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

	Total Loans		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
December 31, 2022
Real estate loans:
Residential	$	657,192	$	1,289	$	655,903
Construction		26,594		-		26,594
Commercial		707,134		12,097		695,037
Commercial		44,960		927		44,033
Obligations of states and political subdivisions		39,312		-		39,312
Home equity loans and lines of credit		43,687		34		43,653
Auto loans		2,401		13		2,388
Other		1,861		5		1,856
Total	$	1,523,141	$	14,365	$	1,508,776

	Total Loans		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
September 30, 2022
Real estate loans:
Residential	$	623,375	$	1,342	$	622,033
Construction		25,024		-		25,024
Commercial		678,841		12,165		666,676
Commercial		38,158		937		37,221
Obligations of states and political subdivisions		40,416		-		40,416
Home equity loans and lines of credit		43,170		36		43,134
Auto loans		3,611		16		3,595
Other		1,716		6		1,710
Total	$	1,454,311	$	14,502	$	1,439,809

The Company maintains a loan review system that allows for a periodic review of our loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. Specific loan loss allowances are established for identified losses based on a review of such information. A loan evaluated for impairment is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as impaired are evaluated independently. The Company does not aggregate such loans for evaluation

purposes. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential mortgage loans for impairment disclosures, unless such loans are part of a larger relationship that is impaired or are classified as a troubled debt restructuring (“TDR”).

A loan is considered to be a TDR loan when the Company grants a concession to the borrower that it would not otherwise consider because of the borrower’s financial condition. Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk. TDR loans that are in compliance with their modified terms and that yield a market rate at the time of modification may be removed from TDR status after one year of performance.

The following tables include the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount at the dates indicated, if applicable (in thousands):

	Recorded Investment		Unpaid Principal Balance		Associated Allowance
December 31, 2022
With no specific allowance recorded:
Real estate loans
Residential	$	1,187	$	1,956	$	-
Construction		-		-		-
Commercial		7,389		8,043		-
Commercial		369		409		-
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		34		67		-
Auto loans		13		19		-
Other		5		19		-
Total		8,997		10,513		-
With an allowance recorded:
Real estate loans
Residential		102		106		11
Construction		-		-		-
Commercial		4,708		4,864		420
Commercial		558		572		249
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		-		-		-
Auto loans		-		-		-
Other		-		-		-
Total		5,368		5,542		680
Total:
Real estate loans
Residential		1,289		2,062		11
Construction		-		-		-
Commercial		12,097		12,907		420
Commercial		927		981		249
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		34		67		-
Auto loans		13		19		-
Other		5		19		-
Total Impaired Loans	$	14,365	$	16,055	$	680

	Recorded Investment		Unpaid Principal Balance		Associated Allowance
September 30, 2022
With no specific allowance recorded:
Real Estate Loans
Residential	$	1,239	$	2,029	$	-
Construction		-		-		-
Commercial		8,384		8,987		-
Commercial		865		905		-
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		36		68		-
Auto Loans		16		28		-
Other		6		19		-
Total		10,546		12,036		-
With an allowance recorded:
Real Estate Loans
Residential		103		108		12
Construction		-		-		-
Commercial		3,781		3,928		301
Commercial		72		83		38
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		-		-		-
Auto Loans		-		-		-
Other		-		-		-
Total		3,956		4,119		351
Total:
Real Estate Loans
Residential		1,342		2,137		12
Construction		-		-		-
Commercial		12,165		12,915		301
Commercial		937		988		38
Obligations of states and political subdivisions		-		-		-
Home equity loans and lines of credit		36		68		-
Auto Loans		16		28		-
Other		6		19		-
Total Impaired Loans	$	14,502	$	16,155	$	351

The following tables represents the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired (in thousands):

	For the Three Months Ended December 31,
	2022		2021		2022		2021
	Average Recorded Investment		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized
With no specific allowance recorded:
Real estate loans
Residential	$	1,216	$	2,292	$	1	$	2
Construction		-		-		-		-
Commercial		10,563		11,049		-		-
Commercial		699		109		-		-
Obligations of states and political subdivisions		-		-		-		-
Home equity loans and lines of credit		35		310		-		-
Auto loans		6		23		-		-
Other		5		-		-		-
Total		12,524		13,783		1		2
With an allowance recorded:
Real estate loans
Residential		103		118		-		-
Construction		-		-		-		-
Commercial		1,570		13		-		-
Commercial		231		1,173		-		-
Obligations of states and political subdivisions		-		-		-		-
Home equity loans and lines of credit		-		-		-		-
Auto loans		-		10		-		-
Other		-		-		-		-
Total		1,904		1,314		-		-
Total:
Real estate loans
Residential		1,319		2,410		1		2
Construction		-		-		-		-
Commercial		12,133		11,062		-		-
Commercial		930		1,282		-
Obligations of states and political subdivisions		-		-		-		-
Home equity loans and lines of credit		35		310		-		-
Auto loans		6		33		-		-
Other		5		-		-		-
Total Impaired Loans	$	14,428	$	15,097	$	1	$	2

The Company uses a ten-point internal risk-rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as Pass-rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are fundamentally sound yet exhibit potentially unacceptable credit risk or deteriorating trends or characteristics which, if left uncorrected, may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans that are 90 or more days past due are considered Substandard. Loans in the Doubtful category have all the weaknesses inherent in loans classified as Substandard with the added characteristic that their weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans in the Loss category are considered uncollectible and of little value that their continuance as bankable assets is not warranted. Certain residential real estate loans, construction loans, home equity loans and lines of credit, auto loans and other consumer loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are normally risk rated and monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or non-performing.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Bank’s commercial loan officers are responsible for the timely and accurate risk rating recommendation for the loans in their portfolios at origination and on an ongoing basis. The Bank’s commercial loan officers perform an annual review of all commercial relationships $750,000 or greater. Confirmation of the appropriate risk grade is included in the review on an ongoing basis. The Bank engages an external consultant to conduct loan reviews on at least a semi-annual basis. Generally, the external consultant reviews commercial relationships greater than $1,000,000 and/or all criticized relationships. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, and Doubtful or Loss within the internal risk rating system at December 31, 2022 and September 30, 2022 (in thousands):

	Pass		Special Mention		Substandard		Doubtful or Loss		Total
December 31, 2022
Commercial real estate loans	$	689,492	$	3,230	$	14,412	$	-	$	707,134
Commercial		41,662		1,674		1,624		-		44,960
Obligations of states and political subdivisions		39,312		-		-		-		39,312
Total	$	770,466	$	4,904	$	16,036	$	-	$	791,406

	Pass		Special Mention		Substandard		Doubtful or Loss		Total
September 30, 2022
Commercial real estate loans	$	659,104	$	6,060	$	13,677	$	-	$	678,841
Commercial		35,322		1,690		1,146		-		38,158
Obligations of states and political subdivisions		40,416		-		-		-		40,416
Total	$	734,842	$	7,750	$	14,823	$	-	$	757,415

All other loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are normally risk rated and monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or non-performing. The following tables present the risk ratings in the consumer categories of performing and non-performing loans at December 31, 2022 and September 30, 2022 (in thousands):

The Company 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 tables present the classes of the loan portfolio summarized by the aging categories of performing loans, purchased credit impaired loans and nonaccrual loans as of December 31, 2022 and September 30, 2022 (in thousands):

			31-60 Days		61-89 Days		90 + Days		Total		Total
	Current		Past Due		Past Due		Past Due		Past Due		Loans
December 31, 2022
Real estate loans:
Residential	$	654,869	$	754	$	311	$	1,258	$	2,323	$	657,192
Construction		26,594		-		-		-		-		26,594
Commercial		697,592		478		-		9,064		9,542		707,134
Commercial		43,930		493		1		536		1,030		44,960
Obligations of states and political subdivisions		39,312		-		-		-		-		39,312
Home equity loans and lines of credit		43,460		-		140		87		227		43,687
Auto loans		2,335		55		7		4		66		2,401
Other		1,830		-		31		-		31		1,861
Total	$	1,509,922	$	1,780	$	490	$	10,949	$	13,219	$	1,523,141

			31-60 Days		61-89 Days		90 + Days		Total		Total
	Current		Past Due		Past Due		Past Due		Past Due		Loans
September 30, 2022
Real estate loans:
Residential	$	621,270	$	598	$	367	$	1,140	$	2,105	$	623,375
Construction		25,024		-		-		-		-		25,024
Commercial		672,875		5,719		-		247		5,966		678,841
Commercial		37,160		539		440		19		998		38,158
Obligations of states and political subdivisions		40,416		-		-		-		-		40,416
Home equity loans and lines of credit		42,842		121		144		63		328		43,170
Auto loans		3,462		134		2		13		149		3,611
Other		1,685		-		31		-		31		1,716
Total	$	1,444,734	$	7,111	$	984	$	1,482	$	9,577	$	1,454,311

The allowance for loan losses is maintained at a level necessary to absorb loan losses that are both probable and reasonably estimable. Management, in determining the allowance for loan losses, considers the losses inherent in its loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. The allowance for loan losses consists of two elements: (1) an allocated allowance, which comprises allowances established on specific loans and class allowances based on historical loss experience and current trends, and (2) an unallocated allowance based on general economic conditions and other risk factors in our markets and portfolios. We maintain a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. General loan loss allowances are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic conditions, management’s judgment and losses which are probable and reasonably estimable. The allowance is increased through provisions charged against current earnings and recoveries of previously charged-off loans. Loans that are determined to be uncollectible are charged against the allowance. While management uses available information to recognize probable and reasonably estimable loan losses, future loss provisions may be necessary, based on changing economic conditions. Payments received on impaired loans generally

are either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. The allowance for loan losses as of December 31, 2022 was maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio, and such losses were both probable and reasonably estimable.

In addition, the FDIC and the Pennsylvania Department of Banking and Securities, as an integral part of their examination process, have periodically reviewed our allowance for loan losses. The banking regulators may require that we recognize additions to the allowance based on its analysis and review of information available to it at the time of its examination.

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

The following table summarizes changes in the primary segments of the ALL during the three months ended December 31, 2022 and 2021 (in thousands):

													Home
										Obligations of			Equity
										States and			Loans and
	Real Estate Loans							Commercial		Political			Lines of						Other
	Residential			Construction		Commercial		Loans		Subdivisions			Credit			Auto Loans			Loans		Unallocated			Total
ALL balance at September 30, 2022	$	5,122		$	319	$	10,754	$	698	$	283		$	361		$	22		$	22	$	947		$	18,528
Charge-offs		-			-		-		-		-			-			(21	)		-		-			(21	)
Recoveries		2			-		1		-		-			51			30			-		-			84
Provision		162			9		439		350		(8	)		(40	)		(17	)		-		(745	)		150
ALL balance at December 31, 2022	$	5,286		$	328	$	11,194	$	1,048	$	275		$	372		$	14		$	22	$	202		$	18,741
ALL balance at September 30, 2021	$	4,114		$	187	$	10,470	$	1,041	$	393		$	318		$	232		$	21	$	1,337		$	18,113
Charge-offs		(6	)		-		-		-		-			-			(6	)		-		-			(12	)
Recoveries		72			-		1		-		-			2			34			-		-			109
Provision		(82	)		54		136		183		(128	)		(23	)		(64	)		-		(76	)		-
ALL balance at December 31, 2021	$	4,098		$	241	$	10,607	$	1,224	$	265		$	297		$	196		$	21	$	1,261		$	18,210

During the three months ended December 31, 2022, the Company recorded provision expense for the residential real estate loans, construction real estate loans, commercial real estate loans and commercial loans segments due to either increased loan balances, changes in the loan mix within the pool, and/or charge-off activity in those segments. Credit provisions were recorded for loan loss for the obligations of states and political subdivisions, home equity loans and lines of credit and auto loans due to either decreased loan balances, improved asset quality, changes in the loan mix within the pool, and/or decreased charge-off activity in those segments.

During the three months ended December 31, 2021, the Company recorded provision expense for the construction real estate loans, commercial real estate loans and commercial loans segments, due to either increased loan balances, changes in the loan mix within the pool, and/or charge-off activity in those segments. Provision expense was also recorded for possible loan losses due to the economic slowdown caused by COVID-19 restrictions. Credit provisions were recorded for loan loss for the residential real estate loans, obligations of states and political subdivisions, home equity loans and lines of credit and auto loans segments due to either decreased loan balances, changes in the loan mix within the pool, and/or decreased charge-off activity in those segments.

The following table summarizes the primary segments of the ALL, segregated into two categories, the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, 2022 and September 30, 2022 (in thousands):

											Home
									Obligations of		Equity
									States and		Loans and
	Real Estate Loans						Commercial		Political		Lines of				Other
	Residential		Construction		Commercial		Loans		Subdivisions		Credit		Auto Loans		Loans		Unallocated		Total
Individually evaluated for impairment	$	11	$	-	$	420	$	249	$	-	$	-	$	-	$	-	$	-	$	680
Collectively evaluated for impairment		5,275		328		10,774		799		275		372		14		22		202		18,061
ALL balance at December 31, 2022	$	5,286	$	328	$	11,194	$	1,048	$	275	$	372	$	14	$	22	$	202	$	18,741
Individually evaluated for impairment	$	12	$	-	$	301	$	38	$	-	$	-	$	-	$	-	$	-	$	351
Collectively evaluated for impairment		5,110		319		10,453		660		283		361		22		22		947		18,177
ALL balance at September 30, 2022	$	5,122	$	319	$	10,754	$	698	$	283	$	361	$	22	$	22	$	947	$	18,528

The allowance for loan losses is based on estimates, and actual losses will vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date. Despite the above allocations, the allowance for loan losses is general in nature and is available to absorb losses from any loan segment.

There were no new troubled debt restructurings granted during the three months ended December 31, 2021.

The following is a summary of troubled debt restructuring granted during the three months ended December 31, 2022 (dollars in thousands):

	For the Three Months Ended December 31, 2022
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Real estate loans:
Residential		1	$	51	$	54
Construction		—		—		—
Commercial		—		—		—
Commercial		—		—		—
Obligations of states and political subdivisions		—		—		—
Home equity loans and lines of credit		—		—		—
Auto loans		—		—		—
Other		—		—		—
Total		1	$	51	$	54

For the three months ended December 31, 2022 and 2021, no loans defaulted on a restructuring agreement within one year of modification.