809		6,722		1.83
Loans (2)(3)(4):
Residential mortgage loans		268,562		10,797		5.38			202,856		7,128		4.70
Construction		114,386		5,831		6.82			69,437		2,213		4.26
Commercial Loans		1,039,006		45,079		5.80			829,366		28,808		4.64
Agricultural Loans		344,079		12,759		4.96			347,771		11,342		4.36
Loans to state & political subdivisions		60,183		1,736		3.86			54,836		1,327		3.24
Other loans		82,405		4,579		7.43			47,732		1,868		5.23
Loans, net of discount		1,908,621		80,781		5.66			1,551,998		52,686		4.54
Total interest-earning assets		2,435,486		89,408		4.91			2,115,660		59,741		3.78
Cash and due from banks		8,709							6,652
Bank premises and equipment		19,340							17,199
Other assets		126,075							82,726
Total non-interest earning assets		154,124							106,577
Total assets		2,589,610							2,222,237
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
NOW accounts		616,103		8,052		1.75			520,882		1,392		0.36
Savings accounts		320,227		897		0.37			323,667		260		0.11
Money market accounts		352,055		5,802		2.20			347,422		1,037		0.40
Certificates of deposit		303,825		4,768		2.10			305,878		1,780		0.78
Total interest-bearing deposits		1,592,210		19,519		1.64			1,497,849		4,469		0.40
Other borrowed funds		318,180		10,682		4.49			112,582		1,699		2.02
Total interest-bearing liabilities		1,910,390		30,201		2.11			1,610,431		6,168		0.51
Demand deposits		380,638							370,785
Other liabilities		35,566							19,785
Total non-interest-bearing liabilities		416,204							390,570
Stockholders’ equity		263,016							221,236
Total liabilities & stockholders’ equity		2,589,610							2,222,237
Net interest income				59,207							53,573
Net interest spread (5)						2.80	%						3.27	%
Net interest income as a percentage of average interest-earning assets						3.25	%						3.39	%
Ratio of interest-earning assets to interest-bearing liabilities						127	%						131	%

(1) Averages are based on daily averages.

(2) Includes loan origination and commitment fees.

(3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using
a statutory federal income tax rate of 21%.

(4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.

(5) Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

43

	Analysis of Average Balances and Interest Rates
	Three Months Ended
	September 30, 2023							September 30, 2022
	Average				Average			Average				Average
	Balance (1)		Interest		Rate			Balance (1)		Interest		Rate
(dollars in thousands)	$			$		%		$			$		%
ASSETS
Short-term investments:
Interest-bearing deposits at banks		24,096		225		3.70			14,255		12		0.33
Total short-term investments		24,096		225		3.70			14,255		12		0.33
Interest bearing time deposits at banks		4,579		39		3.38			6,640		49		2.93
Investment securities:
Taxable		386,806		2,113		2.19			391,774		1,696		1.73
Tax-exempt (3)		108,959		683		2.51			123,046		797		2.59
Total investment securities		495,765		2,796		2.26			514,820		2,493		1.94
Loans (2)(3)(4):
Residential mortgage loans		357,388		4,925		5.47			204,352		2,416		4.69
Construction		166,204		3,339		7.97			76,934		885		4.56
Commercial Loans		1,196,675		18,983		6.29			900,297		10,732		4.73
Agricultural Loans		342,499		4,285		4.96			346,380		3,887		4.45
Loans to state & political subdivisions		60,820		611		3.99			59,454		502		3.35
Other loans		88,710		1,750		7.83			81,499		1,074		5.23
Loans, net of discount		2,212,296		33,893		6.08			1,668,916		19,496		4.63
Total interest-earning assets		2,736,736		36,953		5.36			2,204,631		22,050		3.96
Cash and due from banks		10,696							6,755
Bank premises and equipment		21,401							17,437
Other assets		190,431							82,012
Total non-interest earning assets		222,528							106,204
Total assets		2,959,264							2,310,835
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
NOW accounts		789,513		4,468		2.25			530,234		675		0.51
Savings accounts		326,452		426		0.52			328,056		106		0.13
Money market accounts		403,628		2,682		2.64			347,460		515		0.59
Certificates of deposit		347,783		2,524		2.88			288,926		542		0.74
Total interest-bearing deposits		1,867,376		10,100		2.15			1,494,676		1,838		0.49
Other borrowed funds		347,326		4,185		4.78			189,174		1,099		2.30
Total interest-bearing liabilities		2,214,702		14,285		2.56			1,683,850		2,937		0.69
Demand deposits		408,531							380,110
Other liabilities		37,118							20,618
Total non-interest-bearing liabilities		445,649							400,728
Stockholders’ equity		298,913							226,257
Total liabilities & stockholders’ equity		2,959,264							2,310,835
Net interest income				22,668							19,113
Net interest spread (5)						2.80	%						3.27	%
Net interest income as a percentage of average interest-earning assets						3.29	%						3.44	%
Ratio of interest-earning assets to interest-bearing liabilities						124	%						131	%

(1) Averages are based on daily averages.

(2) Includes loan origination and commitment fees.

(3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using a statutory federal income tax rate of 21%.

(4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.

(5) Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

44

Tax exempt revenue is shown on a tax-equivalent basis (non-Gaap) for proper comparison using a federal statutory income tax rate of 21% for the three and nine months ended September 30, 2023 and 2022.  For purposes of the comparison, as well as the discussion that follows, this presentation facilitates performance comparisons between taxable and tax-free assets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the Company’s Federal statutory rate during the corresponding period. The following table represents the adjustment to convert net interest income to net interest income on a fully taxable equivalent basis for the periods ended September 30, 2023 and 2022 (in thousands):

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2023		2022		2023		2022
Interest and dividend income from investment securities and interest bearing deposits at banks (non-tax adjusted)	$	2,917	$	2,387	$	8,168	$	6,569
Tax equivalent adjustment		143		167		459		486
Interest and dividend income from investment securities and interest bearing deposits at banks (tax equivalent basis)	$	3,060	$	2,554	$	8,627	$	7,055
Interest and fees on loans (non-tax adjusted)	$	33,772	$	19,396	$	80,438	$	52,436
Tax equivalent adjustment		121		100		343		250
Interest and fees on loans (tax equivalent basis)	$	33,893	$	19,496	$	80,781	$	52,686
Total interest income	$	36,689	$	21,783	$	88,606	$	59,005
Total interest expense		14,285		2,937		30,201		6,168
Net interest income		22,404		18,846		58,405		52,837
Total tax equivalent adjustment		264		267		802		736
Net interest income (tax equivalent basis)	$	22,668	$	19,113	$	59,207	$	53,573

The following table shows the tax-equivalent effect of changes in volume and rate on interest income and expense (in thousands):

	Three months ended September 30, 2023 vs 2022 (1)									Nine months ended September 30, 2023 vs 2022 (1)
	Change in			Change			Total			Change in			Change			Total
	Volume			in Rate			Change			Volume			in Rate			Change
Interest Income:
Short-term investments:
Interest-bearing deposits at banks	$	14		$	199		$	213		$	(25	)	$	208		$	183
Interest bearing time deposits at banks		(20	)		10			(10	)		(90	)		36			(54	)
Investment securities:
Taxable		(22	)		439			417			205			1,366			1,571
Tax-exempt		(89	)		(25	)		(114	)		(111	)		(17	)		(128	)
Total investments		(111	)		414			303			94			1,349			1,443
Loans:
Residential mortgage loans		2,055			454			2,509			2,539			1,130			3,669
Construction		1,493			961			2,454			1,878			1,740			3,618
Commercial Loans		4,116			4,135			8,251			8,195			8,076			16,271
Agricultural Loans		(43	)		441			398			(119	)		1,536			1,417
Loans to state & political subdivisions		12			97			109			138			271			409
Other loans		102			574			676			1,718			993			2,711
Total loans, net of discount		7,735			6,662			14,397			14,349			13,746			28,095
Total Interest Income		7,618			7,285			14,903			14,328			15,339			29,667
Interest Expense:
Interest-bearing deposits:
NOW accounts		471			3,322			3,793			298			6,362			6,660
Savings accounts		(1	)		321			320			(3	)		640			637
Money Market accounts		96			2,071			2,167			13			4,752			4,765
Certificates of deposit		131			1,851			1,982			(12	)		3,000			2,988
Total interest-bearing deposits		697			7,565			8,262			296			14,754			15,050
Other borrowed funds		1,351			1,735			3,086			5,377			3,606			8,983
Total interest expense		2,048			9,300			11,348			5,673			18,360			24,033
Net interest income	$	5,570		$	(2,015	)	$	3,555		$	8,655		$	(3,021	)	$	5,634

(1) The portion of the total change attributable to both volume and rate changes, which can not be separated, has been allocated proportionally to the change due to volume and the change due to rate prior to allocation.

45

Tax equivalent net interest income increased from $53,573,000 for the nine month period ended September 30, 2022 to $59,207,000 for the nine month period ended September 30, 2023, an increase of $5,634,000. The acquisition of HVBC had a substantial impact on the increase, in addition to growth that occurred in the fourth quarter of 2022 in the Delaware region. The tax equivalent net interest margin decreased from 3.39% for the first nine months of 2022 to 3.25% for the comparable period in 2023. The decrease is primarily caused by the increase in the cost of interest-bearing liabilities due to higher market interest rates in 2023 compared to 2022.

Total tax equivalent interest income for the 2023 nine month period increased $29,667,000 as compared to the 2022 nine month period. This increase was a result of an increase of $14,328,000 due to a change in volume as average interest-bearing assets increased $319.8 million. As a result of the higher market interest rate environment, the yield on average interest earning assets increased 1.13% from 3.78% to 4.91% resulting in an increase interest income of $15,339,000.

Tax equivalent investment income for the nine months ended September 30, 2023 increased $1,443,000 over the same period last year. The primary cause of the increase was due to the increase in yield on investment securities of 35 basis points to 2.18%.

• The average balance of taxable securities increased $16.5 million, which resulted in an increase in investment income of $205,000. The yield on taxable securities increased 48 basis points from 1.59% to 2.07% as a result of lower yielding securities maturing in the second half of 2022 and first nine months of 2023. This resulted in an increase in investment income of $1,366,000. For a discussion of the Company’s current investment strategy, see the “Financial Condition – Investments”.

Total loan interest income increased $28,095,000 for the nine months ended September 30, 2023 compared to the same period last year, as a result of higher volume and yields.

• Interest income on residential mortgage loans increased $3,669,000. The change due to rate was an increase of $1,130,000 as the average yield on residential mortgages increased from 4.70% to 5.38% as a result of the higher rate environment during the second half of 2022 and all of 2023. The average balance of residential mortgage loans increased $65.7 million primarily due to the HVBC acquisition and additional organic growth. This resulted in an increase of $2,539,000 on total interest income due to volume.

• The average balance of construction loans increased $44.9 million as a result of projects in our Delaware market and the HVBC acquisition. This resulted in an increase of $1,878,000 on total interest income due to volume. The change due to rate was an increase of $1,740,000 as the average yield on construction loans increased from 4.26% to 6.82% as a result of the higher rate environment during the second half of 2022 and all of 2023.

• The average balance of commercial loans increased $209.6 million from a year ago. The growth was primarily attributable to growth in the Delaware market and the HVCB acquisition. This had a positive impact of $8,195,000 on total interest income due to volume. The yield increased 1.16% to 5.80% as a result of the higher rate environment during the second half of 2022 and all of 2023, which increased loan interest income $8,076,000.

46

• Interest income on agricultural loans increased $1,417,000 from 2022 to 2023. The yield increased 60 basis points to 4.96% as a result of the higher rate environment during the second half of 2022 and all of 2023, which increased loan interest income $1,536,000. The decrease in the average balance of agricultural loans of $3.7 million resulted in a decrease in interest income due to volume of $119,000.

• The average yield of state and political subdivision loans increased 62 basis points to 3.86% due to the higher rate environment resulting in an increase in income of $271,000. The average balance of state and political subdivision loans increased $5.3 million resulting in an increase in loan interest income of $138,000.

• The average balance of other loans increased $34.7 million as a result of outstanding student loans. This resulted in an increase of $1,718,000 on total interest income due to volume. The average yield of other loans increased 220 basis points to 7.43% due to the higher rate environment resulting in an increase in income of $993,000.

Total interest expense increased $24,033,000 for the nine months ended September 30, 2023 compared with the comparative period last year as a result of an increase in the volume of other borrowed funds and an increase in rate on interest-bearing liabilities. Interest expense increased $5,673,000 due to volume as a result of an increase in the average balance of other borrowed funds of $205.6 million. The average rate paid on interest-bearing liabilities increased from 0.51% to 2.11%. The increase was driven by the Federal Reserve interest rate increases in 2022 and 2023, which caused interest expenses to increase $18,360,000.

• The average balance of interest bearing deposits increased $95.2 million from September 30, 2022 to September 30, 2023. The increase was due to the HVBC acquisition. The effect of these volume changes was an increase in interest expense of $296,000. The average rate paid on interest bearing deposits was 1.64% for the first nine months of 2023 and 0.40% for the comparable period in 2022. This resulted in an increase in interest expense of $14,754,000. The increase was due to the Federal Reserve increasing interest rates during 2022 and 2023.

• The average balance of other borrowed funds increased $205.6 million to fund loan growth experienced in 2022 and 2023. This resulted in an increase in interest expense of $5,377,000. There was an increase in the average rate paid on other borrowed funds from 2.02% to 4.49% due to the interest rate increases by the Federal Reserve that increased borrowings costs resulting in an increase in interest expense of $3,606,000.

Tax equivalent net interest income for the three months ended September 30, 2023 was $22,668,000 which compares to $19,113,000 for the same period last year.  This represents an increase of $3,555,000, or 18.6% and was primarily caused by an increase in the volume of interest earning assets due to the HVBC acquisition.

Total tax equivalent interest income was $36,953,000 for the three month period ended September 30, 2023, compared to $22,050,000 for the comparable period last year, an increase of $14,903,000. This increase was a result of an increase of $7,618,000 due to a change in volume as average interest-bearing assets increased $532.1 million due to the HVBC acquisition. As a result of the higher market interest rate environment, the yield on average interest earning assets increased 140 basis point from 3.96% to 5.36% resulting in an increase interest income of $7,285,000.

Tax equivalent investment income for the three months ended September 30, 2023 increased $303,000 over the same period last year. The yield on taxable securities increased 46 basis points from 1.73% to 2.19% as a result of the purchases made in a higher rate environment. This resulted in an increase in investment income of $439,000.

Total loan interest income increased $14,397,000 for the three months ended September 30, 2023 compared to the same period last year, primarily as a result of the HVBC acquisition.

47

• Interest income on residential mortgage loans increased $2,509,000. The change due to rate was an increase of $454,000 as the average yield on residential mortgages increased from 4.69% to 5.47% as a result of the higher rate environment during the second half of 2022 and all of 2023.  The average balance of residential mortgage loans increased $153.0 million primarily as a result of the HVBC acquisition. This resulted in an increase of $2,055,000 on total interest income due to volume.

• The average balance of construction loans increased $89.3 million primarily as a result of the HVBC acquisition. This resulted in an increase of $1,493,000 on total interest income due to volume. The change due to rate was an increase of $961,000 as the average yield on construction loans increased from 4.56% to 7.97% as a result of the higher rate.

• The average balance of commercial loans increased $296.4 million from a year ago. The growth was primarily attributable to growth in the Delaware market and the HVBC acquisition. This had a positive impact of $4,116,000 on total interest income due to volume. The yield increased 156 basis points to 6.29% due to the higher rate environment experienced during the second half of 2022 and all of 2023, which increased loan interest income $4,135,000.

• The average yield of agricultural loans increased 51 basis points to 4.96% due to the higher rate environment resulting in an increase in income of $441,000.

• The average balance of other loans increased $7.2 million as a result of outstanding student loans. This resulted in an increase of $102,000 on total interest income due to volume. The average yield on other loans increased 260 basis points to 7.50% due to the rate earned on the student loans, resulting in an increase in interest income of $574,000.

Total interest expense increased $11,348,000 for the three months ended September 30, 2023 compared with the comparative period last year as a result of an increase in the volume of other borrowed funds and an increase in rate on interest-bearing liabilities. Interest expense increased $1,351,000 due to volume as a result of an increase in the average balance of other borrowed funds of $158.2 million. The average rate paid on interest-bearing liabilities increased from 0.69% to 2.56%. The increase was driven by the Federal Reserve interest rate increases in 2022 and 2023, which caused interest expenses to increase $9,300,000.

• The average balance of interest bearing deposits increased $372.7 million from September 30, 2022 to September 30, 2023 primarily due to the HVBC acquisition, which was offset by customer funds transferred to higher-yielding investment alternatives as well as a reduction in municipal deposits to fund projects in various municipalities. The effect of these volume changes was an increase in interest expense of $697,000. The average rate paid on interest bearing deposits was 2.15% for the three months ended September 30, 2023 and 0.49% for the comparable period in 2022. This resulted in an increase in interest expense of $7,565,000. The increase was due to the Federal Reserve increasing interest rates during 2022 and 2023.

• The average balance of other borrowed funds increased $158.2 million to fund loan growth experienced in 2022 and borrowings acquired as part of the HVBC acquisition. This resulted in an increase in interest expense of $1,351,000. There was an increase in the average rate paid on other borrowed funds from 2.30% to 4.78% due to the interest rate increases by the Federal Reserve that increased borrowings costs resulting in an increase in interest expense of $1,735,000.

Provision for Credit Losses

For the nine month period ended September 30, 2023, we recorded a provision for credit losses of $5,328,000, which represents an increase of $3,903,000 from the $1,425,000 provision recorded in the corresponding nine months of last year. The provision for 2023 includes $4,591,000 associated with the HVBC acquisition and $36,000 as a provision for off-balance sheet items. Excluding these items, the provision for 2023 is $724,000 less than the comparable period in 2022 and is due to limited organic loan activity in  2023. (see “Financial Condition – Allowance for Credit Losses and Credit Quality Risk”).

48

For the three months ended September 30, 2023, we recorded a provision for credit losses of $475,000, which represents a decrease of $250,000 from the $725,000 provision recorded in the corresponding three months of last year. The provision for 2023 includes a $126,000 credit for off-balance sheet items. Excluding this item, the provision for the 2023 third quarter is $124,000 less than the comparable period in 2022 and is due to limited organic loan activity in 2023 compared to 2022.

Non-interest Income

The following table shows the breakdown of non-interest income for the three and nine  months ended September 30, 2023 and 2022 (dollars in thousands):

	Nine months ended September 30,						Change
	2023			2022			Amount			%
Service charges	$	4,196		$	4,081		$	115			2.8
Trust		583			620			(37	)		(6.0	)
Brokerage and insurance		1,429			1,428			1			0.1
Gains on loans sold		674			241			433			179.7
Equity security (losses), net		(223	)		(198	)		(25	)		12.6
Available for sale security (losses), net		(51	)		(6	)		(45	)		750.0
Earnings on bank owned life insurance		941			635			306			48.2
Other		567			626			(59	)		(9.4	)
Total	$	8,116		$	7,427		$	689			9.3

	Three months ended September 30,					Change
	2023		2022			Amount			%
Service charges	$	1,692	$	1,509		$	183			12.1
Trust		172		187			(15	)		(8.0	)
Brokerage and insurance		473		446			27			6.1
Gains on loans sold		460		95			365			384.2
Equity security gains (losses0, net		69		(19	)		88			(463.2	)
Available for sale security gains (losses), net		-		(6	)		6			(100.0	)
Earnings on bank owned life insurance		489		216			273			126.4
Other		307		264			43			16.3
Total	$	3,662	$	2,692		$	970			36.0

Non-interest income for the nine months ended September 30, 2023 totaled $8,116,000, an increase of $689,000 when compared to the same period in 2022. For the three months ended September 30, 2023, non-interest income increased $1,105,000 to $3,797,000.  During the first nine   months of 2023, net equity security losses amounted to $223,000 as a result of market losses associated with general banking stock losses compared with a $198,000 loss in the comparable 2022 period associated with market conditions for that period. During the  nine months ended September 30, 2023, there were $51,000 of losses from the sale of $10.0 million available for sale municipal securities. Additionally, $76.5 million of securities obtained as part of the acquisition were sold for no gain or loss during the second quarter of 2023. There were no sales of available during the three ended September 30, 2023. During the first nine months of 2022, $4.5 million of US Agency securities were sold for a pre-tax loss of $6,000.

49

The increase in gains on loans sold for the three and nine month periods ended September 30 2023 compared to 2022 is attributable the HVBC acquisition and their residential lending model, which focused on originating and selling residential mortgage loans, which includes the use of interest rate locks and other derivative activities, which is included in other income. The increase in earnings on bank owned life insurance is due to the HVBC acquisition, as well as the death benefit of approximately $200,000 received upon the passing of a former employee.

Non-interest Expense

The following tables reflect the breakdown of non-interest expense for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Nine months ended September 30,					Change
	2023		2022			Amount			%
Salaries and employee benefits	$	25,733	$	20,964		$	4,769			22.7
Occupancy		2,870		2,327			543			23.3
Furniture and equipment		568		416			152			36.5
Professional fees		1,274		1,321			(47	)		(3.6	)
FDIC insurance		1,000		440			560			127.3
Pennsylvania shares tax		893		1,017			(124	)		(12.2	)
Amortization of intangibles		219		120			99			82.5
Merger and acquisition		9,269		-			9,269		NA
Software expenses		1,274		1,069			205			19.2
ORE expenses (income)		126		(125	)		251			(200.8	)
Other		5,811		5,496			315			5.7
Total	$	49,037	$	33,045		$	15,992			48.4

	Three months ended September 30,				Change
	2023		2022		Amount			%
Salaries and employee benefits	$	10,140	$	6,933	$	3,207			46.3
Occupancy		1,221		779		442			56.7
Furniture and equipment		255		122		133			109.0
Professional fees		506		588		(82	)		(13.9	)
FDIC insurance		375		160		215			134.4
Pennsylvania shares tax		297		339		(42	)		(12.4	)
Amortization of intangibles		157		40		117			292.5
Merger and acquisition		623		-		623		NA
Software expenses		551		370		181			48.9
ORE expenses		111		122		(11	)		(9.0	)
Other		2,343		2,161		182			8.4
Total	$	16,579	$	11,614	$	4,965			42.8

Non-interest expenses increased $15,992,000 for the nine months ended September 30, 2023 compared to the same period in 2022. Salaries and employee benefits increased $4,769,000 or 22.7%. The increase was due to merit increases effective at the beginning of 2023, additional full time equivalent employees (FTE) of 35.3, which is an increase of 11.4%, and an increase in health care expenses due to higher claims on the Company’s partially self-funded plan and the additional headcount.

50

The increase in merger and acquisition expenses was due to fees associated with the acquisition of HVBC that closed in June 2023 and includes severance costs, change in control payments, contract termination payments and various professional and consulting fees. The increase in ORE expenses was due to the sales of OREO properties in 2022 for a gain of $481,000. The increase in occupancy, furniture and fixtures, amortization of intangibles and other expenses was due to the HVBC acquisition. The increase in FDIC insurance is due to the acquisition and organic growth.

For the three months ended, September 30, 2023, non-interest expenses increased $4,965,000 when compared to the same period in 2022. The changes in salaries and employee benefits, merger and acquisition expenses, occupancy, furniture and equipment, FDIC insurance, amortization of intangibles and other expenses  correspond to the changes for the nine month period.

Provision for Income Taxes

The provision for income taxes was $2,020,000 for the nine month period ended September 30, 2023 compared to $4,609,000 for the same period in 2022. The decrease is primarily attributable to the decrease in income before the provision for income taxes of $13,503,000 for the comparable periods due to the one-time costs associated with the HVBC acquisition.  Through management of our municipal loan and bond portfolios, management is focused on minimizing our effective tax rate.  Our effective tax rate was 16.4% and 17.9% for the first nine months of 2023 and 2022, respectively, compared to the statutory rate of 21%.

For the three months ended September 30, 2023, the provision for income taxes was $1,599,000 compared to a provision of $1,655,000 for the same period in 2022. The decrease is attributable to the decrease in income before the provision for income taxes of $52,000 for the comparable periods and life insurance proceeds being excluded from taxable income. Our effective tax rate was 17.5% and 18.0% for the three months ended September 30, 2023 and 2022, respectively.

We are invested in seven limited partnerships that have established low-income housing projects in our market areas with our most recent investments made in the second half of 2022. Three projects are currently in construction phase with credits being recognized on one of the projects for the first time in the third quarter of 2023. The remaining four partnership credits are fully utilized as of December 31, 2023. We anticipate recognizing an aggregate of $6.5 million of tax credits over the next 13 years.

Financial Condition

Total assets were $2.96 billion at September 30, 2023, an increase of $625.8 million from $2.33 billion at December 31, 2022, due primarily to the HVBC acquisition that closed on June 16, 2023. Cash and cash equivalents increased $17.1 million to $43.3 million with the increase attributable to the acquisition and collateral held for derivative instruments. Available for sale securities decreased $21.7 million and net loans increased $518.5 million to $2.22 billion at September 30, 2023 due to the acquisition. Total deposits increased $490.9 million to $2.34 billion since year-end 2022 as a result of the acquisition, while borrowed funds increased $58.9 million to $316.2 million.

Cash and Cash Equivalents

Cash and cash equivalents totaled $43.3 million at September 30, 2023 compared to $26.2 million at December 31, 2022. The increase is due to the acquisition and cash held as collateral for certain derivative positions the Bank is exposed to with third parties.  Management actively measures and evaluates the Company’s liquidity position through our Asset–Liability Committee and believes the Company’s liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional funding sources including the Bank’s core deposits, Federal Home Loan Bank financing, federal funds lines with correspondent banks, brokered certificates of deposit and the portion of the investment and loan portfolios that mature within one year.  Management expects that these sources of funds will permit us to meet cash obligations and off-balance sheet commitments as they come due.

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Investments

The following table shows the composition of the investment portfolio (including debt and equity securities) as of September 30 2023 and December 31, 2022 (dollars in thousands):

	September 30, 2023				December 31, 2022
	Amount		%		Amount		%
Debt securities:
U. S. Agency securities	$	63,647		15.2	$	70,677		16.0
U. S. Treasury notes		147,431		35.1		148,570		33.6
Obligations of state & political subdivisions		96,022		22.9		110,300		25.0
Corporate obligations		12,120		2.9		9,383		2.1
Mortgage-backed securities in government sponsored entities		98,587		23.5		100,576		22.8
Equity securities		1,858		0.4		2,208		0.5
Total	$	419,665		100.0	$	441,714		100.0

	September 30, 2023/
	December 31, 2022
	Change
	Amount			%
Debt securities:
U. S. Agency securities	$	(7,030	)		(9.9	)
U. S. Treasury notes		(1,139	)		(0.8	)
Obligations of state & political subdivisions		(14,278	)		(12.9	)
Corporate obligations		2,737			29.2
Mortgage-backed securities in government sponsored entities		(1,989	)		(2.0	)
Equity securities		(350	)		(15.9	)
Total	$	(22,049	)		(5.0	)

Our investment portfolio decreased by $22.0 million, or 5.0%, from December 31, 2022 to September 30, 2023. As part of the HVBC acquisition, $79.2 million of available for sale securities were acquired. Excluding the acquisition, $10.3 million of mortgage backed securities were purchased. We experienced $9.4 million of principal repayments and $9.4 million of calls and maturities. We sold $86.6 million of securities to deleverage the balance sheet during 2023 that included a loss of $51,000. The majority of the securities sold were acquired as part of the HVBC acquisition.  As a result of increases in market interest rates, the unrealized loss on available for sale investment portfolio increased $4.6 million. Excluding our short-term investments consisting of monies held primarily at the Federal Reserve for liquidity purposes, our investment portfolio for the nine month period ended September 30, 2023 yielded 2.18%, compared to 1.83% in the comparable period in 2022, on a tax equivalent basis.

The investment strategy for 2023 has been to utilize cashflows from the investment portfolio to repay overnight borrowings. The decrease in the investment portfolio was due to long-term interest rates increasing in the first nine months of 2023 compared to December 31, 2022 and investment repayments and maturities. We continually monitor interest rate trading ranges and seek to time investment security purchases when rates are in the top third of the trading range. The Company believes its investment strategy has appropriately mitigated its interest rate risk exposure for various rate environments, including a rising rate environment, while providing sufficient cashflows to meet liquidity needs.

Management continues to monitor the earnings performance and the liquidity of the investment portfolio on a regular basis.  Through active balance sheet management and analysis of the investment portfolio, the Company believes it maintains sufficient liquidity to satisfy depositor withdrawal requirements and various credit needs of its customers.

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Loans Held for Sale

Loans held for sale increased $13.4 million to $14.2 million as of September 30, 2023 from December 31, 2022 due to the HVBC acquisition and their focus on residential mortgage lending and related loan sales into the secondary market.

Loans

The following table shows the composition of the loan portfolio as of September 30, 2023 and December 31, 2022 (dollars in thousands):

	September 30, 2023				December 31, 2022
	Amount		%		Amount		%
Real estate:
Residential	$	356,381		15.9	$	210,213		12.2
Commercial		1,081,123		48.1		876,569		50.8
Agricultural		314,164		14.0		313,614		18.2
Construction		175,320		7.8		80,691		4.7
Consumer		115,753		5.2		86,650		5.0
Other commercial loans		120,347		5.4		63,222		3.7
Other agricultural loans		26,648		1.2		34,832		2.0
State & political subdivision loans		56,660		2.4		59,208		3.4
Total loans		2,246,396		100.0		1,724,999		100.0
Less allowance for loan losses		21,455				18,552
Net loans	$	2,224,941			$	1,706,447

	September 30, 2023/
	December 31, 2022
	Change
	Amount			%
Real estate:
Residential	$	146,168			69.5
Commercial		204,554			23.3
Agricultural		550			0.2
Construction		94,629			117.3
Consumer		29,103			33.6
Other commercial loans		57,125			90.4
Other agricultural loans		(8,184	)		(23.5	)
State & political subdivision loans		(2,548	)		(4.3	)
Total loans	$	521,397			30.2

The Bank’s lending efforts have historically been focused in north central Pennsylvania, the south central Pennsylvania counties of Lebanon, Schuylkill, Berks and Lancaster, the central Pennsylvania counties of Clinton and Centre, and southern New York. We have a limited branch office in Union County that is staffed by a lending team to primarily support agricultural opportunities in central Pennsylvania. In April 2020, we completed the MidCoast acquisition, which expanded our markets into the State of Delaware with activity centered around the cities of Wilmington and Dover, Delaware. Since the MidCoast acquisition, we have opened two additional branches in the Delaware market to better serve customers in the Wilmington market, as well as the surrounding area of Chester County, Pennsylvania. In June 2023, we completed the HVBC acquisition, which expanded our markets into south east Pennsylvania, including the counties of Montgomery, Bucks and Philadelphia. It also includes a Mortgage production in Mount Laurel, New Jersey. We have received approval to open an office in Williamsport, Pennsylvania, which is expected in the fourth quarter of 2023. We originate loans primarily through direct loans to our existing customer base, with new customers generated through the strong relationships our lending teams have with their customers and our lenders expertise in certain areas, as well as by referrals from real estate brokers, building contractors, attorneys, accountants, corporate and advisory board members, existing customers and the Bank’s website.  The Bank offers a variety of loans although historically most of our lending has focused on real estate loans including residential, commercial, agricultural, and construction loans.  All lending is governed by a lending policy that is developed and administered by management and approved by the Board of Directors.

53

As part of the HVBC acquisition, we acquired $477.0 million of loans for the portfolio. Excluding this, organic loan growth has been limited, and totaled $42.2 million during 2023.

While the Bank lends to companies that service companies that explore for natural gas in our market area, the Bank has not originated any loans to companies performing the actual drilling and exploration activities. Loans made by the Bank are to service industry customers which include trucking companies, stone quarries and other support businesses, favoring customers that have had a relationship with the Bank prior to supporting the exploration for natural gas. We also have originated loans to businesses and individuals for restaurants, hotels and apartment rentals that have been developed and expanded to meet the housing and living needs of the gas industry workers. Due to our understanding of the industry and its cyclical nature, the loans made for natural gas-related activities have been originated in accordance with specific policies and procedures for lending to these entities, which include more stringent loan to value thresholds, shortened amortization periods, and expansion of our monitoring of loan concentrations associated with this activity.

For loans sold on the secondary market, the Company recognizes fee income for servicing certain sold loans, which is included in non-interest income.

Allowance for Credit Losses - Loans

The allowance for credit losses - loans is maintained at a level which, in management’s judgment, is adequate to absorb losses in the loan portfolio. The provision for credit losses - loans is charged against current income.  Loans deemed not collectable are charged-off against the allowance while subsequent recoveries increase the allowance.  The allowance for credit losses - loans was $21,455,000 or 0.96% of total loans as of September 30, 2023 as compared to $18,552,000 or 1.08% of loans as of December 31, 2022. During the first quarter of 2023, the Company adopted CECL, which resulted in a decrease in the allowance for credit losses – loans of $3.3 million. As a result of the acquisition, the Bank recorded a provision for credit losses for non-PCD loans of $4,591,000 and an allowance of $1,689,000 for PCD loans. An additional $701,000 of provision for credit losses-loans was recorded in 2023. Net charge-offs for the first nine months of 2023 totaled $778,000, which was primarily associated with one loan acquired as part of the HVBC acquisition that was fully reserved for at the time of the acquisition. The following table shows the distribution of the allowance for credit losses - loans and the percentage of loans compared to total loans by loan category as of September 30, 2023 and December 31, 2022 (dollars in thousands):

	September 30,				December 31
	2023				2022
	Amount		%		Amount		%
Real estate loans:
Residential	$	2,565		15.9	$	1,056		12.2
Commercial		9,185		48.1		10,120		50.8
Agricultural		3,475		14.0		4,589		18.2
Construction		1,833		7.8		801		4.7
Consumer		1,720		5.2		135		5.0
Other commercial loans		2,072		5.4		1,040		3.7
Other agricultural loans		229		1.2		489		2.0
State & political subdivision loans		48		2.4		322		3.4
Unallocated		328		N/A		-		N/A
Total allowance for loan losses	$	21,455		100.0	$	18,552		100.0

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The following table provides information related to credit loss experience and loan quality for the nine months ended September 30, 2023 and the year ended December 31, 2022 (dollars in thousands).

September 30, 2023	Credit Loss Expense (Benefit)			Net (charge-offs) Recoveries			Average Loans		Ratio of net (charge-offs) recoveries to Average loans			Allowance to total loans			Non-accrual loans as a percent of loans			Allowance to total non-accrual loans
Real estate:
Residential	$	1,323		$	(1	)	$	268,562		0.00	%		0.72	%		0.83	%		86.77	%
Commercial		2,094			2			954,043		0.00	%		0.85	%		0.15	%		575.14	%
Agricultural		(6	)		-			312,436		0.00	%		1.11	%		0.95	%		116.42	%
Construction		1,135			-			114,386		0.00	%		1.05	%		1.34	%		77.77	%
Consumer		(107	)		(25	)		82,405		(0.03	%)		1.49	%		0.88	%		169.12	%
Other commercial loans		1,286			(754	)		84,963		(0.89	%)		1.72	%		1.60	%		107.47	%
Other agricultural loans		(41	)		-			31,643		0.00	%		0.86	%		1.12	%		76.59	%
State & political subdivision loans		6			-			60,183		0.00	%		0.08	%		0.00	%	NA
Unallocated		(398	)		-			-	NA			NA			NA			NA
Total	$	5,292		$	(778	)	$	1,908,621		(0.04	%)		0.96	%		0.58	%		163.29	%

December 31, 2022
Real estate:
Residential	$	(91	)	$	-		$	204,063		0.00	%		0.50	%		0.28	%		178.68	%
Commercial		2,018			3			782,016		0.00	%		1.15	%		0.32	%		364.29	%
Agricultural		(140	)		-			312,999		0.00	%		1.46	%		1.03	%		142.43	%
Construction		367			-			73,214		0.00	%		0.99	%		0.00	%	NA
Consumer		(111	)		(16	)		58,715		(0.03	%)		0.16	%		0.00	%	NA
Other commercial loans		439			(422	)		72,444		(0.58	%)		1.64	%		0.10	%		1,677.42	%
Other agricultural loans		(69	)		-			34,421		0.00	%		1.40	%		0.82	%		171.58	%
State & political subdivision loans		41			-			56,004		0.00	%		0.54	%		0.00	%	NA
Unallocated		(771	)		-			-	NA			NA			NA			NA
Total	$	1,683		$	(435	)	$	1,593,876		(0.03	%)		1.08	%		0.40	%		267.40	%

The Company believes it utilizes a disciplined and thorough loan review process based upon its internal loan policy approved by the Company’s Board of Directors.  The purpose of the review is to assess loan quality, analyze delinquencies, identify problem loans, evaluate potential charge-offs and recoveries, and assess general overall economic conditions in the markets served.  An external independent loan review is performed on our commercial portfolio at least semi-annually for the Company.  The external consultant is engaged to 1) review a minimum of 50%  of the dollar volume of the commercial loan portfolio on an annual basis, 2) new loans originated for over $1.0 million in the last year, 3) review a sample of borrowers with commitments greater than or equal to $1.0 million,  4) selected loan relationships over $750,000 which are over 30 days past due, or classified Special Mention, Substandard, Doubtful, or Loss, and 5) such other loans which management or the consultant deems appropriate. As part of this review, our underwriting process and loan grading system is evaluated.

Management believes it uses the best information available to make such determinations and that the allowance for credit losses - loans is adequate as of September 30, 2023. However, future adjustments could be required if circumstances differ substantially from assumptions and estimates used in making the initial determination.  A prolonged downturn in the economy, changes in the economies of various segments of our agricultural and commercial portfolios, high unemployment rates, significant changes in the value of collateral and delays in receiving financial information from borrowers could result in increased levels of non-performing assets, charge-offs, loan loss provisions and reduction in income.  Additionally, bank regulatory agencies periodically examine the Bank’s allowance for credit losses.  The banking agencies could require the recognition of additions to the allowance for credit losses - loans based upon their judgment of information available to them at the time of their examination.

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On a monthly basis, problem loans are identified and updated primarily using internally prepared past due reports.  Based on data surrounding the collection process of each identified loan, the loan may be added or deleted from the monthly watch list.  The watch list includes loans graded special mention, substandard, doubtful, and loss, as well as additional loans that management may choose to include.  Watch list loans are continually monitored going forward until satisfactory conditions exist that allow management to upgrade and remove the loan from the watchlist.  In certain cases, loans may be placed on non-accrual status or charged-off based upon management’s evaluation of the borrower’s ability to pay.  All commercial loans, which include commercial real estate, agricultural real estate, state and political subdivision loans, other commercial loans and other agricultural loans, on non-accrual are evaluated quarterly for impairment.

See also “Note 6 – Loans and Related Allowance for Credit Loan Losses - Loans” to the consolidated financial statements.

The following table is a summary of our non-performing assets as of September 30, 2023 and December 31, 2022.

	September 30,		December 31,
(dollars in thousands)	2023		2022
Non-performing loans:
Non-accruing loans	$	13,139	$	6,938
Accrual loans - 90 days or more past due		8		7
Total non-performing loans		13,147		6,945
Foreclosed assets held for sale		474		543
Total non-performing assets	$	13,621	$	7,488

The following table identifies amounts of loans contractually past due 30 to 90 days and non-performing loans by loan category, as well as the change from December 31, 2022 to September 30, 2023 in non-performing loans (in thousands).  Non-performing loans include those accruing loans that are contractually past due 90 days or more and non-accrual loans. Interest does not accrue on non-accrual loans.  Subsequent cash payments received are applied to the outstanding principal balance or recorded as interest income, depending upon management’s assessment of its ultimate ability to collect principal and interest.

	September 30, 2023								December 31, 2022
			Non-Performing Loans								Non-Performing Loans
	30 - 89 Days								30 - 89 Days
	Past Due		90 Days Past		Non-		Total Non-		Past Due		90 Days Past		Non-		Total Non-
(in thousands)	Accruing		Due Accruing		accrual		Performing		Accruing		Due Accruing		accrual		Performing
Real estate:
Residential	$	1,203	$	-	$	2,956	$	2,956	$	469	$	-	$	591	$	591
Commercial		2,311		-		1,597		1,597		1,018		-		2,778		2,778
Agricultural		299		-		2,985		2,985		-		-		3,222		3,222
Construction		677		-		2,357		2,357		-		-		-		-
Consumer		771		8		1,017		1,025		147		7		-		7
Other commercial loans		224		-		1,928		1,928		1,695		-		62		62
Other agricultural loans		475		-		299		299		-		-		285		285
Total nonperforming loans	$	5,960	$	8	$	13,139	$	13,147	$	3,329	$	7	$	6,938	$	6,945

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	Change in Non-Performing Loans
	September 30, 2023 /December 31, 2022
(in thousands)	Amount			%
Real estate:
Residential	$	2,365			400.2
Commercial		(1,181	)		(42.5	)
Agricultural		(237	)		(7.4	)
Construction		2,357		NA
Consumer		1,018			14,542.9
Other commercial loans		1,866			3,009.7
Other agricultural loans		14			4.9
Total nonperforming loans	$	6,202			89.3

Nonperforming loans increased $6.2 million during 2023. As part of the HVBC acquisition, we acquired $1.8 million of non-performing residential loans, $1.1 million of non-performing consumer loans and $763,000 of non-performing other commercial loans. During the first quarter of 2023, the Bank place two large relationships totaling $3.8 million on non-accrual status, one of which was secured by real estate and the other was secured by airplanes and camera equipment. At September 30, 2023, approximately 54.7% of the Bank’s non-performing loans are associated with the following five customer relationships:

• A commercial loan relationship with $617,000 outstanding, and additional letters of credit of $1.2 million available, secured by undeveloped land, stone quarries and equipment, was on non-accrual status as of September 30, 2023. The Company services the natural gas industry, as well as local municipalities. As a result, the reduced exploration for natural gas in north central Pennsylvania has significantly impacted the cash flows of the customer, who provides excavation services and stone for pad construction related to these activities. During 2020, the Company had the underlying equipment collateral appraised and in the first quarter of 2022, the Company had the quarry appraised. The appraisals indicated a decrease in collateral values compared to the appraisal ordered for the loan origination, however, the loan was still considered well secured on a loan to value basis at September 30, 2023. In 2022 and 2023, the customer  liquidated some excess equipment and the funds have been utilized to pay down a portion of the loans. Management determined that no specific reserve was required as of September 30, 2023.

• An agricultural loan customer with a total loan relationship of $1.7 million, secured by real estate, equipment and cattle, was on non-accrual status as of September 30, 2023. The customer declared bankruptcy during the fourth quarter of 2018 and developed a workout plan that was approved by the bankruptcy court in the fourth quarter of 2019 and resulted in monthly payments resuming in late 2019 that continue into 2023. Included within these loans to this customer are loans which are subject to Farm Service Agency guarantees in excess of $700,000. Depressed milk prices and the pandemic have created cash flow difficulties for this customer.  Absent a sizable and sustained increase in milk prices, which is not assured, we will need to rely upon the collateral for repayment of interest and principal. During 2023, the Company had the underlying collateral appraised. Management determined that no specific reserve was required as of September 30, 2023.

• An agricultural loan customer with a total loan relationship of $1.2 million, secured by real estate was on non-accrual status as of September 30, 2023. The customer filed bankruptcy in the first quarter of 2023. The COVID-19 pandemic  escalated the cash flow difficulties this customer was experiencing. We expect that we will need to rely upon the collateral for repayment of interest and principal. During 2023, the Company had the underlying collateral appraised.  Management reviewed the collateral and determined that no specific reserve was required as of September 30, 2023.

• A commercial loan customer with a total loan relationship of $1.4 million, secured by airplanes and camera equipment was on non-accrual status as of September 30, 2023. The customer is in the process of selling its business, which has taken longer than expected causing cashflow difficulties. A forbearance agreement was agreed to by the Customer that calls for $180,000 of payments in the fourth quarter of 2023 and a pay-off of the entire relationship during the fourth quarter of 2023 as well. Management reviewed the collateral and determined that no specific reserve was required as of September 30, 2023.

• A construction loan customer with a total loan relationship of $2.4 million, secured by partially  developed real estate, was on non-accrual status as of September 30, 2023. The customer has experienced delays in developing the real estate for resale resulting in financing difficulties. Management reviewed the collateral and determined that a specific reserve of $286,000 was required as of September 30, 2023.

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Management believes that the allowance for credit losses - loans at September 30, 2023 was adequate at that date, which was based on the following factors:

• Five loan relationships comprise 54.7% of the non-performing loan balance, which required a specific reserve of $286,000 as of September 30, 2023.

• The Company has a history of low charge-offs, which were 0.05% of average loans on an annualized basis for 2023, including the acquired loan charged off that was reserved for as of the acquisition date and 0.3% for 2022.

Bank Owned Life Insurance

The Company owns bank owned life insurance policies to offset future employee benefit costs. These policies provide the Bank with an asset that generates earnings to partially offset the current costs of benefits, and eventually (at the death of the insureds) provide partial recovery of cash outflows associated with the benefits.  As of September 30, 2023, and December 31, 2022, the cash surrender value of the life insurance was $49.6 million and $39.4 million, respectively. As part of the HVBC acquisition, the Bank acquired $10.4 million of bank owned life insurance.  The change in cash surrender value, net of purchases and amounts acquired through acquisitions, is recognized in the results of operations. The amounts recorded as non-interest income totaled $489,000 and $216,000 for the three month periods ended September 30, 2023 and 2022, respectively. For the nine months ended September 30, 2023 and 2022, $941,000 and $635,000, respectively, was recorded in non-interest income. During the third quarter of 2023, the Bank received proceeds of $1,097,000 upon the passing of a former employee, which generate income of approximately $200,000. The Company evaluates annually the risks associated with the life insurance policies, including limits on the amount of coverage and an evaluation of the various carriers’ credit ratings.

The Company policies that were purchased directly from insurance companies and acquired as part of the HVBC acquisition are structured so that any death benefits received from a policy while the insured person is an active employee of the Bank will be split with the beneficiary of the policy.  Under these agreements, the employee’s beneficiary will be entitled to receive 50% of the net amount at risk from the proceeds.  The net amount at risk is the total death benefit payable less the cash surrender value of the policy as of the date of death. The policies acquired as part of the acquisition of FNB provide a fixed split-dollar benefit for the beneficiary’s estate, which is dependent on several factors including whether the covered individual was a former Director of First National Bank of Fredericksburg (“FNB”) or a former employee of FNB and their salary level. As of September 30, 2023, and December 31, 2022, included in other liabilities on the Consolidated Balance Sheet was a liability of $618,000 and $660,000, respectively, for the obligation under the split-dollar benefit agreements.

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Premises and Equipment

Premises and equipment increased $3.8 million to $21.4 million as of September 30, 2023 from December 31, 2022. As part of the HVBC acquisition, $2.3 million of property was acquired. Additionally, during 2023, the Bank acquired $1.6 million of real estate in Mansfield, Pennsylvania that will hold its corporate headquarters and operations.

Other assets

Other assets increased $17.3 million to $43.1 million. The primary driver of the increase was the HVBC acquisition, which increased other assets $14.8 million, which was due to leases, restricted stocks and prepaid expenses.

Deposits

The following table shows the composition of deposits as of September 30, 2023 and December 31, 2022 (dollars in thousands):

	September 30,				December 31,
	2023				2022
	Amount		%		Amount		%
Non-interest-bearing deposits	$	542,144		23.2	$	396,260		21.5
NOW accounts		671,020		28.7		512,502		27.8
Savings deposits		319,045		13.7		321,917		17.5
Money market deposit accounts		426,633		18.3		335,838		18.2
Certificates of deposit		376,293		16.1		277,691		15.0
Total	$	2,335,135		100.0	$	1,844,208		100.0

	September 30, 2023/ December 31, 2022 Change
	Amount			%
Non-interest-bearing deposits	$	145,884			36.8
NOW accounts		158,518			30.9
Savings deposits		(2,872	)		(0.9	)
Money market deposit accounts		90,795			27.0
Certificates of deposit		98,602			35.5
Total	$	490,927			26.6

Deposits increased $490.9 million since December 31, 2022. As part of the HVBC acquisition, we acquired $533.4 million of deposits. Excluding the acquisition, deposits would have decreased $42.4 million.  The reduction in deposits resulted from customer funds transferred to higher-yielding investment alternatives; and seasonal reductions in municipal deposits as well as funds used for various projects within municipalities. Brokered deposits totaled $80.9 million and $16.0 million as of September 30, 2023 and December 31, 2022, respectively. As part of the acquisition, we acquired $36.2 million of brokered deposits,  which matured during the third quarter of 2023. At September 30, 2023, the Bank estimates that balances held by customers in excess of the FDIC insurance limit ($250,000 per insured account) totaled $1.08 billion, or 46.4% of the Bank’s total deposits. Included in this balance are balances held through Intrafi, which provides customers with  FDIC insurance coverage by placing customer funds with insured banks within the Intrafi network, as well as deposits collateralized by securities (almost exclusively municipal deposits). The total of these items was $491.6 million, or 21.1% of the Bank’s total deposits, as of September 30, 2023.

Borrowed Funds

Borrowed funds were $316.2 million and $257.3 million as of September 30, 2023 and December 31, 2022, respectively. As part of the HVBC acquisition, the Company acquired $58.6 million of borrowings, which accounts for the majority of the increase. The acquired borrowings included $49.8 million of FHLB advances and $8.9 million of subordinated debt.

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In April 2020, the Bank entered into two interest rate swap agreements to convert floating-rate debt to fixed rate debt on notional amounts of $15.0 million and $10.0 million. The interest rate swap instruments involve an agreement to receive a floating rate and pay a fixed rate, at specified intervals, calculated on the agreed-upon notional amounts. The differentials paid or received on interest rate swap agreements are recognized as adjustments to interest expense in the period. The interest rate swap agreements were entered into on April 1, 2020 and expire on April 1, 2025 and April 1, 2027. In April 2020, the Company entered into an interest rate swap agreement to convert floating-rate debt to fixed rate debt on a notional amounts of $7.5 million. The interest rate swap instrument involves an agreement to receive a floating rate and pay a fixed rate, at specified intervals, calculated on the agreed-upon notional amount. The differentials paid or received on interest rate swap agreements are recognized as adjustments to interest expense in the period. The interest rate swap agreements were entered into on April 13, 2020 and expire on June 17, 2027. In May of 2020, the Bank entered into three two year forward interest rate swaps that will convert floating rate debt to fixed rate debt on notional amounts of $6.0 million each.  The interest rate swap instruments involves an agreement to receive a floating rate and pay a fixed rate, at specified intervals, calculated on the agreed-upon notional amount. The differentials paid or received on interest rate swap agreements are recognized as adjustments to interest expense in the period. The interest rate swap agreements were entered into on May 14, 2020 and expire on May 14, 2027, 2029 and 2032. The fair value of the interest rate swaps at September 30, 2023 was $7,012,000 and is included within fair value of derivative instruments on the consolidated balance sheets.

The Company’s current strategy for borrowings is to consider terms and structures to manage interest rate risk and liquidity in a rising rate environment. The Company’s daily cash requirements or short-term investments are primarily met by using the financial instruments available through the Federal Home Loan Bank of Pittsburgh.

Stockholders’ Equity

We evaluate stockholders’ equity in relation to total assets and the risks associated with those assets.  The greater the capital resource, the more likely a corporation will meet its cash obligations and absorb unforeseen losses.  For these reasons, capital adequacy has been, and will continue to be, of paramount importance to the Company. As such, the Company has implemented policies and procedures to ensure that it has adequate capital levels. As part of this process, we routinely stress test our capital levels and identify potential risk and alternative sources of additional capital should the need arise.

Total stockholders’ equity was $262.7 million at September 30, 2023 compared to $200.1 million at December 31, 2022, an increase of $62,539,000, or 31.3%.  As part of the HVBC acquisition, the Company issued 693,858 shares that had a fair value at the time of issuance of $60.1 million. Excluding accumulated other comprehensive loss, stockholders’ equity increased $66.0 million, or 28.3%. The accumulated comprehensive loss increased $3.5 million, which was primarily the result of the decrease in fair value of the Company’s available for sale investment portfolio caused by the increase in longer term market interest rates. For the nine months of 2023, the Company had net income of $10.3 million and declared cash dividends of $6.2 million, or $1.451 per share, representing a cash dividend payout ratio of 60.3%. As a result of implementing CECL, retained earnings increased $1,766,000.

All of the Company’s debt investment securities are classified as available-for-sale, making this portion of the Company’s balance sheet more sensitive to the changing market value of investments due to changes in market interest rates. As a result of increases in longer term market interest rates, the defined benefit plan obligations and the interest rate swaps entered into during 2020, accumulated other comprehensive loss increased approximately $3.5 million from December 31, 2022.

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

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Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), common equity Tier 1 capital (as defined) to total risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As permitted by applicable federal regulation, the Bank has opted to use the community bank leverage ratio (the “CBLR”) framework for determining its capital adequacy.  Under the CBLR framework a qualifying community bank is considered well-capitalized if its leverage ratio (Tier 1 capital divided by average total consolidated assets) exceeds 9%. Following the passage of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in response to the COVID-19 pandemic, the federal banking regulators revised the CBLR framework as follows: (i) beginning in the second quarter of 2020, a qualifying community bank need only have a leverage ratio of at least 8%, subject to the other qualifying requirements, and (ii) if a qualifying community bank’s leverage ratio falls below 8%, then it will have two calendar quarters to maintain a leverage ratio of 7% or greater.  These revisions under the CARES Act are effective April 23, 2020 and terminated on December 31, 2020.  Following such termination there is a grace period for returning to the 9% CBLR threshold.  The CBLR was set at 8.5% for 2021, and 9% thereafter.  The grace period is also adjusted to account for the graduating increase. As a result, in 2021, a qualifying community bank utilizing the grace period must maintain a CBLR of at least 7.5%. Thereafter, a qualifying community bank utilizing the grace period must maintain a CBLR of at least 8%. If a qualifying community bank fails to maintain the applicable minimum CBLR during the grace period, or if it is unable to restore compliance with the CBLR within the grace period, then it will revert to the Basel III capital framework and the normal Prompt Corrective Action capital categories will apply. At September 30, 2023, the Bank leverage ratio under the CBLR framework was 8.64%. This ratio allows the Bank to fall within the grace period of the CBLR, and the Bank will have to meet the 9.0% requirement to be considered “well-capitalized” by the end of the first quarter of 2024. The Bank leverage ratio as of December 31, 2022 was 8.77%, which did not meet the ratio to be considered “well-capitalized”  under the CBLR as of December 31, 2022. As such, the following table provides the Bank’s computed risk‑based capital ratios as of December 31, 2022, which reflects the Bank being well capitalized at that date (dollars in thousands):

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
December 31, 2022	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk Weighted Assets):
Company	$	238,966		12.87	%	$	148,567		8.00	%	$	185,709		10.00	%
Bank	$	222,714		12.01	%	$	148,348		8.00	%	$	185,435		10.00	%

Tier 1 Capital (to Risk Weighted Assets):
Company	$	210,250	11.32	%	$	111,425	6.00	%	$	148,567	8.00	%
Bank	$	203,998	11.00	%	$	111,261	6.00	%	$	148,348	8.00	%

Common Equity Tier 1 Capital (to Risk Weighted Assets):
Company	$	202,750	10.92	%	$	83,569	4.50	%	$	120,711	6.50	%
Bank	$	203,998	11.00	%	$	83,446	4.50	%	$	120,533	6.50	%

Tier 1 Capital (to Average Assets):
Company	$	210,250	9.03	%	$	93,161	4.00	%	$	116,451	5.00	%
Bank	$	203,998	8.77	%	$	93,075	4.00	%	$	116,344	5.00	%

Off-Balance Sheet Activities

Some financial instruments, such as loan commitments, credit lines, and letters of credit, are issued to meet customer financing needs but are not recorded on the Company’s balance sheet.  The contractual amount of financial instruments with off-balance sheet risk was as follows at September 30, 2023 and December 31, 2022 (in thousands):

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	September 30, 2023		December 31, 2022
Commitments to extend credit	$	505,950	$	437,449
Standby letters of credit		19,011		15,972
	$	524,961	$	453,421
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	$	1,265	$	165

We also offer limited overdraft protection as a non-contractual courtesy which is available to demand deposit accounts in good standing. Overdraft charges as a result of ATM withdrawals and one-time point of sale (non-recurring) transactions require prior approval of the customer. The non-contractual amount of financial instruments with off-balance sheet risk at September 30, 2023 and December 31, 2022 was $13,111,000 and $12,232,000, respectively. The Company reserves the right to discontinue this service without prior notice.

Liquidity

Liquidity is a measure of the Company’s ability to efficiently meet normal cash flow requirements of both borrowers and depositors.  To maintain proper liquidity, we use funds management policies, which include liquidity target ratios, along with our investment policies to assure we can meet our financial obligations to depositors, credit customers and stockholders.  Liquidity is needed to meet depositors’ withdrawal demands, extend credit to meet borrowers’ needs, provide funds for normal operating expenses and cash dividends, and to fund other capital expenditures.

Cash generated by operating activities, investing activities and financing activities influences liquidity management. Our Company’s historical activity in this area can be seen in the Consolidated Statement of Cash Flows.  The most important source of funds is core deposits.  Repayment of principal on outstanding loans and cash flows created from the investment portfolio are also factors in liquidity management.  Other sources of funding include brokered certificates of deposit and the sale of loans or investments, if needed.

The Company’s use of funds is shown in the investing activity section of the Consolidated Statement of Cash Flows, where the net loan activity is presented.  Other uses of funds include purchasing stock from the Federal Home Loan Bank (FHLB) of Pittsburgh, as well as capital expenditures.  Capital expenditures (including software purchases), during the first nine months of 2023 were $2,308,000 compared to $1,150,000 during the same time period in 2022.

Short-term debt from the FHLB supplements the Bank’s availability of funds.  The Bank achieves liquidity primarily from temporary or short‑term investments in the Federal Reserve and the FHLB.  The Bank had a maximum borrowing capacity at the FHLB of approximately $1.10 billion, of which $391.9 million was outstanding, at September 30, 2023. The Bank also has two federal funds line with third party providers for $34.0 million as of September 30, 2023, which is unsecured and undrawn upon. We also have a borrower in custody line with the Federal Reserve Bank of approximately $960,000, which also is not drawn upon as of September 30, 2023. The Bank also has available through the Bank Term Funding program initiated by the Federal Reserve during the second quarter of 2023, a line of $54.5 million, which is undrawn upon as of September 30, 2023. The Company has a $20.0 million line of credit with a Pennsylvania community bank, of which $17.5 million is utilized as of September 30, 2023. The Company continues to evaluate its liquidity needs and as necessary finds additional sources.

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Citizens Financial Services, Inc. is a separate legal entity from the Bank and must provide for its own liquidity.  In addition to its operating expenses, Citizens Financial Services, Inc. is responsible for paying any dividends declared to its shareholders.  Citizens Financial also has repurchased shares of its common stock.  Citizens Financial Services, Inc.’s primary source of income is dividends received from the Bank.  Both federal and state laws impose restrictions on the ability of the Bank to pay dividends. In particular, the Bank may not, as a state-chartered bank which is a member of the Federal Reserve System, declare a dividend without approval of the Federal Reserve, unless the dividend to be declared by the Bank’s Board of Directors does not exceed the total of:  (i) the Bank’s net profits for the current year to date, plus (ii) its retained net profits for the preceding two current years, less any required transfers to surplus.  The Federal Reserve Board and the FDIC have formal and informal policies which provide that insured banks and bank holding companies should generally pay dividends only out of current operating earnings, with some exceptions.  The Prompt Corrective Action Rules, described above, further limit the ability of banks to pay dividends, because banks which are not classified as well capitalized or adequately capitalized may not pay dividends and no dividend may be paid which would make the Bank undercapitalized after the dividend.  At September 30, 2023, Citizens Financial Services, Inc. (on an unconsolidated basis) had liquid assets of approximately $3.4 million.

Interest Rate and Market Risk Management

The objective of interest rate sensitivity management is to maintain an appropriate balance between the stable growth of income and the risks associated with maximizing income through interest sensitivity imbalances and the market value risk of assets and liabilities.

Because of the nature of our operations, we are not subject to foreign currency exchange or commodity price risk and, because we have no trading portfolio, we are not subject to trading risk. At September 30, 2023, the Company has equity securities that represent only 0.06% of its total assets and, therefore, equity risk is not significant.

The primary components of interest-sensitive assets include adjustable-rate loans and investments, loan repayments, investment maturities and money market investments.  The primary components of interest-sensitive liabilities include maturing certificates of deposit, IRA certificates of deposit and short-term borrowings.  Savings deposits, NOW accounts and money market investor accounts are considered core deposits and are not short-term interest sensitive (except for the top-tier money market investor accounts, typically help by local governments, which are paid current market interest rates).

Gap analysis, one of the methods used by us to analyze interest rate risk, does not necessarily show the precise impact of specific interest rate movements on our Company’s net interest income because the re-pricing of certain assets and liabilities is discretionary and is subject to competitive and other pressures.  In addition, assets and liabilities within the same period may, in fact, be repaid at different times and at different rate levels.  We have not experienced the kind of earnings volatility that might be indicated from gap analysis.

The Company currently uses a computer simulation model to better measure the impact of interest rate changes on net interest income. We use the model as part of our risk management and asset liability management processes that we believe will effectively identify, measure, and monitor the Company’s risk exposure.  In this analysis, the Company examines the results of movements in interest rates with additional assumptions made concerning prepayment speeds on mortgage loans and mortgage securities.   Shock scenarios, which assume a parallel shift in interest rates and is instantaneous, typically have the greatest impact on net interest income. The following is a rate shock analysis and the impact on net interest income as of September 30, 2023 (dollars in thousands):

			Change In			% Change In
	Prospective One-Year		Prospective			Prospective
Changes in Rates	Net Interest Income		Net Interest Income			Net Interest Income
-400 Shock	$	93,737	$	5,834			6.64
-300 Shock		91,035		3,132			3.56
-200 Shock		90,235		2,332			2.65
-100 Shock		89,458		1,555			1.77
Base		87,903		-			-
+100 Shock		85,903		(2,000	)		(2.28	)
+200 Shock		83,456		(4,447	)		(5.06	)
+300 Shock		81,507		(6,396	)		(7.28	)
+400 Shock		79,545		(8,358	)		(9.51	)

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The model makes estimates, at each level of interest rate change, regarding cash flows from principal repayments on loans and mortgage backed securities, call activity of other investment securities, and deposit selection, re-pricing and maturity structure.  Because of these assumptions, actual results could differ significantly from these estimates which would result in significant differences in the calculated projected change on net interest income. Additionally, the changes 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. The changes in net interest income noted above are in line with Company policy for interest rate risk.

Item 3-Quantitative and Qualitative Disclosure about Market Risk

In the normal course of conducting business activities, the Company is exposed to market risk, principally interest rate risk, through the operations of its banking subsidiary.  Interest rate risk arises from market driven fluctuations in interest rates that affect cash flows, income, expense and values of financial instruments and was discussed previously in this Form 10-Q.  Management and a committee of the Board of Directors manage interest rate risk (see also “Interest Rate and Market Risk Management”).

Item 4-Control and Procedures

(a) Disclosure Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).  Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the SEC (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes to Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting.

PART II ‑ OTHER INFORMATION

Item 1 ‑
Legal Proceedings

Management is not aware of any pending or threatened litigation that would have a material adverse effect on the consolidated financial position of the Company.  Any pending proceedings are ordinary, routine litigation incidental to the business of the Company and its subsidiary.  In addition, no material proceedings are pending or are known to be threatened or contemplated against the Company and its subsidiary by government authorities.

Item 1A – Risk Factors

In addition to the risk factor discussed below and the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1.A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition or future results. At September 30, 2023, the risk factors of the Company have not changed materially from those reported in our Annual Report on Form 10-K.  However, the risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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Our funding sources may prove insufficient to replace deposits at maturity and support our future growth.

We must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments. As we continue to grow, we are likely to depend more on these sources, which may include Federal Home Loan Bank advances, federal funds purchased and brokered certificates of deposit. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. If we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our operating margins and profitability would be adversely affected.

Our stock price may be negatively impacted by recent unrelated bank failures and negative depositor confidence in depository institutions.  Further, if we are unable to adequately manage our liquidity, interest rate risk, and capital levels, which have come under greater scrutiny in light of recent bank failures, it may have a material adverse effect on our financial condition and results of operations.

The recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank have led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.  These events have led to a greater focus by investors and bank regulators on financial institutions’ on-balance sheet liquidity and funding sources, deposit composition, including the amount of uninsured deposits, capital levels, and liquidity and interest rate risk management practices.  If we are unable to adequately manage our liquidity and interest rate management and capital levels, it may have a material adverse effect on our financial condition and results of operations.

Failure to address the federal debt ceiling in a timely manner, downgrade of the U.S. credit rating, and uncertain credit and financial market conditions may affect the stability of securities issued or guaranteed by the federal government, which may adversely affect the valuation or liquidity of our investment securities portfolio and increase future borrowing costs.

As a result of uncertain political, credit and financial market conditions, including the potential consequences of the federal government defaulting on its obligations for a period of time due to federal debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose credit default and liquidity risks.  Downgrades to the U.S. credit rating could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio of such investment securities, and could result in our counterparties requiring additional collateral for our borrowings.  Further, unless and until U.S. political, credit and financial market conditions have been sufficiently resolved or stabilized, it may increase our future funding costs.

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Item 2 – Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares (or units Purchased)		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans of Programs		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
7/1/23 to 7/31/23		-	$	0.00		-		116,389
8/1/23 to 8/31/23		2,772	$	86.67		-		116,389
9/1/23 to 9/30/23		-	$	0.00		-		116,389
Total		2,772	$	86.67		-		116,389

(1) On April 21, 2020, the Company announced that the Board of Directors authorized the Company to repurchase up to an additional 150,000 shares at an aggregate purchase price not to exceed $12.0 million over a period of 36 months. The repurchases will be conducted through open-market purchases or privately negotiated transactions and will be made from time to time depending on market conditions and other factors.  No time limit was placed on the duration of the share repurchase program.  Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.

Item 3 ‑ Defaults Upon Senior Securities

Not applicable.

Item 4 – Mine Safety Disclosure

Not applicable.

Item 5 ‑ Other Information

None

Item 6 ‑ Exhibits

(a) The following documents are filed as a part of this report:

3.1	Restated Articles of Incorporation of Citizens Financial Services, Inc. (1)
3.2	Articles of Amendment of Restated Articles of Incorporation of Citizens Financial Services, Inc. (2)
3.3	Bylaws of Citizens Financial Services, Inc. (3)
3.4	Amendment No. 1 to Amended and Restated Bylaws of Citizens Financial Services, Inc. (4)
4.1	Form of Common Stock Certificate. (5)
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the period ended  September 30, 2023, formatted in XBRL (Extensible Business Reporting Language): (i) The Consolidated Balance Sheet (unaudited), (ii) the Consolidated Statement of Income (unaudited), (iii) the Consolidated Statement of Comprehensive Income (unaudited), (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statement of Cash Flows (unaudited) and (vi) related notes (unaudited).
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

⁽¹⁾ Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended June 30, 2018, as filed with the Commission on August 9, 2018.

⁽²⁾ Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on April 26, 2021.

⁽³⁾  Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on December 17, 2020.

⁽⁴⁾  Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on November 23, 2022

⁽⁵⁾  Incorporated by reference to Exhibit 4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Commission on March 10, 2023.

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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.

Citizens Financial Services, Inc.

(Registrant)

November 8, 2023	/s/ Randall E. Black
	By:	Randall E. Black
	President and Chief Executive Officer
	(Principal Executive Officer)

November 8, 2023	/s/ Stephen J. Guillaume
	By:	Stephen J. Guillaume
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

I, Randall E. Black, certify that:

1.    I have reviewed this Form 10-Q of Citizens Financial Services, 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(s) 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

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

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

Date: November 8, 2023 By: 
/s/ Randall E. Black

By:	Randall E. Black
President and Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Stephen J. Guillaume, certify that:

1.    I have reviewed this Form 10-Q of Citizens Financial Services, 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(s) 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

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

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

Date: November 8, 2023 By: 
 /s/ Stephen J. Guillaume

By:	Stephen J. Guillaume
Chief Financial Officer
(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

Section 1350 Certification

of Chief Executive Officer and Chief Financial Officer

In connection with the Quarterly Report of Citizens Financial Services, Inc. (the "Company") on Form 10-Q (the "Report") for the period ended September 30 2023 as filed with the Securities and Exchange Commission, the undersigned certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered in the Report.

By: /s/ Randall E. Black

By:	Randall E. Black
President and Chief Executive Officer
(Principal Executive Officer)
Date:  November 8, 2023

By: /s/ Stephen J. Guillaume

By:	Stephen J. Guillaume
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date:  November 8, 2023

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2023	Nov. 01, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Document Transition Report	false
Entity File Number	0-13222
Entity Registrant Name	CITIZENS FINANCIAL SERVICES, INC.
Entity Central Index Key	0000739421
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	23-2265045
Entity Address, Address Line One	15 South Main Street
Entity Address, City or Town	Mansfield
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	16933
City Area Code	570
Local Phone Number	662‑2121
Title of 12(b) Security	Common Stock, Par value $1.0 per share
Trading Symbol	CZFS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,706,111

XML

CONSOLIDATED BALANCE SHEET - USD ($) $ in Thousands		Sep. 30, 2023	Dec. 31, 2022
Cash and due from banks:
Noninterest-bearing		$ 25,267	$ 24,814
Interest-bearing		18,069	1,397
Total cash and cash equivalents		43,336	26,211
Interest bearing time deposits with other banks		4,566	6,055
Equity securities		1,858	2,208
Available-for-sale securities		417,807	439,506
Loans held for sale		14,155	725
Loans (net of allowance for credit losses - loans: 2023 $21,455 and 2022, $18,552)		2,224,941	1,706,447
Premises and equipment		21,421	17,619
Accrued interest receivable		10,327	7,332
Goodwill	[1]	84,758	31,376
Bank owned life insurance		49,586	39,355
Other intangibles		3,866	1,272
Fair value of derivative instruments		18,144	16,599
Deferred tax asset		21,384	12,886
Other assets		43,067	25,802
TOTAL ASSETS		2,959,216	2,333,393
Deposits:
Noninterest-bearing		542,144	396,260
Interest-bearing		1,792,991	1,447,948
Total deposits		2,335,135	1,844,208
Borrowed funds		316,151	257,278
Accrued interest payable		2,726	1,232
Fair value of derivative instruments - liability		10,694	9,726
Other liabilities		31,824	20,802
TOTAL LIABILITIES		2,696,530	2,133,246
STOCKHOLDERS' EQUITY:
Preferred Stock $1.00 par value; authorized 3,000,000 shares at September 30, 2023 and December 31, 2022; none issued in 2023 or 2022		0	0
Common stock $1.00 par value; authorized 25,000,000 shares at September 30, 2023 and December 31, 2022; issued 5,160,754 at September 30, 2023 and 4,427,687 at December 31, 2022		5,161	4,428
Additional paid-in capital		143,302	80,911
Retained earnings		167,740	164,922
Accumulated other comprehensive loss		(36,643)	(33,141)
Treasury stock, at cost: 454,643 shares at September 30, 2023 and 456,478 shares at December 31, 2022		(16,874)	(16,973)
TOTAL STOCKHOLDERS' EQUITY		262,686	200,147
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$ 2,959,216	$ 2,333,393

[1] Excludes fully amortized intangible assets

XML

CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
ASSETS:
Loans, allowance for credit losses - loans	$ 21,455	$ 18,552
STOCKHOLDERS' EQUITY:
Preferred Stock, par value (in dollars per share)	$ 1	$ 1
Preferred Stock, authorized (in shares)	3,000,000	3,000,000
Preferred Stock, issued (in shares)	0	0
Common Stock, par value (in dollars per share)	$ 1	$ 1
Common Stock, authorized (in shares)	25,000,000	25,000,000
Common Stock, issued (in shares)	5,160,754	4,427,687
Treasury stock, shares (in shares)	454,643	456,478

XML

CONSOLIDATED STATEMENT OF INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
INTEREST INCOME:
Interest and fees on loans	$ 33,772	$ 19,396	$ 80,438	$ 52,436
Interest-bearing deposits with banks	264	61	462	333
Investment securities:
Taxable	1,734	1,514	4,973	4,050
Nontaxable	540	630	1,729	1,830
Dividends	379	182	1,004	356
TOTAL INTEREST INCOME	36,689	21,783	88,606	59,005
INTEREST EXPENSE:
Deposits	10,100	1,838	19,519	4,469
Borrowed funds	4,185	1,099	10,682	1,699
TOTAL INTEREST EXPENSE	14,285	2,937	30,201	6,168
NET INTEREST INCOME	22,404	18,846	58,405	52,837
Provision for credit losses	475	725	737	1,425
Provision for credit losses - acquisition day 1 non-PCD	0	0	4,591	0
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	21,929	18,121	53,077	51,412
NON-INTEREST INCOME:
Service charges	1,692	1,509	4,196	4,081
Trust	172	187	583	620
Brokerage and insurance	473	446	1,429	1,428
Gains on loans sold	460	95	674	241
Equity security gains (losses), net	69	(19)	(223)	(198)
Available for sale security gains (losses), net	0	(6)	(51)	(6)
Earnings on bank owned life insurance	489	216	941	635
Other	307	264	567	626
TOTAL NON-INTEREST INCOME	3,662	2,692	8,116	7,427
NON-INTEREST EXPENSES:
Salaries and employee benefits	10,005	6,933	25,598	20,964
Occupancy	1,221	779	2,870	2,327
Furniture and equipment	255	122	568	416
Professional fees	506	588	1,274	1,321
FDIC insurance	375	160	1,000	440
Pennsylvania shares tax	297	339	893	1,017
Amortization of intangibles	157	40	219	120
Merger and acquisition	623	0	9,269	0
Software expenses	551	370	1,274	1,069
ORE expenses (income)	111	122	126	(125)
Other	2,343	2,161	5,811	5,496
TOTAL NON-INTEREST EXPENSES	16,444	11,614	48,902	33,045
Income before provision for income taxes	9,147	9,199	12,291	25,794
Provision for income taxes	1,599	1,655	2,020	4,609
NET INCOME	$ 7,548	$ 7,544	$ 10,271	$ 21,185
PER COMMON SHARE DATA:
Net Income - Basic (in dollars per share)	$ 1.61	$ 1.88	$ 2.4	$ 5.28
Net Income - Diluted (in dollars per share)	1.61	1.88	2.4	5.28
Cash Dividends Paid (in dollars per share)	$ 0.49	$ 0.475	$ 1.451	$ 1.407
Number of shares used in computation - basic (in shares)	4,699,952	4,006,794	4,275,259	4,009,855
Number of shares used in computation - diluted (in shares)	4,699,952	4,007,028	4,275,259	4,009,857

XML

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME [Abstract]
Net income	$ 7,548	$ 7,544	$ 10,271	$ 21,185
Other Comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities	(7,627)	(13,578)	(4,645)	(50,581)
Income tax effect	1,602	2,851	976	10,622
Change in unrecognized pension cost	7	24	21	72
Income tax effect	(1)	(5)	(4)	(15)
Change in unrealized loss on interest rate swaps	450	1,781	140	5,314
Income tax effect	(94)	(374)	(29)	(1,117)
Reclassification adjustment for investment security gains included in net income	0	6	51	6
Income tax effect	0	(1)	(12)	(1)
Other comprehensive income (loss), net of tax	(5,663)	(9,296)	(3,502)	(35,700)
Comprehensive income (loss)	$ 1,885	$ (1,752)	$ 6,769	$ (14,515)

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss) Income [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2021	$ 4,389	$ 78,395	$ 146,010	$ (155)	$ (16,147)	$ 212,492
Balance (in shares) at Dec. 31, 2021	4,388,901
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			21,185			21,185
Net other comprehensive income (loss)				(35,700)		(35,700)
Stock dividend	$ 39	2,521				0
Stock dividend			(2,560)
Stock dividend (in shares)	38,786
Purchase of treasury stock					(1,279)	(1,279)
Restricted stock, executive and Board of Director awards		(221)			365	144
Restricted stock vesting		158				158
Sale of treasury stock to employees		6			106	112
Forfeited restricted stock		10			(10)	0
Cash dividends			(5,682)			(5,682)
Balance at Sep. 30, 2022	$ 4,428	80,869	158,953	(35,855)	(16,965)	191,430
Balance (in shares) at Sep. 30, 2022	4,427,687
Balance at Jun. 30, 2022	$ 4,428	80,892	153,315	(26,559)	(17,044)	195,032
Balance (in shares) at Jun. 30, 2022	4,427,687
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			7,544			7,544
Net other comprehensive income (loss)				(9,296)		(9,296)
Purchase of treasury stock					0	0
Restricted stock, executive and Board of Director awards		(52)			52	0
Restricted stock vesting		16				16
Sale of treasury stock to employees		5			35	40
Forfeited restricted stock		8			(8)	0
Cash dividends			(1,906)			(1,906)
Balance at Sep. 30, 2022	$ 4,428	80,869	158,953	(35,855)	(16,965)	191,430
Balance (in shares) at Sep. 30, 2022	4,427,687
Balance at Dec. 31, 2022	$ 4,428	80,911	164,922	(33,141)	(16,973)	200,147
Balance (in shares) at Dec. 31, 2022	4,427,687
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			10,271			10,271
Net other comprehensive income (loss)				(3,502)		(3,502)
Stock dividend	$ 39	2,982				0
Stock dividend			(3,021)
Stock dividend (in shares)	39,209
Issuance of Common stock	$ 694	59,443				60,137
Issuance of Common stock (in shares)	693,858
Purchase of treasury stock					(264)	(264)
Restricted stock, executive and Board of Director awards		(231)			348	117
Restricted stock vesting		184				184
Sale of treasury stock to employees		0			28	28
Forfeited restricted stock		13			(13)	0
Cash dividends			(6,198)			(6,198)
Balance at Sep. 30, 2023	$ 5,161	143,302	167,740	(36,643)	(16,874)	262,686
Balance (ASU 2016-13 [Member]) at Sep. 30, 2023			1,766	0		1,766
Balance (in shares) at Sep. 30, 2023	5,160,754
Balance at Jun. 30, 2023	$ 5,161	143,351	162,499	(30,980)	(16,803)	263,228
Balance (in shares) at Jun. 30, 2023	5,160,754
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			7,548			7,548
Net other comprehensive income (loss)				(5,663)		(5,663)
Purchase of treasury stock					(264)	(264)
Restricted stock, executive and Board of Director awards		(86)			168	82
Restricted stock vesting		34			0	34
Sale of treasury stock to employees		0			28	28
Forfeited restricted stock		3			(3)	0
Cash dividends			(2,307)			(2,307)
Balance at Sep. 30, 2023	$ 5,161	$ 143,302	167,740	(36,643)	$ (16,874)	262,686
Balance (ASU 2016-13 [Member]) at Sep. 30, 2023			$ 1,766	$ 0		$ 1,766
Balance (in shares) at Sep. 30, 2023	5,160,754

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY [Abstract]
Purchase of treasury stock (in shares)	2,772	18,584	2,772	18,697
Restricted stock (in shares)	2,167	769	2,242	5,392
Sale of treasury stock to employee (in shares)	410	540	410	1,600
Forfeited restricted stock (in shares)	52	120	213	159
Cash dividends (in dollars per share)	$ 0.49	$ 0.475	$ 1.451	$ 1.407

XML

CONSOLIDATED STATEMENT OF CASH FLOWS $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023 USD ($)		Sep. 30, 2023 USD ($)		Sep. 30, 2022 USD ($)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 7,548		$ 10,271		$ 21,185
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses			5,328		1,425
Depreciation and amortization			1,022		773
Amortization and accretion of loans and other assets			(2,392)		(1,386)
Amortization and accretion of investment securities			1,197		1,467
Deferred income taxes			355		86
Investment securities losses, net			274		204
Earnings on bank owned life insurance	(489)		(941)		(635)
Vesting of restricted stock			184		158
Originations of loans held for sale			(53,510)		(9,447)
Proceeds from sales of loans held for sale			51,428		12,864
Realized gains on loans sold	(460)		(674)		(241)
Increase in accrued interest receivable			(769)		(1,309)
Gain on sale of foreclosed assets held for sale			(98)		(481)
Increase in accrued interest payable			609		211
Other, net			(1,955)		(536)
Net cash provided by operating activities			10,329		24,338
Available-for-sale securities:
Proceeds from sales	0		86,504		4,492
Proceeds from maturity and principal repayments			18,847		28,553
Purchase of securities			(10,246)		(117,913)
Purchase of equity securities			0		(218)
Proceeds from sale of equity securities			127		33
Purchase of interest bearing time deposits with other banks			0		(3,720)
Proceeds from sale of interest bearing time deposits with other banks			0		2,733
Proceeds from life insurance			1,097		0
Proceeds from matured interest bearing time deposits with other banks			1,489		5,954
Proceeds from redemption of regulatory stock			19,936		3,811
Purchase of regulatory stock			(22,105)		(12,081)
Net increase in loans			(42,162)		(295,059)
Purchase of premises and equipment			(2,308)		(1,150)
Investments in low income housing partnerships			(616)		(949)
Proceeds from sale of foreclosed assets held for sale			314		845
Acquisition, net of cash paid			4,905		0
Net cash provided by (used in) investing activities			55,782		(384,669)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits			(42,438)		32,559
Proceeds from long-term borrowings			20,000		0
Repayments of long-term borrowings			0		(4,725)
Net (decrease) increase in short-term borrowed funds			(20,115)		189,661
Purchase of treasury stock			(264)		(1,279)
Sale of treasury stock to employees			28		112
Dividends paid			(6,197)		(5,682)
Net cash (used in) provided by financing activities			(48,986)		210,646
Net increase (decrease) in cash and cash equivalents			17,125		(149,685)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			26,211		172,833
CASH AND CASH EQUIVALENTS AT END OF PERIOD	43,336		43,336		23,148
Supplemental Disclosures of Cash Flow Information:
Interest paid			28,707		5,957
Income taxes paid			4,600		4,600
Loans transferred to foreclosed property			147		61
Right of use asset and liability			5		1,518
Stock Dividend			3,021		2,560
CECL adjustment			3,300		$ 0
Non-cash assets acquired
Goodwill	84,758	[1]	84,758	[1]
HV Bancorp, Inc. [Member]
Non-cash assets acquired
Available-for-sale securities	79,248		79,248
Interest bearing time deposits with other banks	0		0
Loans held for sale	10,750		10,750
Loans	475,338		475,338
Premises and equipment	2,310		2,310
Accrued interest receivable	2,226		2,226
Bank owned life insurance	10,387		10,387
Intangibles	2,972		2,972
Deferred tax asset	8,392		8,392
Other assets	18,213		18,213
Goodwill	53,382		53,382
Total Non-cash assets acquired	663,218		663,218
Liabilities assumed
Noninterest-bearing deposits	197,549		197,549
Interest-bearing deposits	335,815		335,815
Accrued interest payable	885		885
Borrowed funds	58,647		58,647
Other liabilities	11,674		11,674
Total liabilities assumed	604,570		604,570
Net non-cash liabilities acquired	58,648		58,648
Cash and cash equivalents acquired	$ 18,017		$ 18,017

[1] Excludes fully amortized intangible assets

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2023

Basis of Presentation [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

Citizens Financial Services, Inc. (individually and collectively with its direct and indirect subsidiaries, the “Company”) is a Pennsylvania corporation and its wholly owned subsidiary is CZFS Acquisition Company, LLC. CZFS Acquisition Company, LLC is the holding company of its wholly owned subsidiary, First Citizens Community Bank (the “Bank”), and of the Bank’s wholly owned subsidiaries, First Citizens Insurance Agency, Inc. (“First Citizens Insurance”) and 1^st Realty of PA LLC (“Realty”).

The accompanying consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with U.S. generally accepted accounting principles.  Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  Certain of the prior year amounts have been reclassified to conform with the current year presentation.  Such reclassifications had no effect on net income or stockholders’ equity.  All material inter‑company balances and transactions have been eliminated in consolidation.

In the opinion of management of the Company, the accompanying interim consolidated financial statements at September 30, 2023 and for the periods ended September 30, 2023 and 2022 include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition and the results of operations at the dates and for the periods presented. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and of revenues and expenses for the periods covered by the Consolidated Statement of Income. The financial performance reported for the Company for the nine month period ended September 30, 2023 is not necessarily indicative of the results to be expected for the full year.  This information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Accounting Pronouncements Adopted in 2023

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

The Company adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans and held-to-maturity debt securities, available-for-sale debt securities and unfunded commitments. On January 1, 2023, the Bank recorded a cumulative effect increase to retained earnings of $1.8 million, net of tax, of which $3.3 million related to loans and ($1.1) million related to unfunded commitments.

The Company adopted the provisions of ASC 326 related to financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired (PCI) and accounted for under ASC 310-30 using the prospective transition approach. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

The Company expanded the pooling utilized under the legacy incurred loss method to include additional segmentation based on risk. The impact of the change from the incurred loss model to the current expected credit loss model is detailed below (in thousands):

	January 1, 2023
	Pre-adoption		Adoption Impact			As Reported
Assets
Allowance for credit losses - loans
Real estate loans:
Residential	$	1,056	$	79		$	1,135
Commercial		10,120		(3,070	)		7,050
Agricultural		4,589		(1,145	)		3,444
Construction		801		(103	)		698
Consumer		135		1,040			1,175
Other commercial loans		1,040		(328	)		712
Other agricultural loans		489		(219	)		270
State and political subdivision loans		322		(280	)		42
Unallocated		-		726			726
Total	$	18,552	$	(3,300	)	$	15,252
Liabilities
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	$	165	$	1,064		$	1,229

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

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for modifications of receivables made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investment in leases in the existing vintage disclosures. This ASU became effective on January 1, 2023 for the Corporation. The adoption of this ASU resulted in updated disclosures within our financial statements but otherwise did not have a material impact on the Company’s consolidated financial statements.

Loans

 A loan is classified as a modified loan to a borrower experiencing financial difficulty when a contractual loan modification in the form of principal forgiveness, an interest rate reduction, an other-than-significant payment delay or a term extension (or a combination thereof) has been granted to an existing borrower experiencing financial difficulties. The goal when modifying a credit is to establish a reasonable period of time to provide cash flow relief to customers experiencing cash flow difficulties. Accruing modified loans to borrowers experiencing financial difficulty are primarily comprised of loans on which interest is being accrued under the modified terms, and the loans are current or less than 90 days past due.

Loans and Leases - Prior to ASU No. 2022-02 Adoption

In situations where, for economic or legal reasons related to a borrower’s financial difficulties, management granted a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a Troubled Debt Restructuring (TDR). Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans.

Allowance for Credit losses – Loans

The allowance for credit losses (ACL) on loans and leases is a valuation account that is used to present the net amount expected to be collected on a loan or lease. The ACL for loans and leases is adjusted through provision for credit losses as a charge against, or credit to, earnings. Loans and leases deemed to be uncollectible are charged against the ACL on loans and leases, and any subsequent recoveries are credited to the ACL. Management evaluates the ACL on a quarterly basis. When changes in the reserve are necessary, an adjustment is made.

Management utilizes a discounted cash flow (DCF) model to calculate the present value of the expected cash flows for pools of loans and leases that share similar risk characteristics and compares the results of this calculation to the amortized cost basis to determine its allowance for credit loss balance.

Management uses relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts in calculating its ACL. Historical credit loss experience provides the basis for the estimation of expected credit losses. Management determines whether there is a need to make qualitative adjustments to historical loss information by monitoring certain factors including differences in current loan-specific risk characteristics as well as for changes in external or environmental conditions, or other relevant factors.

The contractual term used in projecting the cash flows of a loan is based on the maturity date of a loan, and is adjusted for prepayment or curtailment assumptions which may shorten that contractual time period. Options to extend are considered by management in determining the contractual term.

The key inputs to the DCF model are (1) probability of default, (2) loss given default, (3) prepayment and curtailment rates, (4) reasonable and supportable economic forecasts, (5) forecast reversion period, (6) expected recoveries on charged off loans, and (7) discount rate.

Probability of Default (PD)

In order to incorporate economic factors into forecasting within the DCF model, management elected to use the Loss Driver method to generate the PD rate inputs. The Loss Driver method analyzes how one or more economic factors change the default rate using a statistical regression analysis. Management selected economic factors that had strong correlations to historical default rates.

Loss Given Default (LGD)

Management elected to use the Frye Jacobs parameter for determining the LGD input, which is an estimation technique that derives a LGD input from segment specific risk curves that correlates LGD with PD.

Prepayment and Curtailment Rates

Prepayment Rates: Loan level transaction data is used to calculate a semi-annual prepayment rate. Those semi-annual rates are annualized and the average of the annualized rates is used in the DCF calculation for fixed payment or term loans. Rates are calculated for each pool.

Curtailment Rates: Loan level transaction data is used to calculate annual curtailment rates using any available historical loan level data. The average of the historical rates is used in the DCF model for interest only payment or line of credit type loans. Rates are calculated for each pool.

Reasonable and Supportable Forecasts

The forecast data used in the DCF model is obtained via a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario.

Forecast Reversion Period

Management uses forecasts to predict how economic factors will perform and has determined to use a four quarter forecast period as well as a four quarter straight-line reversion period to historical averages (also commonly referred to as the mean reversion period).

Expected Recoveries on Charged-off Loans

Management performs an analysis to estimate recoveries that could be reasonably expected based on historical experience in order to account for expected recoveries on loans that have already been fully charged-off and are not included in the ACL calculation.

Discount Rate

The effective interest rate of the underlying loans and leases of the Company serves as the discount rate applied to the expected periodic cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

Individual Evaluation

Management evaluates individual instruments for expected credit losses when those instruments do not share similar risk characteristics with instruments evaluated using a collective (pooled) basis. Instruments will not be included in both collective and individual analyses. Individual analysis will establish a specific reserve for instruments in scope.

Management considers a financial asset as collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral, based on management’s assessment as of the reporting date.

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $7.8 million at September 30, 2023 and is included within Accrued interest receivable. This amount is excluded from the estimate of expected credit losses.

Reserve for Unfunded Commitments

The Company maintains a reserve in other liabilities for off-balance sheet credit exposures such as unfunded commitments that are currently unfunded in categories with historical loss experience. Management calculates funding rates annually using loan level data history at the portfolio level. The applicable pool level loss rates for the is then applied to calculate the reserve for unfunded commitments liability each period.

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Acquisition of HV Bancorp, Inc.

9 Months Ended

Sep. 30, 2023

Acquisition of HV Bancorp, Inc. [Abstract]

Acquisition of HV Bancorp, Inc.

Note 2 – Acquisition of HV Bancorp, Inc.

In the fourth quarter of 2022, the Company announced the signing of a definitive merger agreement to acquire 100% of the outstanding equity interest of HV Bancorp, Inc. (“HVBC”) for $30.50 per share in cash and stock. HVBC was a Pennsylvania corporation that conducted its business primarily through its wholly owned subsidiary Huntingdon Valley Bank (“HVB”), which operated from a main office in Doylestown, Pennsylvania, and had five service branches, four mortgage production office and one business banking office.

The transaction closed on June 16, 2023, with HVB having been merged into First Citizens Community Bank, with First Citizens Community Bank as the surviving entity. The acquisition established the Company’s presence in the Montgomery, Bucks and Philadelphia counties markets.

Under the terms of the merger agreement, the Company acquired all of the outstanding shares of HVBC for a total purchase price of approximately $76,665,000.  As a result of the acquisition, the Company issued 693,858 common shares and $16.5 million in cash to the former shareholders of HVBC. The shares were issued with a value of $86.67 per share, which was based on the closing price of the Company’s stock on June 16, 2023.

The following table summarizes the purchase of HVBC as of June 16, 2023:

(In Thousands, Except Per Share Data)
Purchase Price Consideration in Common Stock
Citizens Financial Services, Inc. shares issued		693,858
Value assigned to Citizens Financial Services, Inc. common share	$	86.67
Purchase price assigned to HVBC common shares exchanged for Citizens Financial Services, Inc.				$	60,137
Purchase Price Consideration - Cash for Common Stock
Purchase price assigned to HVBC’s common shares exchanged for cash					13,112
Purchase Price Related to Cash Payout of Stock Options					3,416
Total Purchase Price					76,665
Net Assets Acquired:
HVBC shareholders’ equity	$	40,630
Adjustments to reflect assets acquired at fair value:
Investments		31
Loans
Interest rate		(24,097	)
General credit		(1,834	)
Credit - PCD Loans		(2,042	)
Core deposit intangible		2,770
Owned premises		67
Other assets		(193	)
Deferred tax assets		3,737
Adjustments to reflect liabilities acquired at fair value:
Time deposits		586
Borrowings		3,017
Other liabilities		611
					23,283
Goodwill resulting from merger				$	53,382

The following condensed statement reflects the amounts recognized as of the acquisition date for each major class of asset acquired and liability assumed:

(In Thousands, Except Per Share Data)
Total purchase price		76,665
Fair value of assets acquired
Cash and due from banks	18,017
Investment securities	79,248
Loans held for sale	10,750
Loans	475,338
Premises and equipment	2,310
Intangible assets	2,972
Bank owned life insurance	10,387
Interest receivable	2,226
Deferred taxes	8,392
Other assets	18,213
Total assets acquired	627,853
Fair value of liabilities assumed
Deposits	533,364
Borrowings	58,647
Accrued interest payable	885
Other liabilities	11,674
Total liabilities assumed	604,570
Total fair value of identifiable net assets		23,283
Goodwill resulting from merger		53,382

The Company determined that this acquisition constitutes a business combination and therefore was accounted for using the acquisition method of accounting. Accordingly, as of the date of the acquisition, the Company recorded the assets acquired, liabilities assumed and consideration paid at fair value. The $53.4 million excess of the consideration paid over the fair value of assets acquired was recorded as goodwill and is not amortizable or deductible for tax purposes. The amount of goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company with HVBC.

The fair value of the 693,858 common shares issued was determined based on the $86.67 closing market price of the Company’s common shares on the acquisition date, June 16, 2023. While the valuation of the acquired assets and liabilities is substantially complete, fair value estimates are subject to adjustment during the provisional period, which may last up to twelve months subsequent to the acquisition date. During this period, the Company may obtain additional information to refine the valuations and adjust the recorded fair value, although such adjustments are not expected to be significant. Valuations subject to adjustments include, but are not limited to, the fair value of acquired loans, deposits, land and building, core deposit intangible and other assets and liabilities.

The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed. The Company used an independent valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities.

• Cash and due from banks - The estimated fair value was determined to approximate the carrying amount of these assets.

• Investment securities - The estimated fair value of the investment portfolio was based on quoted market prices, dealer quotes, and pricing obtained from independent pricing services.

• Loans - The estimated fair value of loans were based on a discounted cash flow methodology applied on a pooled basis for nonpurchased credit-deteriorated (“non-PCD”) loans, accruing purchased credit-deteriorated loans and on an individual basis for nonaccruing purchased credit-deteriorated (“PCD”) loans. The valuation considered underlying characteristics including loan type, term, rate, payment schedule and credit rating. The discounted cash flow methodology involved assumptions and judgements as to credit risk, expected lifetime losses, environmental factors, collateral values, discount rates, expected payments and expected prepayments.

• Premises and equipment - The estimated fair value of land and buildings were determined by independent market-based appraisals.

• Core deposit intangible - The core deposit intangible was valued utilizing a discounting cash flow method approach, which recognizes the cost savings represented by the expense of maintaining the core deposit base (net of deposit fee income) versus the cost of an alternative funding source. The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.

• Time deposits - The estimated fair value of time deposits was determined using a discounted cash flow approach incorporating a discount rate equal to current market interest rates offered on time deposits with similar terms and maturities.

• Borrowings - The estimated fair value of short-term borrowings was determined to approximate stated value. The estimated fair value of long-term borrowings from the FHLB were determined using a discounted cash flow approach incorporating a discount rate equal to current market interest rates offered on borrowings with similar terms and maturities. Subordinated debentures were valued using a discounted cash flow approach incorporating a discount rate that incorporated similar terms, maturity and credit rating.

Accounting for Acquired Loans

Acquired loans are classified into two categories: PCD loans and non-PCD loans. PCD loans are defined as a loan or group of loans that have experienced more than insignificant credit deterioration since origination. Non-PCD loans will have an allowance established on acquisition date, which is recognized as an expense through provision for credit losses. For PCD loans, an allowance is recognized on day 1 by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no provision for credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan.

A Day 1 allowance for credit losses on non-PCD loans of $4.6 million was recorded through the provision for credit losses within the Consolidated Statements of Income. At the date of acquisition, of the $506.9 million of loans acquired from HVB, $18.0 million, or 3.6%, of HVB’s loan portfolio, was accounted for as PCD loans.

The following table provides details related to the fair value of acquired PCD loans (in thousands):

	Unpaid principal balance		PCD Allowance for Credit Loss at Acquisition			(Discount) Premium on Acquired Loans			Fair Value of PCD Loans at Acquisition
Real estate loans:
Mortgages	$	2,398	$	(108	)	$	-		$	2,290
Home Equity		34		-			(4	)		30
Commercial		4,774		(39	)		(507	)		4,228
Construction		4,278		(37	)		(293	)		3,948
Consumer		1,343		(677	)		(271	)		395
Other commercial loans		5,214		(828	)		(48	)		4,338
	$	18,041	$	(1,689	)	$	(1,123	)	$	15,229

The following table provides details related to the fair value and Day 1 provision related to the acquired non-PCD loans (in thousands):

	Unpaid principal balance		(Discount)Premium on Acquired Loans			Fair Value of Non-PCD Loans at Acquisition		Day 1 Provision for Credit Losses- Non-PCD Loans
Real estate loans:
Mortgages	$	155,799	$	(17,506	)	$	138,293	$	1,015
Home Equity		2,165		(55	)		2,110		15
Commercial		203,638		(9,226	)		194,412		1,968
Construction		76,703		(1,420	)		75,283		747
Consumer		2,794		(222	)		2,572		159
Other commercial loans		47,753		(314	)		47,439		687
	$	488,852	$	(28,743	)	$	460,109	$	4,591

Amounts recognized separately from the acquisition include primarily legal fees, investment banking fees, system conversion costs, severance costs and contract termination costs. These costs were included in merger and acquisition expenses within non-interest expenses on the Consolidated Statement of Income and amounted to approximately $9,269,000 for the nine months ended September 30, 2023.

Results of operations for HVBC prior to the acquisition date are not included in the Consolidated Statement of Income for the quarter ended September 30, 2023.

The following table presents financial information regarding the former HVBC operations included in our Consolidated Statement of Income from the date of acquisition through September 30, 2023 under the column “Actual from Acquisition Date through September 30, 2023”.  In addition, the following table presents unaudited pro forma information as if the acquisition of HVBC had occurred on January 1, 2022 under the “Pro Forma” columns.  The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited proforma information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings as a result of the integration and consolidation of the acquisition.  Merger and acquisition integration costs and amortization of fair value adjustments are included in the numbers below.

	Actual from Acquisition Date Through September 30, 2023		Unaudited Pro Forma for
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
(In Thousands, Except Per Share Data)			2023		2022		2023		2022
Net interest income	$	8,046	$	21,775	$	25,369	$	68,025	$	70,329
Non-interest income		600		3,797		4,372		10,502		14,638
Net income		3,140		7,061		9,070		8,008		22,652
Pro forma earnings per share:
Basic			$	1.31	$	1.93		1.61	$	4.82
Diluted			$	1.31	$	1.93	$	1.61	$	4.82

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Revenue Recognition

9 Months Ended

Sep. 30, 2023

Revenue Recognition [Abstract]

Revenue Recognition

Note 3 – Revenue Recognition

In accordance with ASC 606, Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, loan servicing, gains on loans sold, earnings on bank owned life insurances, gains and losses from derivative instruments and changes in the fair of loans held for sale  are not within the scope of ASC 606. The main types of noninterest income within the scope of the standard are as follows:

• Service charges on deposit accounts – The Company has contracts with its deposit customers where fees are charged if certain parameters are not met. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific transactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time upon the completion of the requested service/transaction.

• Trust fees – Typical contracts for trust services are based on a fixed percentage of the assets earned ratably over a defined period and billed on a monthly basis. Fees charged to customers’ accounts are recognized as revenue over the period during which the Company fulfills its performance obligation under the contract (i.e., holding client asset in a managed fiduciary trust account). For these accounts, the performance obligation of the Company is typically satisfied by holding and managing the customer’s assets over time. Other fees related to specific customer requests are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time, upon completion of the requested service/transaction.

• Gains and losses on sale of other real estate owned – Gains and losses are recognized at the completion of the property sale when the buyer obtains control of the real estate and all of the performance obligations of the Company have been satisfied. Evidence of the buyer obtaining control of the asset include transfer of the property title, physical possession of the asset, and the buyer obtaining control of the risks and rewards related to the asset. In situations where the Company agrees to provide financing to facilitate the sale, additional analysis is performed to ensure that the contract for sale identifies the buyer and seller, the asset to be transferred, payment terms, and that the contract has a true commercial substance and that collection of amounts due from the buyer are reasonable. In situations where financing terms are not reflective of current market terms, the transaction price is discounted impacting the gain/loss and the carrying value of the asset.

• Brokerage and insurance – Fees includes commissions from the sales of investments and insurance products recognized on a trade date basis as the performance obligation is satisfied at the point in time in which the trade is processed. Additional fees are based on a percentage of the market value of customer accounts and billed on a monthly or quarterly basis. The Company’s performance obligation under the contracts with certain customers is generally satisfied through the passage of time as the Company monitors and manages the assets in the customer’s portfolio and is not dependent on certain return or performance level of the customer’s portfolio. Fees for these services are billed monthly and are recorded as revenue at the end of the month for which the wealth management service has been performed. Other performance obligations (such as the delivery of account statements to customers) are generally considered immaterial to the overall transaction price.

The following table depicts the disaggregation of revenue derived from contracts with customers to depict the nature, amount, timing, and uncertainty of revenue and cash flows for the three and nine months ended September 30, 2023 and 2022 (in thousands). All revenue in the table below relates to goods and services transferred at a point in time.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Revenue stream	2023		2022		2023		2022
Service charges on deposit accounts
Overdraft fees	$	408		374	$	1,138	$	993
Statement fees		47		51		153		158
Interchange revenue		1,008		953		2,469		2,495
ATM income		35		39		107		194
Other service charges		194		92		329		241
Total Service Charges		1,692		1,509		4,196		4,081
Trust		172		187		583		620
Brokerage and insurance		473		446		1,429		1,428
Other		260		125		494		387
Total	$	2,597	$	2,267	$	6,702	$	6,516

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Earnings per Share

9 Months Ended

Sep. 30, 2023

Earnings per Share [Abstract]

Earnings per Share

Note 4 – Earnings per Share

The following table sets forth the computation of earnings per share.

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net income applicable to common stock	$	7,548,000	$	7,544,000	$	10,271,000	$	21,185,000
Basic earnings per share computation
Weighted average common shares outstanding		4,699,952		4,006,794		4,275,259		4,009,855
Earnings per share - basic	$	1.61	$	1.88	$	2.40	$	5.28
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,699,952		4,006,794		4,275,259		4,009,855
Add: Dilutive effects of restricted stock		-		234		-		2
Weighted average common shares outstanding for dilutive earnings per share		4,699,952		4,007,028		4,275,259		4,009,857
Earnings per share - diluted	$	1.61	$	1.88	$	2.40	$	5.28

For the three months ended September 30, 2023 and 2022, there were 5,535 and 356 shares, respectively, related to the restricted stock plan that were excluded from the diluted earnings per share calculations since they were anti-dilutive. These anti-dilutive shares had per share prices ranging from $44.93-$83.38 for the three month period ended September 30, 2023 and per share prices ranging from $57.36-$74.27 for the three month period ended September 30, 2022. For the nine months ended September 30, 2023 and 2022, 5,535 and 5,811 shares, respectively, related to the restricted stock plan were excluded from the diluted earnings per share calculations since they were anti-dilutive. These anti-dilutive shares had prices ranging from $44.93-$83.38 for the nine month period ended September 30, 2023 and prices ranging from $44.93-$74.27 for the nine month period ended September 30, 2022.

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Investments

9 Months Ended

Sep. 30, 2023

Investments [Abstract]

Investments

Note 5 – Investments

The amortized cost, gross unrealized gains and losses, and fair value of investment securities at September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses			Fair Value
Available-for-sale securities:
U.S. agency securities	$	71,567	$	-	$	(7,920	)	$	63,647
U.S. treasury securities		160,426		-		(12,995	)		147,431
Obligations of state and political subdivisions		108,569		5		(12,552	)		96,022
Corporate obligations		13,381		229		(1,490	)		12,120
Mortgage-backed securities in government sponsored entities		115,945		9		(17,367	)		98,587
Total available-for-sale securities	$	469,888	$	243	$	(52,324	)	$	417,807

December 31, 2022
Available-for-sale securities:
U.S. agency securities	$	78,556	$	-	$	(7,879	)	$	70,677
U.S. treasury securities		162,236		-		(13,666	)		148,570
Obligations of state and political subdivisions		120,562		35		(10,297	)		110,300
Corporate obligations		10,335		-		(952	)		9,383
Mortgage-backed securities in government sponsored entities		115,304		15		(14,743	)		100,576
Total available-for-sale securities	$	486,993	$	50	$	(47,537	)	$	439,506

The following table shows the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time, which individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022 (in thousands). As of September 30, 2023, the Company owned 338 securities whose fair value was less than their cost basis.

September 30, 2023	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. agency securities	$	-	$	-		$	61,646	$	(7,920	)	$	61,646	$	(7,920	)
U.S. treasury securities		-		-			147,431		(12,995	)		147,431		(12,995	)
Obligations of state and  political subdivisions		4,731		(130	)		89,094		(12,422	)		93,825		(12,552	)
Corporate obligations		1,458		(289	)		8,102		(1,201	)		9,560		(1,490	)
Mortgage-backed securities in government sponsored entities		9,207		(293	)		86,820		(17,074	)		96,027		(17,367	)
Total securities	$	15,396	$	(712	)	$	393,093	$	(51,612	)	$	408,489	$	(52,324	)

December 31, 2022
U.S. agency securities	$	39,729	$	(1,892	)	$	30,948	$	(5,987	)	$	70,677	$	(7,879	)
U.S. treasury securities		32,673		(1,337	)		115,897		(12,329	)		148,570		(13,666	)
Obligations of states and political subdivisions		66,725		(4,887	)		35,782		(5,410	)		102,507		(10,297	)
Corporate obligations		2,165		(165	)		6,218		(787	)		8,383		(952	)
Mortgage-backed securities in government sponsored entities		40,270		(3,367	)		57,319		(11,376	)		97,589		(14,743	)
Total securities	$	181,562	$	(11,648	)	$	246,164	$	(35,889	)	$	427,726	$	(47,537	)

Allowance for Credit Losses – Available for Sale Securities

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

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

Accrued interest receivable on available-for-sale debt securities totaled $2,145,000 at September 30, 2023 and is included within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

Credit Losses on Investment Securities – Prior to adopting ASU 2016-13

The Company adopted ASU No. 2016-13 effective January 1, 2023. Financial statement amounts related to Investment Securities recorded as of December 31, 2022 and for the periods ending December 31, 2022 are presented in accordance with the accounting policies described in the following sections. The following sections were carried forward from the Annual Report on Form 10-K for the year ended December 31, 2022.

Securities are evaluated on at least a quarterly basis, and more frequently when market conditions warrant such an evaluation, to determine whether a decline in their value is other than temporary. To determine whether a loss is other than temporary, management utilizes criteria such as the reasons underlying the decline, the magnitude and duration of the decline, and whether or not management intends to sell or expects that it is more likely than not that it will be required to sell the security prior to an anticipated recovery of the fair value. The term “other than temporary” is not intended to indicate that the decline is permanent but indicates that the prospects for a near-term recovery of value are not necessarily favorable or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss), and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive (loss) income.

Proceeds from sales of securities available-for-sale for the nine months ended September 30, 2023 and 2022 were $86,504,000 and $4,492,000, respectively. Proceeds from sales of securities available-for-sale for the three months ended September 30, 2022 were $4,492,000. There were no sales of available for sale securities during the three months ended September 30, 2023.

The gross gains and losses were as follows (in thousands):

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2023			2022				2023				2022
Gross gains on available for sale securities		$	-		$	-			$	38			$	-
Gross losses on available for sale securities			-			(6	)			(89	)			(6	)
Net gains		$	-		$	(6	)		$	(51	)		$	(6	)

The following table presents the net gains (losses) on the Company’s equity investments recognized in earnings during the three and nine month periods ended September 30, 2023 and 2022, and the portion of unrealized gains for the period that relates to equity investments held at September 30, 2023 and 2022 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
Equity securities	2023		2022			2023			2022
Net gains (losses) recognized in equity securities during the period	$	69	$	(19	)	$	(223	)	$	(198	)
Less: Net gains realized on the sale of equity securities during the period		9		4			14			4
Net unrealized  gains (losses)	$	60	$	(23	)	$	(237	)	$	(202	)

Investment securities with an approximate carrying value of $353.2 million and $311.8 million at September 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds, certain other deposits and borrowing lines.

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

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	44,257	$	43,316
Due after one year through five years		170,521		155,161
Due after five years through ten years		98,835		86,730
Due after ten years		156,275		132,600
Total	$	469,888	$	417,807

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Loans

9 Months Ended

Sep. 30, 2023

Loans [Abstract]

Loans

Note 6 – Loans

The Company grants commercial, industrial, agricultural, residential, and consumer loans primarily to customers throughout north central, central and south central Pennsylvania, southern New York and Wilmington and Dover, Delaware. The recently completed HVBC acquisition has expanded our lending market further into southeast Pennsylvania, including Montgomery, Bucks and Philadelphia Counties as well as Burlington County, New Jersey. Although the Company had a diversified loan portfolio at September 30, 2023 and December 31, 2022, a substantial portion of its debtors’ ability to honor their contracts is dependent on the economic conditions within these regions. The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for credit losses - loans as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023		December 31, 2022
Real estate loans:
Residential	$	356,381	$	210,213
Commercial		1,081,123		876,569
Agricultural		314,164		313,614
Construction		175,320		80,691
Consumer		115,753		86,650
Other commercial loans		120,347		63,222
Other agricultural loans		26,648		34,832
State and political subdivision loans		56,660		59,208
Total		2,246,396		1,724,999
Allowance for credit losses - loans		21,455		18,552
Net loans	$	2,224,941	$	1,706,447

Allowance for Credit Losses, effective January 1, 2023

As discussed in Note 1 “Basis of Presentation”, the Company adopted CECL effective January 1, 2023. CECL requires estimated credit losses on loans to be determined based on an expected life of loan model, as compared to an incurred loss model (in effect for periods prior to 2023). Accordingly, allowance for losses disclosures subsequent to January 1, 2023 are not always comparable to prior dates. In addition, certain new disclosures required under CECL are not applicable to prior periods. As a result, the following tables present disclosures separately for each period, where appropriate. New disclosures required under CECL are only shown for the current period and are noted. See Note 1, “Basis of Presentation”, for a summary of the impact of adopting CECL on January 1, 2023.

Under CECL, loans evaluated for impairment consist of non-accrual commercial loans and recently modified loans that were experiencing financial difficulty at the time of the modification. Under the incurred loss model in effect prior to the adoption of CECL, loans evaluated individually for impairment were referred to as impaired loans.

The allowance for credit losses related to loans consists of loans evaluated collectively and individually for expected credit losses. It represents an estimate of 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 allowance for credit losses for off-balance sheet credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other off-balance sheet credit exposures. The total allowance for credit losses 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 allowance for credit losses as of September 30, 2023 (in thousands):

	September 30, 2023
Allowance for Credit Losses - Loans	$	21,455
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,265
Total allowance for credit losses	$	22,720

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2023 (in thousands):

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off- Balance Sheet credit Exposure			Total
Balance at June 30, 2023	$	21,652		$	1,391		$	23,043
Loans charge-off		(808	)		-			(808	)
Recoveries of loans previously charged-off		10			-			10
Net loans charged-off		(798	)		-			(798	)
Provision for credit losses		601			(126	)		475
Balance at September 30, 2023	$	21,455		$	1,265		$	22,720

	Allowance for Credit Losses -Loans			Allowance for Credit Losses - Off- Balance Sheet credit Exposure		Total
Balance at December 31, 2022	$	18,552		$	165	$	18,717
Impact of adopting CECL		(3,300	)		1,064		(2,236	)
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(819	)		-		(819	)
Recoveries of loans previously charged-off		41			-		41
Net loans charged-off		(778	)		-		(778	)
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		701			36		737
Balance at September 30, 2023	$	21,455		$	1,265	$	22,720

The following tables presents the activity in the allowance for credit losses – loans, by portfolio segment, for the three and nine months ended September 30, 2023 (in thousands).

	For the three months ended September 30, 2023
	Balance at June 30, 2023		Charge-offs			Recoveries		Provision			Balance at September 30, 2023
Real estate loans:
Residential	$	2,675	$	-		$	-	$	(110	)	$	2,565
Commercial		9,274		-			2		(91	)		9,185
Agricultural		3,579		-			-		(104	)		3,475
Construction		1,667		-			-		166			1,833
Consumer		1,259		(45	)		3		503			1,720
Other commercial loans		2,477		(763	)		5		353			2,072
Other agricultural loans		268		-			-		(39	)		229
State and political subdivision loans		52		-			-		(4	)		48
Unallocated		401		-			-		(73	)		328
Total	$	21,652	$	(808	)	$	10	$	601		$	21,455

	For the nine months ended September 30, 2023
	Balance at December 31, 2022		Impact of adopting CECL			Allowance for credit loss on PCD acquired loans		Charge-offs			Recoveries		Provision			Balance at September 30, 2023
Real estate loans:
Residential	$	1,056	$	79		$	108	$	(1	)	$	-	$	1,323		$	2,565
Commercial		10,120		(3,070	)		39		-			2		2,094			9,185
Agricultural		4,589		(1,145	)		37		-			-		(6	)		3,475
Construction		801		(103	)				-			-		1,135			1,833
Consumer		135		1,040			677		(55	)		30		(107	)		1,720
Other commercial loans		1,040		(328	)		828		(763	)		9		1,286			2,072
Other agricultural loans		489		(219	)		-		-			-		(41	)		229
State and political subdivision loans		322		(280	)		-		-			-		6			48
Unallocated		-		726			-		-			-		(398	)		328
Total	$	18,552	$	(3,300	)	$	1,689	$	(819	)	$	41	$	5,292		$	21,455

The following table presents the allowance for credit losses – loans and amortized cost basis of loans under CECL methodology as of September 30, 2023 (in thousands):

	Allowance for Credit Losses - Loans						Loans
September 30, 2023	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,484	$	81	$	2,565	$	355,129	$	1,252	$	356,381
Commercial		9,030		155		9,185		1,078,360		2,763		1,081,123
Agricultural		3,456		19		3,475		310,507		3,657		314,164
Construction		1,547		286		1,833		172,963		2,357		175,320
Consumer		1,316		404		1,720		114,613		1,140		115,753
Other commercial loans		1,697		375		2,072		118,419		1,928		120,347
Other agricultural loans		229		-		229		26,349		299		26,648
State and political subdivision loans		48		-		48		56,660		-		56,660
Unallocated		328		-		328		-		-		-
Total	$	20,135	$	1,320	$	21,455	$	2,233,000	$	13,396	$	2,246,396

Allowance for Credit Losses, prior to January 1, 2023

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to net loans. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in unfunded commitments and letters of credit, and is recorded in other liabilities on the consolidated balance sheet. The allowance for credit losses 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 allowance for credit losses as of December 31, 2022 (in thousands):

	December 31, 2022
Allowance for loan Losses	$	18,552
Reserve for unfunded commitments		165
Total allowance for credit losses	$	18,717

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2022 (in thousands):

	Allowance for Credit Losses - Loans			Reserve for unfunded commitments		Total
Balance at June 30, 2022	$	17,570		$	165	$	17,735
Loans charge-off		(13	)		-		(13	)
Recoveries of loans previously charged-off		9			-		9
Net loans charged-off		(4	)		-		(4	)
Provision for credit losses		725			-		725
Balance at September 30, 2022	$	18,291		$	165	$	18,456
Balance at December 31, 2021	$	17,304		$	165	$	17,469
Loans charge-off		(464	)		-		(464	)
Recoveries of loans previously charged-off		26			-		26
Net loans charged-off		(438	)		-		(438	)
Provision for credit losses		1,425			-		1,425
Balance at September 30, 2022	$	18,291		$	165	$	18,456

The following table presents the activity in the allowance for loan losses, by portfolio segment, for the three and nine months ended September 30, 2022 (in thousands).

	For the three months ended September 30, 2022
	Balance at June 30, 2022			Charge-offs			Recoveries		Provision			Balance at September 30, 2022
Real estate loans:
Residential	$	1,015		$	-		$	-	$	(10	)	$	1,005
Commercial		9,216			-			-		721			9,937
Agricultural		4,484			-			-		54			4,538
Construction		563			-			-		115			678
Consumer		464			(13	)		5		(224	)		232
Other commercial loans		1,173			-			4		(784	)		393
Other agricultural loans		446			-			-		913			1,359
State and political subdivision loans		323			-			-		2			325
Unallocated		(114	)		-			-		(62	)		(176	)
Total	$	17,570		$	(13	)	$	9	$	725		$	18,291

	For the nine months ended September 30, 2022
	Balance at December 31, 2021		Charge-offs			Recoveries		Provision			Balance at September 30, 2022
Real estate loans:
Residential	$	1,147	$	-		$	-	$	(142	)	$	1,005
Commercial		8,099		-			-		1,838			9,937
Agricultural		4,729		-			-		(191	)		4,538
Construction		434		-			-		244			678
Consumer		262		(30	)		15		(15	)		232
Other commercial loans		1,023		(434	)		11		(207	)		393
Other agricultural loans		558		-			-		801			1,359
State and political subdivision loans		281		-			-		44			325
Unallocated		771		-			-		(947	)		(176	)
Total	$	17,304	$	(464	)	$	26	$	1,425		$	18,291

The following table presents loans and their related allowance for loan losses, by portfolio segment, as of December 31, 2022 (in thousands):

	Allowance for loan losses						Loans
	Collectively evaluated for impairment		Individually evaluated for impairment		Total allowance for loan losses		Collectively evaluated for impairment		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Total Loans
Real estate loans:
Residential	$	4	$	1,052	$	1,056	$	209,869	$	335	$	9	$	210,213
Commercial		57		10,063		10,120		869,038		5,675		1,856		876,569
Agricultural		24		4,565		4,589		306,793		5,380		1,441		313,614
Construction		-		801		801		80,691		-		-		80,691
Consumer		4		131		135		86,646		4		-		86,650
Other commercial loans		13		1,027		1,040		63,120		102		-		63,222
Other agricultural loans		-		489		489		34,359		473		-		34,832
State and political subdivision loans		-		322		322		59,208		-		-		59,208
Total	$	102	$	18,450	$	18,552	$	1,709,724	$	11,969	$	3,306	$	1,724,999

Non-performing Loans

Non-performing loans include those loans that are considered nonaccrual, described in more detail below and all loans past due 90 or more days. Loans are considered for non-accrual status upon reaching 90 days delinquency, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans, or if full payment of principal and interest is not expected. Additionally, if management is made aware of other information including bankruptcy, repossession, death, or legal proceedings, the loan may be placed on non-accrual status. If a loan is 90 days or more past due and is well secured and in the process of collection, it may still be considered accruing.

The following table reflects the non-performing loan receivables, as well as those on non-accrual status as of September 30, 2023 and December 31, 2022, respectively. The balances are presented by class of loan receivable (in thousands):

	September 30, 2023								December 31, 2022
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	318	$	2,517	$	-	$	2,835	$	562	$	-	$	562
Home Equity		-		121		-		121		29		-		29
Commercial		260		1,337		-		1,597		2,778		-		2,778
Agricultural		182		2,803		-		2,985		3,222		-		3,222
Construction		2,357		-		-		2,357		-		-		-
Consumer		1,007		10		8		1,025		-		7		7
Other commercial loans		526		1,402		-		1,928		62		-		62
Other agricultural loans		-		299		-		299		285		-		285
	$	4,650	$	8,489	$	8	$	13,147	$	6,938	$	7	$	6,945

As of September 30, 2023, there were $8.5 million of non-accrual loans that did not have a related allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charge down to the realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

The following table presents, by class of loans and leases, the amortized cost basis of collateral-dependent nonaccrual loans and leases and type of collateral as of  September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	2,835	$	-	$	-	$	2,835
Home Equity		121		-		-		121
Commercial		1,597		-		-		1,597
Agricultural		2,985		-		-		2,985
Construction		2,357		-		-		2,357
Consumer		-		-		1,017		1,017
Other commercial loans		-		1,928		-		1,928
Other agricultural loans		-		299		-		299
	$	9,895	$	2,227	$	1,017	$	13,139

December 31, 2022
Real estate loans:
Mortgages	$	562	$	-	$	-	$	562
Home Equity		29		-		-		29
Commercial		2,778		-		-		2,778
Agricultural		3,222		-		-		3,222
Construction		-		-		-		-
Consumer		-		-		-		-
Other commercial loans		-		62		-		62
Other agricultural loans		-		285		-		285
	$	6,591	$	347	$	-	$	6,938

Credit Quality Information

For commercial real estate, agricultural real estate, construction, other commercial, other agricultural, and state and political subdivision loans, management uses a internal risk rating system to monitor and assess credit quality. During the third quarter of 2023, this rating system was expanded from a nine grade rating system to a ten grade rating system. The first six categories under the revised system are considered not criticized and are aggregated as “Pass” rated. Under the prior system, the first five categories were considered not criticized and aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The definitions of each rating are defined below:

• Pass (Grades 1-6) – These loans are to customers with credit quality ranging from an acceptable to very high quality and are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

• Special Mention (Grade 7) – This loan grade is in accordance with regulatory guidance and includes loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

• Substandard (Grade 8) – This loan grade is in accordance with regulatory guidance and includes loans that have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

• Doubtful (Grade 9) – This loan grade is in accordance with regulatory guidance and includes loans that have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

• Loss (Grade 10) – This loan grade is in accordance with regulatory guidance and includes loans that are considered uncollectible, or of such value that continuance as an asset is not warranted.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay the loan as agreed, the Company’s loan rating process includes several layers of internal and external oversight. The Company’s loan officers are responsible for the timely and accurate risk rating of the loans in each of their portfolios at origination and on an ongoing basis under the supervision of management.  All commercial, agricultural and state and political relationships over $500,000 are reviewed annually to ensure the appropriateness of the loan grade. In addition, the Company engages an external consultant on at least an annual basis to: 1) review a minimum of 50% of the dollar volume of the commercial, agricultural and municipal loan portfolios on an annual basis, 2) review a sample of new loans originated for over $1.0 million in the last year, 3) review a sample of borrowers with commitments greater than or equal to $1.0 million,  4) review selected loan relationships over $750,000 which are over 30 days past due or classified Special Mention, Substandard, Doubtful, or Loss, and 5) such other loans which management or the consultant deems appropriate.

The following tables represent credit exposures by internally assigned grades, by origination year, as of September 30, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	65,893	$	333,600	$	215,198	$	123,779	$	82,640	$	195,576	$	29,476	$	1,166	$	1,047,328
Special Mention		-		8,824		3,412		1,563		7,659		9,391		123		-		30,972
Substandard		-		233		6		-		161		1,686		729		8		2,823
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	65,893	$	342,657	$	218,616	$	125,342	$	90,460	$	206,653	$	30,328	$	1,174	$	1,081,123
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	16,361	$	54,306	$	29,828	$	32,559	$	26,760	$	123,598	$	12,926	$	1,689	$	298,027
Special Mention		149		1,915		1,211		-		-		6,702		94		-		10,071
Substandard		-		-		-		-		103		5,645		75		243		6,066
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	16,510	$	56,221	$	31,039	$	32,559	$	26,863	$	135,945	$	13,095	$	1,932	$	314,164
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	37,135	$	92,252	$	35,486	$	-	$	-	$	385	$	-	$	-	$	165,258
Special Mention		2,130		1,165		4,410		-		-		-		-		-		7,705
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	39,265	$	93,417	$	42,253	$	-	$	-	$	385	$	-	$	-	$	175,320
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	5,227	$	12,057	$	9,234	$	5,487	$	5,291	$	4,213	$	71,633	$	99	$	113,241
Special Mention		-		81		1,555		216		286		22		1,214		1,708		5,082
Substandard		-		100		-		-		186		1,202		294		-		1,782
Doubtful		-		-		-		-		-		-		218		24		242
Total	$	5,227	$	12,238	$	10,789	$	5,703	$	5,763	$	5,437	$	73,359	$	1,831	$	120,347
Current period gross charge-offs	$	-	$	-	$	-	$	763	$	-	$	-	$	-	$	-	$	763
Other agricultural loans										-
Risk Rating
Pass	$	3,464	$	1,645	$	7,005	$	1,154	$	666	$	521	$	10,554	$	-	$	25,009
Special Mention		-		491		223		45		8		42		500		-		1,309
Substandard		-		-		-		-		6		265		25		34		330
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,464	$	2,136	$	7,228	$	1,199	$	680	$	828	$	11,079	$	34	$	26,648
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	1,426	$	14,207	$	10,984	$	4,363	$	2	$	25,678	$	-	$	-	$	56,660
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,426	$	14,207	$	10,984	$	4,363	$	2	$	25,678	$	-	$	-	$	56,660
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	129,506	$	508,067	$	307,735	$	167,342	$	115,359	$	349,971	$	124,589	$	2,954	$	1,705,523
Special Mention		2,279		12,476		10,811		1,824		7,953		16,157		1,931		1,708		55,139
Substandard		-		333		2,363		-		456		8,798		1,123		285		13,358
Doubtful		-		-		-		-		-		-		218		24		242
Total	$	131,785	$	520,876	$	320,909	$	169,166	$	123,768	$	374,926	$	127,861	$	4,971	$	1,774,262

Information presented in the table above is not required for periods prior to adoption of CECL. The following table presents the most comparable information for the prior period, internal credit risk ratings for the indicated loan class segments as of December 31, 2022 (in thousands).

December 31, 2022	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	842,912	$	28,047	$	5,610	$	-	$	-	$	876,569
Agricultural		295,443		11,960		6,211		-		-		313,614
Construction		75,703		2,642		2,346		-		-		80,691
Other commercial loans		59,902		2,953		337		30		-		63,222
Other agricultural loans		32,708		1,307		817		-		-		34,832
State and political
subdivision loans		59,208		-		-		-		-		59,208
Total	$	1,365,876	$	46,909	$	15,321	$	30	$	-	$	1,428,136

For residential real estate mortgage loans, home equity loans, and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail above, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loan classes based on payment activity, by origination year, as of September 30, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	15,478	$	89,640	$	48,451	$	30,300	$	19,086	$	101,162	$	-	$	-	$	304,117
Nonperforming		-		406		771		399		-		1,259		-		-		2,835
Total	$	15,478	$	90,046	$	49,222	$	30,699	$	19,086	$	102,421	$	-	$	-	$	306,952
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity										-
Payment Performance
Performing	$	3,188	$	3,105	$	1,980	$	2,142	$	2,593	$	8,412	$	27,613	$	275	$	49,308
Nonperforming		-		-		-		-		-		53		68		-		121
Total	$	3,188	$	3,105	$	1,980	$	2,142	$	2,593	$	8,465	$	27,681	$	275	$	49,429
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	1,742	$	1,115	$	598	$	509	$	570	$	3,024	$	107,168	$	2	$	114,728
Nonperforming		-		18		-		-		-		1,007		-		-		1,025
Total	$	1,742	$	1,133	$	598	$	509	$	570	$	4,031	$	107,168	$	2	$	115,753
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	38	$	16	$	-	$	55
Total										-
Payment Performance
Performing	$	20,408	$	93,860	$	51,029	$	32,951	$	22,249	$	112,593	$	134,781	$	277	$	468,148
Nonperforming		-		424		771		399		-		2,324		68		-		3,986
Total	$	20,408	$	94,284	$	51,800	$	33,350	$	22,249	$	114,917	$	134,849	$	277	$	472,134

Information presented in the table above is not required for periods prior to adoption of CECL. The following table presents the most comparable information for the prior period, internal credit risk ratings for the indicated loan class segments as of December 31, 2022 (in thousands).

December 31, 2022	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	161,998	$	562	$	9	$	162,569
Home Equity		47,615		29		-		47,644
Consumer		86,643		7		-		86,650
Total	$	296,256	$	598	$	9	$	296,863

Aging Analysis of Past Due Loan Receivables

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table includes an aging analysis of the recorded investment of past due loan receivables as of September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	836	$	282	$	2,335	$	3,453	$	303,499	$	306,952	$	-
Home Equity		130		77		100		307		49,122		49,429		-
Commercial		1,797		514		1,003		3,314		1,077,809		1,081,123		-
Agricultural		299		-		1,367		1,666		312,498		314,164		-
Construction		677		-		2,357		3,034		172,286		175,320		-
Consumer		647		124		1,025		1,796		113,957		115,753		8
Other commercial loans		633		59		-		692		119,655		120,347		-
Other agricultural loans		-		224		-		224		26,424		26,648		-
State and political subdivision loans		-		-		-		-		56,660		56,660		-
Total	$	5,019	$	1,280	$	8,187	$	14,486	$	2,231,910	$	2,246,396	$	8
Loans considered non-accrual	$	241	$	98	$	8,179	$	8,518	$	4,621	$	13,139
Loans still accruing		4,778		1,182		8		5,968		2,227,289		2,233,257
Total	$	5,019	$	1,280	$	8,187	$	14,486	$	2,231,910	$	2,246,396

December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		PCI		Total Loan Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	356	$	132	$	229	$	717	$	161,843	$	9	$	162,569	$	-
Home Equity		48		9		29		86		47,558		-		47,644		-
Commercial		1,065		115		1,788		2,968		871,745		1,856		876,569		-
Agricultural		-		-		1,368		1,368		310,805		1,441		313,614		-
Construction		-		-		-		-		80,691		-		80,691		-
Consumer		147		-		7		154		86,496		-		86,650		7
Other commercial loans		1,660		35		32		1,727		61,495		-		63,222		-
Other agricultural loans		-		-		-		-		34,832		-		34,832		-
State and political subdivision loans		-		-		-		-		59,208		-		59,208		-
Total	$	3,276	$	291	$	3,453	$	7,020	$	1,714,673	$	3,306	$	1,724,999	$	7
Loans considered non-accrual	$	46	$	76	$	3,446	$	3,568	$	3,370	$	-	$	6,938
Loans still accruing		3,230		215		7		3,452		1,711,303		3,306		1,718,061
Total	$	3,276	$	291	$	3,453	$	7,020	$	1,714,673	$	3,306	$	1,724,999

Modifications to Borrowers Experiencing Financial Difficulty

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

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

The following table shows, the amortized cost basis by class of loans receivable, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023 (dollars in thousands):

	Three months ended September 30, 2023
	Number of loans		Amortized Cost Basis			% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1		$	42		0.00	%
Agricultural		2			673		0.21	%
Other commercial loans		5			1,378		1.15	%
Total		8		$	2,093

	Nine months ended September 30, 2023
	Number of loans		Amortized Cost Basis		% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	$	129		0.04	%
Commercial		7		1,969		0.18	%
Agricultural		3		728		0.23	%
Other commercial loans		5		1,378		1.15	%
Total		16	$	4,204
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	$	86		0.01	%
Total		1	$	86

The following table shows, by class of loans receivable, information regarding the financial effect on accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023:

Three months ended September 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the weighted average loan maturity 6 months
Agricultural		2	Extended the weighted average loan maturity 3 months
Consumer		5	Extended the loan maturity 10 months
Total		8

Nine months ended September 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	Extended the loan maturity 4 months
Commercial		7	Extended the weighted average loan maturity 22 months
Agricultural		3	Extended the weighted average loan maturity 5 months
Other commercial loans		5	Extended the loan maturity 10 months
Total		16
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the loan maturity 6 months
Total		1

There were no accruing or nonaccrual modified loans to borrowers experiencing financial difficulty for which there were payment defaults after the modification date for the three and nine months ended September 30, 2023.

The following presents, by class of loans, the amortized cost and payment status of accruing and nonaccrual modified loans to borrowers experiencing financial difficulty at September 30, 2023 (in thousands):

	September 30, 2023
			30-89 Days		90 Days
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty	Current		Past Due		Or Greater		Total
Real estate loans:
Mortgages	$	129	$	-	$	-	$	129
Commercial		1,969		-		-		1,969
Agricultural		728		-		-		728
Total	$	4,204	$	-	$	-	$	4,204
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial	$	86	$	-	$	-	$	86
Total	$	86	$	-	$	-	$	86

Foreclosed Assets Held For Sale

Foreclosed assets acquired in settlement of loans are carried at fair value, less estimated costs to sell, and are included in other assets on the Consolidated Balance Sheet. As of September 30, 2023 and December 31, 2022, included within other assets are $474,000 and $543,000, respectively, of foreclosed assets. As of September 30, 2023, included within the foreclosed assets are $176,000 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end. As of September 30, 2023, the Company had initiated formal foreclosure proceedings on $241,000 of residential mortgage loans, the collateral properties which have not yet been transferred into foreclosed assets.

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Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

Note 7 – Goodwill and Other Intangible Assets

The following table provides the gross carrying value and accumulated amortization of intangible assets as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023							December 31, 2022
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,607	$	(1,590	)	$	1,017	$	2,336	$	(1,362	)	$	974
Core deposit intangibles		4,713		(1,864	)		2,849		1,943		(1,645	)		298
Total amortized intangible assets	$	7,320	$	(3,454	)	$	3,866	$	4,279	$	(3,007	)	$	1,272
Unamortized intangible assets:
Goodwill	$	84,758						$	31,376

(1) Excludes fully amortized intangible assets

The following table provides the current year and estimated future amortization expense for amortized intangible assets for the next five years (in thousands). The Company based its projections of amortization expense shown below on existing asset balances at September 30, 2023. Future amortization expense may vary from these projections:

	MSRs		Core deposit intangibles		Total
Three months ended September 30, 2023 (actual)	$	80	$	157	$	237
Nine months ended September 30, 2023 (actual)		228		219		447
Three months ended September 30, 2022 (actual)		74		40		114
Nine months ended September 30, 2022 (actual)		234		120		354
Estimate for year ending December 31,
Remaining 2023		76		154		230
2024		277		564		841
2025		226		478		704
2026		174		395		569
2027		118		339		457
Thereafter		146		919		1,065
Total	$	1,017	$	2,849	$	3,866

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Employee Benefit Plans

9 Months Ended

Sep. 30, 2023

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note 8 – Employee Benefit Plans

For additional detailed disclosure on the Company’s pension and employee benefits plans, please refer to Note 11 of the Company’s Audited Consolidated Financial Statements included in the 2022 Annual Report on Form 10-K.

Noncontributory Defined Benefit Pension Plan

The Bank sponsors a trusteed noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all employees and officers hired prior to January 1, 2007. The Bank’s funding policy is to make annual contributions, if needed, based upon the funding formula developed by the plan’s actuary. Any employee with a hire date of January 1, 2007 or later is not eligible to participate in the Pension Plan.

In lieu of the Pension Plan, employees with a hire date of January 1, 2007 or later are eligible to receive, after meeting certain length of service requirements, an annual discretionary 401(k) plan contribution from the Bank equal to a percentage of an employee’s base compensation.  The contribution amount, if any, is placed in a separate account within the 401(k) plan and is subject to a vesting requirement.

For employees who are eligible to participate in the Pension Plan, the Pension Plan requires benefits to be paid to eligible employees based primarily upon age and compensation rates during employment.  Upon retirement or other termination of employment, employees can elect either an annuity benefit or a lump sum distribution of vested benefits in the Pension Plan.

The following sets forth the components of net periodic benefit costs of the Pension Plan and the line item on the Consolidated Statement of Income where such amounts are included, for the three and nine months ended September 30, 2023 and 2022, respectively (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022			Affected line item on the Consolidated Statement of Income (Loss)
Service cost	$	75		$	89		$	230		$	267		Salary and Employee Benefits
Interest cost		104			69			324			207		Other Expenses
Expected return on plan assets		(183	)		(234	)		(577	)		(701	)	Other Expenses
Partial Settlement		-			144			-			144		Other Expenses
Net amortization and deferral		17			24			31			72		Other Expenses
Net periodic benefit cost	$	13		$	92		$	8		$	(11	)

The Bank does not expect to contribute to the Pension Plan during 2023.

Restricted Stock Plan

The Company maintains a Restricted Stock Plan (the “Plan”) whereby employees and non-employee corporate directors are eligible to receive awards of restricted stock based upon performance related requirements.  Awards granted under the Plan are in the form of the Company’s common stock and are subject to certain vesting requirements including continuous employment or service with the Company.  In April 2016, the Company’s stockholders authorized a total of 150,000 shares of the Company’s common stock to be made available under the Plan. As of September 30, 2023, 113,449 shares remain available to be issued under the Plan.  The Plan assists the Company in attracting, retaining and motivating employees to make substantial contributions to the success of the Company and to increase the emphasis on the use of equity as a key component of compensation.

The following table details the vesting, awarding and forfeiting of restricted stock during the three and nine months ended September 30, 2023:

	Three months						Nine months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,254		$	71.61			6,622		$	63.63
Granted		367			81.58			2,609			83.13
Forfeited		(52	)		(63.09	)		(213	)		(63.12	)
Vested		(499	)		(67.37	)		(2,948	)		(62.39	)
Outstanding, end of period		6,070		$	72.63			6,070		$	72.63

Compensation expense related to restricted stock is recognized, based on the market price of the stock at the grant date, over the vesting period. Compensation expense related to restricted stock was $178,000 and $210,000 for the nine months ended September 30, 2023 and 2022, respectively. For the three months ended September 30, 2023 and 2022, compensation expense totaled $62,000 and $68,000, respectively. At September 30, 2023, the total compensation cost related to nonvested awards that had not yet been recognized was $441,000, which is expected to be recognized over the next three years.

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2023

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

Note 9 – Accumulated Other Comprehensive Loss

The following tables present the changes in accumulated other comprehensive income by component, net of tax, for the three and nine months ended September 30, 2023 and 2022 (in thousands):

	Three months ended September 30, 2023
	Unrealized gain (loss) on available for sale  securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)
Other comprehensive income (loss) before reclassifications (net of tax)		(6,025	)		-			823			(5,202	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			6			(467	)		(461	)
Net current period other comprehensive income (loss)		(6,025	)		6			356			(5,663	)
Balance as of September 30, 2023	$	(41,144	)	$	(1,039	)	$	5,540		$	(36,643	)

	Nine months ended September 30, 2023
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of December 31, 2022	$	(37,514	)	$	(1,056	)	$	5,429		$	(33,141	)
Other comprehensive income (loss) before reclassifications (net of tax)		(3,669	)		-			1,352			(2,317	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			17			(1,241	)		(1,185	)
Net current period other comprehensive income (loss)		(3,630	)		17			111			(3,502	)
Balance as of September 30, 2023	$	(41,144	)	$	(1,039	)	$	5,540		$	(36,643	)

	Three months ended September 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299		$	(26,559	)
Other comprehensive income (loss) before reclassifications (net of tax)		(10,727	)		-			1,444			(9,283	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		5			19			(37	)		(13	)
Net current period other comprehensive income (loss)		(10,722	)		19			1,407			(9,296	)
Balance as of September 30, 2022	$	(39,650	)	$	(1,911	)	$	5,706		$	(35,855	)

	Nine months ended September 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)		Total
Balance as of December 31, 2021	$	304		$	(1,968	)	$	1,509	$	(155	)
Other comprehensive income (loss) before reclassifications (net of tax)		(39,959	)		-			4,185		(35,774	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		5			57			12		74
Net current period other comprehensive income (loss)		(39,954	)		57			4,197		(35,700	)
Balance as of September 30, 2022	$	(39,650	)	$	(1,911	)	$	5,706	$	(35,855	)

(a) Amounts in parentheses indicate debits on the Consolidated Balance Sheet.

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

Details about accumulated other comprehensive income (loss)	Amount reclassified from accumulated comprehensive income (loss) (a)						Affected line item in the Consolidated Statement of Income
	Three Months Ended September 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	-		$	(6	)	Available for sale securities gains, net
		-			1		Provision for income taxes
	$	-		$	(5	)	Net of tax
Defined benefit pension items
	$	(7	)	$	(24	)	Other expenses
		1			5		Provision for income taxes
	$	(6	)	$	(19	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	591		$	47		Interest expense
		(124	)		(10	)	Provision for income taxes
	$	467		$	37		Net of tax
Total reclassifications	$	461		$	13

Nine Months Ended September 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	(6	)	Available for sale securities gains, net
		12			1		Provision for income taxes
	$	(39	)	$	(5	)	Net of tax
Defined benefit pension items
	$	(21	)	$	(72	)	Other expenses
		4			15		Provision for income taxes
	$	(17	)	$	(57	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	1,571		$	(15	)	Interest expense
		(330	)		3		Provision for income taxes
	$	1,241		$	(12	)	Net of tax
Total reclassifications	$	1,185		$	(74	)

(a) Amounts in parentheses indicate expenses and other amounts indicate income on the Consolidated Statement of Income

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Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 10 – Fair Value Measurements

The Company has established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by this hierarchy are as follows:

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.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterly valuation process.

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

The fair values of equity securities and securities available for sale are determined by quoted prices in active markets, when available, and classified as Level I. If quoted market prices are not available, the fair value is determined by a matrix pricing, which is a mathematical technique, widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities and classified as Level II. The fair values consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

The following tables present the assets and liabilities 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 (in thousands). 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	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,858	$	-		$	-	$	1,858
Available for sale securities:
U.S. Agency securities		-		63,647			-		63,647
U.S. Treasury securities		147,431		-			-		147,431
Obligations of state and political subdivisions		-		96,022			-		96,022
Corporate obligations		-		12,120			-		12,120
Mortgage-backed securities in government sponsored entities		-		98,587			-		98,587
Loans held for sale		-		14,155			-		14,155
Other Assets
Derivative instruments		-		17,707			437		18,144
Liabilities
Derivative instruments		-		(10,694	)		-		(10,694	)

December 31, 2022	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets:
Equity securities	$	2,208	$	-		$	-	$	2,208
Available for sale securities:
U.S. Agency securities		-		70,677			-		70,677
U.S. Treasuries securities		148,570		-			-		148,570
Obligations of state and political subdivisions		-		110,300			-		110,300
Corporate obligations		-		9,383			-		9,383
Mortgage-backed securities in government sponsored entities		-		100,576			-		100,576
Derivative instruments		-		16,599			-		16,599
Liabilities:
Derivative instruments		-		(9,726	)		-		(9,726	)

The following tables represent the change in the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2023 (in thousands):

	IRLC- Asset
Balance: June 30, 2023	$	529
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(92	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: September 30, 2023	$	437
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of September 30, 2023	$	(92	)

	IRLC- Asset
Beginning Balance: June 16, 2023	$	657
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(220	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: September 30, 2023	$	437
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of September 30, 2023	$	(220	)

At September 30, 2023, the Company had classified as Level 3 $437,000 of net derivative assets and liabilities related to IRLC. The fair value of IRLCs is based on prices obtained for loans with similar characteristics from third parties, adjusted by the pull-through rate, which represents the Company’s best estimate of the probability that a committed loan will fund. The weighted average pull-through rates applied ranged from 75.39% to 99.64% at September 30, 2023.

Significant unobservable inputs for assets measured at fair value on a recurring basis at September 30, 2023 (in thousands):

	Quantitative Information about Level 3 Fair Value Measurements at September 30, 2023
	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	437	Discounted cash flows	Pull-through rates		75.39%-99.64	%		90.40	%

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

Assets measured at fair value on a nonrecurring basis as of September 30, 2023 and December 31, 2022 are included in the table below (in thousands):

September 30, 2023	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	3,980	$	3,980
Other real estate owned		-		-		97		97
December 31, 2022	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	496	$	496
Other real estate owned		-		-		297		297

• Individually analyzed loans held for investment - The Company has measured impairment on impaired loans generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed.   Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value.  If the fair value of the collateral dependent loan is less than the carrying amount of the loan a specific reserve for the loan is made in the allowance for credit losses - loans or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the table above as a Level III measurement.  If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the table above as it is not currently being carried at its fair value. The fair values above excluded estimated selling costs of $393,000 and $50,000 at September 30, 2023 and December 31, 2022, respectively.

• Other Real Estate Owned (OREO) – OREO is carried at the lower of cost or fair value, less estimated costs to sell, which is measured at the date of foreclosure.  If the fair value of the collateral exceeds the carrying amount of the loan, no charge-off or adjustment is necessary, the loan is not considered to be carried at fair value, and is therefore not included in the table above. If the fair value of the collateral is less than the carrying amount of the loan, management will charge the loan down to its estimated realizable value. The fair value of OREO is based on the appraised value of the property, which is generally unadjusted by management and is based on comparable sales for similar properties in the same geographic region as the subject property, and is included in the above table as a Level II measurement.  In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed.  In these cases, the loans are categorized in the above table as a Level III measurement since these adjustments are considered to be unobservable inputs. Income and expenses from operations and further declines in the fair value of the collateral subsequent to foreclosure are included in net expenses from OREO.

The following table provides a listing of the significant unobservable inputs used in the fair value measurement process for items valued utilizing Level III techniques (dollars in thousands).

Quantitative Information about Level III Fair Value Measurements

September 30, 2023	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Individually analyzed loans held for investment	$	3,980	Appraised Collateral Values	Discount for time since appraisal		0-100	%		26.55	%
				Selling costs		8%-10	%		9.89	%
				Holding period	0 - 12 months			6.70 months
Other real estate owned		97	Appraised Collateral Values	Discount for time since appraisal		32	%		32.00	%

December 31, 2022	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Individually analyzed loans held for investment		496	Appraised Collateral Values	Discount for time since appraisal		0-100	%		25.16	%
				Selling costs		8%-10	%		8.41	%
				Holding period	6 - 12 months			11.51 months
Other real estate owned		297	Appraised Collateral Values	Discount for time since appraisal		20-84	%		39.84	%

Financial Instruments Not Required to be Measured or Reported at Fair Value

The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis are as follows (in thousands):

September 30, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,566	$	4,566	$	-	$	-	$	4,566
Net loans		2,224,941		2,145,060		-		-		2,080,817
Financial liabilities:
Deposits		2,335,135		2,324,624		1,958,842		-		365,782
Borrowed funds		316,151		298,617		-		-		298,617
December 31, 2022
Financial assets:
Interest bearing time deposits with other banks	$	6,055	$	6,055	$	-	$	-	$	6,055
Loans held for sale		725		725		-		-		725
Net loans		1,706,447		1,662,514		-		-		1,662,514
Financial liabilities:
Deposits		1,844,208		1,832,037		1,566,517		-		265,520
Borrowed funds		257,278		246,288		-		-		246,288

The carrying amounts for cash and due from banks, bank owned life insurance, regulatory stock, accrued interest receivable and payable approximate fair value and are considered Level I measurements.

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2023

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 11 – Recent Accounting Pronouncements

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

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which added to ASU 2020-04 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 onetime election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company has identified our loan receivables that have an interest rate indexed to LIBOR and is currently assessing the appropriate transition path. As such, the Company does not have an estimate of the financial impact of this update but does not expect the impact to be material to the financial statements of the Company.

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

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2023

Basis of Presentation [Abstract]

Basis of Presentation

Citizens Financial Services, Inc. (individually and collectively with its direct and indirect subsidiaries, the “Company”) is a Pennsylvania corporation and its wholly owned subsidiary is CZFS Acquisition Company, LLC. CZFS Acquisition Company, LLC is the holding company of its wholly owned subsidiary, First Citizens Community Bank (the “Bank”), and of the Bank’s wholly owned subsidiaries, First Citizens Insurance Agency, Inc. (“First Citizens Insurance”) and 1^st Realty of PA LLC (“Realty”).

The accompanying consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with U.S. generally accepted accounting principles.  Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  Certain of the prior year amounts have been reclassified to conform with the current year presentation.  Such reclassifications had no effect on net income or stockholders’ equity.  All material inter‑company balances and transactions have been eliminated in consolidation.

In the opinion of management of the Company, the accompanying interim consolidated financial statements at September 30, 2023 and for the periods ended September 30, 2023 and 2022 include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition and the results of operations at the dates and for the periods presented. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and of revenues and expenses for the periods covered by the Consolidated Statement of Income. The financial performance reported for the Company for the nine month period ended September 30, 2023 is not necessarily indicative of the results to be expected for the full year.  This information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Accounting Pronouncements Adopted

Accounting Pronouncements Adopted in 2023

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

The Company adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans and held-to-maturity debt securities, available-for-sale debt securities and unfunded commitments. On January 1, 2023, the Bank recorded a cumulative effect increase to retained earnings of $1.8 million, net of tax, of which $3.3 million related to loans and ($1.1) million related to unfunded commitments.

The Company adopted the provisions of ASC 326 related to financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired (PCI) and accounted for under ASC 310-30 using the prospective transition approach. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

The Company expanded the pooling utilized under the legacy incurred loss method to include additional segmentation based on risk. The impact of the change from the incurred loss model to the current expected credit loss model is detailed below (in thousands):

	January 1, 2023
	Pre-adoption		Adoption Impact			As Reported
Assets
Allowance for credit losses - loans
Real estate loans:
Residential	$	1,056	$	79		$	1,135
Commercial		10,120		(3,070	)		7,050
Agricultural		4,589		(1,145	)		3,444
Construction		801		(103	)		698
Consumer		135		1,040			1,175
Other commercial loans		1,040		(328	)		712
Other agricultural loans		489		(219	)		270
State and political subdivision loans		322		(280	)		42
Unallocated		-		726			726
Total	$	18,552	$	(3,300	)	$	15,252
Liabilities
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	$	165	$	1,064		$	1,229

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

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for modifications of receivables made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investment in leases in the existing vintage disclosures. This ASU became effective on January 1, 2023 for the Corporation. The adoption of this ASU resulted in updated disclosures within our financial statements but otherwise did not have a material impact on the Company’s consolidated financial statements.

Loans

Loans

 A loan is classified as a modified loan to a borrower experiencing financial difficulty when a contractual loan modification in the form of principal forgiveness, an interest rate reduction, an other-than-significant payment delay or a term extension (or a combination thereof) has been granted to an existing borrower experiencing financial difficulties. The goal when modifying a credit is to establish a reasonable period of time to provide cash flow relief to customers experiencing cash flow difficulties. Accruing modified loans to borrowers experiencing financial difficulty are primarily comprised of loans on which interest is being accrued under the modified terms, and the loans are current or less than 90 days past due.

Loans and Leases - Prior to ASU No. 2022-02 Adoption

In situations where, for economic or legal reasons related to a borrower’s financial difficulties, management granted a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a Troubled Debt Restructuring (TDR). Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans.

Allowance for Credit losses - Loans

Allowance for Credit losses – Loans

The allowance for credit losses (ACL) on loans and leases is a valuation account that is used to present the net amount expected to be collected on a loan or lease. The ACL for loans and leases is adjusted through provision for credit losses as a charge against, or credit to, earnings. Loans and leases deemed to be uncollectible are charged against the ACL on loans and leases, and any subsequent recoveries are credited to the ACL. Management evaluates the ACL on a quarterly basis. When changes in the reserve are necessary, an adjustment is made.

Management utilizes a discounted cash flow (DCF) model to calculate the present value of the expected cash flows for pools of loans and leases that share similar risk characteristics and compares the results of this calculation to the amortized cost basis to determine its allowance for credit loss balance.

Management uses relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts in calculating its ACL. Historical credit loss experience provides the basis for the estimation of expected credit losses. Management determines whether there is a need to make qualitative adjustments to historical loss information by monitoring certain factors including differences in current loan-specific risk characteristics as well as for changes in external or environmental conditions, or other relevant factors.

The contractual term used in projecting the cash flows of a loan is based on the maturity date of a loan, and is adjusted for prepayment or curtailment assumptions which may shorten that contractual time period. Options to extend are considered by management in determining the contractual term.

The key inputs to the DCF model are (1) probability of default, (2) loss given default, (3) prepayment and curtailment rates, (4) reasonable and supportable economic forecasts, (5) forecast reversion period, (6) expected recoveries on charged off loans, and (7) discount rate.

Probability of Default (PD)

In order to incorporate economic factors into forecasting within the DCF model, management elected to use the Loss Driver method to generate the PD rate inputs. The Loss Driver method analyzes how one or more economic factors change the default rate using a statistical regression analysis. Management selected economic factors that had strong correlations to historical default rates.

Loss Given Default (LGD)

Management elected to use the Frye Jacobs parameter for determining the LGD input, which is an estimation technique that derives a LGD input from segment specific risk curves that correlates LGD with PD.

Prepayment and Curtailment Rates

Prepayment Rates: Loan level transaction data is used to calculate a semi-annual prepayment rate. Those semi-annual rates are annualized and the average of the annualized rates is used in the DCF calculation for fixed payment or term loans. Rates are calculated for each pool.

Curtailment Rates: Loan level transaction data is used to calculate annual curtailment rates using any available historical loan level data. The average of the historical rates is used in the DCF model for interest only payment or line of credit type loans. Rates are calculated for each pool.

Reasonable and Supportable Forecasts

The forecast data used in the DCF model is obtained via a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario.

Forecast Reversion Period

Management uses forecasts to predict how economic factors will perform and has determined to use a four quarter forecast period as well as a four quarter straight-line reversion period to historical averages (also commonly referred to as the mean reversion period).

Expected Recoveries on Charged-off Loans

Management performs an analysis to estimate recoveries that could be reasonably expected based on historical experience in order to account for expected recoveries on loans that have already been fully charged-off and are not included in the ACL calculation.

Discount Rate

The effective interest rate of the underlying loans and leases of the Company serves as the discount rate applied to the expected periodic cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

Individual Evaluation

Management evaluates individual instruments for expected credit losses when those instruments do not share similar risk characteristics with instruments evaluated using a collective (pooled) basis. Instruments will not be included in both collective and individual analyses. Individual analysis will establish a specific reserve for instruments in scope.

Management considers a financial asset as collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral, based on management’s assessment as of the reporting date.

Accrued Interest Receivable on Loans and Leases

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $7.8 million at September 30, 2023 and is included within Accrued interest receivable. This amount is excluded from the estimate of expected credit losses.

Reserve for Unfunded Commitments

Reserve for Unfunded Commitments

The Company maintains a reserve in other liabilities for off-balance sheet credit exposures such as unfunded commitments that are currently unfunded in categories with historical loss experience. Management calculates funding rates annually using loan level data history at the portfolio level. The applicable pool level loss rates for the is then applied to calculate the reserve for unfunded commitments liability each period.

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Revenue Recognition (Policies)

9 Months Ended

Sep. 30, 2023

Revenue Recognition [Abstract]

Revenue Recognition

In accordance with ASC 606, Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, loan servicing, gains on loans sold, earnings on bank owned life insurances, gains and losses from derivative instruments and changes in the fair of loans held for sale  are not within the scope of ASC 606. The main types of noninterest income within the scope of the standard are as follows:

• Service charges on deposit accounts – The Company has contracts with its deposit customers where fees are charged if certain parameters are not met. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific transactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time upon the completion of the requested service/transaction.

• Trust fees – Typical contracts for trust services are based on a fixed percentage of the assets earned ratably over a defined period and billed on a monthly basis. Fees charged to customers’ accounts are recognized as revenue over the period during which the Company fulfills its performance obligation under the contract (i.e., holding client asset in a managed fiduciary trust account). For these accounts, the performance obligation of the Company is typically satisfied by holding and managing the customer’s assets over time. Other fees related to specific customer requests are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time, upon completion of the requested service/transaction.

• Gains and losses on sale of other real estate owned – Gains and losses are recognized at the completion of the property sale when the buyer obtains control of the real estate and all of the performance obligations of the Company have been satisfied. Evidence of the buyer obtaining control of the asset include transfer of the property title, physical possession of the asset, and the buyer obtaining control of the risks and rewards related to the asset. In situations where the Company agrees to provide financing to facilitate the sale, additional analysis is performed to ensure that the contract for sale identifies the buyer and seller, the asset to be transferred, payment terms, and that the contract has a true commercial substance and that collection of amounts due from the buyer are reasonable. In situations where financing terms are not reflective of current market terms, the transaction price is discounted impacting the gain/loss and the carrying value of the asset.

• Brokerage and insurance – Fees includes commissions from the sales of investments and insurance products recognized on a trade date basis as the performance obligation is satisfied at the point in time in which the trade is processed. Additional fees are based on a percentage of the market value of customer accounts and billed on a monthly or quarterly basis. The Company’s performance obligation under the contracts with certain customers is generally satisfied through the passage of time as the Company monitors and manages the assets in the customer’s portfolio and is not dependent on certain return or performance level of the customer’s portfolio. Fees for these services are billed monthly and are recorded as revenue at the end of the month for which the wealth management service has been performed. Other performance obligations (such as the delivery of account statements to customers) are generally considered immaterial to the overall transaction price.

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Recent Accounting Pronouncements (Policies)

9 Months Ended

Sep. 30, 2023

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

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

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which added to ASU 2020-04 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 onetime election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company has identified our loan receivables that have an interest rate indexed to LIBOR and is currently assessing the appropriate transition path. As such, the Company does not have an estimate of the financial impact of this update but does not expect the impact to be material to the financial statements of the Company.

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

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

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Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2023

Basis of Presentation [Abstract]

Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model

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

	January 1, 2023
	Pre-adoption		Adoption Impact			As Reported
Assets
Allowance for credit losses - loans
Real estate loans:
Residential	$	1,056	$	79		$	1,135
Commercial		10,120		(3,070	)		7,050
Agricultural		4,589		(1,145	)		3,444
Construction		801		(103	)		698
Consumer		135		1,040			1,175
Other commercial loans		1,040		(328	)		712
Other agricultural loans		489		(219	)		270
State and political subdivision loans		322		(280	)		42
Unallocated		-		726			726
Total	$	18,552	$	(3,300	)	$	15,252
Liabilities
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	$	165	$	1,064		$	1,229

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Acquisition of HV Bancorp, Inc. (Tables)

9 Months Ended

Sep. 30, 2023

Acquisition of HV Bancorp, Inc. [Abstract]

Net Assets Acquired and Consideration Transferred

The following table summarizes the purchase of HVBC as of June 16, 2023:

(In Thousands, Except Per Share Data)
Purchase Price Consideration in Common Stock
Citizens Financial Services, Inc. shares issued		693,858
Value assigned to Citizens Financial Services, Inc. common share	$	86.67
Purchase price assigned to HVBC common shares exchanged for Citizens Financial Services, Inc.				$	60,137
Purchase Price Consideration - Cash for Common Stock
Purchase price assigned to HVBC’s common shares exchanged for cash					13,112
Purchase Price Related to Cash Payout of Stock Options					3,416
Total Purchase Price					76,665
Net Assets Acquired:
HVBC shareholders’ equity	$	40,630
Adjustments to reflect assets acquired at fair value:
Investments		31
Loans
Interest rate		(24,097	)
General credit		(1,834	)
Credit - PCD Loans		(2,042	)
Core deposit intangible		2,770
Owned premises		67
Other assets		(193	)
Deferred tax assets		3,737
Adjustments to reflect liabilities acquired at fair value:
Time deposits		586
Borrowings		3,017
Other liabilities		611
					23,283
Goodwill resulting from merger				$	53,382

The following condensed statement reflects the amounts recognized as of the acquisition date for each major class of asset acquired and liability assumed:

(In Thousands, Except Per Share Data)
Total purchase price		76,665
Fair value of assets acquired
Cash and due from banks	18,017
Investment securities	79,248
Loans held for sale	10,750
Loans	475,338
Premises and equipment	2,310
Intangible assets	2,972
Bank owned life insurance	10,387
Interest receivable	2,226
Deferred taxes	8,392
Other assets	18,213
Total assets acquired	627,853
Fair value of liabilities assumed
Deposits	533,364
Borrowings	58,647
Accrued interest payable	885
Other liabilities	11,674
Total liabilities assumed	604,570
Total fair value of identifiable net assets		23,283
Goodwill resulting from merger		53,382

Fair Value of Acquired PCD Loans

The following table provides details related to the fair value of acquired PCD loans (in thousands):

	Unpaid principal balance		PCD Allowance for Credit Loss at Acquisition			(Discount) Premium on Acquired Loans			Fair Value of PCD Loans at Acquisition
Real estate loans:
Mortgages	$	2,398	$	(108	)	$	-		$	2,290
Home Equity		34		-			(4	)		30
Commercial		4,774		(39	)		(507	)		4,228
Construction		4,278		(37	)		(293	)		3,948
Consumer		1,343		(677	)		(271	)		395
Other commercial loans		5,214		(828	)		(48	)		4,338
	$	18,041	$	(1,689	)	$	(1,123	)	$	15,229

Fair Value of Acquired Non-PCD Loans

The following table provides details related to the fair value and Day 1 provision related to the acquired non-PCD loans (in thousands):

	Unpaid principal balance		(Discount)Premium on Acquired Loans			Fair Value of Non-PCD Loans at Acquisition		Day 1 Provision for Credit Losses- Non-PCD Loans
Real estate loans:
Mortgages	$	155,799	$	(17,506	)	$	138,293	$	1,015
Home Equity		2,165		(55	)		2,110		15
Commercial		203,638		(9,226	)		194,412		1,968
Construction		76,703		(1,420	)		75,283		747
Consumer		2,794		(222	)		2,572		159
Other commercial loans		47,753		(314	)		47,439		687
	$	488,852	$	(28,743	)	$	460,109	$	4,591

Pro Forma Information

The following table presents financial information regarding the former HVBC operations included in our Consolidated Statement of Income from the date of acquisition through September 30, 2023 under the column “Actual from Acquisition Date through September 30, 2023”.  In addition, the following table presents unaudited pro forma information as if the acquisition of HVBC had occurred on January 1, 2022 under the “Pro Forma” columns.  The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited proforma information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings as a result of the integration and consolidation of the acquisition.  Merger and acquisition integration costs and amortization of fair value adjustments are included in the numbers below.

	Actual from Acquisition Date Through September 30, 2023		Unaudited Pro Forma for
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
(In Thousands, Except Per Share Data)			2023		2022		2023		2022
Net interest income	$	8,046	$	21,775	$	25,369	$	68,025	$	70,329
Non-interest income		600		3,797		4,372		10,502		14,638
Net income		3,140		7,061		9,070		8,008		22,652
Pro forma earnings per share:
Basic			$	1.31	$	1.93		1.61	$	4.82
Diluted			$	1.31	$	1.93	$	1.61	$	4.82

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Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2023

Revenue Recognition [Abstract]

Disaggregation of Revenue Derived from Contracts with Customers

The following table depicts the disaggregation of revenue derived from contracts with customers to depict the nature, amount, timing, and uncertainty of revenue and cash flows for the three and nine months ended September 30, 2023 and 2022 (in thousands). All revenue in the table below relates to goods and services transferred at a point in time.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Revenue stream	2023		2022		2023		2022
Service charges on deposit accounts
Overdraft fees	$	408		374	$	1,138	$	993
Statement fees		47		51		153		158
Interchange revenue		1,008		953		2,469		2,495
ATM income		35		39		107		194
Other service charges		194		92		329		241
Total Service Charges		1,692		1,509		4,196		4,081
Trust		172		187		583		620
Brokerage and insurance		473		446		1,429		1,428
Other		260		125		494		387
Total	$	2,597	$	2,267	$	6,702	$	6,516

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Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2023

Earnings per Share [Abstract]

Computation of Earnings per Share

The following table sets forth the computation of earnings per share.

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net income applicable to common stock	$	7,548,000	$	7,544,000	$	10,271,000	$	21,185,000
Basic earnings per share computation
Weighted average common shares outstanding		4,699,952		4,006,794		4,275,259		4,009,855
Earnings per share - basic	$	1.61	$	1.88	$	2.40	$	5.28
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,699,952		4,006,794		4,275,259		4,009,855
Add: Dilutive effects of restricted stock		-		234		-		2
Weighted average common shares outstanding for dilutive earnings per share		4,699,952		4,007,028		4,275,259		4,009,857
Earnings per share - diluted	$	1.61	$	1.88	$	2.40	$	5.28

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Investments (Tables)

9 Months Ended

Sep. 30, 2023

Investments [Abstract]

Amortized Cost and Fair Value of Investment Securities

The amortized cost, gross unrealized gains and losses, and fair value of investment securities at September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses			Fair Value
Available-for-sale securities:
U.S. agency securities	$	71,567	$	-	$	(7,920	)	$	63,647
U.S. treasury securities		160,426		-		(12,995	)		147,431
Obligations of state and political subdivisions		108,569		5		(12,552	)		96,022
Corporate obligations		13,381		229		(1,490	)		12,120
Mortgage-backed securities in government sponsored entities		115,945		9		(17,367	)		98,587
Total available-for-sale securities	$	469,888	$	243	$	(52,324	)	$	417,807

December 31, 2022
Available-for-sale securities:
U.S. agency securities	$	78,556	$	-	$	(7,879	)	$	70,677
U.S. treasury securities		162,236		-		(13,666	)		148,570
Obligations of state and political subdivisions		120,562		35		(10,297	)		110,300
Corporate obligations		10,335		-		(952	)		9,383
Mortgage-backed securities in government sponsored entities		115,304		15		(14,743	)		100,576
Total available-for-sale securities	$	486,993	$	50	$	(47,537	)	$	439,506

Unrealized Losses and Fair Value of Investments

The following table shows the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time, which individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022 (in thousands). As of September 30, 2023, the Company owned 338 securities whose fair value was less than their cost basis.

September 30, 2023	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. agency securities	$	-	$	-		$	61,646	$	(7,920	)	$	61,646	$	(7,920	)
U.S. treasury securities		-		-			147,431		(12,995	)		147,431		(12,995	)
Obligations of state and  political subdivisions		4,731		(130	)		89,094		(12,422	)		93,825		(12,552	)
Corporate obligations		1,458		(289	)		8,102		(1,201	)		9,560		(1,490	)
Mortgage-backed securities in government sponsored entities		9,207		(293	)		86,820		(17,074	)		96,027		(17,367	)
Total securities	$	15,396	$	(712	)	$	393,093	$	(51,612	)	$	408,489	$	(52,324	)

December 31, 2022
U.S. agency securities	$	39,729	$	(1,892	)	$	30,948	$	(5,987	)	$	70,677	$	(7,879	)
U.S. treasury securities		32,673		(1,337	)		115,897		(12,329	)		148,570		(13,666	)
Obligations of states and political subdivisions		66,725		(4,887	)		35,782		(5,410	)		102,507		(10,297	)
Corporate obligations		2,165		(165	)		6,218		(787	)		8,383		(952	)
Mortgage-backed securities in government sponsored entities		40,270		(3,367	)		57,319		(11,376	)		97,589		(14,743	)
Total securities	$	181,562	$	(11,648	)	$	246,164	$	(35,889	)	$	427,726	$	(47,537	)

Gross Gains and Losses on Available-for-sale Securities

The gross gains and losses were as follows (in thousands):

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2023			2022				2023				2022
Gross gains on available for sale securities		$	-		$	-			$	38			$	-
Gross losses on available for sale securities			-			(6	)			(89	)			(6	)
Net gains		$	-		$	(6	)		$	(51	)		$	(6	)

Unrealized Gains (Losses) Related to Equity Securities

The following table presents the net gains (losses) on the Company’s equity investments recognized in earnings during the three and nine month periods ended September 30, 2023 and 2022, and the portion of unrealized gains for the period that relates to equity investments held at September 30, 2023 and 2022 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
Equity securities	2023		2022			2023			2022
Net gains (losses) recognized in equity securities during the period	$	69	$	(19	)	$	(223	)	$	(198	)
Less: Net gains realized on the sale of equity securities during the period		9		4			14			4
Net unrealized  gains (losses)	$	60	$	(23	)	$	(237	)	$	(202	)

Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

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

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	44,257	$	43,316
Due after one year through five years		170,521		155,161
Due after five years through ten years		98,835		86,730
Due after ten years		156,275		132,600
Total	$	469,888	$	417,807

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Loans (Tables)

9 Months Ended

Sep. 30, 2023

Loans [Abstract]

Loan Portfolio and Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for credit losses - loans as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023		December 31, 2022
Real estate loans:
Residential	$	356,381	$	210,213
Commercial		1,081,123		876,569
Agricultural		314,164		313,614
Construction		175,320		80,691
Consumer		115,753		86,650
Other commercial loans		120,347		63,222
Other agricultural loans		26,648		34,832
State and political subdivision loans		56,660		59,208
Total		2,246,396		1,724,999
Allowance for credit losses - loans		21,455		18,552
Net loans	$	2,224,941	$	1,706,447

Components of the Allowance for Credit Losses

The following table presents the components of the allowance for credit losses as of September 30, 2023 (in thousands):

	September 30, 2023
Allowance for Credit Losses - Loans	$	21,455
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,265
Total allowance for credit losses	$	22,720

The following table presents the components of the allowance for credit losses as of December 31, 2022 (in thousands):

	December 31, 2022
Allowance for loan Losses	$	18,552
Reserve for unfunded commitments		165
Total allowance for credit losses	$	18,717

Activity in Allowance for Credit Losses

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2023 (in thousands):

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off- Balance Sheet credit Exposure			Total
Balance at June 30, 2023	$	21,652		$	1,391		$	23,043
Loans charge-off		(808	)		-			(808	)
Recoveries of loans previously charged-off		10			-			10
Net loans charged-off		(798	)		-			(798	)
Provision for credit losses		601			(126	)		475
Balance at September 30, 2023	$	21,455		$	1,265		$	22,720

	Allowance for Credit Losses -Loans			Allowance for Credit Losses - Off- Balance Sheet credit Exposure		Total
Balance at December 31, 2022	$	18,552		$	165	$	18,717
Impact of adopting CECL		(3,300	)		1,064		(2,236	)
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(819	)		-		(819	)
Recoveries of loans previously charged-off		41			-		41
Net loans charged-off		(778	)		-		(778	)
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		701			36		737
Balance at September 30, 2023	$	21,455		$	1,265	$	22,720

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2022 (in thousands):

	Allowance for Credit Losses - Loans			Reserve for unfunded commitments		Total
Balance at June 30, 2022	$	17,570		$	165	$	17,735
Loans charge-off		(13	)		-		(13	)
Recoveries of loans previously charged-off		9			-		9
Net loans charged-off		(4	)		-		(4	)
Provision for credit losses		725			-		725
Balance at September 30, 2022	$	18,291		$	165	$	18,456
Balance at December 31, 2021	$	17,304		$	165	$	17,469
Loans charge-off		(464	)		-		(464	)
Recoveries of loans previously charged-off		26			-		26
Net loans charged-off		(438	)		-		(438	)
Provision for credit losses		1,425			-		1,425
Balance at September 30, 2022	$	18,291		$	165	$	18,456

Activity of Allowance for Credit Losses - Loans by Portfolio Segment

The following table presents the activity in the allowance for loan losses, by portfolio segment, for the three and nine months ended September 30, 2022 (in thousands).

	For the three months ended September 30, 2022
	Balance at June 30, 2022			Charge-offs			Recoveries		Provision			Balance at September 30, 2022
Real estate loans:
Residential	$	1,015		$	-		$	-	$	(10	)	$	1,005
Commercial		9,216			-			-		721			9,937
Agricultural		4,484			-			-		54			4,538
Construction		563			-			-		115			678
Consumer		464			(13	)		5		(224	)		232
Other commercial loans		1,173			-			4		(784	)		393
Other agricultural loans		446			-			-		913			1,359
State and political subdivision loans		323			-			-		2			325
Unallocated		(114	)		-			-		(62	)		(176	)
Total	$	17,570		$	(13	)	$	9	$	725		$	18,291

	For the nine months ended September 30, 2022
	Balance at December 31, 2021		Charge-offs			Recoveries		Provision			Balance at September 30, 2022
Real estate loans:
Residential	$	1,147	$	-		$	-	$	(142	)	$	1,005
Commercial		8,099		-			-		1,838			9,937
Agricultural		4,729		-			-		(191	)		4,538
Construction		434		-			-		244			678
Consumer		262		(30	)		15		(15	)		232
Other commercial loans		1,023		(434	)		11		(207	)		393
Other agricultural loans		558		-			-		801			1,359
State and political subdivision loans		281		-			-		44			325
Unallocated		771		-			-		(947	)		(176	)
Total	$	17,304	$	(464	)	$	26	$	1,425		$	18,291

Allowance for Credit Losses After Evaluation for Impairment

The following table presents the allowance for credit losses – loans and amortized cost basis of loans under CECL methodology as of September 30, 2023 (in thousands):

	Allowance for Credit Losses - Loans						Loans
September 30, 2023	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,484	$	81	$	2,565	$	355,129	$	1,252	$	356,381
Commercial		9,030		155		9,185		1,078,360		2,763		1,081,123
Agricultural		3,456		19		3,475		310,507		3,657		314,164
Construction		1,547		286		1,833		172,963		2,357		175,320
Consumer		1,316		404		1,720		114,613		1,140		115,753
Other commercial loans		1,697		375		2,072		118,419		1,928		120,347
Other agricultural loans		229		-		229		26,349		299		26,648
State and political subdivision loans		48		-		48		56,660		-		56,660
Unallocated		328		-		328		-		-		-
Total	$	20,135	$	1,320	$	21,455	$	2,233,000	$	13,396	$	2,246,396

The following table presents loans and their related allowance for loan losses, by portfolio segment, as of December 31, 2022 (in thousands):

	Allowance for loan losses						Loans
	Collectively evaluated for impairment		Individually evaluated for impairment		Total allowance for loan losses		Collectively evaluated for impairment		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Total Loans
Real estate loans:
Residential	$	4	$	1,052	$	1,056	$	209,869	$	335	$	9	$	210,213
Commercial		57		10,063		10,120		869,038		5,675		1,856		876,569
Agricultural		24		4,565		4,589		306,793		5,380		1,441		313,614
Construction		-		801		801		80,691		-		-		80,691
Consumer		4		131		135		86,646		4		-		86,650
Other commercial loans		13		1,027		1,040		63,120		102		-		63,222
Other agricultural loans		-		489		489		34,359		473		-		34,832
State and political subdivision loans		-		322		322		59,208		-		-		59,208
Total	$	102	$	18,450	$	18,552	$	1,709,724	$	11,969	$	3,306	$	1,724,999

Loan Receivables on Nonaccrual Status

The following table reflects the non-performing loan receivables, as well as those on non-accrual status as of September 30, 2023 and December 31, 2022, respectively. The balances are presented by class of loan receivable (in thousands):

	September 30, 2023								December 31, 2022
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	318	$	2,517	$	-	$	2,835	$	562	$	-	$	562
Home Equity		-		121		-		121		29		-		29
Commercial		260		1,337		-		1,597		2,778		-		2,778
Agricultural		182		2,803		-		2,985		3,222		-		3,222
Construction		2,357		-		-		2,357		-		-		-
Consumer		1,007		10		8		1,025		-		7		7
Other commercial loans		526		1,402		-		1,928		62		-		62
Other agricultural loans		-		299		-		299		285		-		285
	$	4,650	$	8,489	$	8	$	13,147	$	6,938	$	7	$	6,945

Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans and Leases

The following table presents, by class of loans and leases, the amortized cost basis of collateral-dependent nonaccrual loans and leases and type of collateral as of  September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	2,835	$	-	$	-	$	2,835
Home Equity		121		-		-		121
Commercial		1,597		-		-		1,597
Agricultural		2,985		-		-		2,985
Construction		2,357		-		-		2,357
Consumer		-		-		1,017		1,017
Other commercial loans		-		1,928		-		1,928
Other agricultural loans		-		299		-		299
	$	9,895	$	2,227	$	1,017	$	13,139

December 31, 2022
Real estate loans:
Mortgages	$	562	$	-	$	-	$	562
Home Equity		29		-		-		29
Commercial		2,778		-		-		2,778
Agricultural		3,222		-		-		3,222
Construction		-		-		-		-
Consumer		-		-		-		-
Other commercial loans		-		62		-		62
Other agricultural loans		-		285		-		285
	$	6,591	$	347	$	-	$	6,938

Financing Receivable Credit Exposures by Internally Assigned Grades, by Origination Year

The following tables represent credit exposures by internally assigned grades, by origination year, as of September 30, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	65,893	$	333,600	$	215,198	$	123,779	$	82,640	$	195,576	$	29,476	$	1,166	$	1,047,328
Special Mention		-		8,824		3,412		1,563		7,659		9,391		123		-		30,972
Substandard		-		233		6		-		161		1,686		729		8		2,823
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	65,893	$	342,657	$	218,616	$	125,342	$	90,460	$	206,653	$	30,328	$	1,174	$	1,081,123
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	16,361	$	54,306	$	29,828	$	32,559	$	26,760	$	123,598	$	12,926	$	1,689	$	298,027
Special Mention		149		1,915		1,211		-		-		6,702		94		-		10,071
Substandard		-		-		-		-		103		5,645		75		243		6,066
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	16,510	$	56,221	$	31,039	$	32,559	$	26,863	$	135,945	$	13,095	$	1,932	$	314,164
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	37,135	$	92,252	$	35,486	$	-	$	-	$	385	$	-	$	-	$	165,258
Special Mention		2,130		1,165		4,410		-		-		-		-		-		7,705
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	39,265	$	93,417	$	42,253	$	-	$	-	$	385	$	-	$	-	$	175,320
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	5,227	$	12,057	$	9,234	$	5,487	$	5,291	$	4,213	$	71,633	$	99	$	113,241
Special Mention		-		81		1,555		216		286		22		1,214		1,708		5,082
Substandard		-		100		-		-		186		1,202		294		-		1,782
Doubtful		-		-		-		-		-		-		218		24		242
Total	$	5,227	$	12,238	$	10,789	$	5,703	$	5,763	$	5,437	$	73,359	$	1,831	$	120,347
Current period gross charge-offs	$	-	$	-	$	-	$	763	$	-	$	-	$	-	$	-	$	763
Other agricultural loans										-
Risk Rating
Pass	$	3,464	$	1,645	$	7,005	$	1,154	$	666	$	521	$	10,554	$	-	$	25,009
Special Mention		-		491		223		45		8		42		500		-		1,309
Substandard		-		-		-		-		6		265		25		34		330
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,464	$	2,136	$	7,228	$	1,199	$	680	$	828	$	11,079	$	34	$	26,648
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	1,426	$	14,207	$	10,984	$	4,363	$	2	$	25,678	$	-	$	-	$	56,660
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,426	$	14,207	$	10,984	$	4,363	$	2	$	25,678	$	-	$	-	$	56,660
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	129,506	$	508,067	$	307,735	$	167,342	$	115,359	$	349,971	$	124,589	$	2,954	$	1,705,523
Special Mention		2,279		12,476		10,811		1,824		7,953		16,157		1,931		1,708		55,139
Substandard		-		333		2,363		-		456		8,798		1,123		285		13,358
Doubtful		-		-		-		-		-		-		218		24		242
Total	$	131,785	$	520,876	$	320,909	$	169,166	$	123,768	$	374,926	$	127,861	$	4,971	$	1,774,262

Information presented in the table above is not required for periods prior to adoption of CECL. The following table presents the most comparable information for the prior period, internal credit risk ratings for the indicated loan class segments as of December 31, 2022 (in thousands).

December 31, 2022	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	842,912	$	28,047	$	5,610	$	-	$	-	$	876,569
Agricultural		295,443		11,960		6,211		-		-		313,614
Construction		75,703		2,642		2,346		-		-		80,691
Other commercial loans		59,902		2,953		337		30		-		63,222
Other agricultural loans		32,708		1,307		817		-		-		34,832
State and political
subdivision loans		59,208		-		-		-		-		59,208
Total	$	1,365,876	$	46,909	$	15,321	$	30	$	-	$	1,428,136

For residential real estate mortgage loans, home equity loans, and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail above, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loan classes based on payment activity, by origination year, as of September 30, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	15,478	$	89,640	$	48,451	$	30,300	$	19,086	$	101,162	$	-	$	-	$	304,117
Nonperforming		-		406		771		399		-		1,259		-		-		2,835
Total	$	15,478	$	90,046	$	49,222	$	30,699	$	19,086	$	102,421	$	-	$	-	$	306,952
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity										-
Payment Performance
Performing	$	3,188	$	3,105	$	1,980	$	2,142	$	2,593	$	8,412	$	27,613	$	275	$	49,308
Nonperforming		-		-		-		-		-		53		68		-		121
Total	$	3,188	$	3,105	$	1,980	$	2,142	$	2,593	$	8,465	$	27,681	$	275	$	49,429
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	1,742	$	1,115	$	598	$	509	$	570	$	3,024	$	107,168	$	2	$	114,728
Nonperforming		-		18		-		-		-		1,007		-		-		1,025
Total	$	1,742	$	1,133	$	598	$	509	$	570	$	4,031	$	107,168	$	2	$	115,753
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	38	$	16	$	-	$	55
Total										-
Payment Performance
Performing	$	20,408	$	93,860	$	51,029	$	32,951	$	22,249	$	112,593	$	134,781	$	277	$	468,148
Nonperforming		-		424		771		399		-		2,324		68		-		3,986
Total	$	20,408	$	94,284	$	51,800	$	33,350	$	22,249	$	114,917	$	134,849	$	277	$	472,134

Information presented in the table above is not required for periods prior to adoption of CECL. The following table presents the most comparable information for the prior period, internal credit risk ratings for the indicated loan class segments as of December 31, 2022 (in thousands).

December 31, 2022	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	161,998	$	562	$	9	$	162,569
Home Equity		47,615		29		-		47,644
Consumer		86,643		7		-		86,650
Total	$	296,256	$	598	$	9	$	296,863

Aging Analysis of Past Due Loan Receivables

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table includes an aging analysis of the recorded investment of past due loan receivables as of September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	836	$	282	$	2,335	$	3,453	$	303,499	$	306,952	$	-
Home Equity		130		77		100		307		49,122		49,429		-
Commercial		1,797		514		1,003		3,314		1,077,809		1,081,123		-
Agricultural		299		-		1,367		1,666		312,498		314,164		-
Construction		677		-		2,357		3,034		172,286		175,320		-
Consumer		647		124		1,025		1,796		113,957		115,753		8
Other commercial loans		633		59		-		692		119,655		120,347		-
Other agricultural loans		-		224		-		224		26,424		26,648		-
State and political subdivision loans		-		-		-		-		56,660		56,660		-
Total	$	5,019	$	1,280	$	8,187	$	14,486	$	2,231,910	$	2,246,396	$	8
Loans considered non-accrual	$	241	$	98	$	8,179	$	8,518	$	4,621	$	13,139
Loans still accruing		4,778		1,182		8		5,968		2,227,289		2,233,257
Total	$	5,019	$	1,280	$	8,187	$	14,486	$	2,231,910	$	2,246,396

December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		PCI		Total Loan Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	356	$	132	$	229	$	717	$	161,843	$	9	$	162,569	$	-
Home Equity		48		9		29		86		47,558		-		47,644		-
Commercial		1,065		115		1,788		2,968		871,745		1,856		876,569		-
Agricultural		-		-		1,368		1,368		310,805		1,441		313,614		-
Construction		-		-		-		-		80,691		-		80,691		-
Consumer		147		-		7		154		86,496		-		86,650		7
Other commercial loans		1,660		35		32		1,727		61,495		-		63,222		-
Other agricultural loans		-		-		-		-		34,832		-		34,832		-
State and political subdivision loans		-		-		-		-		59,208		-		59,208		-
Total	$	3,276	$	291	$	3,453	$	7,020	$	1,714,673	$	3,306	$	1,724,999	$	7
Loans considered non-accrual	$	46	$	76	$	3,446	$	3,568	$	3,370	$	-	$	6,938
Loans still accruing		3,230		215		7		3,452		1,711,303		3,306		1,718,061
Total	$	3,276	$	291	$	3,453	$	7,020	$	1,714,673	$	3,306	$	1,724,999

Modifications to Borrowers Experiencing Financial Difficulty

The following table shows, the amortized cost basis by class of loans receivable, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023 (dollars in thousands):

	Three months ended September 30, 2023
	Number of loans		Amortized Cost Basis			% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1		$	42		0.00	%
Agricultural		2			673		0.21	%
Other commercial loans		5			1,378		1.15	%
Total		8		$	2,093

	Nine months ended September 30, 2023
	Number of loans		Amortized Cost Basis		% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	$	129		0.04	%
Commercial		7		1,969		0.18	%
Agricultural		3		728		0.23	%
Other commercial loans		5		1,378		1.15	%
Total		16	$	4,204
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	$	86		0.01	%
Total		1	$	86

The following table shows, by class of loans receivable, information regarding the financial effect on accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023:

Three months ended September 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the weighted average loan maturity 6 months
Agricultural		2	Extended the weighted average loan maturity 3 months
Consumer		5	Extended the loan maturity 10 months
Total		8

Nine months ended September 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	Extended the loan maturity 4 months
Commercial		7	Extended the weighted average loan maturity 22 months
Agricultural		3	Extended the weighted average loan maturity 5 months
Other commercial loans		5	Extended the loan maturity 10 months
Total		16
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the loan maturity 6 months
Total		1

There were no accruing or nonaccrual modified loans to borrowers experiencing financial difficulty for which there were payment defaults after the modification date for the three and nine months ended September 30, 2023.

The following presents, by class of loans, the amortized cost and payment status of accruing and nonaccrual modified loans to borrowers experiencing financial difficulty at September 30, 2023 (in thousands):

	September 30, 2023
			30-89 Days		90 Days
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty	Current		Past Due		Or Greater		Total
Real estate loans:
Mortgages	$	129	$	-	$	-	$	129
Commercial		1,969		-		-		1,969
Agricultural		728		-		-		728
Total	$	4,204	$	-	$	-	$	4,204
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial	$	86	$	-	$	-	$	86
Total	$	86	$	-	$	-	$	86

XML

Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2023

Goodwill and Other Intangible Assets [Abstract]

Gross Carrying Value and Accumulated Amortization of Intangible Assets

The following table provides the gross carrying value and accumulated amortization of intangible assets as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023							December 31, 2022
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,607	$	(1,590	)	$	1,017	$	2,336	$	(1,362	)	$	974
Core deposit intangibles		4,713		(1,864	)		2,849		1,943		(1,645	)		298
Total amortized intangible assets	$	7,320	$	(3,454	)	$	3,866	$	4,279	$	(3,007	)	$	1,272
Unamortized intangible assets:
Goodwill	$	84,758						$	31,376

(1) Excludes fully amortized intangible assets

Future Amortization Expense for Amortized Intangible Assets

The following table provides the current year and estimated future amortization expense for amortized intangible assets for the next five years (in thousands). The Company based its projections of amortization expense shown below on existing asset balances at September 30, 2023. Future amortization expense may vary from these projections:

	MSRs		Core deposit intangibles		Total
Three months ended September 30, 2023 (actual)	$	80	$	157	$	237
Nine months ended September 30, 2023 (actual)		228		219		447
Three months ended September 30, 2022 (actual)		74		40		114
Nine months ended September 30, 2022 (actual)		234		120		354
Estimate for year ending December 31,
Remaining 2023		76		154		230
2024		277		564		841
2025		226		478		704
2026		174		395		569
2027		118		339		457
Thereafter		146		919		1,065
Total	$	1,017	$	2,849	$	3,866

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Employee Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2023

Employee Benefit Plans [Abstract]

Components of Net Periodic Benefit Costs

The following sets forth the components of net periodic benefit costs of the Pension Plan and the line item on the Consolidated Statement of Income where such amounts are included, for the three and nine months ended September 30, 2023 and 2022, respectively (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022			Affected line item on the Consolidated Statement of Income (Loss)
Service cost	$	75		$	89		$	230		$	267		Salary and Employee Benefits
Interest cost		104			69			324			207		Other Expenses
Expected return on plan assets		(183	)		(234	)		(577	)		(701	)	Other Expenses
Partial Settlement		-			144			-			144		Other Expenses
Net amortization and deferral		17			24			31			72		Other Expenses
Net periodic benefit cost	$	13		$	92		$	8		$	(11	)

Restricted Stock Activity

The following table details the vesting, awarding and forfeiting of restricted stock during the three and nine months ended September 30, 2023:

	Three months						Nine months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,254		$	71.61			6,622		$	63.63
Granted		367			81.58			2,609			83.13
Forfeited		(52	)		(63.09	)		(213	)		(63.12	)
Vested		(499	)		(67.37	)		(2,948	)		(62.39	)
Outstanding, end of period		6,070		$	72.63			6,070		$	72.63

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2023

Accumulated Other Comprehensive Loss [Abstract]

Changes in Accumulated Other Comprehensive Loss by Component, Net of Tax

The following tables present the changes in accumulated other comprehensive income by component, net of tax, for the three and nine months ended September 30, 2023 and 2022 (in thousands):

	Three months ended September 30, 2023
	Unrealized gain (loss) on available for sale  securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)
Other comprehensive income (loss) before reclassifications (net of tax)		(6,025	)		-			823			(5,202	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			6			(467	)		(461	)
Net current period other comprehensive income (loss)		(6,025	)		6			356			(5,663	)
Balance as of September 30, 2023	$	(41,144	)	$	(1,039	)	$	5,540		$	(36,643	)

	Nine months ended September 30, 2023
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of December 31, 2022	$	(37,514	)	$	(1,056	)	$	5,429		$	(33,141	)
Other comprehensive income (loss) before reclassifications (net of tax)		(3,669	)		-			1,352			(2,317	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			17			(1,241	)		(1,185	)
Net current period other comprehensive income (loss)		(3,630	)		17			111			(3,502	)
Balance as of September 30, 2023	$	(41,144	)	$	(1,039	)	$	5,540		$	(36,643	)

	Three months ended September 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)			Total
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299		$	(26,559	)
Other comprehensive income (loss) before reclassifications (net of tax)		(10,727	)		-			1,444			(9,283	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		5			19			(37	)		(13	)
Net current period other comprehensive income (loss)		(10,722	)		19			1,407			(9,296	)
Balance as of September 30, 2022	$	(39,650	)	$	(1,911	)	$	5,706		$	(35,855	)

	Nine months ended September 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized gain on interest rate swap (a)		Total
Balance as of December 31, 2021	$	304		$	(1,968	)	$	1,509	$	(155	)
Other comprehensive income (loss) before reclassifications (net of tax)		(39,959	)		-			4,185		(35,774	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		5			57			12		74
Net current period other comprehensive income (loss)		(39,954	)		57			4,197		(35,700	)
Balance as of September 30, 2022	$	(39,650	)	$	(1,911	)	$	5,706	$	(35,855	)

(a) Amounts in parentheses indicate debits on the Consolidated Balance Sheet.

Significant Amounts Reclassified Out of Each Component of Accumulated Other Comprehensive Loss

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

Details about accumulated other comprehensive income (loss)	Amount reclassified from accumulated comprehensive income (loss) (a)						Affected line item in the Consolidated Statement of Income
	Three Months Ended September 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	-		$	(6	)	Available for sale securities gains, net
		-			1		Provision for income taxes
	$	-		$	(5	)	Net of tax
Defined benefit pension items
	$	(7	)	$	(24	)	Other expenses
		1			5		Provision for income taxes
	$	(6	)	$	(19	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	591		$	47		Interest expense
		(124	)		(10	)	Provision for income taxes
	$	467		$	37		Net of tax
Total reclassifications	$	461		$	13

Nine Months Ended September 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	(6	)	Available for sale securities gains, net
		12			1		Provision for income taxes
	$	(39	)	$	(5	)	Net of tax
Defined benefit pension items
	$	(21	)	$	(72	)	Other expenses
		4			15		Provision for income taxes
	$	(17	)	$	(57	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	1,571		$	(15	)	Interest expense
		(330	)		3		Provision for income taxes
	$	1,241		$	(12	)	Net of tax
Total reclassifications	$	1,185		$	(74	)

(a) Amounts in parentheses indicate expenses and other amounts indicate income on the Consolidated Statement of Income

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

Fair Value Measurements [Abstract]

Assets Measured at Fair Value on a Recurring Basis

The following tables present the assets and liabilities 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 (in thousands). 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	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,858	$	-		$	-	$	1,858
Available for sale securities:
U.S. Agency securities		-		63,647			-		63,647
U.S. Treasury securities		147,431		-			-		147,431
Obligations of state and political subdivisions		-		96,022			-		96,022
Corporate obligations		-		12,120			-		12,120
Mortgage-backed securities in government sponsored entities		-		98,587			-		98,587
Loans held for sale		-		14,155			-		14,155
Other Assets
Derivative instruments		-		17,707			437		18,144
Liabilities
Derivative instruments		-		(10,694	)		-		(10,694	)

December 31, 2022	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets:
Equity securities	$	2,208	$	-		$	-	$	2,208
Available for sale securities:
U.S. Agency securities		-		70,677			-		70,677
U.S. Treasuries securities		148,570		-			-		148,570
Obligations of state and political subdivisions		-		110,300			-		110,300
Corporate obligations		-		9,383			-		9,383
Mortgage-backed securities in government sponsored entities		-		100,576			-		100,576
Derivative instruments		-		16,599			-		16,599
Liabilities:
Derivative instruments		-		(9,726	)		-		(9,726	)

Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The following tables represent the change in the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2023 (in thousands):

	IRLC- Asset
Balance: June 30, 2023	$	529
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(92	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: September 30, 2023	$	437
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of September 30, 2023	$	(92	)

	IRLC- Asset
Beginning Balance: June 16, 2023	$	657
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(220	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: September 30, 2023	$	437
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of September 30, 2023	$	(220	)

Assets Measured at Fair Value on Non-recurring Basis

Assets measured at fair value on a nonrecurring basis as of September 30, 2023 and December 31, 2022 are included in the table below (in thousands):

September 30, 2023	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	3,980	$	3,980
Other real estate owned		-		-		97		97
December 31, 2022	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	496	$	496
Other real estate owned		-		-		297		297

Significant Unobservable Inputs Used in Fair Value Measurement Process

Significant unobservable inputs for assets measured at fair value on a recurring basis at September 30, 2023 (in thousands):

	Quantitative Information about Level 3 Fair Value Measurements at September 30, 2023
	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	437	Discounted cash flows	Pull-through rates		75.39%-99.64	%		90.40	%

The following table provides a listing of the significant unobservable inputs used in the fair value measurement process for items valued utilizing Level III techniques (dollars in thousands).

Quantitative Information about Level III Fair Value Measurements

September 30, 2023	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Individually analyzed loans held for investment	$	3,980	Appraised Collateral Values	Discount for time since appraisal		0-100	%		26.55	%
				Selling costs		8%-10	%		9.89	%
				Holding period	0 - 12 months			6.70 months
Other real estate owned		97	Appraised Collateral Values	Discount for time since appraisal		32	%		32.00	%

December 31, 2022	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Individually analyzed loans held for investment		496	Appraised Collateral Values	Discount for time since appraisal		0-100	%		25.16	%
				Selling costs		8%-10	%		8.41	%
				Holding period	6 - 12 months			11.51 months
Other real estate owned		297	Appraised Collateral Values	Discount for time since appraisal		20-84	%		39.84	%

Carrying Amount and Fair Value of Financial Instruments

The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis are as follows (in thousands):

September 30, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,566	$	4,566	$	-	$	-	$	4,566
Net loans		2,224,941		2,145,060		-		-		2,080,817
Financial liabilities:
Deposits		2,335,135		2,324,624		1,958,842		-		365,782
Borrowed funds		316,151		298,617		-		-		298,617
December 31, 2022
Financial assets:
Interest bearing time deposits with other banks	$	6,055	$	6,055	$	-	$	-	$	6,055
Loans held for sale		725		725		-		-		725
Net loans		1,706,447		1,662,514		-		-		1,662,514
Financial liabilities:
Deposits		1,844,208		1,832,037		1,566,517		-		265,520
Borrowed funds		257,278		246,288		-		-		246,288

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Basis of Presentation, Accounting Pronouncements (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Allowance for Credit Loss [Abstract]
Retained earnings	$ 167,740		$ 164,922
Related to unfunded commitments	1,265	$ 1,391	165	$ 165	$ 165	$ 165
Related to loans	$ (21,455)	$ (21,652)	(18,552)	$ (18,291)	$ (17,570)	$ (17,304)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Allowance for Credit Loss [Abstract]
Retained earnings			1,800
Related to unfunded commitments			1,064
Related to loans			$ 3,300

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Basis of Presentation, Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	$ 21,455	$ 21,652	$ 18,552	$ 18,291	$ 17,570	$ 17,304
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	1,265	1,391	165	165	165	165
Real Estate Loans [Member] | Residential [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	2,565	2,675	1,056	1,005	1,015	1,147
Real Estate Loans [Member] | Commercial [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	9,185	9,274	10,120	9,937	9,216	8,099
Real Estate Loans [Member] | Agricultural [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	3,475	3,579	4,589	4,538	4,484	4,729
Real Estate Loans [Member] | Construction [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	1,833	1,667	801	678	563	434
Consumer [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	1,720	1,259	135	232	464	262
Other Commercial Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	2,072	2,477	1,040	393	1,173	1,023
Other Agricultural Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	229	268	489	1,359	446	558
State and Political Subdivision Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	48	52	322	325	323	281
Unallocated [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	$ 328	$ 401	0	$ (176)	$ (114)	$ 771
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(3,300)
Allowance for Credit Losses - Off-Balance Sheet credit Exposure			1,064
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Real Estate Loans [Member] | Residential [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			79
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Real Estate Loans [Member] | Commercial [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(3,070)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Real Estate Loans [Member] | Agricultural [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(1,145)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Real Estate Loans [Member] | Construction [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(103)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Consumer [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			1,040
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Other Commercial Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(328)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Other Agricultural Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(219)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | State and Political Subdivision Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(280)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Unallocated [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			726
As Reported [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			15,252
Allowance for Credit Losses - Off-Balance Sheet credit Exposure			1,229
As Reported [Member] | Real Estate Loans [Member] | Residential [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			1,135
As Reported [Member] | Real Estate Loans [Member] | Commercial [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			7,050
As Reported [Member] | Real Estate Loans [Member] | Agricultural [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			3,444
As Reported [Member] | Real Estate Loans [Member] | Construction [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			698
As Reported [Member] | Consumer [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			1,175
As Reported [Member] | Other Commercial Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			712
As Reported [Member] | Other Agricultural Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			270
As Reported [Member] | State and Political Subdivision Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			42
As Reported [Member] | Unallocated [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			$ 726

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Basis of Presentation, Accrued Interest Receivable on Loans and Leases (Details) $ in Millions	Sep. 30, 2023 USD ($)
Accrued Interest Receivable on Loans and Leases [Abstract]
Accrued interest receivable on loans held for investment	$ 7.8

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Acquisition of HV Bancorp, Inc., Summary (Details) $ / shares in Units, $ in Thousands		3 Months Ended	9 Months Ended
	Jun. 16, 2023 USD ($) $ / shares shares	Dec. 31, 2022 Office Branch $ / shares	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)
Acquisition of HV Bancorp, Inc [Abstract]
Cash			$ (4,905)	$ 0
HV Bancorp, Inc. [Member]
Acquisition of HV Bancorp, Inc [Abstract]
Acquired outstanding equity interest percentage		100.00%
Right to receive cash for each share of common stock (in dollars per share) | $ / shares		$ 30.5
Number of service branches | Branch		5
Number of mortgage production offices | Office		4
Number of business banking offices | Office		1
Total purchase of consideration amount	$ 76,665
Number of common shares issued for acquisition (in shares) | shares	693,858
Cash	$ 16,500
Share price (in dollars per share) | $ / shares	$ 86.67

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Acquisition of HV Bancorp, Inc., Summary of Purchase of HVB Acquisition (Details) - USD ($) $ / shares in Units, $ in Thousands		Jun. 16, 2023	Sep. 30, 2023	Dec. 31, 2022
Fair Value of Liabilities Assumed [Abstract]
Goodwill	[1]		$ 84,758	$ 31,376
HV Bancorp, Inc. [Member]
Purchase Price Consideration in Common Stock [Abstract]
Citizens Financial Services, Inc. shares issued (in shares)		693,858
Value assigned to Citizens Financial Services, Inc. common share (in dollars per share)		$ 86.67
Purchase price assigned to HVBC common shares exchanged for Citizens Financial Services, Inc.		$ 60,137
Purchase Price Consideration - Cash for Common Stock [Abstract]
Purchase price assigned to HVBC's common shares exchanged for cash		13,112
Purchase Price Related to Cash Payout of Stock Options		3,416
Total Purchase Price		76,665
Net Assets Acquired [Abstract]
HVBC shareholders equity		40,630
Adjustments to Reflect Assets Acquired at Fair Value [Abstract]
Investment		31
Loans [Abstract]
Interest rate		(24,097)
General credit		(1,834)
Credit - PCD Loans		(2,042)
Core deposit intangible		2,770
Owned premises		67
Other assets		(193)
Deferred tax asset		3,737
Fair Value of Liabilities Assumed [Abstract]
Time deposits		586
Borrowings		3,017
Other liabilities		611
Total fair value of identifiable net assets		23,283
Goodwill		$ 53,382	$ 53,382

[1] Excludes fully amortized intangible assets

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Acquisition of HV Bancorp, Inc., Asset Acquired and Liability Assumed (Details) - USD ($) $ in Thousands		Jun. 16, 2023	Sep. 30, 2023	Dec. 31, 2022
Fair Value of Liabilities Assumed [Abstract]
Goodwill	[1]		$ 84,758	$ 31,376
HV Bancorp, Inc. [Member]
Consideration Transferred [Abstract]
Total Purchase Price		$ 76,665
Fair Value of Assets Acquired [Abstract]
Cash and due from banks		18,017	18,017
Investment securities		79,248	79,248
Loans held for sale		10,750
Loans		475,338	475,338
Premises and equipment		2,310	2,310
Intangible assets		2,972	2,972
Bank owned life insurance		10,387	10,387
Interest receivable		2,226	2,226
Deferred taxes		8,392	8,392
Other assets		18,213	18,213
Total Non-cash assets acquired		627,853	663,218
Fair Value of Liabilities Assumed [Abstract]
Deposits		533,364
Borrowings		58,647	58,647
Accrued interest payable		885	885
Other liabilities		11,674	11,674
Total liabilities assumed		604,570	604,570
Total fair value of identifiable net assets		23,283
Goodwill		$ 53,382	$ 53,382
Maximum provisional period		12 months

[1] Excludes fully amortized intangible assets

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Acquisition of HV Bancorp, Inc., Fair Value of Acquired PCD and Non-PCD Loans (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Jun. 16, 2023	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Accounting for Acquired Loans [Abstract]
Day 1 Provision for Credit Losses- Non-PCD Loans		$ 0	$ 0	$ 4,591	$ 0
Merger and acquisition		$ 623	$ 0	$ 9,269	$ 0
HV Bancorp, Inc. [Member]
Accounting for Acquired Loans [Abstract]
Loans acquired	$ 506,900
HV Bancorp, Inc. [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Loans acquired	$ 18,000
Loans acquired percentage	3.60%
Unpaid principal balance	$ 18,041
PCD Allowance for Credit Loss at Acquisition	(1,689)
(Discount) Premium on Acquired Loans	(1,123)
Fair Value of Loans at Acquisition	15,229
HV Bancorp, Inc. [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	488,852
(Discount) Premium on Acquired Loans	(28,743)
Fair Value of Loans at Acquisition	460,109
Day 1 Provision for Credit Losses- Non-PCD Loans	4,591
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Mortgages [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	2,398
PCD Allowance for Credit Loss at Acquisition	(108)
(Discount) Premium on Acquired Loans	0
Fair Value of Loans at Acquisition	2,290
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Mortgages [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	155,799
(Discount) Premium on Acquired Loans	(17,506)
Fair Value of Loans at Acquisition	138,293
Day 1 Provision for Credit Losses- Non-PCD Loans	1,015
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Home Equity [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	34
PCD Allowance for Credit Loss at Acquisition	0
(Discount) Premium on Acquired Loans	(4)
Fair Value of Loans at Acquisition	30
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Home Equity [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	2,165
(Discount) Premium on Acquired Loans	(55)
Fair Value of Loans at Acquisition	2,110
Day 1 Provision for Credit Losses- Non-PCD Loans	15
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Commercial [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	4,774
PCD Allowance for Credit Loss at Acquisition	(39)
(Discount) Premium on Acquired Loans	(507)
Fair Value of Loans at Acquisition	4,228
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Commercial [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	203,638
(Discount) Premium on Acquired Loans	(9,226)
Fair Value of Loans at Acquisition	194,412
Day 1 Provision for Credit Losses- Non-PCD Loans	1,968
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Construction [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	4,278
PCD Allowance for Credit Loss at Acquisition	(37)
(Discount) Premium on Acquired Loans	(293)
Fair Value of Loans at Acquisition	3,948
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Construction [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	76,703
(Discount) Premium on Acquired Loans	(1,420)
Fair Value of Loans at Acquisition	75,283
Day 1 Provision for Credit Losses- Non-PCD Loans	747
HV Bancorp, Inc. [Member] | Consumer [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	1,343
PCD Allowance for Credit Loss at Acquisition	(677)
(Discount) Premium on Acquired Loans	(271)
Fair Value of Loans at Acquisition	395
HV Bancorp, Inc. [Member] | Consumer [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	2,794
(Discount) Premium on Acquired Loans	(222)
Fair Value of Loans at Acquisition	2,572
Day 1 Provision for Credit Losses- Non-PCD Loans	159
HV Bancorp, Inc. [Member] | Other Commercial Loans [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	5,214
PCD Allowance for Credit Loss at Acquisition	(828)
(Discount) Premium on Acquired Loans	(48)
Fair Value of Loans at Acquisition	4,338
HV Bancorp, Inc. [Member] | Other Commercial Loans [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	47,753
(Discount) Premium on Acquired Loans	(314)
Fair Value of Loans at Acquisition	47,439
Day 1 Provision for Credit Losses- Non-PCD Loans	$ 687

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Acquisition of HV Bancorp, Inc., Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		4 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2023	Sep. 30, 2022
Pro Forma Information [Abstract]
Net interest income	$ 22,404	$ 18,846		$ 58,405	$ 52,837
Non-interest income	3,662	2,692		8,116	7,427
Net income	7,548	7,544		10,271	21,185
HV Bancorp, Inc. [Member] | Pro Forma [Member]
Pro Forma Information [Abstract]
Net interest income			$ 8,046
Non-interest income			600
Net income			$ 3,140
Net interest income	21,775	25,369		68,025	70,329
Non-interest income	3,797	4,372		10,502	14,638
Net income	$ 7,061	$ 9,070		$ 8,008	$ 22,652
Business Acquisition, Pro Forma Earnings per Share [Abstract]
Basic (in dollars per share)	$ 1.31	$ 1.93		$ 1.61	$ 4.82
Diluted (in dollars per share)	$ 1.31	$ 1.93		$ 1.61	$ 4.82

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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenue from Customers [Abstract]
Service charges	$ 1,692	$ 1,509	$ 4,196	$ 4,081
Trust	172	187	583	620
Brokerage and insurance	473	446	1,429	1,428
Other	260	125	494	387
Revenue from customers	2,597	2,267	6,702	6,516
Service Charges [Member]
Revenue from Customers [Abstract]
Service charges	1,692	1,509	4,196	4,081
Overdraft Fees [Member]
Revenue from Customers [Abstract]
Service charges	408	374	1,138	993
Statement Fees [Member]
Revenue from Customers [Abstract]
Service charges	47	51	153	158
Interchange Revenue [Member]
Revenue from Customers [Abstract]
Service charges	1,008	953	2,469	2,495
ATM Income [Member]
Revenue from Customers [Abstract]
Service charges	35	39	107	194
Other Service Charges [Member]
Revenue from Customers [Abstract]
Service charges	$ 194	$ 92	$ 329	$ 241

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Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Earnings per Share [Abstract]
Net income applicable to common stock	$ 7,548	$ 7,544	$ 10,271	$ 21,185
Basic earnings per share computation [Abstract]
Weighted average common shares outstanding (in shares)	4,699,952	4,006,794	4,275,259	4,009,855
Earnings per share - basic (in dollars per share)	$ 1.61	$ 1.88	$ 2.4	$ 5.28
Diluted earnings per share computation [Abstract]
Weighted average common shares outstanding for basic earnings per share (in shares)	4,699,952	4,006,794	4,275,259	4,009,855
Add: Dilutive effects of restricted stock (in shares)	0	234	0	2
Weighted average common shares outstanding for dilutive earnings per share (in shares)	4,699,952	4,007,028	4,275,259	4,009,857
Earnings per share - diluted (in dollars per share)	$ 1.61	$ 1.88	$ 2.4	$ 5.28
Restricted Stock [Member]
Antidilutive Securities [Abstract]
Antidilutive restricted stock excluded from net income per share calculations (in shares)	5,535	356	5,535	5,811
Restricted Stock [Member] | Minimum [Member]
Antidilutive Securities [Abstract]
Antidilutive stock share price range (in dollars per share)	$ 44.93	$ 57.36	$ 44.93	$ 44.93
Restricted Stock [Member] | Maximum [Member]
Antidilutive Securities [Abstract]
Antidilutive stock share price range (in dollars per share)	$ 83.38	$ 74.27	$ 83.38	$ 74.27

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Investments, Amortized Cost, Gross Unrealized Gains and Losses and Fair Value of Investment (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Debt Securities [Abstract]
Amortized cost	$ 469,888	$ 486,993
Gross unrealized gains	243	50
Gross unrealized losses	(52,324)	(47,537)
Fair value	417,807	439,506
U.S. Agency Securities [Member]
Debt Securities [Abstract]
Amortized cost	71,567	78,556
Gross unrealized gains	0	0
Gross unrealized losses	(7,920)	(7,879)
Fair value	63,647	70,677
U.S. Treasury Securities [Member]
Debt Securities [Abstract]
Amortized cost	160,426	162,236
Gross unrealized gains	0	0
Gross unrealized losses	(12,995)	(13,666)
Fair value	147,431	148,570
Obligations of State and Political Subdivisions [Member]
Debt Securities [Abstract]
Amortized cost	108,569	120,562
Gross unrealized gains	5	35
Gross unrealized losses	(12,552)	(10,297)
Fair value	96,022	110,300
Corporate Obligations [Member]
Debt Securities [Abstract]
Amortized cost	13,381	10,335
Gross unrealized gains	229	0
Gross unrealized losses	(1,490)	(952)
Fair value	12,120	9,383
Mortgage-backed Securities in Government Sponsored Entities [Member]
Debt Securities [Abstract]
Amortized cost	115,945	115,304
Gross unrealized gains	9	15
Gross unrealized losses	(17,367)	(14,743)
Fair value	$ 98,587	$ 100,576

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Investments, Gross Unrealized Losses and Fair Value and Net Unrealized Gains (Losses) (Details) $ in Thousands	Sep. 30, 2023 USD ($) Security	Dec. 31, 2022 USD ($)
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Number of securities owned with fair value less than cost | Security	338
Less than twelve months, Fair value	$ 15,396	$ 181,562
Less than twelve months, Gross unrealized losses	(712)	(11,648)
Twelve months or greater, Fair value	393,093	246,164
Twelve months or greater, Gross unrealized losses	(51,612)	(35,889)
Total, Fair value	408,489	427,726
Total, Gross Unrealized Losses	(52,324)	(47,537)
U.S. Agency Securities [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	0	39,729
Less than twelve months, Gross unrealized losses	0	(1,892)
Twelve months or greater, Fair value	61,646	30,948
Twelve months or greater, Gross unrealized losses	(7,920)	(5,987)
Total, Fair value	61,646	70,677
Total, Gross Unrealized Losses	(7,920)	(7,879)
U.S. Treasury Securities [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	0	32,673
Less than twelve months, Gross unrealized losses	0	(1,337)
Twelve months or greater, Fair value	147,431	115,897
Twelve months or greater, Gross unrealized losses	(12,995)	(12,329)
Total, Fair value	147,431	148,570
Total, Gross Unrealized Losses	(12,995)	(13,666)
Obligations of State and Political Subdivisions [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	4,731	66,725
Less than twelve months, Gross unrealized losses	(130)	(4,887)
Twelve months or greater, Fair value	89,094	35,782
Twelve months or greater, Gross unrealized losses	(12,422)	(5,410)
Total, Fair value	93,825	102,507
Total, Gross Unrealized Losses	(12,552)	(10,297)
Corporate Obligations [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	1,458	2,165
Less than twelve months, Gross unrealized losses	(289)	(165)
Twelve months or greater, Fair value	8,102	6,218
Twelve months or greater, Gross unrealized losses	(1,201)	(787)
Total, Fair value	9,560	8,383
Total, Gross Unrealized Losses	(1,490)	(952)
Mortgage-backed Securities in Government Sponsored Entities [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	9,207	40,270
Less than twelve months, Gross unrealized losses	(293)	(3,367)
Twelve months or greater, Fair value	86,820	57,319
Twelve months or greater, Gross unrealized losses	(17,074)	(11,376)
Total, Fair value	96,027	97,589
Total, Gross Unrealized Losses	$ (17,367)	$ (14,743)

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Investments, Gross Gains and Losses, Available for Sale Securities (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
Investments [Abstract]
Accrued interest receivable on available-for-sale debt securities	$ 2,145		$ 2,145
Contractual payment of past due			90 days
Proceeds from sale of securities available-for-sale	0	$ 4,492	$ 86,504	$ 4,492
Gross gains and losses available-for-sale securities [Abstract]
Gross gains on available for sale securities	0	0	38	0
Gross losses on available for sale securities	0	(6)	(89)	(6)
Net gains	0	(6)	(51)	(6)
Equity securities [Abstract]
Net gains (losses) recognized in equity securities during the period	69	(19)	(223)	(198)
Less: Net gains realized on the sale of equity securities during the period	9	4	14	4
Net unrealized gains (losses)	60	$ (23)	(237)	$ (202)
Asset Pledged as Collateral [Member] | Public Funds, Other Deposit and Borrowings [Member]
Investment Securities Pledged [Abstract]
Investment securities pledged as collateral	$ 353,200		$ 353,200		$ 311,800

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Investments, Debt Securities, Amortized Cost and Fair Value by Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Available-for-Sale Debt Securities, Amortized Cost [Abstract]
Due in one year or less	$ 44,257
Due after one year through five years	170,521
Due after five years through ten years	98,835
Due after ten years	156,275
Amortized cost	469,888	$ 486,993
Available-for-Sale Debt Securities, Fair Value [Abstract]
Due in one year or less	43,316
Due after one year through five years	155,161
Due after five years through ten years	86,730
Due after ten years	132,600
Fair value	$ 417,807	$ 439,506

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Loans, Primary Segments Portfolio and Accretable Yield for PCI Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	$ 2,246,396		$ 1,724,999
Allowance for Credit Losses	21,455	$ 21,652	18,552	$ 18,291	$ 17,570	$ 17,304
Net loans	2,224,941		1,706,447
Residential [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	306,952
Commercial [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	1,081,123
Construction [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	175,320
Real Estate Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Net loans			296,863
Real Estate Loans [Member] | Residential [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	356,381		210,213
Allowance for Credit Losses	2,565	2,675	1,056	1,005	1,015	1,147
Real Estate Loans [Member] | Commercial [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	1,081,123		876,569
Allowance for Credit Losses	9,185	9,274	10,120	9,937	9,216	8,099
Net loans			876,569
Real Estate Loans [Member] | Agricultural [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	314,164		313,614
Allowance for Credit Losses	3,475	3,579	4,589	4,538	4,484	4,729
Real Estate Loans [Member] | Construction [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	175,320		80,691
Allowance for Credit Losses	1,833	1,667	801	678	563	434
Net loans			80,691
Consumer [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	115,753		86,650
Allowance for Credit Losses	1,720	1,259	135	232	464	262
Other Commercial Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	120,347		63,222
Allowance for Credit Losses	2,072	2,477	1,040	393	1,173	1,023
Net loans			63,222
Other Commercial Loans [Member] | Construction [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	120,347
Other Agricultural Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	26,648		34,832
Allowance for Credit Losses	229	268	489	1,359	446	558
Net loans			34,832
State and Political Subdivision Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	56,660		59,208
Allowance for Credit Losses	$ 48	$ 52	322	$ 325	$ 323	$ 281
Net loans			$ 59,208

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Loans, Components of the Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Financing Receivable, Allowance for Credit Loss [Abstract]
Allowance for Credit Losses	$ 21,455	$ 18,291	$ 21,455	$ 18,291
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	1,265	165	1,265	165
Total allowance for credit losses	22,720	18,456	22,720	18,456
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	21,652	17,570	18,552	17,304
Loans charge-off	(808)	(13)	(819)	(464)
Recoveries of loans previously charged-off	10	9	41	26
Net loans charged-off	(798)	(4)	(778)	(438)
Provision for credit losses	601	725	701	1,425
Balance at end of period	21,455	18,291	21,455	18,291
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability	1,391	165	165	165
Off-Balance-Sheet, credit loss, liability, provision for credit losses	(126)		36
Off-Balance-Sheet, credit loss, liability	1,265	165	1,265	165
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period	23,043	17,735	18,717	17,469
Loans charge-off	(808)	(13)	(819)	(464)
Recoveries of loans previously charged-off	10	9	41	26
Net loans charged-off	(798)	(4)	(778)	(438)
Provision for credit losses	475	725	737	1,425
Balance at end of period	$ 22,720	$ 18,456	22,720	$ 18,456
PCD Acquired Loans [Member]
Financing Receivable, Allowance for Credit Loss [Abstract]
Allowance for Credit Losses
Allowance for Credit Losses - Off-Balance Sheet credit Exposure
Total allowance for credit losses
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			1,689
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability			0
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period			1,689
Acquisition Day 1 Non-PCD [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Provision for credit losses			4,591
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Provision for credit losses			4,591
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Loss [Abstract]
Allowance for Credit Losses
Allowance for Credit Losses - Off-Balance Sheet credit Exposure
Total allowance for credit losses
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(3,300)
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability			1,064
Off-Balance-Sheet, credit loss, liability, credit loss expense (reversal)			1,064
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period			$ (2,236)

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Loans, Allowance for Loan Losses by Portfolio Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	$ 21,652	$ 17,570	$ 18,552	$ 17,304
Allowance for credit loss on PCD acquired loans			1,689
Charge-offs	(808)	(13)	(819)	(464)
Recoveries	10	9	41	26
Provision	601	725	5,292	1,425
Balance at end of period	21,455	18,291	21,455	18,291
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(3,300)
Residential [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			(1)
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			0
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			0
Real Estate Loans [Member] | Residential [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	2,675	1,015	1,056	1,147
Allowance for credit loss on PCD acquired loans			108
Charge-offs	0	0	(1)	0
Recoveries	0	0	0	0
Provision	(110)	(10)	1,323	(142)
Balance at end of period	2,565	1,005	2,565	1,005
Real Estate Loans [Member] | Residential [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			79
Real Estate Loans [Member] | Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	9,274	9,216	10,120	8,099
Allowance for credit loss on PCD acquired loans			39
Charge-offs	0	0	0	0
Recoveries	2	0	2	0
Provision	(91)	721	2,094	1,838
Balance at end of period	9,185	9,937	9,185	9,937
Real Estate Loans [Member] | Commercial [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(3,070)
Real Estate Loans [Member] | Agricultural [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	3,579	4,484	4,589	4,729
Allowance for credit loss on PCD acquired loans			37
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	(104)	54	(6)	(191)
Balance at end of period	3,475	4,538	3,475	4,538
Real Estate Loans [Member] | Agricultural [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(1,145)
Real Estate Loans [Member] | Construction [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	1,667	563	801	434
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	166	115	1,135	244
Balance at end of period	1,833	678	1,833	678
Real Estate Loans [Member] | Construction [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(103)
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	1,259	464	135	262
Allowance for credit loss on PCD acquired loans			677
Charge-offs	(45)	(13)	(55)	(30)
Recoveries	3	5	30	15
Provision	503	(224)	(107)	(15)
Balance at end of period	1,720	232	1,720	232
Consumer [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			1,040
Other Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	2,477	1,173	1,040	1,023
Allowance for credit loss on PCD acquired loans			828
Charge-offs	(763)	0	(763)	(434)
Recoveries	5	4	9	11
Provision	353	(784)	1,286	(207)
Balance at end of period	2,072	393	2,072	393
Other Commercial Loans [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(328)
Other Agricultural Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	268	446	489	558
Allowance for credit loss on PCD acquired loans			0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	(39)	913	(41)	801
Balance at end of period	229	1,359	229	1,359
Other Agricultural Loans [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(219)
Subdivision Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	52	323	322	281
Allowance for credit loss on PCD acquired loans			0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	(4)	2	6	44
Balance at end of period	48	325	48	325
Subdivision Loans [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(280)
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	401	(114)	0	771
Allowance for credit loss on PCD acquired loans			0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	(73)	(62)	(398)	(947)
Balance at end of period	$ 328	$ (176)	328	$ (176)
Unallocated [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			$ 726

XML

Loans, Allowance for Credit Losses - Loans and Amortized Cost Basis of Loans Under CECL Methodology (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	$ 20,135		$ 102
Individually evaluated for impairment	1,320		18,450
Total Allowance for Credit Losses - Loans	21,455	$ 21,652	18,552	$ 18,291	$ 17,570	$ 17,304
Collectively evaluated for impairment	2,233,000		1,709,724
Individually evaluated for impairment	13,396		11,969
Loans acquired with deteriorated credit quality			3,306
Total Loans	2,246,396		1,724,999
Residential [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	306,952
Commercial [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	1,081,123
Construction [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	175,320
Real Estate Loans [Member] | Residential [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	2,484		4
Individually evaluated for impairment	81		1,052
Total Allowance for Credit Losses - Loans	2,565	2,675	1,056	1,005	1,015	1,147
Collectively evaluated for impairment	355,129		209,869
Individually evaluated for impairment	1,252		335
Loans acquired with deteriorated credit quality			9
Total Loans	356,381		210,213
Real Estate Loans [Member] | Commercial [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	9,030		57
Individually evaluated for impairment	155		10,063
Total Allowance for Credit Losses - Loans	9,185	9,274	10,120	9,937	9,216	8,099
Collectively evaluated for impairment	1,078,360		869,038
Individually evaluated for impairment	2,763		5,675
Loans acquired with deteriorated credit quality			1,856
Total Loans	1,081,123		876,569
Real Estate Loans [Member] | Agricultural [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	3,456		24
Individually evaluated for impairment	19		4,565
Total Allowance for Credit Losses - Loans	3,475	3,579	4,589	4,538	4,484	4,729
Collectively evaluated for impairment	310,507		306,793
Individually evaluated for impairment	3,657		5,380
Loans acquired with deteriorated credit quality			1,441
Total Loans	314,164		313,614
Real Estate Loans [Member] | Construction [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	1,547		0
Individually evaluated for impairment	286		801
Total Allowance for Credit Losses - Loans	1,833	1,667	801	678	563	434
Collectively evaluated for impairment	172,963		80,691
Individually evaluated for impairment	2,357		0
Loans acquired with deteriorated credit quality			0
Total Loans	175,320		80,691
Consumer [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	1,316		4
Individually evaluated for impairment	404		131
Total Allowance for Credit Losses - Loans	1,720	1,259	135	232	464	262
Collectively evaluated for impairment	114,613		86,646
Individually evaluated for impairment	1,140		4
Loans acquired with deteriorated credit quality			0
Total Loans	115,753		86,650
Other Commercial Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	1,697		13
Individually evaluated for impairment	375		1,027
Total Allowance for Credit Losses - Loans	2,072	2,477	1,040	393	1,173	1,023
Collectively evaluated for impairment	118,419		63,120
Individually evaluated for impairment	1,928		102
Loans acquired with deteriorated credit quality			0
Total Loans	120,347		63,222
Other Commercial Loans [Member] | Construction [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	120,347
Other Agricultural Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	229		0
Individually evaluated for impairment	0		489
Total Allowance for Credit Losses - Loans	229	268	489	1,359	446	558
Collectively evaluated for impairment	26,349		34,359
Individually evaluated for impairment	299		473
Loans acquired with deteriorated credit quality			0
Total Loans	26,648		34,832
State and Political Subdivision Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	48		0
Individually evaluated for impairment	0		322
Total Allowance for Credit Losses - Loans	48	52	322	325	323	281
Collectively evaluated for impairment	56,660		59,208
Individually evaluated for impairment	0		0
Loans acquired with deteriorated credit quality			0
Total Loans	56,660		59,208
Unallocated [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	328
Individually evaluated for impairment	0
Total Allowance for Credit Losses - Loans	328	$ 401	$ 0	$ (176)	$ (114)	$ 771
Collectively evaluated for impairment	0
Individually evaluated for impairment	0
Total Loans	$ 0

XML

Loans, Credit Quality Indicator, Summary (Details) - Minimum [Member] $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)
Financing Receivable [Abstract]
Amount over which all relationships to be reviewed, minimum	$ 500
Percentage of dollar volume of commercial loan portfolio to be reviewed	50.00%
Amount over which all new loans to be reviewed	$ 1,000
Amount over which all relationships to be reviewed	1,000
Amount which is 30 days past due to be reviewed for all aggregate loan relationships	$ 750

XML

Loans, Credit Exposures by Internally Assigned Grades, by Origination Year (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
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans	$ 2,246,396		$ 2,246,396		$ 1,724,999
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	808	$ 13	819	$ 464
Commercial Real Estate [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	65,893		65,893
2022	342,657		342,657
2021	218,616		218,616
2020	125,342		125,342
2019	90,460		90,460
Prior	206,653		206,653
Revolving Loans Amortized Cost Basis	30,328		30,328
Revolving Loans Converted to Term	1,174		1,174
Total loans	1,081,123		1,081,123
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			0
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	65,893		65,893
2022	333,600		333,600
2021	215,198		215,198
2020	123,779		123,779
2019	82,640		82,640
Prior	195,576		195,576
Revolving Loans Amortized Cost Basis	29,476		29,476
Revolving Loans Converted to Term	1,166		1,166
Total loans	1,047,328		1,047,328
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	8,824		8,824
2021	3,412		3,412
2020	1,563		1,563
2019	7,659		7,659
Prior	9,391		9,391
Revolving Loans Amortized Cost Basis	123		123
Revolving Loans Converted to Term	0		0
Total loans	30,972		30,972
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	233		233
2021	6		6
2020	0		0
2019	161		161
Prior	1,686		1,686
Revolving Loans Amortized Cost Basis	729		729
Revolving Loans Converted to Term	8		8
Total loans	2,823		2,823
Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
Agricultural Real Estate [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	16,510		16,510
2022	56,221		56,221
2021	31,039		31,039
2020	32,559		32,559
2019	26,863		26,863
Prior	135,945		135,945
Revolving Loans Amortized Cost Basis	13,095		13,095
Revolving Loans Converted to Term	1,932		1,932
Total loans	314,164		314,164
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			0
Agricultural Real Estate [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	16,361		16,361
2022	54,306		54,306
2021	29,828		29,828
2020	32,559		32,559
2019	26,760		26,760
Prior	123,598		123,598
Revolving Loans Amortized Cost Basis	12,926		12,926
Revolving Loans Converted to Term	1,689		1,689
Total loans	298,027		298,027
Agricultural Real Estate [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	149		149
2022	1,915		1,915
2021	1,211		1,211
2020	0		0
2019	0		0
Prior	6,702		6,702
Revolving Loans Amortized Cost Basis	94		94
Revolving Loans Converted to Term	0		0
Total loans	10,071		10,071
Agricultural Real Estate [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	103		103
Prior	5,645		5,645
Revolving Loans Amortized Cost Basis	75		75
Revolving Loans Converted to Term	243		243
Total loans	6,066		6,066
Agricultural Real Estate [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
Construction [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	39,265		39,265
2022	93,417		93,417
2021	42,253		42,253
2020	0		0
2019	0		0
Prior	385		385
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	175,320		175,320
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			0
Construction [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	37,135		37,135
2022	92,252		92,252
2021	35,486		35,486
2020	0		0
2019	0		0
Prior	385		385
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	165,258		165,258
Construction [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,130		2,130
2022	1,165		1,165
2021	4,410		4,410
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	7,705		7,705
Construction [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	2,357		2,357
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	2,357		2,357
Construction [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
Other Commercial Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans	120,347		120,347		63,222
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			763
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs	763	0	763	434
Other Commercial Loans [Member] | Construction [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	5,227		5,227
2022	12,238		12,238
2021	10,789		10,789
2020	5,703		5,703
2019	5,763		5,763
Prior	5,437		5,437
Revolving Loans Amortized Cost Basis	73,359		73,359
Revolving Loans Converted to Term	1,831		1,831
Total loans	120,347		120,347
Other Commercial Loans [Member] | Construction [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	5,227		5,227
2022	12,057		12,057
2021	9,234		9,234
2020	5,487		5,487
2019	5,291		5,291
Prior	4,213		4,213
Revolving Loans Amortized Cost Basis	71,633		71,633
Revolving Loans Converted to Term	99		99
Total loans	113,241		113,241
Other Commercial Loans [Member] | Construction [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	81		81
2021	1,555		1,555
2020	216		216
2019	286		286
Prior	22		22
Revolving Loans Amortized Cost Basis	1,214		1,214
Revolving Loans Converted to Term	1,708		1,708
Total loans	5,082		5,082
Other Commercial Loans [Member] | Construction [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	100		100
2021	0		0
2020	0		0
2019	186		186
Prior	1,202		1,202
Revolving Loans Amortized Cost Basis	294		294
Revolving Loans Converted to Term	0		0
Total loans	1,782		1,782
Other Commercial Loans [Member] | Construction [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	218		218
Revolving Loans Converted to Term	24		24
Total loans	242		242
Other Agricultural Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	3,464		3,464
2022	2,136		2,136
2021	7,228		7,228
2020	1,199		1,199
2019	680		680
Prior	828		828
Revolving Loans Amortized Cost Basis	11,079		11,079
Revolving Loans Converted to Term	34		34
Total loans	26,648		26,648		34,832
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs	0	0	0	0
Other Agricultural Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	3,464		3,464
2022	1,645		1,645
2021	7,005		7,005
2020	1,154		1,154
2019	666		666
Prior	521		521
Revolving Loans Amortized Cost Basis	10,554		10,554
Revolving Loans Converted to Term	0		0
Total loans	25,009		25,009
Other Agricultural Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	491		491
2021	223		223
2020	45		45
2019	8		8
Prior	42		42
Revolving Loans Amortized Cost Basis	500		500
Revolving Loans Converted to Term	0		0
Total loans	1,309		1,309
Other Agricultural Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	6		6
Prior	265		265
Revolving Loans Amortized Cost Basis	25		25
Revolving Loans Converted to Term	34		34
Total loans	330		330
Other Agricultural Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
State and Political Subdivision Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,426		1,426
2022	14,207		14,207
2021	10,984		10,984
2020	4,363		4,363
2019	2		2
Prior	25,678		25,678
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	56,660		56,660		$ 59,208
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs	0	$ 0	0	$ 0
State and Political Subdivision Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,426		1,426
2022	14,207		14,207
2021	10,984		10,984
2020	4,363		4,363
2019	2		2
Prior	25,678		25,678
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	56,660		56,660
State and Political Subdivision Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
State and Political Subdivision Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
State and Political Subdivision Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
Total Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	131,785		131,785
2022	520,876		520,876
2021	320,909		320,909
2020	169,166		169,166
2019	123,768		123,768
Prior	374,926		374,926
Revolving Loans Amortized Cost Basis	127,861		127,861
Revolving Loans Converted to Term	4,971		4,971
Total loans	1,774,262		1,774,262
Total Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	129,506		129,506
2022	508,067		508,067
2021	307,735		307,735
2020	167,342		167,342
2019	115,359		115,359
Prior	349,971		349,971
Revolving Loans Amortized Cost Basis	124,589		124,589
Revolving Loans Converted to Term	2,954		2,954
Total loans	1,705,523		1,705,523
Total Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,279		2,279
2022	12,476		12,476
2021	10,811		10,811
2020	1,824		1,824
2019	7,953		7,953
Prior	16,157		16,157
Revolving Loans Amortized Cost Basis	1,931		1,931
Revolving Loans Converted to Term	1,708		1,708
Total loans	55,139		55,139
Total Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	333		333
2021	2,363		2,363
2020	0		0
2019	456		456
Prior	8,798		8,798
Revolving Loans Amortized Cost Basis	1,123		1,123
Revolving Loans Converted to Term	285		285
Total loans	13,358		13,358
Total Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	218		218
Revolving Loans Converted to Term	24		24
Total loans	$ 242		$ 242

XML

Loans, Internal Credit Risk Ratings for Loan Class Segments (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financing Receivable by credit exposure [Abstract]
Total loans	$ 2,224,941	$ 1,706,447
Real Estate Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		296,863
Real Estate Loans [Member] | Commercial [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		876,569
Real Estate Loans [Member] | Commercial [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		842,912
Real Estate Loans [Member] | Commercial [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		28,047
Real Estate Loans [Member] | Commercial [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		5,610
Real Estate Loans [Member] | Commercial [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Commercial [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Agricultural [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		313,614
Real Estate Loans [Member] | Agricultural [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		295,443
Real Estate Loans [Member] | Agricultural [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		11,960
Real Estate Loans [Member] | Agricultural [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		6,211
Real Estate Loans [Member] | Agricultural [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Agricultural [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Construction [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		80,691
Real Estate Loans [Member] | Construction [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		75,703
Real Estate Loans [Member] | Construction [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		2,642
Real Estate Loans [Member] | Construction [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		2,346
Real Estate Loans [Member] | Construction [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Construction [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Other Commercial Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		63,222
Other Commercial Loans [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		59,902
Other Commercial Loans [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		2,953
Other Commercial Loans [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		337
Other Commercial Loans [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		30
Other Commercial Loans [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Other Agricultural Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		34,832
Other Agricultural Loans [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		32,708
Other Agricultural Loans [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		1,307
Other Agricultural Loans [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		817
Other Agricultural Loans [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Other Agricultural Loans [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Subdivision Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		59,208
Subdivision Loans [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		59,208
Subdivision Loans [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Subdivision Loans [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Subdivision Loans [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Subdivision Loans [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Total Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		1,428,136
Total Loans [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		1,365,876
Total Loans [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		46,909
Total Loans [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		15,321
Total Loans [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		30
Total Loans [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		$ 0

XML

Loans, Recorded Investment in Loan Classes Based on Payment Activity, By Origination Year (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
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
Total loans	$ 2,246,396		$ 2,246,396		$ 1,724,999
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	808	$ 13	819	$ 464
Residential Real Estate [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	15,478		15,478
2022	90,046		90,046
2021	49,222		49,222
2020	30,699		30,699
2019	19,086		19,086
Prior	102,421		102,421
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	306,952		306,952
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			1
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			1
Residential Real Estate [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	15,478		15,478
2022	89,640		89,640
2021	48,451		48,451
2020	30,300		30,300
2019	19,086		19,086
Prior	101,162		101,162
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	304,117		304,117
Residential Real Estate [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	0		0
2022	406		406
2021	771		771
2020	399		399
2019	0		0
Prior	1,259		1,259
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	2,835		2,835
Home Equity [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	3,188		3,188
2022	3,105		3,105
2021	1,980		1,980
2020	2,142		2,142
2019	2,593		2,593
Prior	8,465		8,465
Revolving Loans Amortized Cost Basis	27,681		27,681
Revolving Loans Converted to Term	275		275
Total loans	49,429		49,429
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			0
Home Equity [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	3,188		3,188
2022	3,105		3,105
2021	1,980		1,980
2020	2,142		2,142
2019	2,593		2,593
Prior	8,412		8,412
Revolving Loans Amortized Cost Basis	27,613		27,613
Revolving Loans Converted to Term	275		275
Total loans	49,308		49,308
Home Equity [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	53		53
Revolving Loans Amortized Cost Basis	68		68
Revolving Loans Converted to Term	0		0
Total loans	121		121
Consumer [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	1,742		1,742
2022	1,133		1,133
2021	598		598
2020	509		509
2019	570		570
Prior	4,031		4,031
Revolving Loans Amortized Cost Basis	107,168		107,168
Revolving Loans Converted to Term	2		2
Total loans	115,753		115,753
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			1
Prior			38
Revolving Loans Amortized Cost Basis			16
Revolving Loans Converted to Term			0
Gross charge-offs			55
Consumer [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	1,742		1,742
2022	1,115		1,115
2021	598		598
2020	509		509
2019	570		570
Prior	3,024		3,024
Revolving Loans Amortized Cost Basis	107,168		107,168
Revolving Loans Converted to Term	2		2
Total loans	114,728		114,728
Consumer [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	0		0
2022	18		18
2021	0		0
2020	0		0
2019	0		0
Prior	1,007		1,007
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	1,025		1,025
Mortgage, Home Equity, and Consumer [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	20,408		20,408
2022	94,284		94,284
2021	51,800		51,800
2020	33,350		33,350
2019	22,249		22,249
Prior	114,917		114,917
Revolving Loans Amortized Cost Basis	134,849		134,849
Revolving Loans Converted to Term	277		277
Total loans	472,134		472,134
Mortgage, Home Equity, and Consumer [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	20,408		20,408
2022	93,860		93,860
2021	51,029		51,029
2020	32,951		32,951
2019	22,249		22,249
Prior	112,593		112,593
Revolving Loans Amortized Cost Basis	134,781		134,781
Revolving Loans Converted to Term	277		277
Total loans	468,148		468,148
Mortgage, Home Equity, and Consumer [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	0		0
2022	424		424
2021	771		771
2020	399		399
2019	0		0
Prior	2,324		2,324
Revolving Loans Amortized Cost Basis	68		68
Revolving Loans Converted to Term	0		0
Total loans	3,986		3,986
Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
Total loans	356,381		356,381		$ 210,213
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	$ 0	$ 0	$ 1	$ 0

XML

Loans, Internal Credit Risk Ratings for Loan Class Segments by Performance Status (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financing Receivable by credit exposure [Abstract]
Total loans	$ 2,224,941	$ 1,706,447
Consumer [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		86,650
Consumer [Member] | Performing [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		86,643
Consumer [Member] | Nonperforming [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		7
Consumer [Member] | PCI [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		296,863
Real Estate Loans [Member] | Performing [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		296,256
Real Estate Loans [Member] | Nonperforming [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		598
Real Estate Loans [Member] | PCI [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		9
Real Estate Loans [Member] | Mortgages [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		162,569
Real Estate Loans [Member] | Mortgages [Member] | Performing [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		161,998
Real Estate Loans [Member] | Mortgages [Member] | Nonperforming [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		562
Real Estate Loans [Member] | Mortgages [Member] | PCI [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		9
Real Estate Loans [Member] | Home Equity [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		47,644
Real Estate Loans [Member] | Home Equity [Member] | Performing [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		47,615
Real Estate Loans [Member] | Home Equity [Member] | Nonperforming [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		29
Real Estate Loans [Member] | Home Equity [Member] | PCI [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		$ 0

XML

Loans, Past Due (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Recorded investment of past due [Abstract]
Total past due	$ 2,246,396	$ 1,724,999
Current	2,231,910	1,714,673
PCI		3,306
Total financing receivables	2,246,396	1,724,999
90 days or greater past due and accruing	8	7
Financing receivables on nonaccrual status [Abstract]
Current and non-accrual	4,621	3,370
PCI Loans considered non accrual		0
Nonaccrual With a related allowance	4,650	6,938
Nonaccrual Without a related allowance	8,489
90 days or greater past due and accruing	8	7
Total loans receivables	13,139	6,938
Total non-performing loans	13,147	6,945
Financing receivables on accrual status [Abstract]
Current and still accruing	2,227,289	1,711,303
PCI Loans still accruing		3,306
Total financing receivables and still accruing	$ 2,233,257	1,718,061
Minimum [Member]
Financing receivables on nonaccrual status [Abstract]
Period of past due after which loans considered as non accrual	90 days
Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	$ 14,486	7,020
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	8,518	3,568
Financing receivables on accrual status [Abstract]
Total past due and still accruing	5,968	3,452
30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	5,019	3,276
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	241	46
Financing receivables on accrual status [Abstract]
Total past due and still accruing	4,778	3,230
60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,280	291
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	98	76
Financing receivables on accrual status [Abstract]
Total past due and still accruing	1,182	215
90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	8,187	3,453
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	8,179	3,446
Financing receivables on accrual status [Abstract]
Total past due and still accruing	8	7
Home Equity [Member]
Recorded investment of past due [Abstract]
Total past due	49,429
Commercial [Member]
Recorded investment of past due [Abstract]
Total past due	1,081,123
Construction [Member]
Recorded investment of past due [Abstract]
Total past due	175,320
Real Estate Loans [Member] | Mortgages [Member]
Recorded investment of past due [Abstract]
Current	303,499	161,843
PCI		9
Total financing receivables	306,952	162,569
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	318	562
Nonaccrual Without a related allowance	2,517
90 days or greater past due and accruing	0	0
Total loans receivables	2,835	562
Total non-performing loans	2,835	562
Real Estate Loans [Member] | Mortgages [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	3,453	717
Real Estate Loans [Member] | Mortgages [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	836	356
Real Estate Loans [Member] | Mortgages [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	282	132
Real Estate Loans [Member] | Mortgages [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	2,335	229
Real Estate Loans [Member] | Home Equity [Member]
Recorded investment of past due [Abstract]
Current	49,122	47,558
PCI		0
Total financing receivables	49,429	47,644
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	0	29
Nonaccrual Without a related allowance	121
90 days or greater past due and accruing	0	0
Total loans receivables	121	29
Total non-performing loans	121	29
Real Estate Loans [Member] | Home Equity [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	307	86
Real Estate Loans [Member] | Home Equity [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	130	48
Real Estate Loans [Member] | Home Equity [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	77	9
Real Estate Loans [Member] | Home Equity [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	100	29
Real Estate Loans [Member] | Commercial [Member]
Recorded investment of past due [Abstract]
Total past due	1,081,123	876,569
Current	1,077,809	871,745
PCI		1,856
Total financing receivables	1,081,123	876,569
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	260	2,778
Nonaccrual Without a related allowance	1,337
90 days or greater past due and accruing	0	0
Total loans receivables	1,597	2,778
Total non-performing loans	1,597	2,778
Real Estate Loans [Member] | Commercial [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	3,314	2,968
Real Estate Loans [Member] | Commercial [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,797	1,065
Real Estate Loans [Member] | Commercial [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	514	115
Real Estate Loans [Member] | Commercial [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,003	1,788
Real Estate Loans [Member] | Agricultural [Member]
Recorded investment of past due [Abstract]
Total past due	314,164	313,614
Current	312,498	310,805
PCI		1,441
Total financing receivables	314,164	313,614
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	182	3,222
Nonaccrual Without a related allowance	2,803
90 days or greater past due and accruing	0	0
Total loans receivables	2,985	3,222
Total non-performing loans	2,985	3,222
Real Estate Loans [Member] | Agricultural [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,666	1,368
Real Estate Loans [Member] | Agricultural [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	299	0
Real Estate Loans [Member] | Agricultural [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
Real Estate Loans [Member] | Agricultural [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,367	1,368
Real Estate Loans [Member] | Construction [Member]
Recorded investment of past due [Abstract]
Total past due	175,320	80,691
Current	172,286	80,691
PCI		0
Total financing receivables	175,320	80,691
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	2,357	0
Nonaccrual Without a related allowance	0
90 days or greater past due and accruing	0	0
Total loans receivables	2,357	0
Total non-performing loans	2,357	0
Real Estate Loans [Member] | Construction [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	3,034	0
Real Estate Loans [Member] | Construction [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	677	0
Real Estate Loans [Member] | Construction [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
Real Estate Loans [Member] | Construction [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	2,357	0
Consumer [Member]
Recorded investment of past due [Abstract]
Total past due	115,753	86,650
Current	113,957	86,496
PCI		0
Total financing receivables	115,753	86,650
90 days or greater past due and accruing	8	7
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	1,007	0
Nonaccrual Without a related allowance	10
90 days or greater past due and accruing	8	7
Total loans receivables	1,017	0
Total non-performing loans	1,025	7
Consumer [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,796	154
Consumer [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	647	147
Consumer [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	124	0
Consumer [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,025	7
Other Commercial Loans [Member]
Recorded investment of past due [Abstract]
Total past due	120,347	63,222
Current	119,655	61,495
PCI		0
Total financing receivables	120,347	63,222
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	526	62
Nonaccrual Without a related allowance	1,402
90 days or greater past due and accruing	0	0
Total loans receivables	1,928	62
Total non-performing loans	1,928	62
Other Commercial Loans [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	692	1,727
Other Commercial Loans [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	633	1,660
Other Commercial Loans [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	59	35
Other Commercial Loans [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	0	32
Other Commercial Loans [Member] | Construction [Member]
Recorded investment of past due [Abstract]
Total past due	120,347
Other Agricultural Loans [Member]
Recorded investment of past due [Abstract]
Total past due	26,648	34,832
Current	26,424	34,832
PCI		0
Total financing receivables	26,648	34,832
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	0	285
Nonaccrual Without a related allowance	299
90 days or greater past due and accruing	0	0
Total loans receivables	299	285
Total non-performing loans	299	285
Other Agricultural Loans [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	224	0
Other Agricultural Loans [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
Other Agricultural Loans [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	224	0
Other Agricultural Loans [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
State and Political Subdivision Loans [Member]
Recorded investment of past due [Abstract]
Total past due	56,660	59,208
Current	56,660	59,208
PCI		0
Total financing receivables	56,660	59,208
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
90 days or greater past due and accruing	0	0
State and Political Subdivision Loans [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
State and Political Subdivision Loans [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
State and Political Subdivision Loans [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
State and Political Subdivision Loans [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	$ 0	$ 0

XML

Loans, Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	$ 13,139	$ 6,938
Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	9,895	6,591
Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,227	347
None [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,017
Real Estate Loans [Member] | Mortgages [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,835	562
Real Estate Loans [Member] | Mortgages [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,835	562
Real Estate Loans [Member] | Mortgages [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Real Estate Loans [Member] | Home Equity [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	121	29
Real Estate Loans [Member] | Home Equity [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	121	29
Real Estate Loans [Member] | Home Equity [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Real Estate Loans [Member] | Commercial [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,597	2,778
Real Estate Loans [Member] | Commercial [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,597	2,778
Real Estate Loans [Member] | Commercial [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Real Estate Loans [Member] | Agricultural [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,985	3,222
Real Estate Loans [Member] | Agricultural [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,985	3,222
Real Estate Loans [Member] | Agricultural [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Real Estate Loans [Member] | Construction [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,357	0
Real Estate Loans [Member] | Construction [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,357	0
Real Estate Loans [Member] | Construction [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Consumer [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,017	0
Consumer [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Consumer [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Consumer [Member] | None [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,017
Other Commercial Loans [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,928	62
Other Commercial Loans [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Other Commercial Loans [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,928	62
Other Agricultural Loans [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	299	285
Other Agricultural Loans [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Other Agricultural Loans [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	$ 299	$ 285

XML

Loans, Modifications to Borrowers Experiencing Financial Difficulty (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2023 USD ($) Loan	Sep. 30, 2023 USD ($) Loan
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan	8	16
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis	$ 2,093	$ 4,204
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan		1
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		$ 86
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty	$ 2,093	4,204
Non accruing modified loans to borrowers experiencing financial difficulty		86
Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		4,204
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		86
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		4,204
Non accruing modified loans to borrowers experiencing financial difficulty		86
30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Non accruing modified loans to borrowers experiencing financial difficulty		0
90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Non accruing modified loans to borrowers experiencing financial difficulty		$ 0
Real Estate Loans [Member] | Mortgages [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan		1
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		$ 129
Accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables		0.04%
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term		4 months
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		$ 129
Real Estate Loans [Member] | Mortgages [Member] | Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		129
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		129
Real Estate Loans [Member] | Mortgages [Member] | 30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Real Estate Loans [Member] | Mortgages [Member] | 90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		$ 0
Real Estate Loans [Member] | Commercial [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan	1	7
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis	$ 42	$ 1,969
Accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables	0.00%	0.18%
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term	6 months	22 months
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan		1
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		$ 86
Non accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables		0.01%
Non accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term		6 months
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty	$ 42	$ 1,969
Non accruing modified loans to borrowers experiencing financial difficulty		86
Real Estate Loans [Member] | Commercial [Member] | Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		1,969
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		86
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		1,969
Non accruing modified loans to borrowers experiencing financial difficulty		86
Real Estate Loans [Member] | Commercial [Member] | 30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Non accruing modified loans to borrowers experiencing financial difficulty		0
Real Estate Loans [Member] | Commercial [Member] | 90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Non accruing modified loans to borrowers experiencing financial difficulty		$ 0
Real Estate Loans [Member] | Agricultural [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan	2	3
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis	$ 673	$ 728
Accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables	0.21%	0.23%
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term	3 months	5 months
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty	$ 673	$ 728
Real Estate Loans [Member] | Agricultural [Member] | Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		728
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		728
Real Estate Loans [Member] | Agricultural [Member] | 30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Real Estate Loans [Member] | Agricultural [Member] | 90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		$ 0
Consumer Portfolio Segment [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan	5
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term	10 months
Other Commercial Loans [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan	5	5
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis	$ 1,378	$ 1,378
Accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables	1.15%	1.15%
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term		10 months
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty	$ 1,378	$ 1,378

XML

Loans, Foreclosed Assets Held for Sale (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Foreclosed assets held for sale [Abstract]
Foreclosed assets held for sale	$ 474	$ 543
Consumer Residential Mortgages [Member]
Foreclosed assets held for sale [Abstract]
Foreclosed assets held for sale	176
Formal foreclosure proceedings on potential foreclosure assets	$ 241

XML

Goodwill and Other Intangible Assets (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
Amortized intangible assets [Abstract]
Gross carrying value	[1]	$ 7,320		$ 7,320		$ 4,279
Accumulated amortization	[1]	(3,454)		(3,454)		(3,007)
Net carrying value	[1]	3,866		3,866		1,272
Unamortized intangible assets [Abstract]
Goodwill	[1]	84,758		84,758		31,376
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		237	$ 114	447	$ 354
Estimated Amortization Expense [Abstract]
Remaining 2023		230		230
2024		841		841
2025		704		704
2026		569		569
2027		457		457
Thereafter		1,065		1,065
Net carrying value	[1]	3,866		3,866		1,272
Mortgage Servicing Rights (MSRs) [Member]
Amortized intangible assets [Abstract]
Gross carrying value	[1]	2,607		2,607		2,336
Accumulated amortization	[1]	(1,590)		(1,590)		(1,362)
Net carrying value	[1]	1,017		1,017		974
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		80	74	228	234
Estimated Amortization Expense [Abstract]
Remaining 2023		76		76
2024		277		277
2025		226		226
2026		174		174
2027		118		118
Thereafter		146		146
Net carrying value	[1]	1,017		1,017		974
Core Deposit Intangibles [Member]
Amortized intangible assets [Abstract]
Gross carrying value	[1]	4,713		4,713		1,943
Accumulated amortization	[1]	(1,864)		(1,864)		(1,645)
Net carrying value	[1]	2,849		2,849		298
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		157	$ 40	219	$ 120
Estimated Amortization Expense [Abstract]
Remaining 2023		154		154
2024		564		564
2025		478		478
2026		395		395
2027		339		339
Thereafter		919		919
Net carrying value	[1]	$ 2,849		$ 2,849		$ 298

[1] Excludes fully amortized intangible assets

XML

Employee Benefit Plans, Noncontributory Defined Benefit Pension Plan (Details) - Pension Plan [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Components of net periodic benefit cost [Abstract]
Service cost	$ 75	$ 89	$ 230	$ 267
Interest cost	104	69	324	207
Expected return on plan assets	(183)	(234)	(577)	(701)
Partial settlement	0	144	0	144
Net amortization and deferral	17	24	31	72
Net periodic benefit cost	13	$ 92	8	$ (11)
Expected employer contribution to pension plan	$ 0		$ 0

XML

Employee Benefit Plans, Restricted Stock Plan (Details) - Restricted Stock [Member] - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Deferred Compensation Arrangements [Abstract]
Number of shares authorized (in shares)	150,000		150,000
Number of shares available for grant (in shares)	113,449		113,449
Unvested Shares [Roll Forward]
Outstanding, beginning of period (in shares)	6,254		6,622
Granted (in shares)	367		2,609
Forfeited (in shares)	(52)		(213)
Vested (in shares)	(499)		(2,948)
Outstanding, end of period (in shares)	6,070		6,070
Weighted Average Market Price [Roll Forward]
Outstanding, beginning of period (in dollars per share)	$ 71.61		$ 63.63
Granted (in dollars per share)	81.58		83.13
Forfeited (in dollars per share)	(63.09)		(63.12)
Vested (in dollars per share)	(67.37)		(62.39)
Outstanding, end of period (in dollars per share)	$ 72.63		$ 72.63
Additional General Disclosures [Abstract]
Share-based compensation expense	$ 62,000	$ 68,000	$ 178,000	$ 210,000
Compensation cost related to nonvested awards that has not yet been recognized	$ 441,000		$ 441,000
Period over which compensation cost is expected to be recognized			3 years

XML

Accumulated Other Comprehensive Loss, By Component (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]
Balance		$ 263,228	$ 195,032	$ 200,147	$ 212,492
Other comprehensive income (loss) before reclassifications (net of tax)		(5,202)	(9,283)	(2,317)	(35,774)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		(461)	(13)	(1,185)	74
Other comprehensive income (loss), net of tax		(5,663)	(9,296)	(3,502)	(35,700)
Balance		262,686	191,430	262,686	191,430
Accumulated Other Comprehensive Income [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance		(30,980)	(26,559)	(33,141)	(155)
Other comprehensive income (loss), net of tax		(5,663)	(9,296)	(3,502)	(35,700)
Balance		(36,643)	(35,855)	(36,643)	(35,855)
Unrealized Gain (Loss) on Available for Sale Securities [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	(35,119)	(28,928)	(37,514)	304
Other comprehensive income (loss) before reclassifications (net of tax)	[1]	(6,025)	(10,727)	(3,669)	(39,959)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)	[1]	0	5	39	5
Other comprehensive income (loss), net of tax	[1]	(6,025)	(10,722)	(3,630)	(39,954)
Balance	[1]	(41,144)	(39,650)	(41,144)	(39,650)
Defined Benefit Pension Items [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	(1,045)	(1,930)	(1,056)	(1,968)
Other comprehensive income (loss) before reclassifications (net of tax)	[1]	0	0	0	0
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)	[1]	6	19	17	57
Other comprehensive income (loss), net of tax	[1]	6	19	17	57
Balance	[1]	(1,039)	(1,911)	(1,039)	(1,911)
Unrealized Gain on Interest Rate Swap [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	5,184	4,299	5,429	1,509
Other comprehensive income (loss) before reclassifications (net of tax)	[1]	823	1,444	1,352	4,185
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)	[1]	(467)	(37)	(1,241)	12
Other comprehensive income (loss), net of tax	[1]	356	1,407	111	4,197
Balance	[1]	$ 5,540	$ 5,706	$ 5,540	$ 5,706

[1] Amounts in parentheses indicate debits on the Consolidated Balance Sheet.

XML

Accumulated Other Comprehensive Loss, Reclassification (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 [Abstract]
Available for sale security gains, net				$ (274)	$ (204)
Interest expense		$ (14,285)	$ (2,937)	(30,201)	(6,168)
Provision for income taxes		(1,599)	(1,655)	(2,020)	(4,609)
NET INCOME		7,548	7,544	10,271	21,185
Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
NET INCOME	[1]	461	13	1,185	(74)
Unrealized Gains and Losses on Available for Sale Securities [Member] | Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
Available for sale security gains, net	[1]	0	(6)	(51)	(6)
Provision for income taxes	[1]	0	1	12	1
NET INCOME	[1]	0	(5)	(39)	(5)
Defined Benefit Pension Items [Member] | Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
Other expenses	[1]	(7)	(24)	(21)	(72)
Provision for income taxes	[1]	1	5	4	15
NET INCOME	[1]	(6)	(19)	(17)	(57)
Unrealized Gain (Loss) on Interest Rate Swap [Member] | Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
Interest expense	[1]	591	47	1,571	(15)
Provision for income taxes	[1]	(124)	(10)	(330)	3
NET INCOME	[1]	$ 467	$ 37	$ 1,241	$ (12)

[1] Amounts in parentheses indicate expenses and other amounts indicate income on the Consolidated Statement of Income

XML

Fair Value Measurements, Measured on a Recurring and Nonrecurring Basis (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Other Assets [Abstract]
Derivative instruments	$ 18,144	$ 16,599
Liabilities [Abstract]
Derivative instruments	(10,694)	(9,726)
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment, estimated selling cost	393	50
Recurring [Member]
Assets [Abstract]
Equity securities	1,858	2,208
Available for sale securities [Abstract]
U.S. Agency securities	63,647	70,677
U.S. Treasury securities	147,431	148,570
Obligations of state and political subdivisions	96,022	110,300
Corporate obligations	12,120	9,383
Mortgage-backed securities in government sponsored entities	98,587	100,576
Loans held for sale	14,155
Other Assets [Abstract]
Derivative instruments	18,144	16,599
Liabilities [Abstract]
Derivative instruments	(10,694)	(9,726)
Recurring [Member] | Level I [Member]
Assets [Abstract]
Equity securities	1,858	2,208
Available for sale securities [Abstract]
U.S. Agency securities	0	0
U.S. Treasury securities	147,431	148,570
Obligations of state and political subdivisions	0	0
Corporate obligations	0	0
Mortgage-backed securities in government sponsored entities	0	0
Loans held for sale	0	0
Other Assets [Abstract]
Derivative instruments	0	0
Liabilities [Abstract]
Derivative instruments	0	0
Recurring [Member] | Level II [Member]
Assets [Abstract]
Equity securities	0	0
Available for sale securities [Abstract]
U.S. Agency securities	63,647	70,677
U.S. Treasury securities	0	0
Obligations of state and political subdivisions	96,022	110,300
Corporate obligations	12,120	9,383
Mortgage-backed securities in government sponsored entities	98,587	100,576
Loans held for sale	14,155	0
Other Assets [Abstract]
Derivative instruments	17,707	16,599
Liabilities [Abstract]
Derivative instruments	(10,694)	(9,726)
Recurring [Member] | Level III [Member]
Assets [Abstract]
Equity securities	0	0
Available for sale securities [Abstract]
U.S. Agency securities	0	0
U.S. Treasury securities	0	0
Obligations of state and political subdivisions	0	0
Corporate obligations	0	0
Mortgage-backed securities in government sponsored entities	0	0
Loans held for sale	0	725
Other Assets [Abstract]
Derivative instruments	437	0
Liabilities [Abstract]
Derivative instruments	0	0
Nonrecurring [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment	3,980	496
Other real estate owned	97	297
Nonrecurring [Member] | Level I [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment	0	0
Other real estate owned	0	0
Nonrecurring [Member] | Level II [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment	0	0
Other real estate owned	0	0
Nonrecurring [Member] | Level III [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment	3,980	496
Other real estate owned	$ 97	$ 297

XML

Fair Value Measurements, Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3) (Details) - IRLC Assets [Member] - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2023
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance	$ 657	$ 529
Total unrealized losses: Included in other comprehensive loss	0	0
Total losses included in earnings and held at reporting date	(220)	(92)
Purchases, sales and settlements	0	0
Transfers in and/or out of Level 3	0	0
Ending Balance	437	437
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held	$ (220)	$ (92)

XML

Fair Value Measurements, Quantitative Information about Level 3 Fair Value Measurements (Details) $ in Thousands	Sep. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	$ 18,144	$ 16,599
Net derivative liability	10,694	$ 9,726
IRLC Assets [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	437
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	437
Net derivative liability	$ 437
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member] | Valuation Technique, Discounted Cash Flow [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Derivative Asset, Measurement Input	0.7539
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member] | Valuation Technique, Discounted Cash Flow [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Derivative Asset, Measurement Input	0.9964
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member] | Valuation Technique, Discounted Cash Flow [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Derivative Asset, Measurement Input	0.904

XML

Fair Value Measurements, Quantitative Information (Details) - Appraised Collateral Values [Member] $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Individually Analyzed Loans Held For Investment [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment	$ 3,980	$ 496
Individually Analyzed Loans Held For Investment [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	0 months	6 months
Individually Analyzed Loans Held For Investment [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	12 months	12 months
Individually Analyzed Loans Held For Investment [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	6 months 21 days	11 months 15 days
Individually Analyzed Loans Held For Investment [Member] | Discount for Time Since Appraisal [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0	0
Individually Analyzed Loans Held For Investment [Member] | Discount for Time Since Appraisal [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	1	1
Individually Analyzed Loans Held For Investment [Member] | Discount for Time Since Appraisal [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0.2655	0.2516
Individually Analyzed Loans Held For Investment [Member] | Selling Costs [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0.08	0.08
Individually Analyzed Loans Held For Investment [Member] | Selling Costs [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0.10	0.10
Individually Analyzed Loans Held For Investment [Member] | Selling Costs [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0.0989	0.0841
Other Real Estate Owned [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment	$ 97	$ 297
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input	0.32
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input		0.20
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input		0.84
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input	0.32	0.3984

XML

Fair Value Measurements, By Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financial assets [Abstract]
Interest bearing time deposits with other banks	$ 4,566	$ 6,055
Recurring [Member]
Financial assets [Abstract]
Loans held for sale	14,155
Level I [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	0	0
Loans held for sale	0	0
Net loans	0	0
Financial liabilities [Abstract]
Deposits	1,958,842	1,566,517
Borrowed funds	0	0
Level II [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	0	0
Loans held for sale	14,155	0
Net loans	0	0
Financial liabilities [Abstract]
Deposits	0	0
Borrowed funds	0	0
Level III [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	4,566	6,055
Loans held for sale	0	725
Net loans	2,080,817	1,662,514
Financial liabilities [Abstract]
Deposits	365,782	265,520
Borrowed funds	298,617	246,288
Carrying Amount [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	4,566	6,055
Loans held for sale		725
Net loans	2,224,941	1,706,447
Financial liabilities [Abstract]
Deposits	2,335,135	1,844,208
Borrowed funds	316,151	257,278
Fair Value [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	4,566	6,055
Loans held for sale		725
Net loans	2,145,060	1,662,514
Financial liabilities [Abstract]
Deposits	2,324,624	1,832,037
Borrowed funds	$ 298,617	$ 246,288