10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 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                        000-13232
Juniata Valley Financial Corp.
(Exact name of registrant as specified in its charter)
Pennsylvania	23-2235254
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
Bridge and Main Streets, Mifflintown, Pennsylvania	17059
(Address of principal executive offices)	(Zip Code)
(855) 582-5101
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
NONE	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes        ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes        ☐ No

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes        ☒ No

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

Class	Outstanding as of October 31, 2023
Common Stock ($1.00 par value)	4,991,129 shares

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Financial Condition as of September 30, 2023 (Unaudited) and December 31, 2022	3
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)	5
	Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (Unaudited)	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Not applicable.
Item 4.	Controls and Procedures	58
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
	Signatures	62

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Financial Condition

(Dollars in thousands, except share data)	September 30, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	27,377	$	10,856
Interest bearing deposits with banks		390		143
Cash and cash equivalents		27,767		10,999
Equity securities		978		1,056
Debt securities available for sale		66,527		73,536
Debt securities held to maturity (fair value $189,221 and $209,887, respectively)		202,646		209,565
Restricted investment in bank stock		2,476		3,666
Total loans		514,132		484,512
Less: Allowance for credit losses		(5,586)		(4,027)
Total loans, net of allowance for credit losses		508,546		480,485
Premises and equipment, net		8,131		8,190
Other real estate owned		39		—
Bank owned life insurance and annuities		14,783		15,197
Investment in low income housing partnerships		1,234		1,507
Core deposit and other intangible assets		368		121
Goodwill		9,812		9,047
Mortgage servicing rights		84		92
Deferred tax asset		12,099		11,838
Accrued interest receivable and other assets		7,178		5,576
Total assets	$	862,668	$	830,875
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing	$	200,619	$	199,131
Interest bearing		556,823		512,381
Total deposits		757,442		711,512
Short-term borrowings and repurchase agreements		39,638		55,710
Long-term debt		20,000		20,000
Other interest bearing liabilities		941		1,011
Accrued interest payable and other liabilities		6,512		5,693
Total liabilities		824,533		793,926
Commitments and contingent liabilities
Stockholders’ Equity:
Preferred stock, no par value: Authorized - 500,000 shares, none issued		—		—
Common stock, par value $1.00 per share: Authorized 20,000,000 shares; Issued - 5,151,279 shares at September 30, 2023 and December 31, 2022; Outstanding - 5,018,129 shares at September 30, 2023 and 5,003,059 shares at December 31, 2022		5,151		5,151
Surplus		24,887		24,986
Retained earnings		51,978		51,217
Accumulated other comprehensive loss		(41,601)		(41,867)
Cost of common stock in Treasury: 133,150 shares at September 30, 2023; 148,220 shares at December 31, 2022		(2,280)		(2,538)
Total stockholders’ equity		38,135		36,949
Total liabilities and stockholders’ equity	$	862,668	$	830,875

See Notes to Consolidated Financial Statements

3

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Income (Unaudited)

	Three Months Ended				Nine Months Ended
(Dollars in thousands, except share data)	September 30,				September 30,
	2023		2022		2023		2022
Interest and dividend income:
Loans, including fees	$	6,940	$	5,286	$	19,569	$	15,446
Taxable securities		1,525		1,493		4,684		4,479
Tax-exempt securities		36		37		109		117
Other interest income		24		55		69		80
Total interest income		8,525		6,871		24,431		20,122
Interest expense:
Deposits		2,286		680		5,614		1,692
Short-term borrowings and repurchase agreements		431		70		1,314		105
Long-term debt		119		118		353		352
Other interest bearing liabilities		9		4		29		6
Total interest expense		2,845		872		7,310		2,155
Net interest income		5,680		5,999		17,121		17,967
Provision for credit losses		121		100		411		350
Net interest income after provision for credit losses		5,559		5,899		16,710		17,617
Non-interest income:
Customer service fees		356		394		1,018		1,113
Debit card fee income		436		422		1,293		1,267
Earnings on bank-owned life insurance and annuities		57		53		167		164
Trust fees		123		128		381		378
Commissions from sales of non-deposit products		87		86		255		302
Fees derived from loan activity		124		220		295		452
Mortgage banking income		12		11		35		24
Gain (loss) on sales and calls of securities		—		(378)		—		(1,452)
Change in value of equity securities		(14)		(30)		(78)		(110)
Gain from life insurance proceeds		—		329		161		380
Other non-interest income		120		75		366		1,450
Total non-interest income		1,301		1,310		3,893		3,968
Non-interest expense:
Employee compensation expense		2,167		2,112		6,333		6,347
Employee benefits		429		544		1,913		1,858
Occupancy		312		298		964		948
Equipment		162		187		493		546
Data processing expense		699		665		2,226		1,894
Professional fees		211		223		634		587
Taxes, other than income		(7)		106		158		370
FDIC Insurance premiums		157		143		352		307
Gain on other real estate owned		—		—		—		(7)
Amortization of intangible assets		25		14		56		41
Amortization of investment in low-income housing partnerships		81		200		273		600
Merger and acquisition expense		18		—		227		—
Other non-interest expense		505		495		1,344		1,388
Total non-interest expense		4,759		4,987		14,973		14,879
Income before income taxes		2,101		2,222		5,630		6,706
Income tax provision		310		102		708		488
Net income	$	1,791	$	2,120	$	4,922	$	6,218
Earnings per share
Basic	$	0.36	$	0.42	$	0.98	$	1.24
Diluted	$	0.36	$	0.42	$	0.98	$	1.24

See Notes to Consolidated Financial Statements

4

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

	Three Months Ended September 30,
	2023						2022
(Dollars in thousands)	Pre-Tax		Tax		Net of Tax		Pre-Tax		Tax		Net of Tax
	Amount		Effect		Amount		Amount		Effect		Amount
Net income	$	2,101	$	(310)	$	1,791	$	2,222	$	(102)	$	2,120
Other comprehensive income (loss):
Securities
Available for sale securities
Unrealized holding loss arising during the period		(684)		144		(540)		(16,284)		3,419		(12,865)
Reclassification adjustment for losses included in net income (1) (3)		—		—		—		378		(79)		299
Held to maturity securities
Amortization of unrealized holding losses on held to maturity securities (3) (4)		1,217		(265)		952		—		—		—
Cash Flow Hedge
Unrealized gain on cash flow hedge		—		—		—		81		(17)		64
Reclassification adjustment for gain included in net income (2) (3)		—		—		—		(86)		18		(68)
Other comprehensive income (loss)		533		(121)		412		(15,911)		3,341		(12,570)
Total comprehensive income (loss)	$	2,634	$	(431)	$	2,203	$	(13,689)	$	3,239	$	(10,450)

	Nine Months Ended September 30,
	2023						2022
(Dollars in thousands)	Pre-Tax		Tax		Net-of-Tax		Pre-Tax		Tax		Net-of-Tax
	Amount		Effect		Amount		Amount		Effect		Amount
Net income	$	5,630	$	(708)	$	4,922	$	6,706	$	(488)	$	6,218
Other comprehensive income (loss):
Securities
Available for sale securities
Unrealized holding loss arising during the period		(2,925)		614		(2,311)		(51,349)		10,783		(40,566)
Reclassification adjustment for losses included in net income (1) (3)		—		—		—		1,452		(305)		1,147
Held to maturity securities
Amortization of unrealized holding losses on held to maturity securities (3) (4)		3,563		(775)		2,788		—		—		—
Cash Flow Hedge
Unrealized gain on cash flow hedge		2		(1)		1		1,195		(251)		944
Reclassification adjustment for gain included in net income (2) (3)		(269)		57		(212)		(1,317)		277		(1,040)
Other comprehensive income (loss)		371		(105)		266		(50,019)		10,504		(39,515)
Total comprehensive income (loss)	$	6,001	$	(813)	$	5,188	$	(43,313)	$	10,016	$	(33,297)

(1) Amounts are included in gain (loss) on sales and calls of securities on the Consolidated Statements of Income as a separate element within total non-interest income.

(2) Amounts are included in interest expense on short-term borrowings and repurchase agreements and in other non-interest income on the Consolidated Statements of Income.

(3) Income tax amounts are included in the provision for income taxes on the Consolidated Statements of Income.

(4) Amounts included in interest income on the Consolidated Statements of Income.

See Notes to Consolidated Financial Statements

5

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Stockholders’ Equity (Unaudited)

	Three months ended September 30, 2023
								Accumulated
	Number							Other				Total
(Dollars in thousands, except share data)	of Shares	Common				Retained		Comprehensive		Treasury		Stockholders’
	Outstanding	Stock		Surplus		Earnings		Income (Loss)		Stock		Equity
Balance, July 1, 2023	5,018,129	$	5,151	$	24,852	$	51,291	$	(42,013)	$	(2,280)	$	37,001
Net income							1,791						1,791
Other comprehensive income									412				412
Cash dividends at $0.22 per share							(1,104)						(1,104)
Stock-based compensation					35								35
Balance, September 30, 2023	5,018,129	$	5,151	$	24,887	$	51,978	$	(41,601)	$	(2,280)	$	38,135

	Nine months ended September 30, 2023
								Accumulated
	Number							Other				Total
(Dollars in thousands, except share data)	of Shares	Common				Retained		Comprehensive		Treasury		Stockholders’
	Outstanding	Stock		Surplus		Earnings		Income (Loss)		Stock		Equity
Balance, January 1, 2023	5,003,059	$	5,151	$	24,986	$	51,217	$	(41,867)	$	(2,538)	$	36,949
Cumulative effect of change in accounting principle (Note 2)							(854)						(854)
Net income							4,922						4,922
Other comprehensive income									266				266
Cash dividends at $0.66 per share							(3,307)						(3,307)
Stock-based compensation					106								106
Purchase of treasury stock	(569)										(9)		(9)
Treasury stock issued for stock plans	15,639				(205)						267		62
Balance, September 30, 2023	5,018,129	$	5,151	$	24,887	$	51,978	$	(41,601)	$	(2,280)	$	38,135

6

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Stockholders’ Equity (Unaudited)

	Three months ended September 30, 2022
								Accumulated
	Number							Other				Total
(Dollars in thousands, except share data)	of Shares	Common				Retained		Comprehensive		Treasury		Stockholders’
	Outstanding	Stock		Surplus		Earnings		Loss		Stock		Equity
Balance, July 1, 2022	5,003,059	$	5,151	$	24,926	$	49,196	$	(30,310)	$	(2,538)	$	46,425
Net income							2,120						2,120
Other comprehensive loss									(12,570)				(12,570)
Cash dividends at $0.22 per share							(1,100)						(1,100)
Stock-based compensation					30								30
Balance, September 30, 2022	5,003,059	$	5,151	$	24,956	$	50,216	$	(42,880)	$	(2,538)	$	34,905

	Nine months ended September 30, 2022
								Accumulated
	Number							Other				Total
(Dollars in thousands, except share data)	of Shares	Common				Retained		Comprehensive		Treasury		Stockholders’
	Outstanding	Stock		Surplus		Earnings		Loss		Stock		Equity
Balance, January 1, 2022	4,988,542	$	5,151	$	25,008	$	47,298	$	(3,365)	$	(2,802)	$	71,290
Net income							6,218						6,218
Other comprehensive loss									(39,515)				(39,515)
Cash dividends at $0.66 per share							(3,300)						(3,300)
Stock-based compensation					146								146
Purchase of treasury stock	(995)										(3)		(3)
Treasury stock issued for stock plans	15,512				(198)						267		69
Balance, September 30, 2022	5,003,059	$	5,151	$	24,956	$	50,216	$	(42,880)	$	(2,538)	$	34,905

See Notes to Consolidated Financial Statements

7

Juniata Valley Financial Corp. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)	Nine Months Ended September 30,
	2023		2022
Operating activities:
Net income	$	4,922	$	6,218
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		411		350
Depreciation		429		480
Net amortization of securities premiums		101		370
Net amortization of loan origination (costs) fees		(85)		405
Deferred net loan origination costs		(402)		(468)
Amortization of intangibles		56		41
Amortization of investment in low income housing partnerships		273		600
Net amortization of purchase fair value adjustments		(5)		(84)
Net realized (gain) loss on sales and calls of available for sale securities		—		1,452
Change in value of equity securities		78		110
Net gain on other real estate owned		—		(7)
Earnings on bank owned life insurance and annuities		(167)		(164)
Deferred income tax expense (benefit)		25		(49)
Stock-based compensation expense		106		146
Proceeds from mortgage loans sold to others		42		48
Mortgage banking income		(35)		(24)
Gain from life insurance proceeds		(161)		(380)
Increase in accrued interest receivable and other assets		(2,001)		(1,251)
Decrease in accrued interest payable and other liabilities		743		87
Net cash provided by operating activities		4,330		7,880
Investing activities:
Purchases of:
Securities available for sale		—		(53,295)
FHLB stock		—		(988)
Premises and equipment		(140)		(362)
Bank owned life insurance and annuities		(28)		(28)
Proceeds from:
Sales of debt securities available for sale		—		23,271
Maturities of and principal repayments on securities available for sale		3,984		26,478
Maturities of and principal repayments on securities held to maturity		10,481		—
Redemption of FHLB stock		1,190		—
Life insurance claims		770		2,285
Sale of other real estate owned		—		94
Sale of fixed assets		21		—
Net decrease in interest bearing time deposits with banks		—		735
Net increase in loans		(29,121)		(43,964)
Net cash received in acquisition		17,384		—
Net cash provided by (used in) investing activities		4,541		(45,774)
Financing activities:
Net increase in deposits		27,223		9,387
Net (decrease) increase in short-term borrowings and securities sold under agreements to repurchase		(16,072)		31,642
Cash dividends		(3,307)		(3,300)
Purchase of treasury stock		(9)		(3)
Treasury stock issued for employee stock plans		62		69
Net cash provided by financing activities		7,897		37,795
Net increase (decrease) in cash and cash equivalents		16,768		(99)
Cash and cash equivalents at beginning of year		10,999		13,526
Cash and cash equivalents at end of period	$	27,767	$	13,427
Supplemental information:
Interest paid	$	6,552	$	2,169
Income tax paid		710		400
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to other real estate owned	$	39	$	30

See Notes to Consolidated Financial Statements, including Note 13 regarding the branch acquisition

8

JUNIATA VALLEY FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The consolidated financial statements include the accounts of Juniata Valley Financial Corp. (the “Company” or “Juniata”) and its wholly owned subsidiary, The Juniata Valley Bank (the “Bank” or “JVB”). All significant intercompany accounts and transactions have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences could be material to the financial statements. Estimates that are particularly susceptible to material change include the determination of the allowance for credit losses, and possible impairment of goodwill and other intangible assets. 

In the opinion of management, all adjustments considered necessary for fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2023 are not necessarily indicative of the results that can be expected for the year ending December 31, 2023. For further information, refer to the consolidated financial statements and notes thereto included in Juniata Valley Financial Corp.’s Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2022.

The Company has evaluated events and transactions occurring subsequent to the consolidated statement of financial condition date of September 30, 2023 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

2. RECENT ACCOUNTING STANDARDS UPDATES

Adoption of New Accounting Standards:

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

On, January 1, 2023, the Company adopted ASC 326, as amended, which replaces the incurred loss methodology with an expected loss methodology referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including  held to maturity debt securities and loan receivables (see Notes 5 and 6, respectively). It also applies to certain off-balance sheet (“OBS”) credit exposures such as unfunded commitments. In addition, ASC 326 made changes to the accounting for available for sale debt securities. One such change is to require credit losses on such securities to be presented as an allowance rather than as a write-down on available for sale debt securities that management does not intend to sell or does not believe will be required to be sold.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and OBS credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP standards. The Company recorded a net decrease to retained earnings of $854,000 as of January 1, 2023 for the cumulative effect of adopting ASC 326. At adoption of ASC 326, management did not record an allowance for credit losses for the held to maturity or the available for sale debt securities portfolio.

9

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $354,000 to the allowance for credit losses.

The following table illustrates the impact of ASC 326.

	January 1, 2023
	As Reported				Impact of
(Dollars in thousands)	Under		Pre-ASC 326		ASC 326
	ASC 326		Adoption		Adoption
Assets:
Loans
Commercial, financial and agricultural	$	634	$	297	$	337
Real estate - commercial		2,421		1,110		1,311
Real estate - construction:
1-4 family residential construction		183		69		114
Other construction loans		670		1,077		(407)
Real estate - mortgage		1,136		1,385		(249)
Obligations of states and political subdivisions		45		54		(9)
Personal		49		35		14
Allowance for credit losses on loans	$	5,138	$	4,027	$	1,111
Liabilities:
Allowance for credit losses on OBS credit exposures	$	448	$	8	$	440

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326); Troubled Debt Restructurings and Vintage Disclosures

On, January 1, 2023, the Company also adopted ASU 2022-02, which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted ASC 326. Due to the removal of the TDR accounting model, all loan modifications will now be accounted for under the general loan modification guidance in Subtopic 310-20. In addition, on a prospective basis, the Company is subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. Vintage disclosure requirements are also required to prospectively disclose current period gross write-off information by vintage (see Note 6).

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3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of accumulated other comprehensive income (loss), net of tax, consisted of the following:

			Unrealized		Unrealized
	Gains		Gains		Gains
(Dollars in thousands)	(Losses) on		(Losses) on		(Losses) on
	Cash Flow		AFS		HTM
September 30, 2023	Hedges		Securities		Securities		Total
Beginning balance, December 31, 2022	$	211	$	(6,161)	$	(35,917)	$	(41,867)
Current period other comprehensive income (loss):
Other comprehensive income before reclassification		1		(2,311)		—		(2,310)
Amounts reclassified from accumulated other comprehensive income (loss)		(212)		—		2,788		2,576
Net current period other comprehensive income (loss)		(211)		(2,311)		2,788		266
Ending balance, September 30, 2023	$	—	$	(8,472)	$	(33,129)	$	(41,601)

			Unrealized
	Gains		Gains
(Dollars in thousands)	(Losses) on		(Losses) on
	Cash Flow		AFS
September 30, 2022	Hedges		Securities		Total
Beginning balance, December 31, 2021	$	427	$	(3,792)	$	(3,365)
Current period other comprehensive income (loss):
Other comprehensive income (loss) before reclassification		944		(40,566)		(39,622)
Amounts reclassified from accumulated other comprehensive income (loss)		(1,040)		1,147		107
Net current period other comprehensive loss		(96)		(39,419)		(39,515)
Ending balance, September 30, 2022	$	331	$	(43,211)	$	(42,880)

4. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilutive effect on EPS that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, increasing the total number of shares outstanding. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

The following tables set forth the computation of basic and diluted earnings per share:

(Amounts in thousands, except earnings per share data)	Three Months Ended September 30,
	2023		2022
Net income	$	1,791	$	2,120
Weighted-average common shares outstanding		5,018		5,003
Basic earnings per share		0.36		0.42
Weighted-average common shares outstanding	$	5,018	$	5,003
Common stock equivalents due to effect of stock options		9		9
Total weighted-average common shares and equivalents	$	5,027	$	5,012
Diluted earnings per share	$	0.36	$	0.42
Anti-dilutive stock options outstanding		—		—

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(Amounts in thousands, except earnings per share data)	Nine months ended September 30,
	2023		2022
Net income	$	4,922	$	6,218
Weighted-average common shares outstanding		5,014		4,999
Basic earnings per share		0.98		1.24
Weighted-average common shares outstanding	$	5,014	$	4,999
Common stock equivalents due to effect of stock options		8		9
Total weighted-average common shares and equivalents	$	5,022	$	5,008
Diluted earnings per share	$	0.98	$	1.24
Anti-dilutive stock options outstanding		2		1

5. SECURITIES

Equity Securities

Equity securities owned by the Company consist of common stock of various financial services providers. ASC Topic 321, Investments – Equity Securities requires all equity securities within its scope to be measured at fair value with changes in fair value recognized in net income. As of September 30, 2023, the Company had $978,000 in equity securities recorded at fair value and $1.1 million in equity securities were recorded at fair value at December 31, 2022. The Company recorded net losses of $14,000 and $78,000 during the three and nine months ended September 30, 2023 and net losses of $30,000 and $110,000 during the three and nine months ended September 30 2022, due to changes in the fair value of the Company’s portfolio of equity securities during the applicable periods.

Debt Securities

Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities that are not classified as held to maturity or trading are classified as available for sale. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

The Company reassessed classification of certain investments and, effective October 1, 2022, transferred $28.4 million of obligations of U.S. Government sponsored enterprises and $183.9 million in mortgage-backed securities from the available for sale to the held to maturity security classification. The transfer occurred at fair value. The combined related unrealized loss of $46.8 million, included in other comprehensive income, remained in other comprehensive income following the transfer and is being amortized out of other comprehensive income with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities. No gain or loss was recorded at the time of transfer.

The Company’s debt securities portfolio includes primarily bonds issued by U.S. Government sponsored enterprises (approximately 16% of the investment portfolio), mortgage-backed securities issued by Government-sponsored entities and backed by residential mortgages (approximately 76%), corporate debt securities (approximately 5%) and municipal bonds (approximately 3%) as of September 30, 2023. Most of the municipal bonds are general obligation bonds with maturities or pre-refunding dates within 5 years.

At each of September 30, 2023 and December 31, 2022, excluding securities of the U.S. Government and its agencies, the Company had holdings of securities from two issuers in excess of 10% of stockholders’ equity; holdings in Federal Farm Credit Bank and Pennsylvania Housing Finance securities had fair values of $10.8 million and $5.1 million, respectively, as of September 30, 2023, and $10.9 million and $6.1 million, respectively, as of December 31, 2022.

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The amortized cost and fair value of debt securities as of September 30, 2023 and December 31, 2022, by contractual maturity, are shown in the tables below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid, with or without prepayment penalties. Securities not due at a single maturity date are shown separately.

(Dollars in thousands)	September 30, 2023
					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Debt Securities Available for Sale	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,500	$	13,727	$	—	$	(1,773)
		15,500		13,727		—		(1,773)
Obligations of state and political subdivisions
Within one year		490		490		—		—
After one year but within five years		2,761		2,595		—		(166)
After five years but within ten years		4,613		3,628		—		(985)
		7,864		6,713		—		(1,151)
Corporate debt securities
After one year but within five years		4,625		3,962		—		(663)
After five years but within ten years		13,000		9,412		—		(3,588)
		17,625		13,374		—		(4,251)
Mortgage-backed securities		36,263		32,713		—		(3,550)
Total	$	77,252	$	66,527	$	—	$	(10,725)

(Dollars in thousands)	September 30, 2023
					Gross		Gross
	Amortized		Fair		Unrecognized		Unrecognized
Debt Securities Held to Maturity	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,766	$	15,316	$	—	$	(450)
After five years but within ten years		13,517		12,949		—		(568)
		29,283		28,265		—		(1,018)
Mortgage-backed securities		173,363		160,956		—		(12,407)
Total	$	202,646	$	189,221	$	—	$	(13,425)

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(Dollars in thousands)	December 31, 2022
					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Debt Securities Available for Sale	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,500	$	13,705	$	—	$	(1,795)
		15,500		13,705		—		(1,795)
Obligations of state and political subdivisions
After one year but within five years		4,076		3,924		—		(152)
After five years but within ten years		4,608		3,755		—		(853)
		8,684		7,679		—		(1,005)
Corporate debt securities
After one year but within five years		4,673		4,190		—		(483)
After five years but within ten years		13,000		11,151		—		(1,849)
		17,673		15,341		—		(2,332)
Mortgage-backed securities		39,479		36,811		—		(2,668)
Total	$	81,336	$	73,536	$	—	$	(7,800)

(Dollars in thousands)	December 31, 2022
					Gross		Gross
	Amortized		Fair		Unrecognized		Unrecognized
Debt Securities Held to Maturity	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	13,039	$	13,067	$	28	$	—
After five years but within ten years		15,561		15,605		56		(12)
		28,600		28,672		84		(12)
Mortgage-backed securities		180,965		181,215		1,682		(1,432)
Total	$	209,565	$	209,887	$	1,766	$	(1,444)

Certain obligations of the U.S. Government and state and political subdivisions, as well as mortgage-backed securities are pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law. The carrying value of the pledged assets was $174.3 million and $102.3 million on September 30, 2023 and December 31, 2022, respectively.

In addition to cash received from the scheduled maturities of investment securities, some securities available for sale are sold or called at current market values during normal operations. The Bank sold $24.7 million, par value, of subordinated debt of unconsolidated financial institutions, classified as corporate debt securities, at a loss of $1.5 million during the nine months ended September 30, 2022 due to the adverse regulatory impact of substantial (relative to capital) holdings of subordinated debt.

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There were no sales of securities during the three or nine months ended September 30, 2023. There was one called security during the three months ended September 30, 2023 and two called securities during the nine months ended September 30, 2023. The proceeds from these calls were immaterial to the financial statements. The following table summarizes proceeds received from sales or calls of available for sale investment securities transactions and the resulting realized gains and losses during the three and nine months ended September 30, 2022.

(Dollars in thousands)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Gross proceeds from sales and calls of securities	$	—	$	6,137	$	—	$	23,271
Gross realized gains from sold and called securities	$	—	$	—		—		25
Gross realized losses from sold and called securities		—		(378)		—		(1,477)
Net gains (losses) from sales and calls of securities	$	—	$	(378)	$	—	$	(1,452)

The following tables summarize debt securities with unrealized and unrecognized losses at September 30, 2023 and December 31, 2022, aggregated by category and length of time in a continuous unrealized loss position.

	Unrealized Losses at September 30, 2023
	Less Than 12 Months					12 Months or More					Total
(Dollars in thousands)	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Securities available for sale
Obligations of U.S. Government sponsored enterprises	—	$	—	$	—	3	$	13,727	$	(1,773)	3	$	13,727	$	(1,773)
Obligations of state and political subdivisions	2		1,429		(48)	7		4,794		(1,103)	9		6,223		(1,151)
Corporate debt securities	—		—		—	9		13,374		(4,251)	9		13,374		(4,251)
Mortgage-backed securities	—		—		—	34		32,713		(3,550)	34		32,713		(3,550)
Total temporarily impaired securities available for sale	2	$	1,429	$	(48)	53	$	64,608	$	(10,677)	55	$	66,037	$	(10,725)
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	7	$	28,265	$	(1,018)	—	$	—	$	—	7	$	28,265	$	(1,018)
Mortgage-backed securities	35		114,476		(5,763)	15		46,480		(6,644)	50		160,956		(12,407)
Total temporarily impaired securities held to maturity	42	$	142,741	$	(6,781)	15	$	46,480	$	(6,644)	57	$	189,221	$	(13,425)
Total	44	$	144,170	$	(6,829)	68	$	111,088	$	(17,321)	112	$	255,258	$	(24,150)

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	Unrealized Losses at December 31, 2022
	Less Than 12 Months					12 Months or More					Total
(Dollars in thousands)	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Securities available for sale
Obligations of U.S. Government sponsored enterprises	1	$	2,456	$	(44)	2	$	11,248	$	(1,751)	3	$	13,704	$	(1,795)
Obligations of state and political subdivisions	4		2,781		(20)	7		4,898		(985)	11		7,679		(1,005)
Corporate debt securities	5		9,831		(1,669)	4		5,510		(663)	9		15,341		(2,332)
Mortgage-backed securities	33		36,493		(2,630)	1		319		(38)	34		36,812		(2,668)
Total temporarily impaired securities available for sale	43	$	51,561	$	(4,363)	14	$	21,975	$	(3,437)	57	$	73,536	$	(7,800)
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	1	$	3,463	$	(12)	—	$	—	$	—	1	$	3,463	$	(12)
Mortgage-backed securities	9		21,643		(392)	12		48,788		(1,040)	21		70,431		(1,432)
Total temporarily impaired securities held to maturity	10	$	25,106	$	(404)	12	$	48,788	$	(1,040)	22	$	73,894	$	(1,444)
Total	53	$	76,667	$	(4,767)	26	$	70,763	$	(4,477)	79	$	147,430	$	(9,244)

At September 30, 2023, ten obligations of U.S. Government sponsored enterprises, nine obligations of state and political subdivisions, nine corporate debt securities, and eighty-four mortgage-backed securities had unrealized losses. Sixty-eight of these securities have been in a continuous loss position for twelve months or more. The mortgage-backed securities in the Company’s portfolio are government sponsored enterprise (“GSE”) pass-through instruments issued by the Federal National Mortgage Association (“FNMA”) or Federal Home Loan Mortgage Corporation (“FHLMC”), which guarantees the timely payment of principal on these investments.

ASC 326 made targeted improvements to the accounting for credit losses on securities available for sale. The concept of other-than-temporarily impaired securities has been replaced with the allowance for credit losses. Unlike held to maturity debt securities, available for sale securities are evaluated on an individual level and pooling of securities is not allowed.

For available for sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is 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 debt securities available for sale that do not meet the criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management 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 assessment 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 the 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, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. As of September 30, 2023, management determined that an immaterial credit loss existed because the decline in fair value of the available for sale debt securities was mostly attributable to changes in  interest rates and other market conditions, rather than erosion of issuer credit quality and, as a

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result, timely payment of contractual cash flows, including principal and interest, has continued and is not considered at risk.

Included in corporate debt securities is $1.5 million par value of PacWest Bancorp (“PACW”) subordinated debt. In August 2022, Fitch Ratings downgraded PACW’s subordinated debt Viability Rating to BB+ from BBB-, and further downgraded the rating to BB in April 2023. Since early May 2023, PACW has taken steps to improve capital and liquidity. On July 25, 2023, PACW announced a merger with Banc of California, Inc. (“BANC”) and will operate under the BANC name and brand. The merger is an all-stock transaction. BANC also announced that it has entered into investment agreements to issue $400.0 million of equity securities in conjunction with the merger. Management believes that this capital infusion and planned repositioning of the balance sheet reduces credit risk associated with the $1.5 million PACW subordinated debt owned by the Company. These steps have led to a generally upward trend for PACW’s common stock. The Company monitors this situation and, at September 30, 2023, determined any credit loss associated with the PACW subordinated debt was immaterial.

Credit Quality Indicators

All the Company’s held to maturity debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities are either explicitly or implicitly guaranteed by the U.S. government, except for the Federal Farm Credit Bank securities, but all are highly rated by major rating agencies and have a long history of no credit losses. Therefore, the Company did not record an allowance for credit losses for these securities as of September 30, 2023.

The Company monitors the credit quality of held to maturity debt securities using credit ratings. The credit ratings are sourced from nationally recognized rating agencies. All held to maturity debt securities were current in their payment of principal and interest as of September 30, 2023.

The following table summarizes the amortized cost of held to maturity debt securities aggregated by credit quality indicator based on the latest information available as of September 30, 2023.

(Dollars in thousands)
September 30, 2023	AAA		Total
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	$	29,283	$	29,283
Mortgage-backed securities		173,363		173,363
	$	202,646	$	202,646

6. LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

Loans that the Company originated and has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the outstanding unpaid principal balances, net of any deferred fees or costs and the allowance for credit losses. Interest income on all loans, other than nonaccrual loans, is accrued over the term of the loans based on the amount of principal outstanding. Unearned income is amortized to income over the life of the loans, using the interest method.

The loan portfolio includes the following classes: (1) commercial, financial and agricultural, (2) real estate - commercial, (3) real estate - construction, (4) real estate – mortgage, (5) obligations of states and political subdivisions, and (6) personal loans.

The Company originates loans in the portfolio with the intent to hold them until maturity. Should the Company no longer intend to hold loans to maturity based on asset/liability management practices, the Company transfers loans from its portfolio to held for sale at fair value. Any write-down recorded upon transfer is charged against the allowance for credit

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losses. Any write-downs recorded after the initial transfers are recorded as a charge to other non-interest expense. Gains or losses recognized upon sale are included in gains on sales of loans, which is a component of non-interest income.

Loans Held for Sale

The Company has originated residential mortgage loans with the intent to sell. These individual loans are normally sold to the buyer immediately. The Company maintains servicing rights on these loans.

When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. Under the fair value measurement method, the Company measures servicing rights at fair value at each reporting date and reports changes in fair value of servicing assets in earnings in the period in which the changes occur, which are included with mortgage banking income on the income statement. The fair values of servicing rights are subject to fluctuations because of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the income statement as mortgage banking income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. Late fees and ancillary fees related to loan servicing are not material.

Allowance for Credit Losses (“ACL”)

The Company adopted ASU 2013-13 on January 1, 2023 to calculate the ACL, which requires a projection of credit losses estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a loan modification will be executed with an individual borrower, or the extension or renewal options are included in the original or modified contract at the reporting date and not unconditionally cancellable by the Company. The allowance for credit losses is a valuation account that is deducted from the loan’s amortized cost basis to present the net amount expected to be collected on the loan. The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans.

Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions and reasonable and supportable forecasts of certain macro-economic variables. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, lending personnel, delinquency trends, credit concentrations, loan review results, changes in collateral values, as well as the impact of changes in the regulatory and business environment or other relevant factors.

The Company utilizes the Discounted Cash Flow (“DCF”) method to analyze most loan segments, particularly loan segments with longer average lives and regular payment structures, as it allows for the effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner. The DCF model has two key components; a loss driver analysis combined with a cash flow analysis. The contractual cash flow is adjusted for probability of default/loss given defaults (“PD/LGD”) and prepayment speed to establish a reserve level. The prepayment and curtailment studies are updated quarterly by a third-party for each applicable pool of loans. The Company estimates losses over a four quarter forecast period using Federal Open Market Committee (“FOMC”) estimates for real GDP and unemployment rate. Based on the final values in the forecast and the uncertainty of a post-pandemic economic recovery, management has elected to revert to historical loss experience over four quarters. The economic factors considered as part of the ACL were selected after a rigorous regression analysis and model selection process. Additionally, the Company uses reasonable credit risk assumptions based on an annual report produced by Moody’s for the obligations of states and political subdivisions segment.

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The Weighted Average Remaining Life (“WARM”) method is used to analyze the personal loan segment, which includes revolving credit plans, automobile loans and other consumer loans, because this segment contains loans with many different structures, payment streams and collateral. The WARM method uses an average annual charge-off rate applied to the contractual term, further adjusted for estimated prepayments to determine the unadjusted historical charge-off rate for the remaining balance of assets.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods:

Portfolio Segments	Methodology	Loss Drivers
Commercial, financial and agricultural	DCF	National unemployment
Real estate - commercial	DCF	National unemployment & national GDP
Real estate - construction:
1-4 family residential construction	DCF	National unemployment & national GDP
Other construction loans	DCF	National unemployment & national GDP
Real estate - mortgage	DCF	National unemployment & national GDP
Obligations of states and political subdivisions	DCF	Moody's report
Personal	Remaining Life	Call report loss history

According to ASC 326, an entity may make an accounting policy election not to measure an allowance for credit losses for accrued interest receivable if the entity writes off the applicable accrued interest receivable balance in a timely manner. The Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivable for all loan segments. Accrual of interest on loans is discontinued when the payment of principal or interest is in doubt or when a loan becomes contractually past due by 90 days or more with respect to principal or interest, except for loans that are well-secured and in the process of collection. When a loan is placed on nonaccrual status, any accrued but uncollected interest is reversed from current income.

ASC 326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. At September 30, 2023, the Company had $55.0 million in unfunded commitments and $292,000 in anticipated credit losses in the reserve for unfunded lending commitments subject to ASC 326 requirements; the reserve is recorded in other liabilities on the Consolidated Balance Sheets as opposed to in the ACL. Provisions to the reserve for unfunded lending commitments are recorded as other noninterest expense on the Consolidated Statements of Income.

The determination of the ACL is complex, and the Company makes decisions on the effects of matters that are inherently uncertain. Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgements as to the facts and circumstances related to particular situations or credits. There may be significant changes in the ACL in future periods determined by factors prevailing at that point in time along with future forecasts.

Risks associated with each portfolio segment are as follows:

Commercial, Financial and Agricultural Lending:

The Company originates commercial, financial and agricultural loans primarily to businesses located in its primary market area and surrounding areas. These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment purchases, inventory and accounts receivable. Generally, the maximum term

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for loans extended on machinery and equipment is shorter and does not exceed the projected useful life of such machinery and equipment. Most business lines of credit are written with a five year maturity, subject to an annual credit review.

Commercial loans are generally secured with short-term assets; however, in many cases, additional collateral, such as real estate, is provided as additional security for the loan. Loan-to-value maximum values have been established by the Company and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, collateral appraisals, and other methods.

In underwriting commercial loans, the Company performs an analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral, and conditions affecting the borrower. Evaluation of the borrower’s past, present and future cash flows is also an important aspect of the Company’s analysis.

Concentration analysis assists in identifying industry specific risk inherent in commercial, financial and agricultural lending. Mitigants include the identification of secondary and tertiary sources of repayment and appropriate increases in oversight.

Commercial, financial and agricultural loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Real Estate - Commercial Lending:

The Company engages in real estate - commercial lending in its primary market area and surrounding areas. The Company’s real estate - commercial portfolio is secured primarily by residential housing, commercial buildings, raw land and hotels. Generally, real estate - commercial loans have terms that do not exceed 20 years, have loan-to-value ratios of up to 80% of the appraised value of the property and are typically secured by personal guarantees of the borrowers.

As economic conditions deteriorate, the Company reduces its exposure in real estate loans with higher risk characteristics. In underwriting these loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Real estate - commercial loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Real Estate - Construction Lending:

The Company engages in real estate - construction lending in its primary market area and surrounding areas. The Company’s real estate - construction lending consists of 1-4 family residential construction loans and other construction loans, which are construction loans for purposes other than constructing 1-4 family residential properties such as land development and commercial building construction loans.

The Company’s 1-4 family residential construction loans are loans for constructing 1-4 family residential properties, which will secure the loan. Other construction loans are generally secured with the subject property, and advances are made in conformity with a pre-determined draw schedule supported by independent inspections. Terms of construction loans depend on the specifics of the project, such as estimated absorption rates, estimated time to complete, etc.

In underwriting real estate - construction loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history and, when applicable, the reliability and predictability of the cash flow generated by the project using feasibility studies, market data, and other resources. Most appraisals on properties securing real estate - construction loans originated by the Company are performed by independent appraisers.

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Real estate - construction loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. The difficulty of estimating total construction costs adds to the risk as well.

Real Estate - Mortgage Lending:

The Company’s real estate - mortgage portfolio is comprised of 1-4 family residential mortgages and business loans secured by 1-4 family properties. One-to-four family residential mortgage loan originations, including home equity installment and home equity lines of credit loans, are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within the Company’s market area or with customers primarily from the market area.

The Company offers fixed-rate and adjustable rate real estate - mortgage loans with a term up to a maximum of 25-years for both permanent structures and those under construction. The Company’s 1-4 family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas. Most of the Company’s residential real estate - mortgage loans originate with a loan-to-value of 80% or less. Home equity installment loans are secured by the borrower’s primary residence with a maximum loan-to-value of 80% and a maximum term of 15 years. Home equity lines of credit are secured by the borrower’s primary residence with a maximum loan-to-value of 90% and a maximum term of 20 years.

In underwriting 1-4 family residential real estate loans, the Company evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral or security. Most properties securing real estate loans made by the Company are appraised by independent fee appraisers. The Company generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title insurance and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. The Company does not engage in sub-prime residential mortgage originations.

Residential mortgage loans and home equity loans generally present a lower level of risk than certain other types of consumer loans because they are secured by the borrower’s primary residence. Risk is increased when the Company is in a subordinate position for the loan collateral.

Obligations of States and Political Subdivisions:

The Company lends to local municipalities and other tax-exempt organizations. These loans are primarily tax-anticipation notes and, as such, carry minimal risk. Historically, the Company has never had a loss on any loan of this type.

Personal Lending:

The Company offers a variety of secured and unsecured personal loans, including vehicle loans, mobile home loans and loans secured by savings deposits as well as other types of personal loans.

Personal loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting personal loans, a thorough analysis of the borrower’s willingness and financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background.

Personal loans may entail greater credit risk than do residential mortgage loans, particularly in the case of personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted personal loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation. In addition, personal loan

21

collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

Loan Portfolio Classification

The following table presents the loan portfolio by class at September 30, 2023 and December 31, 2022.

(Dollars in thousands)
	September 30, 2023		December 31, 2022
Commercial, financial and agricultural	$	63,265	$	61,458
Real estate - commercial		212,816		199,206
Real estate - construction:
1-4 family residential construction		6,788		7,995
Other construction loans		46,852		42,753
Real estate - mortgage		160,036		150,290
Obligations of states and political subdivisions		19,985		18,770
Personal		4,390		4,040
Total	$	514,132	$	484,512

The following table discloses allowance for credit loss activity by loan class for the three and nine months ended September 30, 2023.

					Real estate-				Obligations
	Commercial,				construction		Real estate-		of states
(Dollars in thousands)	financial and		Real estate-		1-4 family		construction		and political		Real estate-
	agricultural		commercial		residential		other		subdivisions		mortgage		Personal		Total
Three Months Ended
September 30, 2023
Allowance for credit losses:
Balance, beginning of period	$	677	$	2,677	$	113	$	720	$	41	$	1,150	$	64	$	5,442
Provision for credit losses (1)		33		25		31		31		—		8		(7)		121
Loans charged off		—		—		—		—		—		—		(11)		(11)
Recoveries collected		—		—		—		—		—		19		15		34
Total ending allowance balance (1)	$	710	$	2,702	$	144	$	751	$	41	$	1,177	$	61	$	5,586
Nine Months Ended
September 30, 2023
Allowance for credit losses:
Beginning balance, prior to ASC 326 adoption	$	297	$	1,110	$	69	$	1,077	$	54	$	1,385	$	35	$	4,027
Impact of adopting ASC 326		337		1,204		114		(407)		(9)		(497)		15		757
Initial allowance on loans purchased with credit deterioration		—		106		—		—		—		248		—		354
Provision for credit losses (1)		76		282		(39)		81		(4)		4		11		411
Loans charged off		—		—		—		—		—		(19)		(19)		(38)
Recoveries collected		—		—		—		—		—		56		19		75
Total ending allowance balance (1)	$	710	$	2,702	$	144	$	751	$	41	$	1,177	$	61	$	5,586

(1) Allowance/provision for credit losses in 2023 are not comparable to prior periods due to the adoptions of ASC 326.

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The following table discloses allowance for credit loss activity by loan class for the three and nine months ended September 30, 2022, prior to the adoption of ASC 326.

							Obligations
	Commercial,						of states
(Dollars in thousands)	financial and		Real estate-		Real estate-		and political		Real estate-
	agricultural		commercial		construction		subdivisions		mortgage		Personal		Total
Three Months Ended
September 30, 2022
Allowance for loan losses:
Beginning balance	$	286	$	934	$	1,208	$	56	$	1,294	$	35	$	3,813
Provision for loan losses		(4)		129		(123)		—		94		4		100
Loans charged off		—		—		—		—		(22)		(4)		(26)
Recoveries collected		—		—		—		—		18		—		18
Total ending allowance balance	$	282	$	1,063	$	1,085	$	56	$	1,384	$	35	$	3,905
Nine Months Ended
September 30, 2022
Allowance for loan losses:
Beginning balance	$	251	$	1,020	$	884	$	45	$	1,269	$	39	$	3,508
Provision for loan losses		31		43		201		11		61		3		350
Loans charged off		—		—		—		—		(23)		(9)		(32)
Recoveries collected		—		—		—		—		77		2		79
Total ending allowance balance	$	282	$	1,063	$	1,085	$	56	$	1,384	$	35	$	3,905

The following table summarizes loans by loan class, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, 2022, prior to the adoption of ASC 326.

							Obligations
	Commercial,						of states
(Dollars in thousands)	financial and		Real estate-		Real estate-		and political		Real estate-
	agricultural		commercial		construction		subdivisions		mortgage		Personal		Total
December 31, 2022
Loans allocated by:
Individually evaluated for impairment	$	—	$	2,025	$	—	$	—	$	377	$	—	$	2,402
Acquired with credit deterioration		—		334		—		—		419		—		753
Collectively evaluated for impairment		61,458		196,847		50,748		18,770		149,494		4,040		481,357
	$	61,458	$	199,206	$	50,748	$	18,770	$	150,290	$	4,040	$	484,512
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Acquired with credit deterioration		—		—		—		—		—		—		—
Collectively evaluated for impairment		297		1,110		1,146		54		1,385		35		4,027
	$	297	$	1,110	$	1,146	$	54	$	1,385	$	35	$	4,027

There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of September 30, 2023. As of December 31, 2022, there was $123,000 in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process. Charge-offs will occur when a confirmed loss is identified. Professional appraisals of collateral, discounted for expected selling costs, appraisal age, economic conditions and other known factors, are used to determine the charge-off amount.

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Following the adoption of ASC 326 as of January 1, 2023, the definitions of impairment and related impaired loan disclosures were removed. However, under ASC 326, loans that do not share risk characteristics are not evaluated collectively and are instead individually evaluated.  When management determines foreclosure is probable, expected credit losses are based on the fair value of the collateral, adjusted for selling costs as appropriate.  

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of September 30, 2023.

(Dollars in thousands)
	Real Estate
Real estate - mortgage	$	57
Total	$	57

The following table summarizes information regarding impaired loans by portfolio class as of December 31, 2022, prior to the adoption of ASC 326.

(Dollars in thousands)	As of December 31, 2022
	Recorded		Unpaid Principal		Related
	Investment		Balance		Allowance
Impaired loans
With no related allowance recorded:
Real estate - commercial	$	2,025	$	2,471	$	—
Acquired with credit deterioration		334		344		—
Real estate - mortgage		377		993		—
Acquired with credit deterioration		419		634		—
Total:
Real estate - commercial	$	2,025	$	2,471	$	—
Acquired with credit deterioration		334		344		—
Real estate – mortgage		377		993		—
Acquired with credit deterioration		419		634		—
	$	3,155	$	4,442	$	—

Average recorded investment of impaired loans and related interest income recognized for the three and nine months ended September 30, 2022 are summarized in the tables below, prior to the adoption of ASC 326.

(Dollars in thousands)	Three Months Ended September 30, 2022
	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Income
Impaired loans
With no related allowance recorded:
Real estate - commercial	$	2,058	$	98	$	—
Acquired with credit deterioration		341		—		—
Real estate - mortgage		348		4		19
Acquired with credit deterioration		440		—		—
Total:
Real estate - commercial	$	2,058	$	98	$	—
Acquired with credit deterioration		341		—		—
Real estate - mortgage		348		4		19
Acquired with credit deterioration		440		—		—
	$	3,187	$	102	$	19

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(Dollars in thousands)	Nine Months Ended September 30, 2022
	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Income
Impaired Loans
With no related allowance recorded:
Real estate - commercial	$	4,187	$	161	$	—
Acquired with credit deterioration		347		—		—
Real estate - mortgage		397		7		29
Acquired with credit deterioration		455		—		—
Total:
Real estate - commercial	$	4,187	$	161	$	—
Acquired with credit deterioration		347		—		—
Real estate - mortgage		397		7		29
Acquired with credit deterioration		455		—		—
	$	5,386	$	168	$	29

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due if (1) they are guaranteed or well secured and (2) there is an effective means of timely collection in process.

When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income, and unpaid interest accrued in prior years is charged against the allowance for credit losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The Company’s nonaccrual and charge-off policies are the same, regardless of the loan type.

The following tables present the amortized cost basis of loans on nonaccrual status, including nonaccrual status loans with no allowance, and loans past due over 89 days still accruing as of September 30, 2023 and December 31, 2022, respectively.

(Dollars in thousands)	Nonaccrual with				Loans Past Due
	No Allowance				Over 89 Days
As of September 30, 2023	for Credit Loss		Nonaccrual		Still Accruing(1)
Commercial, financial and agricultural	$	—	$	20	$	—
Real estate - mortgage		57		—		—
Total	$	57	$	20	$	—

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(Dollars in thousands)					Loans Past Due
	Nonaccrual with				Over 89 Days
As of December 31, 2022	No Allowance		Nonaccrual		Still Accruing(1)
Commercial, financial and agricultural	$	—	$	—	$	24
Real estate - commercial		—		—		7
Real estate - mortgage		—		139		4
Personal		—		—		4
Total	$	—	$	139	$	39

(1) These loans are guaranteed, or well-secured, and there is an effective means of collection in process.

The Company recognized $11,000 and $33,000 in interest income on nonaccrual loans during the three and nine months ended September 30, 2023, respectively.

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. Past due status is determined by the contractual terms of the loan. The following tables present the classes of the loan portfolio, summarized by the past due status as of September 30, 2023 and December 31, 2022, respectively.

(Dollars in thousands)					Greater
	30‑59 Days		60‑89 Days		Than 89 Days		Total Past
As of September 30, 2023	Past Due(1)		Past Due		Past Due		Due
Commercial, financial and agricultural	$	19	$	—	$	—	$	19
Real estate - commercial		122		—		—		122
Real estate - mortgage		673		8		14		695
Total	$	814	$	8	$	14	$	836

(Dollars in thousands)					Greater
	30‑59 Days		60‑89 Days		Than 89 Days		Total Past
As of December 31, 2022	Past Due(1)		Past Due		Past Due		Due
Commercial, financial and agricultural	$	75	$	—	$	24	$	99
Real estate - commercial		—		104		7		111
Real estate - mortgage		205		36		142		383
Personal		27		1		4		32
Total	$	307	$	141	$	177	$	625

(1) Loans are considered past due when the borrower is in arrears on two or more monthly payments.

Occasionally, the Company modifies loans to borrowers in financial difficulty by providing principal forgiveness, term extension, an other-then-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 may provide 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. There were no loans modified to borrowers experiencing financial difficulty during the three or nine months ended September 30, 2023 and, as such, there were no payment defaults on loans modified to borrowers experiencing financial difficulty during the three or nine months ended September 30, 2023.

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If the Company determines a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

As of December 31, 2022, the Company had a recorded investment in troubled debt restructurings of $2.3 million with no specific reserves or any charge-offs related to the troubled debt restructured loans and no commitments to lend additional amounts to these customers as of December 31, 2022. There were no troubled debt restructured loans in default within 12 months of restructure during the year ended December 31, 2022, nor were there any loans whose terms were modified, resulting in troubled debt  restructurings during 2022.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans to commercial customers with an aggregate loan exposure greater than $500,000 and for lines of credit more than $50,000. This analysis is performed on a continuing basis, with all such loans reviewed annually. The Company uses the following definitions for risk ratings:

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Loans in this category are reviewed no less than quarterly.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans in this category are reviewed no less than monthly.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable. Loans in this category are reviewed no less than monthly.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

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The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of September 30, 2023 and December 31, 2022, respectively.

(Dollars in thousands)			Special
As of September 30, 2023	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	63,104	$	142	$	19	$	—	$	63,265
Real estate - commercial		197,506		14,374		936		—		212,816
Real estate - construction:
1-4 family residential construction		6,788		—		—		—		6,788
Other construction loans		42,159		4,693		—		—		46,852
Real estate - mortgage		159,756		223		57		—		160,036
Obligations of states and political subdivisions		19,985		—		—		—		19,985
Personal		4,390		—		—		—		4,390
Total	$	493,688	$	19,432	$	1,012	$	—	$	514,132

(Dollars in thousands)			Special
As of December 31, 2022	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	60,990	$	468	$	—	$	—	$	61,458
Real estate - commercial		186,977		9,802		2,427		—		199,206
Real estate - construction		50,008		740						50,748
Real estate - mortgage		149,272		222		796		—		150,290
Obligations of states and political subdivisions		18,770		—		—		—		18,770
Personal		4,040		—		—		—		4,040
Total	$	470,057	$	11,232	$	3,223	$	—	$	484,512

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Based on the most recent analysis performed, the amortized cost basis by risk category of loans by class of loan and by origination year is as follows:

													Revolving		Revolving
(Dollars in thousands)													Loans		Loans
													Amortized		Converted
As of September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial, financial and agricultural:
Risk Rating
Pass	$	10,032	$	6,361	$	12,451	$	5,403	$	4,141	$	1,569	$	23,147	$	—	$	63,104
Special Mention		70		—		—		—		72		—		—		—		142
Substandard		—		—		—		—		—		19		—		—		19
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial, financial and agricultural loans	$	10,102	$	6,361	$	12,451	$	5,403	$	4,213	$	1,588	$	23,147	$	—	$	63,265
Commercial, financial and agricultural loans:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - commercial:
Risk Rating
Pass	$	17,355	$	58,584	$	23,947	$	16,208	$	18,052	$	59,570	$	3,789	$	1	$	197,506
Special Mention		—		—		—		9,001		421		4,952		—		—		14,374
Substandard		—		—		—		—		—		936		—		—		936
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - commercial loans	$	17,355	$	58,584	$	23,947	$	25,209	$	18,473	$	65,458	$	3,789	$	1	$	212,816
Real estate - commercial:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - construction - 1-4 family residential:
Risk Rating
Pass	$	2,818	$	3,411	$	—	$	—	$	—	$	559	$	—	$	—	$	6,788
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - construction - 1-4 family residential loans	$	2,818	$	3,411	$	—	$	—	$	—	$	559	$	—	$	—	$	6,788
Real estate - construction - 1-4 family residential:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - construction - other:
Risk Rating
Pass	$	2,280	$	6,732	$	17,646	$	2,469	$	393	$	3,303	$	9,336	$	—	$	42,159
Special Mention		—		—		2		4,691		—		—		—		—		4,693
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - construction - other loans	$	2,280	$	6,732	$	17,648	$	7,160	$	393	$	3,303	$	9,336	$	—	$	46,852
Real estate - construction - other:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

29

													Revolving		Revolving
(Dollars in thousands)													Loans		Loans
													Amortized		Converted
As of September 30, 2023 (cont.)	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Real estate - mortgage:
Risk Rating
Pass	$	17,922	$	44,975	$	19,869	$	15,003	$	5,627	$	47,730	$	8,510	$	120	$	159,756
Special Mention		—		—		—		—		—		223		—		—		223
Substandard		—		—		—		—		—		57		—		—		57
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - mortgage loans	$	17,922	$	44,975	$	19,869	$	15,003	$	5,627	$	48,010	$	8,510	$	120	$	160,036
Real estate - mortgage:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	(19)	$	—	$	—	$	(19)
Obligations of states and political subdivisions:
Risk Rating
Pass	$	2,741	$	3,882	$	2,456	$	5,106	$	12	$	5,787	$	1	$	—	$	19,985
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Obligations of states and political subdivisions	$	2,741	$	3,882	$	2,456	$	5,106	$	12	$	5,787	$	1	$	—	$	19,985
Obligations of states and political subdivisions:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Personal:
Risk Rating
Pass	$	1,997	$	1,339	$	466	$	116	$	127	$	231	$	110	$	4	$	4,390
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total personal loans	$	1,997	$	1,339	$	466	$	116	$	127	$	231	$	110	$	4	$	4,390
Personal:
Current period gross write offs	$	—	$	—	$	—	$	(4)	$	—	$	(15)	$	—	$	—	$	(19)

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill associated with this transaction is carried at $2.0 million. On November 30, 2015, the Company acquired FNBPA Bancorp, Inc. and, as a result, the Company carries goodwill of $3.4 million relating to the acquisition. On April 30, 2018, the Company acquired the remainder of the outstanding common stock of Liverpool Community Bank and, as a result, the Company carries goodwill of $3.6 million relating to the acquisition. On May 12, 2023, the Company acquired a branch office (“Path Valley”) in Spring Run, Pennsylvania. Goodwill associated with this transaction is carried at $765,000.

Total goodwill at September 30, 2023 and December 31, 2022 was $9.8 million and $9.0 million, respectively. Goodwill is not amortized but is tested annually for impairment as of December 31, or more frequently if certain events occur which might indicate goodwill has been impaired. There was no goodwill impairment during the nine months ended September 30, 2023 or September 30, 2022.

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Intangible Assets

On November 30, 2015, a core deposit intangible in the amount of $303,000 associated with the FNBPA Bancorp, Inc. acquisition was recorded and is being amortized over a ten-year period using a sum of the years’ digits basis. Amortization expense recognized for the intangibles related to the FNBPA acquisition for the three and nine months ended September 30, 2023 was $4,000 and $12,000, respectively, and for the three and nine months ended September 30, 2022 was $5,000 and $16,000, respectively.

On April 30, 2018, a core deposit intangible in the amount of $289,000 associated with the Liverpool Community Bank acquisition was recorded and is being amortized over a ten-year period using a sum of the years’ digit basis. Amortization expense recognized for the intangible related to the Liverpool Community Bank acquisition for the three and nine months ended September 30, 2023 was $7,000 and $21,000, respectively, and for the three and nine months ended September 30, 2022 was $9,000 and $25,000, respectively.

On May 12, 2023, a core deposit intangible in the amount of $303,000 associated with the Path Valley branch acquisition was recorded and is being amortized over a ten-year period using a sum of the years’ digit basis. Amortization expense recognized for the intangible related to the Path Valley branch acquisition for the three and nine months ended September 30, 2023 was $14,000 and $23,000, respectively, while no amortization expense was recorded for the three and nine months ended September 30, 2022.

The following table shows the amortization schedule for each of the intangible assets recorded.

(Dollars in thousands)	Path Valley		FNBPA		LCB
	Acquisition		Acquisition		Acquisition
	Core		Core		Core
	Deposit		Deposit		Deposit
	Intangible		Intangible		Intangible
Beginning Balance at Acquisition Date	$	303	$	303	$	289
Amortization expense recorded prior to January 1, 2022		—		250		167
Amortization expense recorded in the twelve months
ended December 31, 2022		—		21		33
Unamortized balance as of December 31, 2022		—		32		89
Amortization expense recorded in the
nine months ended September 30, 2023		23		12		21
Unamortized balance as of September 30, 2023	$	280	$	20	$	68
Scheduled remaining amortization expense for years ended:
December 31, 2023	$	14	$	4	$	7
December 31, 2024		51		11		23
December 31, 2025		46		5		17
December 31, 2026		40		—		12
December 31, 2027		35		—		7
Thereafter		94		—		2

8. DEPOSITS

At September 30, 2023 and December 31, 2022, time deposits that met or exceeded the FDIC insurance limit of $250,000 were $33.0 million and $13.2 million, respectively.

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9. BORROWINGS

Borrowings consisted of the following as of September 30, 2023 and December 31, 2022.

(Dollars in thousands)	September 30,		December 31,
	2023		2022
Securities sold under agreements to repurchase	$	11,638	$	7,585
Overnight advances with FHLB		12,000		28,125
Short-term debt		16,000		20,000
Long-term debt with FHLB		20,000		20,000
	$	59,638	$	75,710

Long-term debt is comprised only of Federal Home Loan Bank (“FHLB”) advances with an original maturity of one year or more. The following table summarizes the scheduled maturities of long-term debt as of September 30, 2023.

(Dollars in thousands)	Scheduled		Weighted Average
Year	Maturities		Interest Rate
2023	$	—	—	%
2024		15,000	2.29
2025		5,000	2.41
2026		—	—
2027		—	—
Thereafter		—	—
	$	20,000	2.32	%

10. STOCK COMPENSATION PLAN

Long-Term Incentive Plan

The Company maintains the 2016 Long-Term Incentive Plan (the “Plan”); the Plan amended and restated the former 2011 Stock Option Plan (the “2011 Plan”). The Plan continues in effect for any outstanding awards under the 2011 Plan in accordance with the terms and conditions governing such awards immediately prior to the effective date of the Plan. The Plan expanded the types of awards authorized by the 2011 Plan to include, among others, restricted stock. Under the provisions of the Plan, awards may consist of grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and performance shares to officers and key employees of the Company, as well as directors. The Plan is administered by a committee of the Board of Directors.

The maximum number of shares of common stock that may be issued under the Plan is 300,000 shares, and 162,503 shares remained available for grant as of September 30, 2023. Shares of common stock issued under the Plan may be treasury shares or authorized but unissued shares. Forfeited awards are returned to the pool of shares available for grant for future awards.

Through the nine months ended September 30, 2023, 11,409 restricted shares were awarded to certain officers and all directors. Each of the awards vest after three-years, with no interim vesting. As of September 30, 2023, there was $253,000 of unrecognized compensation cost related to all non-vested restricted stock awards. This cost is expected to be recognized over the vesting period through February 2026.

Compensation expense for stock options granted and restricted stock awarded is measured using the fair value of the award on the grant date and is recognized over the vesting period. The Company recognized stock-based compensation expense for the three and nine months ended September 30, 2023 of $35,000 and $106,000, respectively, and for the three and nine months ended September 30, 2022 of $30,000 and $146,000, respectively.

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The following table presents a summary of the status of the Company’s non-vested restricted stock awards as of September 30, 2023. Changes during the period then ended are presented further below:

		Weighted
		Average
		Grant Date
	Shares	Fair Value
Non-vested at January 1, 2023	20,975	$	17.10
Vested	(6,739)		19.05
Forfeited	—		—
Granted	11,409		16.25
Non-vested at September 30, 2023	25,645	$	16.21

No stock options were awarded during the nine months ended September 30, 2023. Previously granted stock options vest over a period of three to five years and are exercisable at the grant price, which is at least the fair market value of the stock on the grant date. The Plan provides that the option price per share may not be less than the fair market value of the stock on the day the option was granted, and in no event less than the par value of such stock. Options granted under the Plan are exercisable no earlier than one year after the date of grant and expire ten years after the date of the grant. All options previously granted under the Plans are scheduled to expire by February 17, 2025.

Total options outstanding as of September 30, 2023 have exercise prices between $17.72 and $17.80, with a weighted average exercise price of $17.76 and a weighted average remaining contractual life of 1.16 years.

As of September 30, 2023, there was no unrecognized compensation cost related to options granted under the Plan, and no options were exercised under the Plan during the period.

A summary of the status of the outstanding stock options as of September 30, 2023, and changes during the period then ended, is presented below:

		Weighted
		Average
		Exercise
	Shares	Price
Outstanding at beginning of year	60,347	$	17.74
Granted	—		—
Exercised	—		—
Expired	(9,922)		17.65
Outstanding at end of year	50,425	$	17.76

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan under which employees, through payroll deductions, may purchase shares of Company stock annually. The option price of the stock purchases is between 95% and 100% of the fair market value of the stock on the offering termination date as determined annually by the Board of Directors. The maximum number of shares which employees may purchase under the Plan is 250,000; however, the annual issuance of shares may not exceed 5,000 shares plus any unissued shares from prior offerings. There were 4,230 and 5,026 shares issued from treasury under this plan during the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there were 152,420 shares reserved for issuance under the Employee Stock Purchase Plan.

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11. FAIR VALUE MEASUREMENT

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. Additional guidance is provided on determining when the volume and level of activity for the asset or liability has significantly decreased. The guidance also includes instruction on identifying circumstances when a transaction may not be considered orderly.

Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes that there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed, and significant adjustments to the related prices may be necessary to estimate fair value in accordance with fair value measurement and disclosure guidance.

This guidance clarifies that, when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

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

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

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An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities 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 and 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.

Equity Securities – The fair value of equity securities is based upon quoted prices in active markets and is reported using Level 1 inputs.

Debt Securities – For debt securities where quoted prices are not available, fair values are calculated based on market prices of similar securities and are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurement from an independent pricing service. The fair value measurements 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 debt securities’ terms and conditions, among other things. For debt securities where quoted prices or market prices of similar securities are not available, fair values are calculated using other market indicators and are reported at fair value utilizing Level 3 inputs.

Derivatives – The fair values of derivatives are based on valuation models using observable market data as of the measurement date utilizing Level 2 inputs. The Company’s derivatives were comprised of interest rate swaps traded in an over-the-counter market where quoted market prices were not always available; therefore, the fair values were determined using quantitative models that utilize multiple market inputs. The inputs varied based on the type of yield curves, prepayment rates and volatility factors used to value the position. Most market inputs were actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

Other Real Estate Owned – Certain assets included in other real estate owned are carried at fair value as a result of impairment and accordingly are presented as measured on a non-recurring basis. Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity.

Mortgage Servicing Rights – The fair value of servicing assets is based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date and are considered Level 3 inputs.

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The following tables summarize financial assets and financial liabilities measured at fair value as of September 30, 2023 and December 31, 2022 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. There were no assets measured at fair value on a non-recurring basis as of September 30, 2023 or December 31, 2022.

	(Level 1)		(Level 2)		(Level 3)
	Quoted Prices in		Significant		Significant
(Dollars in thousands)	Active Markets		Other		Other
	for Identical		Observable		Unobservable
September 30, 2023	Assets		Inputs		Inputs		Total
Assets measured at fair value on a recurring basis:
Debt securities available for sale:
Obligations of U.S. Government agencies and corporations	$	—	$	13,727	$	—	$	13,727
Obligations of state and political subdivisions		—		6,713		—		6,713
Corporate debt securities		—		7,466		5,908		13,374
Mortgage-backed securities		—		32,713		—		32,713
Total debt securities available for sale	$	—	$	60,619	$	5,908	$	66,527
Equity securities	$	978	$	—	$	—	$	978
Mortgage servicing rights	$	—	$	—	$	84	$	84

	(Level 1)		(Level 2)		(Level 3)
	Quoted Prices in		Significant		Significant
(Dollars in thousands)	Active Markets		Other		Other
	for Identical		Observable		Unobservable
December 31, 2022	Assets		Inputs		Inputs		Total
Assets measured at fair value on a recurring basis:
Debt securities available for sale:
Obligations of U.S. Government agencies and corporations	$	—	$	13,705	$	—	$	13,705
Obligations of state and political subdivisions		—		7,679		—		7,679
Corporate debt securities		—		8,196		7,145		15,341
Mortgage-backed securities		—		36,811		—		36,811
Total debt securities available for sale	$	—	$	66,391	$	7,145	$	73,536
Equity securities	$	1,056	$	—	$	—	$	1,056
Mortgage servicing rights	$	—	$	—	$	92	$	92
Interest rate swaps	$	—	$	268	$	—	$	268

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The table below presents a reconciliation of the beginning and ending balances of investment securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three month periods ended September 30, 2023 and 2022.

	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30,				September 30,
	2023		2022		2023		2022
Investment Securities:
Beginning balance	$	5,908	$	7,788	$	7,145	$	4,520
Total gains (loss) included in OCI		—		(440)		(1,237)		(1,172)
Purchases		—		—		—		4,000
Principal payments and other		—		—		—		—
Sales		—		—		—		—
Balance, end of period	$	5,908	$	7,348	$	5,908	$	7,348

Mortgage servicing rights and assets measured at fair value on a nonrecurring basis for which Level 3 inputs have been used to determine fair value are immaterial to the Company’s consolidated financial statements.

Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, the fair value estimates reported herein are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates indicated. The estimated fair value amounts have been measured as of their respective year ends and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments after the respective reporting dates may be different from the amounts reported at each quarter end.

The information presented below should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is provided only for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

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The carrying amounts and estimated fair values of the Company’s financial instruments are as follows:

	Financial Instruments
(Dollars in thousands)	September 30, 2023				December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and due from banks	$	27,377	$	27,377	$	10,856	$	10,856
Interest bearing deposits with banks		390		390		143		143
Debt securities available for sale		66,527		66,527		73,536		73,536
Debt securities held to maturity		202,646		189,221		209,565		209,887
Restricted investment in bank stock		2,476		N/A		3,666		N/A
Loans, net of allowance for credit losses		508,546		500,250		480,485		467,667
Interest rate swaps		—		—		268		268
Accrued interest receivable		2,509		2,509		2,124		2,124
Financial liabilities:
Time deposits	$	195,169	$	189,481	$	142,271	$	134,417
Securities sold under agreements to repurchase		11,638		N/A		7,585		N/A
Short-term borrowings		28,000		27,901		48,125		48,122
Long-term debt		20,000		19,412		20,000		19,156
Other interest bearing liabilities		941		937		1,011		1,009
Accrued interest payable		1,091		1,091		333		333
Off-balance sheet financial instruments:
Commitments to extend credit	$	—	$	—	$	—	$	—
Letters of credit		—		—		—		—

The following tables present the carrying amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments not previously disclosed as of September 30, 2023 and December 31, 2022. The tables exclude financial instruments for which the carrying amount approximates fair value.

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
September 30, 2023
Financial instruments – Assets
Debt securities held to maturity	$	202,646	$	189,221	$	—	$	189,221	$	—
Loans, net of allowance for credit losses		508,546		500,250		—		—		500,250
Financial instruments – Liabilities
Time deposits	$	195,169	$	189,481	$	—	$	189,481	$	—
Long-term debt		20,000		19,412		—		19,412		—
Other interest bearing liabilities		941		937		—		937		—

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					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
December 31, 2022
Financial instruments – Assets
Debt securities held to maturity	$	209,565	$	209,887	$	—	$	209,887	$	—
Loans, net of allowance for credit losses		480,485		467,667		—		—		467,667
Financial instruments – Liabilities
Time deposits	$	142,271	$	134,417	$	—	$	134,417	$	—
Long-term debt		20,000		19,156		—		19,156		—
Other interest bearing liabilities		1,011		1,009		—		1,009		—

12. COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES

In the ordinary course of business, the Company makes commitments to extend credit to its customers through letters of credit, loan commitments and lines of credit. At September 30, 2023, the Company had $111.5 million outstanding in loan commitments and other unused lines of credit extended to its customers as compared to $116.1 million at December 31, 2022.

The Company does not issue any guarantees that would require liability recognition or disclosure, other than its letters of credit. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. Generally, financial and performance letters of credit have expiration dates within one year of issuance, while commercial letters of credit have longer term commitments. The credit risk involved in issuing letters of credit is essentially the same as the risks that are involved in extending loan facilities to customers. The Company generally holds collateral and/or personal guarantees supporting these commitments. The Company had outstanding $2.5 million and  $2.6 million of financial and performance letters of credit commitments as of September 30, 2023 and December 31, 2022, respectively. Commercial letters of credit as of September 30, 2023 and December 31, 2022 totaled $9.3 million and $9.8 million, respectively. Management believes the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential number of future payments required under the corresponding guarantees. The amount of the liability as of September 30, 2023 for payments under letters of credit issued was not material. Because these instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk.

Additionally, the Company has sold qualifying residential mortgage loans to the FHLB as part of its Mortgage Partnership Finance Program (“Program”). Under the terms of the Program, there is limited recourse back to the Company for loans that do not perform in accordance with the terms of the loan agreement. Each loan sold under the Program is “credit enhanced” such that the individual loan’s rating is raised to “BBB”, as determined by the FHLB. The Program can be terminated by either the FHLB or the Company, without cause. The FHLB has no obligation to commit to purchase any mortgage loans through, or from, the Company.

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13. DERIVATIVES

The Company may use interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. As of September 30, 2023, the Company had no interest rate swaps as the remaining cash flow hedge matured in April 2023. As of December 31, 2022, an interest rate swap with a notional amount of $20.0 million was designated as a cash flow hedge of a short-term FHLB advance. The notional amount of the interest rate swap did not represent amounts exchanged by the parties. The amount exchanged was determined by reference to the notional amount and the other terms of the individual interest rate swap agreement. The aggregate fair value of the swap was $268,000 as of December 31, 2022 and was recorded in other assets on the Consolidated Statements of Condition, with changes in fair value recorded in other comprehensive income.

The Interest rate swap was determined to be fully effective during the periods presented and, as such, no amount of ineffectiveness was included in net income.

The effect of cash flow hedge accounting on accumulated other comprehensive income for the periods ended September 30, 2023 and December 31, 2022 were as follows:

(Dollars in thousands)	September 30, 2023
	Amount of Gain		Location of Gain	Amount of Gain
	Recognized in		Reclassified	Reclassified from
	OCI on Derivatives		from OCI into Income	OCI into Income
Interest rate contract	$	2	Interest expense on short-term borrowings and repurchase agreements	$	(269)
Total	$	2		$	(269)

(Dollars in thousands)	December 31, 2022
	Amount of Gain		Location of Gain	Amount of Gain
	Recognized in		Reclassified	Reclassified from
	OCI on Derivatives		from OCI into Income	OCI into Income
Interest rate contract	$	18	Interest expense on short-term borrowings and repurchase agreements	$	(291)
Swap termination gain		1,202	Other non-interest income		(1,202)
Total	$	1,220		$	(1,493)

The effect of cash flow hedge accounting on the Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022 was as follows:

Amount of Gain or Loss Recognized in Income on Cash Flow Hedging Relationships

	Income (Expense)				Income (Expense)
	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30,				September 30,
	2023		2022		2023		2022
Effects of cash flow hedging:
Gain on cash flow hedging relationships:
Amount reclassified from AOCI into income	$	—	$	99	$	269	$	115
Amount reclassified from AOCI into income for swap termination		—		(13)		—		1,202
Total	$	—	$	86	$	269	$	1,317

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14. BRANCH ACQUISITION

On May 12, 2023, the Company completed the acquisition of a branch office in Spring Run, Pennsylvania. The acquisition included real estate and deposits. The liabilities were recorded on the balance sheet at their estimated fair values as of May 12, 2023, and their results of operations of the branch have been included in the Consolidated Statement of Income since such date.

Included in the purchase price of the branch was goodwill and core deposit intangible of $765,000 and $303,000, respectively. The core deposit intangible is being amortized over a ten-year period using a sum of the years’ digit basis. The goodwill will not be amortized but will be measured annually for impairment.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed:

(Dollars in thousands)
Assets:
Cash received at settlement	$	17,384
Fixed assets		248
Goodwill		765
Core deposit intangible		303
Other assets purchased		3
	$	18,703
Liabilities:
Deposits purchased	$	18,697
Other liabilities assumed		6
	$	18,703

The estimated fair values of the assets and liabilities, including identifiable intangible assets, are subject to refinement. Subsequent adjustments to the estimated fair values of assets and liabilities acquired, and the resulting goodwill, is allowed for a period of up to one year after the acquisition date for new information that becomes available reflecting circumstances at the acquisition date.

15. SUBSEQUENT EVENTS

On October 17, 2023, the Board of Directors declared a cash dividend of $0.22 per share to shareholders of record on November 16, 2023, payable on December 1, 2023.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements:

The information contained in this Quarterly Report on Form 10-Q contains forward looking statements (as such term is defined in the Securities Exchange Act of 1934 and the regulations thereunder). These forward-looking statements may include projections of, or guidance on, the Company’s future financial performance, expected levels of future expenses, including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in the Company’s business or financial results. When words such as "may”, "should”, "will”, "could”, "estimates”, "predicts”, "potential”, "continue”, "anticipates”, "believes”, "plans”, "expects”, "future”, "intends”, “projects”, the negative of these terms and other comparable terminology are used in this report, Juniata is making forward-looking statements. Any forward-looking statement made by the Company in this document is based only on Juniata’s current expectations, estimates and projections about future events and financial trends affecting the financial condition of its business based on information currently available to the Company and speaks only as of the date when made. Juniata undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new or updated information, future events, or otherwise. Forward-looking statements are not historical facts or guarantees of future performance. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control, and actual results may differ materially from this forward-looking information and therefore, should not be unduly relied upon.  Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements, including, but not limited to: (i) the factors set forth in the sections of Juniata’s Annual Report on Form 10-K for the year ended December 31, 2022, titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Juniata’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and June 30, 2023 and factors set forth in other current and periodic reports which Juniata has or will file with the Securities and Exchange Commission, and (ii) the following factors:

● changes in general economic, business and political conditions, including inflation, a recession or intensified international hostilities;

● the impact of adverse changes in the economy and real estate markets, including protracted periods of low-growth and sluggish loan demand;

● the effect of market interest rates and uncertainties, and relative balances of rate-sensitive assets to rate-sensitive liabilities, on net interest margin and net interest income;

● the effect of competition on rates of deposit and loan growth and net interest margin;

● increases in non-performing assets, which may result in increases in the allowance for credit losses, loan charge-offs and elevated collection and carrying costs related to such non-performing assets;

● other income growth, including the impact of regulatory changes which have reduced debit card interchange revenue;

● investment securities gains and losses, including other than temporary declines in the value of securities which may result in charges to earnings;

● the effects of changes in the applicable federal income tax rate;

● the level of other expenses, including salaries and employee benefit expenses;

● the impact of increased regulatory scrutiny of the banking industry;

● the impact of governmental monetary and fiscal policies, as well as legislative and regulatory changes;

● the results of regulatory examination and supervision processes;

● the failure of assumptions underlying the establishment of reserves for loan and lease losses, and estimations of collateral values and various financial assets and liabilities;

● the increasing time and expense associated with regulatory compliance and risk management;

● the ability to implement business strategies, including business acquisition activities and organic branch, product and service expansion strategies;

● capital and liquidity strategies, including the impact of the capital and liquidity requirements modified by the Basel III standards;

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● the effects of changes in accounting policies, standards, and interpretations on the presentation in the Company’s consolidated balance sheets and consolidated statements of income;

● the Company’s failure to identify and to address cyber-security risks;

● the Company’s ability to keep pace with technological changes;

● the Company’s ability to attract and retain talented personnel;

● the Company’s reliance on its subsidiary for substantially all its revenues and its ability to pay dividends;

● acts of war or terrorism;

● disruptions due to flooding, climate change, severe weather, or other natural disasters;

● failure of third-party service providers to perform their contractual obligations;

● the impact of unrealized losses on debt securities on accumulated other comprehensive income and stockholders’ equity; and

● the possibility of a contagion in the banking industry because of the recent bank failures and resulting emphasis on liquidity, uninsured deposits and customer and industry concentrations in the deposit base.

Critical Accounting Policies:

Disclosure of the Company’s significant accounting policies is included in the Company’s critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2022 and in Note 2 of this document. Some of these policies require significant judgments, estimates, and assumptions to be made by management, most particularly in connection with determining the provision for credit losses and the appropriate level of the allowance for credit losses.

General:

The following discussion relates to the consolidated financial condition of the Company as of September 30, 2023, compared to December 31, 2022, and the consolidated results of operations for the three and nine months ended September 30, 2023, compared to the same periods in 2022. This discussion should be read in conjunction with the interim consolidated financial statements and related notes included herein.

Overview:

Juniata Valley Financial Corp. is a Pennsylvania corporation organized in 1983 to be the holding company of The Juniata Valley Bank. The Bank is a state-chartered bank headquartered in Mifflintown, Pennsylvania. Juniata Valley Financial Corp. and its subsidiary bank derive substantially all their income from banking and bank-related services, including interest earned on residential real estate, commercial mortgage, commercial and consumer loans, interest earned on investment securities and fee income from deposit services and other financial services provided to its customers.

Financial Condition:

On May 12, 2023, Juniata completed the acquisition of the former Orrstown Bank Path Valley branch office. As a result of the acquisition, Juniata added approximately $18.7 million in deposits. In addition, $765,000 in goodwill was recorded, as well as a core deposit intangible of $303,000, which is being amortized over a ten-year period using a sum of the year’s digit basis.

Total assets as of September 30, 2023, were $862.7 million, an increase of $31.8 million, or 3.8%, compared to December 31, 2022. Comparing asset balances as of September 30, 2023 and December 31, 2022, total cash and cash equivalents increased by $16.8 million, or 152.5%, due to the receipt of approximately $16.0 million in new deposits on September 29, 2023, the last business day of the month. Over the same period, total loans increased by $29.6 million, or 6.1%, primarily due to increases in real estate – commercial and real estate – mortgage loans, while debt securities decreased by $13.9 million, or 4.9.%, as cash flows from the investment portfolio were used to fund loan growth and pay down short-term debt rather than being reinvested into the investment portfolio.  As of September 30, 2023 the allowance for credit

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losses increased $1.6 million, or 38.7%, compared to December 31, 2022 primarily due to recording the CECL Day 1 entry of $1.1 million upon the adoption of ASU 326 on January 1, 2023.

Total deposits increased by $45.9 million, or 6.5%, as of September 30, 2023 compared to December 31, 2022, primarily due to the addition of approximately $18.7 million in deposits from the Path Valley branch acquisition in May and the approximately $16.0 million in new deposits at the end of September. The increase in deposit funds allowed the Company to repay a portion of its short-term debt, resulting in a decrease of $20.1 million, or 41.8%, in short-term debt as of September 30, 2023 compared to December 31, 2022, which was partially offset by an increase of $4.0 million, or 53.4%, in securities sold under agreements to repurchase due to the addition of two new relationships in 2023.

The table below shows changes in deposit volumes by type of deposit between December 31, 2022 and September 30, 2023. Most of the deposit growth was in time deposits which was primarily the result of the higher interest rate environment  in 2023 as many customers migrated from non-interest or lower-rate interest bearing demand and savings deposits to higher-rate time deposits.

(Dollars in thousands)	September 30,		December 31,		Change
	2023		2022		$		%
Deposits:
Demand, non-interest bearing	$	200,619	$	199,131	$	1,488	0.7	%
Interest bearing demand and money market		225,424		227,028		(1,604)	(0.7)
Savings		136,230		143,082		(6,852)	(4.8)
Time deposits, $250,000 and more		33,049		13,238		19,811	149.7
Other time deposits		162,120		129,033		33,087	25.6
Total deposits	$	757,442	$	711,512	$	45,930	6.5	%

As shown in the table below, total loans increased $29.6 million, or 6.1%, between December 31, 2022 and September 30, 2023. Juniata experienced loan growth in all segments, except 1-4 family residential construction loans, which have declined primarily due to the higher market interest rate environment.

(Dollars in thousands)	September 30,		December 31,		Change
	2023		2022		$		%
Loans:
Commercial, financial and agricultural	$	63,265	$	61,458	$	1,807	2.9	%
Real estate – commercial		212,816		199,206		13,610	6.8
Real estate – construction:
1-4 family residential construction		6,788		7,995		(1,207)	(15.1)
Other construction loans		46,852		42,753		4,099	9.6
Real estate – mortgage		160,036		150,290		9,746	6.5
Obligations of states and political subdivisions		19,985		18,770		1,215	6.5
Personal		4,390		4,040		350	8.7
Total loans	$	514,132	$	484,512	$	29,620	6.1	%

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A summary of the activity in the allowance for credit losses for the nine month periods ended September 30, 2023 and 2022, respectively, is presented below.

(Dollars in thousands)	Nine months ended September 30,
	2023			2022
January 1, beginning balance, prior to ASC 326 adoption	$	4,027		$	3,508
Impact of adopting ASC 326		1,111			—
Loans charged off		(38)			(32)
Recoveries of loans previously charged off		75			79
Net recoveries		37			47
Provision for credit losses		411			350
Balance of allowance – end of period	$	5,586		$	3,905
Ratio of net recoveries during period to average loans outstanding		(0.01)	%		(0.01)	%

Juniata adopted ASU 326 as of January 1, 2023, resulting in the recording of a $1.1 million increase to the allowance for credit losses. A credit loss expense of $411,000 was recorded in the nine months ended September 30, 2023, compared to a provision expense of $350,000 for the nine months ended September 30, 2022.While Juniata continued to experience favorable asset quality trends, elevated qualitative risk factors were considered in evaluating the allowance for credit losses due to political and economic uncertainty, national delinquency trends and the ongoing effects of the increasing interest rate environment, as well as loan growth.

As of September 30, 2023, there were $19.4 million of loans classified as special mention compared to $11.2 million at December 31, 2022, $1.0 million classified as substandard at September 30, 2023 compared to $3.2 million at December 31, 2022, and no loans classified as doubtful at either September 30, 2023 or December 31, 2022. The increase in special mention loans as of September 30, 2023 compared to December 31, 2022 was primarily due to the downgrade of a purchased participated commercial real estate construction loan in the third quarter of 2023 and a commercial real estate construction loan that was converted to a commercial real estate mortgage loan in the second quarter of 2023. The decline in substandard loans was primarily due to the partial pay-off of a real estate-commercial loan during the first quarter of 2023, as well as the upgrade of former troubled debt restructured and formerly classified as PCI (now classified as PCD) loans upon the adoptions of ASU 2022-02 and ASU 2016-13, respectively, as these performing loans were only considered substandard at December 31, 2022 because of their PCI and TDR impaired loan classifications.

Management believes the allowance for credit losses carried were adequate to cover forecasted expected credit losses related to these relationships as of September 30, 2023. Management also believes the Company has sufficient liquidity and capital to absorb losses that may occur but continues to closely monitor the financial strength of borrowers and their ability to comply with repayment terms.

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due if (1) they are guaranteed or well secured and (2) there is an effective means of timely collection in process.

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The following table summarizes the Bank’s non-performing loans on September 30, 2023 compared to December 31, 2022.

(Dollars in thousands)	September 30, 2023			December 31, 2022
Non-performing loans
Non-accrual loans	$	77		$	139
Accruing loans past due 90 days or more		—			39
Total	$	77		$	226
Loans outstanding	$	514,132		$	484,512
Ratio of non-performing loans to loans outstanding		0.01	%		0.04	%
Ratio of non-accrual loans to loans outstanding		0.01	%		0.03	%
Allowance for credit losses to non-accrual loans		7,254.55	%		2,897.12	%

Total non-performing loans as of September 30, 2023 decreased $149,000 compared to total non-performing loans as of December 31, 2022, primarily due to a decline in non-accrual loans as performing PCD (formerly PCI) real estate – mortgage loans were returned to accruing status following the adoption of ASC 326, as these loans were only classified as nonaccrual at December 31, 2022 because of their PCI classifications.

Subsequent to September 30, 2023, the following event took place:

On October 17, 2023, the Board of Directors declared a cash dividend of $0.22 per share to shareholders of record on November 16, 2023, payable on December 1, 2023.

Allowance for Credit Losses (“ACL”):

Juniata adopted ASU 2016-13 – Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments as of January 1, 2023, resulting in the recording of a $1.1 million increase to the allowance for credit losses. The new current expected credit loss (“CECL”) model is based on forecasted economic scenarios as well as qualitative factors specific to Juniata. The ACL represents management’s assessment of the estimated credit losses the Company will receive over the life of the loan. ACL requires a projection of credit losses over the contract lifetime of the credit adjusted for prepayment tendencies.

Management analyzes the adequacy of the ACL regularly through reviews of the loan portfolio. Consideration is given to economic conditions, changes in interest rates and the effect of such changes on collateral values and borrowers’ ability to pay, changes in the composition of the loan portfolio and trends in past due and non-performing loan balances. The ACL is a material estimate that is susceptible to significant fluctuation and is established through a provision for credit losses based on management’s evaluation of the inherent risk in the loan portfolio. In addition to extensive in-house loan monitoring procedures, the Company utilizes an outside party to conduct an independent loan review of commercial loan and commercial real estate loan relationships. Management utilizes the results of this outside loan review to assess the effectiveness of its internal loan grading system as well as to assist in the assessment of the overall adequacy of the ACL associated with these types of loans.

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The ACL is made up of two basic components. The first component of the allowance for credit loss is the specific reserve in which the Company sets aside reserves based on the analysis of individual analyzed credits. In establishing specific reserves, the Company analyzes all substandard, doubtful and loss graded loans monthly and makes judgments about the risk of loss based on the cash flow of the borrower, the value of any collateral and the financial strength of any guarantors. If the loan is individually analyzed and cash flow dependent, then a specific reserve is established for the discount on the net present value of expected future cash flows. If the loan is individually analyzed and collateral dependent, then any shortfall is either charged off or a specific reserve is established. The Company also considers the impacts of any Small Business Administration guarantees. The specific reserve portion of the ACL was $5,000 at September 30, 2023, while there was no specific reserve at December 31, 2022.

The second component is a general reserve, which is used to record loan loss reserves for groups of homogenous loans for which the Company estimates the expected losses over the contractual lifetime of the loan, adjusted for prepayment tendencies. In addition, the future economic environment is incorporated into the projection with selected macro-economic variables to revert to the long-run historical mean after such time as management can no longer make or obtain a reasonable and supportable forecast.

Discounted cash flows (“DCF”) was selected as the appropriate method to analyze most of the Company’s loan segments, particularly loan segments with longer average lives and regular payment structures, because DCF allows for the effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner. DCF generates cash flow projections at the instrument level where payment expectations are adjusted for prepayment and curtailment to produce an expected cash flow stream. This expected cash flow stream is compared to contractual cash flows to establish a valuation account for these loans.

The personal loan portfolio contains loans with many different payment structures, payment streams and collateral. The Weighted Average Remaining Life (“WARM”) method was deemed most appropriate for these loans. WARM uses an annual charge-off rate over several vintages to estimate credit losses. The average annual charge-off rate is applied to the contractual term adjusted for prepayments.

Additionally, the Company is using reasonable credit risk assumptions, based on an annual report produced by Moody’s, for the obligations of states and political subdivisions segment.

CECL requires a reasonable and supportable economic forecast when establishing the ACL. The Company estimates losses over a four quarter forecast period and has elected to revert historical loss experience over four quarters. The economic factors considered as part of the ACL were selected after a rigorous regression analysis and model selection process.

The quantitative general allowance was $2.4 million at September 30, 2023 and $2.5 million at January 1, 2023.

In addition to the quantitative analysis, a qualitative analysis is performed each quarter to provide additional general reserves on loan portfolios that are not individually analyzed for various factors. The overall qualitative factors are based on the following risk factors:

1) Lending Policy, Procedures, & Strategies - Changes in policy and/or underwriting standards as well as anticipated changes are considered, and a qualitative factor is applied in accordance with the magnitude and direction (loosening/tightening) of the change. In addition, any new loan programs are also taken into consideration when evaluating this factor.

2) Changes in Nature and Volume of the Portfolio - The composition of the Bank’s loan portfolio is assessed to evaluate possible risk changes arising from new or increasing types of loans, industries or collateral.

3) Credit & Lending Staff/Administration - The knowledge and experience of the lending and credit personnel is assessed.  

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4) Problem Loan Trends - The level of delinquency, modifications, and extensions is used to measure the trends of the risk changes within the portfolio.

5) Concentrations - As an extension of the portfolio composition review, lending concentrations are monitored regularly. Concentrations may be measured by collateral, type, industry and geographical location.

6) Loan Review Results - Loan reviews conducted internally as well as by outside auditors or examiners are studied for indications of possible risk changes.

7) Collateral Values - Changes in market values of the underlying collateral are monitored on select loan types and pools.   Examples could include housing, CRE or cattle prices. These variations may indicate the need for risk adjustment as future loss levels could change if liquidation becomes necessary.

8) Regulatory and Business Environment - The impact of government fiscal and business policy as well as the regulatory environment are monitored and may result in possible adjustments to the risk factors.

In determining how to apply the weightings for the various qualitative factors, management considered which factors were not entirely considered within the base model and assessed which factors would have the highest impact on potential loan losses. Weights and risks are consistent across various segments except for instances where the risk factor is not applicable, or the segment is more or less exposed than other segments. Risk weighting is adjusted directionally based on relevancy and the ability to quantify an impact. For example, the economy and external factors were determined to have the most significant effect on the estimated losses largely because there is evidence that economic conditions are largely correlated and can explain a significant portion of historical changes in loss. Likewise, risks that are well-controlled throughout the organization, such as managerial contingencies and loan review controls require less allocation.

The qualitative analysis resulted in a general reserve of $3.2 million at September 30, 2023, compared to $2.6 million at January 1, 2023.

The determination of the ACL is complex, and the Company makes decisions on the effects of matter that are inherently uncertain. Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgements as to the facts and circumstances related to particular situations or credits. There may be significant changes in the ACL in future periods determined by factors prevailing at that point in time along with future forecasts.

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

Operations Overview:

Net income for the three months ended September 30, 2023 was $1.8 million, a decrease of $329,000, or 15.5%, compared to the three months ended September 30, 2022. Basic and diluted earnings per share was $0.36 for the three months ended September 30, 2023 compared to basic and diluted earnings per share of $0.42 for the comparable 2022 period.

Annualized return on average assets for the three months ended September 30, 2023 was 0.85%, compared to the annualized return on average assets of 1.03% for the same period in 2022. For the three months ended September 30, annualized return on average equity was 19.15% in 2023 compared to 17.90% in 2022.

Presented below are selected key ratios for the two periods:

	Three Months Ended
	September 30,
	2023		2022
Return on average assets (annualized)	0.85	%	1.03	%
Return on average equity (annualized)	19.15	%	17.90	%
Average equity to average assets	4.43	%	5.74	%
Non-interest income, as a percentage of average assets (annualized)	0.62	%	0.63	%
Non-interest expense, as a percentage of average assets (annualized)	2.26	%	2.42	%

The discussion that follows further explains changes in the components of net income when comparing the three months ended September 30, 2023 with the three months ended September 30, 2022.

Net Interest Income:

Net interest income was $5.7 million during the three months ended September 30, 2023, a decrease of $319,000, or 5.3%, compared to $6.0 million during the three months ended September 30, 2022.

Average interest earning assets increased $36.8 million, or 4.6%, to $841.9 million during the three months ended September 30, 2023, compared to the same period in 2022, primarily due to an increase of $53.4 million, or 11.7%, in average loans, partially offset by a decline of $15.4 million, or 4.5%, in average investment securities. Average interest bearing liabilities increased by $32.3 million, or 5.7%, compared to the comparable 2022 period, primarily due to growth in average time deposits and short-term borrowings. The yields on average loans and investment securities increased by 81 basis points and 12 basis points, respectively, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 while the rates on average time deposits and short-term borrowings and other interest bearing liabilities increased by 209 basis points and 231 basis points, respectively, over the same period, primarily due to the 225 basis point increase in market interest rates between periods. The yield on earning assets increased 63 basis points, to 4.02%, during the three months ended September 30, 2023 compared to same period in 2022, while the cost to fund interest earning assets with interest bearing liabilities increased 126 basis points, to 1.87%.

Margin compression has been prevalent throughout the banking industry in 2023 due to effects of the increasing rate environment and competitive pricing pressures. Specifically, interest earning assets repriced more quickly than interest bearing liabilities, particularly deposits, as a result of the rapid and substantial increase in market interest rates in recent years. As the “gap” between the repricing of interest bearing assets and interest bearing liabilities closed and an emphasis on liquidity through deposits became prevalent in the banking industry, net interest income and net interest margin were adversely affected.

The net interest margin, on a fully tax equivalent basis, decreased from 2.99% during the three months ended September 30, 2022, to 2.71% during the three months ended September 30, 2023.

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The table below shows the net interest margin on a fully tax-equivalent basis for the three months ended September 30, 2023 and 2022.

Average Balance Sheets and Net Interest Income Analysis

	Three Months Ended						Three Months Ended
(Dollars in thousands)	September 30, 2023						September 30, 2022						Increase (Decrease) Due To (6)
	Average				Yield/		Average				Yield/
	Balance(1)		Interest		Rate		Balance(1)		Interest		Rate		Volume		Rate		Total
ASSETS
Interest earning assets:
Loans:
Taxable loans (5)	$	480,251	$	6,724	5.55	%	$	426,166	$	5,075	4.72	%	$	639	$	1,010	$	1,649
Tax-exempt loans		28,206		216	3.04			28,849		211	2.91			(5)		10		5
Total loans		508,457		6,940	5.42			455,015		5,286	4.61			634		1,020		1,654
Investment securities:
Taxable investment securities		321,601		1,525	1.90			336,705		1,493	1.77			(67)		99		32
Tax-exempt investment securities		6,750		36	2.13			7,092		37	2.09			(2)		1		(1)
Total investment securities		328,351		1,561	1.90			343,797		1,530	1.78			(69)		100		31
Interest bearing deposits		5,084		24	1.89			6,310		55	3.43			(11)		(20)		(31)
Federal funds sold		—		—	0.01			—		—	0.00			—		—		—
Total interest earning assets		841,892		8,525	4.02			805,122		6,871	3.39			554		1,100		1,654
Other assets (7)		2,200						20,531
Total assets	$	844,092					$	825,653
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Interest bearing demand deposits (2)	$	215,856		769	1.41		$	235,203		317	0.53		$	(26)	$	478	$	452
Savings deposits		138,685		18	0.05			153,443		20	0.05			(2)		—		(2)
Time deposits		191,642		1,500	3.11			133,824		343	1.02			147		1,010		1,157
Short-term and long-term borrowings and other interest bearing liabilities		57,064		558	3.88			48,508		192	1.57			34		332		366
Total interest bearing liabilities		603,247		2,845	1.87			570,978		872	0.61			153		1,820		1,973
Non-interest bearing liabilities:
Demand deposits		197,303						201,615
Other		6,123						5,689
Stockholders’ equity		37,419						47,371
Total liabilities and stockholders’ equity	$	844,092					$	825,653
Net interest income and net interest rate spread			$	5,680	2.15	%			$	5,999	2.78	%	$	401	$	(720)	$	(319)
Net interest margin on interest earning assets (3)					2.68	%					2.96	%
Net interest income and net interest margin - Tax equivalent basis (4)			$	5,747	2.71	%			$	6,065	2.99	%

Notes:

1) Average balances were calculated using a daily average.

2) Includes interest-bearing demand and money market accounts.

3) Net margin on interest earning assets is net interest income divided by average interest earning assets.

4) Interest on obligations of states and municipalities is not subject to federal income tax. To make the net yield comparable on a fully taxable basis, a tax equivalent adjustment is applied against the tax-exempt income utilizing a federal tax rate of 21%.

5) Non-accruing loans are included in the above table until they are charged off.

6) The change in interest due to rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

7) Includes gross unrealized gains (losses) on securities available for sale.

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Provision for Credit Losses:

Juniata recorded a credit loss provision of $121,000 for the three months ended September 30, 2023 compared to a loan loss provision of $100,000 for the three months ended September 30, 2022. On January 1, 2023, the Company adopted CECL and transitioned from the incurred loss model based on historical loss experience and economic and market conditions to the expected loss model. The CECL standard reflects expected credit losses over the expected life of the financial assets and commitments, primarily based on the DCF methodology for the majority of the loan segments, which applies the probability of default and loss given default factors to future cash flows and adjusts to the net present value to derive the required reserve. Macroeconomic conditions are incorporated into the model for unemployment and gross domestic product, in addition to model assumptions for discount rate and prepayment and curtailment speeds. While Juniata continued to experience favorable asset quality trends, elevated qualitative risk factors including political uncertainty, national delinquency trends and the effects of the increasing interest rate environment, in addition to loan growth, were considered in evaluating the allowance for credit losses, resulting in a greater credit loss provision for the three months ended September 30, 2023, compared to the loan loss provision for the three months ended September 30, 2022.

Management regularly reviews the adequacy of the allowance for credit losses and makes assessments as to specific loan impairment, charge-off expectations, general economic conditions in the Bank’s market area, specific loan quality and other factors. See the earlier discussion in the Financial Condition section explaining the information used to determine the provision.

Non-interest Income:

Non-interest income was $1.3 million for both of the three month periods ended September 30, 2023 and September 30, 2022. Most significantly impacting non-interest income in the comparative three month periods was a $378,000 decrease in the loss on sales and calls of securities recorded as no securities losses were recorded in the 2023 period. Also impacting the comparative three month periods were decreases of $329,000 in life insurance proceeds and $96,000 in fees derived from loan activity for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

As a percentage of average assets, annualized non-interest income was 0.62% for the three months ended September 30, 2023 compared to 0.63% for the three months ended September 30, 2022.

Non-interest Expense:

Non-interest expense was $4.8 million for the three months ended September 30, 2023, compared to $5.0 million for the three months ended September 30, 2022, a decrease of 4.6%. Most significantly impacting non-interest expense in the comparative three month periods was a $119,000 decline in the amortization of investment in low-income housing partnerships due to the completion of the amortization period for one of Juniata’s low-income housing partnership investments in January 2023. Also adding to the decrease in non-interest expense during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were decreases of $115,000 in employee benefits expense resulting from a decline in medical claims expenses and $113,000 in taxes, other than income, due to a decline in Pennsylvania Shares Tax expense and recording a $62,000 Pennsylvania Shares Tax refund in the 2023 period.

As a percentage of average assets, annualized non-interest expense was 2.26% for the three months ended September 30, 2023 compared to 2.42% for the three months ended September 30, 2022.

Provision for Income Taxes:

An income tax provision of $310,000 was recorded for the three months ended September 30, 2023 compared to an income tax provision of $102,000 recorded for the three months ended September 30, 2022. Juniata qualifies for a federal tax credit for investments in low-income housing partnerships. The tax credit decreased from $225,000 for the three months

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ended September 30, 2022 to $82,000 for the three months ended September 30, 2023 due to the completion of the amortization period for one of Juniata’s low-income housing partnership investments.

For the three months ended September 30, 2023, the tax credit lowered the effective tax rate from 18.7% to 14.8% compared to the same period in 2022, when the tax credit lowered the effective tax rate from 14.7% to 4.6%.

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

Operations Overview:

Net income for the nine months ended September 30, 2023 was $4.9 million, a decrease of $1.3 million, or 20.8%, compared to the nine months ended September 30, 2022, while basic and diluted earnings per share decreased by 21.0%, to $0.98, during the nine months ended September 30, 2023 compared to basic and diluted earnings per share of $1.24 during the comparable 2022 period.

Annualized return on average assets for the nine months ended September 30, 2023 was 0.78%, compared to 1.01% for the same period in 2022. For the nine months ended September 30, annualized return on average equity was 17.63% in 2023, compared to 15.02% in 2022.

Presented below are selected key ratios for the two periods:

	Nine Months Ended
	September 30,
	2023		2022
Return on average assets (annualized)	0.78	%	1.01	%
Return on average equity (annualized)	17.63	%	15.02	%
Average equity to average assets	4.45	%	6.74	%
Non-interest income, as a percentage of average assets (annualized)	0.62	%	0.65	%
Non-interest expense, as a percentage of average assets (annualized)	2.39	%	2.42	%

The discussion that follows further explains changes in the components of net income when comparing the nine months ended September 30, 2023 to the nine months ended September 30, 2022.

Net Interest Income:

Net interest income was $17.1 million during the nine months ended September 30, 2023, a decrease of $846,000, or 4.7%, compared to $18.0 million recorded during the nine months ended September 30, 2022.

Average interest earning assets increased $46.3 million, or 5.9%, to $835.1 million, during the nine months ended September 30, 2023, compared to the same period in 2022, due primarily to an increase of $64.1 million, or 14.8%, in average loans. The increase in average loans was partially offset by a decline of $15.4 million, or 4.4%, in average investment securities as the amortization on the mortgage-backed securities portfolio was used to fund loan growth rather than being reinvested into the securities portfolio. Average interest bearing liabilities increased by $31.4 million, or 5.5%, during the nine months ended September 30, 2023 compared to the comparable 2022 period, due primarily to growth in average short-term borrowings and time deposits, which were also used to fund loan growth. The yields on average loans and investment securities increased by 50 basis points and 16 basis points, respectively, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, while the costs of time deposits and short-term borrowings and other interest bearing liabilities over the same period increased by 179 basis points and 189 basis points, respectively, primarily due to the increase in market interest rates as both the prime rate and federal funds target range increased by 225 basis points between periods. The yield on earning assets increased 50 basis points, to 3.91%, in

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the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, while the cost to fund interest earning assets with interest bearing liabilities increased 112 basis points, to 1.63%.

Margin compression has been prevalent throughout the banking industry in 2023 due to effects of the increasing rate environment and competitive pricing pressures. Specifically, interest earning assets repriced more quickly than interest bearing liabilities, particularly deposits, as a result of the rapid and substantial increase in market interest rates in recent years. As the “gap” between the repricing of interest bearing assets and interest bearing liabilities closed and an emphasis on liquidity through deposits became prevalent in the banking industry, net interest income and net interest margin were adversely affected.

The net interest margin, on a fully tax equivalent basis, decreased from 3.08% during the nine months ended September 30, 2022, to 2.77% during the nine months ended September 30, 2023.

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The table below shows the net interest margin on a fully tax-equivalent basis for the nine months ended September 30, 2023 and 2022.

	Nine Months Ended						Nine Months Ended
(Dollars in thousands)	September 30, 2023						September 30, 2022						Increase (Decrease) Due To (6)
	Average				Yield/		Average				Yield/
	Balance(1)		Interest		Rate		Balance(1)		Interest		Rate		Volume		Rate		Total
ASSETS
Interest earning assets:
Loans:
Taxable loans (5)	$	468,138	$	18,925	5.40	%	$	404,863	$	14,853	4.90	%	$	2,328	$	1,744	$	4,072
Tax-exempt loans		28,508		644	3.02			27,669		593	2.87			18		33		51
Total loans		496,646		19,569	5.27			432,532		15,446	4.77			2,346		1,777		4,123
Investment securities:
Taxable investment securities		326,966		4,684	1.91			341,864		4,479	1.75			(195)		400		205
Tax-exempt investment securities		6,780		109	2.14			7,313		117	2.13			(9)		1		(8)
Total investment securities		333,746		4,793	1.91			349,177		4,596	1.75			(204)		401		197
Interest bearing deposits		4,731		69	1.95			7,122		80	1.50			(27)		16		(11)
Federal funds sold		—		—	—			—		—	0.00			—		—		—
Total interest earning assets		835,123		24,431	3.91			788,831		20,122	3.41			2,115		2,194		4,309
Other assets (7)		1,445						30,702
Total assets	$	836,568					$	819,533
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Interest bearing demand deposits (2)	$	213,549		1,798	1.13		$	239,399		593	0.33		$	(64)	$	1,269	$	1,205
Savings deposits		138,964		52	0.05			150,739		57	0.05			(4)		(1)		(5)
Time deposits		180,059		3,765	2.80			137,341		1,042	1.01			325		2,398		2,723
Short-term and long-term borrowings and other interest bearing liabilities		65,224		1,695	3.48			38,892		463	1.59			315		917		1,232
Total interest bearing liabilities		597,796		7,310	1.63			566,371		2,155	0.51			572		4,583		5,155
Non-interest bearing liabilities:
Demand deposits		195,499						192,661
Other		6,054						5,291
Stockholders’ equity		37,219						55,210
Total liabilities and stockholders’ equity	$	836,568					$	819,533
Net interest income and net interest rate spread			$	17,121	2.28	%			$	17,967	2.90	%	$	1,543	$	(2,389)	$	(846)
Net interest margin on interest earning assets (3)					2.74	%					3.05	%
Net interest income and net interest margin - Tax equivalent basis (4)			$	17,322	2.77	%			$	18,155	3.08	%

Notes:

1) Average balances were calculated using a daily average.

2) Includes interest-bearing demand and money market accounts.

3) Net margin on interest earning assets is net interest income divided by average interest earning assets.

4) Interest on obligations of states and municipalities is not subject to federal income tax. To make the net yield comparable on a fully taxable basis, a tax equivalent adjustment is applied against the tax-exempt income utilizing a federal tax rate of 21%.

5) Non-accruing loans are included in the above table until they are charged off.

6) The change in interest due to rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

7) Includes gross unrealized gains (losses) on securities available for sale.

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Provision for Credit Losses:

A credit loss provision of $411,000 was recorded for the nine months ended September 30, 2023, compared to a loan loss provision of $350,000 for the nine months ended September 30, 2022. On January 1, 2023, the Company adopted CECL and transitioned from the incurred loss model based on historical loss experience and economic and market conditions to the expected loss model. The CECL standard reflects expected credit losses over the expected life of the financial assets and commitments, primarily based on the DCF methodology for the majority of the loan segments, which applies the probability of default and loss given default factors to future cash flows and adjusts to the net present value to derive the required reserve. Macroeconomic conditions are incorporated into the model for unemployment and gross domestic product, in addition to model assumptions for discount rate and prepayment and curtailment speeds. While Juniata continued to experience favorable asset quality trends, elevated qualitative risk factors, including political uncertainty, national delinquency trends and the effects of the increasing interest rate environment, in addition to loan growth, were considered in evaluating the allowance for credit losses, resulting in a greater credit loss provision for the nine months ended September 30, 2023, compared to the loan loss provision for the nine months ended September 30, 2022.

Management regularly reviews the adequacy of the allowance for credit losses and makes assessments as to specific loan impairment, charge-off expectations, general economic conditions in the Bank’s market area, specific loan quality and other factors. See the earlier discussion in the Financial Condition section explaining the information used to determine the provision.

Non-interest Income:

Non-interest income was $3.9 million during the nine months ended September 30, 2023 compared to $4.0 million during the nine months ended September 30, 2022, a decrease of $75,000, or 1.9%.

Most significantly impacting the comparative nine month periods was a $1.5 million decline in the loss on sales and calls of securities primarily due to the execution of a balance sheet and regulatory capital management strategy in 2022. The securities losses were partially offset by $1.2 million in gains from the termination of two derivatives contracts, recorded in other non-interest income in 2022, causing the $1.1 million decline in other non-interest income for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Also impacting the comparative nine month periods were decreases of $219,000 in life insurance proceeds, $157,000 in fees derived from loan activity primarily due to a derivative credit adjustment of $104,000 recorded in the third quarter of 2022 for a participated loan relationship with a back-to-back swap arrangement, and $95,000 in customer service fees due to a decline in overdraft fees during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

As a percentage of average assets, annualized non-interest income was 0.62% in the first nine months of 2023 compared to 0.65% in the comparable 2022 period. Excluding the gain/loss on sales and calls of securities, change in fair value of equity securities and life insurance proceeds, annualized non-interest income as a percentage of average assets was 0.61% for the nine months ended September 30, 2023 compared to 0.84% for the nine months ended September 30, 2022.

Non-interest Expense:

Non-interest expense was $15.0 million during the nine months ended September 30, 2023 compared to $14.9 million during the nine months ended September 30, 2022, an increase of $94,000, or 0.6%.

Most significantly impacting non-interest expense in the comparative nine month periods was a $332,000 increase in data processing expense primarily due to a $238,000 breakage fee paid to Juniata’s current core service provider as Juniata plans to convert to a new core service provider in the first quarter of 2024, as well as a $227,000 increase in merger and acquisition expense as a result of the Path Valley branch acquisition in the second quarter of 2023. These increases were partially offset by a decline of $327,000 in low-income housing partnership amortization expense during the nine months ended September 30, 2023 versus the comparable 2022 period due to the completion of the 10-year amortization period in

55

January 2023 for one of Juniata’s low-income housing partnership investments, as well as a $212,000 decrease in taxes, other than income, between the comparative nine month periods due to a decline in Pennsylvania Shares Tax expense and recording a $62,000 Pennsylvania Shares Tax refund in the 2023 period.  

As a percentage of average assets, annualized non-interest expense was 2.39% during the nine months ended September 30, 2023 compared to 2.42% during the nine months ended September 30, 2022. Excluding merger and acquisition expense, as well as the $238,000 breakage fee, annualized non-interest expense as a percentage of average assets was 2.31% for the nine months ended September 30, 2023.

Provision for Income Taxes:

An income tax provision of $708,000 was recorded during the nine months ended September 30, 2023 compared to an income tax expense of $488,000 recorded during the nine months ended September 30, 2022.

The Company qualifies for a federal tax credit for a low-income housing project investment, and the tax provisions for each period reflected the application of the tax credit. The tax credit decreased from $676,000 for the nine months ended September 30, 2022 to $284,000 for the nine months ended September 30, 2023 due to the completion of the amortization period for one of Juniata’s low-income housing partnership investments. The tax credit lowered the effective tax rate from 17.6% to 12.6% during the nine months ended September 30, 2023 compared to the same period in 2022, when the tax credit lowered the effective tax rate from 17.4% to 7.3%.

Liquidity:

The objective of liquidity management is to ensure that sufficient funding is available, at a reasonable cost, to meet the ongoing operational cash needs of the Company and to take advantage of income producing opportunities as they arise. While the desired level of liquidity will vary depending upon a variety of factors, it is a primary goal of the Company to maintain an adequate level of liquidity in all economic environments. Principal sources of asset liquidity are provided by loans and securities maturing in one year or less, and other short-term investments, such as federal funds sold and cash and due from banks. Liability liquidity, which is more difficult to measure, can be met by attracting deposits and maintaining the core deposit base.

The Company is a member of the Federal Home Loan Bank of Pittsburgh for the purpose of providing short-term liquidity to supplement other sources of liability liquidity. During the nine months ended September 30, 2023, overnight borrowings from the FHLB averaged $18.7 million. As of September 30, 2023, the Company had $12.0 million in short-term borrowings and $20.0 million in long-term debt with the Federal Home Loan Bank, with a remaining unused borrowing capacity of $193.4 million with the FHLB. These credit facilities are secured by qualifying loans and investment securities held in safekeeping at the FHLB.

As of September 30, 2023, the Company had $16.0 million in short-term borrowings with the Federal Reserve’s Bank Term Funding Program (“BTFP”) with a remaining unused borrowing capacity at the Federal Reserve of $62.0 million. The Company opted to utilize this additional contingent liquidity source in order to take advantage of the program’s advantageous borrowing rate.

The Company also has two unsecured lines of credit with correspondent banks totaling $16.0 million, of which no funds were drawn at September 30, 2023. These lines of credit are tested periodically to ensure the availability of funds.

Funding derived from securities sold under agreements to repurchase (accounted for as collateralized financing transactions) is available through corporate cash management accounts for business customers. This product provides the Company with the ability to pay interest on corporate checking accounts.

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During the first quarter of 2023, the Company increased its internal policy limit for brokered deposits to $175.0 million from $100.0 million. As of September 30, 2023, the Company had no brokered deposits.

At September 30, 2023, uninsured deposits represented 20.7% of the Company’s total deposits. This amount excludes deposits of state and political subdivisions because the Company pledges debt securities for deposits in excess of the $250,000 FDIC insurance limit in the case of those deposits.

In view of the sources previously mentioned and the steps taken by the Company through the nine months ended September 30, 2023, management believes the Company’s liquidity can provide the funds needed to meet operational cash needs.

Off-Balance Sheet Arrangements:

The Company’s consolidated financial statements do not reflect various off-balance sheet arrangements that are made in the normal course of business, which may involve some liquidity risk, credit risk and interest rate risk. These commitments consist mainly of loans approved but not yet funded, unused lines of credit and outstanding letters of credit. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. Generally, financial and performance letters of credit have expiration dates within one year of issuance, while commercial letters of credit have longer term commitments. The credit risk involved in issuing letters of credit is essentially the same as the risks that are involved in extending loan facilities to customers. The Company generally holds collateral and/or personal guarantees supporting these commitments. As of September 30, 2023 and December 31, 2022, the Company had $2.5 million and $2.6 million, respectively, of financial and performance letters of credit commitments outstanding. Commercial letters of credit as of September 30, 2023 and December 31, 2022 totaled $9.3 million and $9.8 million, respectively.

Management believes the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding letters of credit. The current amount of the liability as of September 30, 2023 for payments under letters of credit issued was not material. Because these instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk.

Additionally, the Company has sold qualifying residential mortgage loans to the FHLB as part of its Mortgage Partnership Finance Program (“Program”). Under the terms of the Program, there is limited recourse back to the Company for loans that do not perform in accordance with the terms of the loan agreement. Each loan sold under the Program is “credit enhanced” such that the individual loan’s rating is raised to “BBB”, as determined by the FHLB. The Program can be terminated by either the FHLB or the Company, without cause. The FHLB has no obligation to commit to purchase any mortgage through, or from, the Company.

Interest Rate Sensitivity:

Interest rate sensitivity management is overseen by the Asset/Liability Management Committee. This process involves the development and implementation of strategies to maximize net interest margin, while minimizing the earnings risk associated with changing interest rates. Traditional gap analysis identifies the maturity and re-pricing terms of all assets and liabilities. A simulation analysis is used to assess earnings and capital at risk from movements in interest rates.

Capital Adequacy:

Bank regulatory authorities in the United States issue risk-based capital standards. These capital standards relate a banking company’s capital to the risk profile of its assets and provide the basis by which all banking companies and banks are evaluated in terms of capital adequacy.

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The Basel III risk-based capital standards require financial institutions to maintain: (a) a minimum ratio of common equity tier 1 (“CET1”) to risk-weighted assets of at least 4.5%, (b) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%; (c) a minimum ratio of total (that is, tier 1 plus tier 2) capital to risk-weighted assets of at least 8.0%; and (d) a minimum leverage ratio of 3.0%, calculated as the ratio of tier 1 capital balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter). In addition, the rules also limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5% above the minimum risk-based standards stated in (a) – (c).

At September 30, 2023, the Bank exceeded the regulatory requirements to be considered a "well capitalized" financial institution under Basel III, as well as exceeded the capital conservation buffer of 2.5% for the risk-based capital standards stated in (a) – (c) in the paragraph above.

The Company’s principal source of funds for dividend payments is dividends received from the Bank. Certain regulatory restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends, loans or advances. At September 30, 2023, $37.1 million in undistributed earnings of the Bank, included in the consolidated stockholders’ equity, was available for distribution to the Company as dividends without prior regulatory approval, subject to regulatory capital requirements.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of September 30, 2023, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined by the Securities Exchange Act of 1934 (“Exchange Act”), Rule 13a-15(e). Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. These controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential conditions, regardless of how remote.

Attached as Exhibits 31 and 32 to this quarterly report are certifications of the Chief Executive Officer and the Chief Financial Officer required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act. This portion of the Company’s quarterly report includes the information concerning the controls evaluation referred to in the certifications and should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Changes in Internal Control Over Financial Reporting

There were no significant changes in the Company’s internal control over financial reporting during the fiscal quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, the internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1.         LEGAL PROCEEDINGS

In the opinion of management of the Company, there are no legal or governmental proceedings pending to which the Company or its subsidiary is a party or to which its property is subject, which, if determined adversely to the Company or its subsidiary, would be material in relation to the Company’s or its subsidiary’s financial condition. There are no proceedings pending other than ordinary routine litigation incident to the business of the Company or its subsidiary. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Company or its subsidiary by government authorities.

Item 1A.      RISK FACTORS

Management has reviewed the risk factors that were previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There are no material changes in risk factors as previously disclosed in the Form 10-K except as described below.

Resent adverse developments affecting the financial services industry, such as bank failures or concerns involving liquidity of banks, may have a material adverse effect on the Company’s operations.

Recent events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, March 12, 2023 and May 1, 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of Silicon Valley Bank (“SVB”), Signature Bank and First Republic Bank (“First Republic”), respectively, after each bank was unable to continue its operations largely due to concerns about each bank’s liquidity position. These events exposed potential vulnerabilities in the banking sector, including liquidity concerns, debt securities in bank investment portfolios yielding lower interest rates  than current market rates (when the carrying value of these securities are “marked to market”, a corresponding decrease in the bank’s capital is recorded), deposit concentrations,  a decline in customer confidence in individual banks and in the banking industry in general, significant deposit outflows, difficulty in raising additional capital, market volatility and contagion risk. These factors have also caused market prices of regional bank stocks to decline.

To date, the Company has not experienced any adverse impact to current and projected business operations, financial condition and results of operations as a result of the SVB, Signature Bank, First Republic or other recent bank failures. However, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. If, for example, other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, the Company’s ability to access existing cash, cash equivalents and investments may be threatened. Therefore, while it is not currently possible to predict the potential impact that the failure of SVB, Signature Bank, First Republic or other bank failures could have on economic activity or the Company’s business in particular, the failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in response to these events could adversely impact the Company’s business, financial condition and results of operations.

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Item 2.         UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company periodically repurchases shares of its common stock under a share repurchase program approved by the Board of Directors. The program will remain authorized until all approved shares are repurchased, unless terminated by the Board of Directors. As of September 30, 2023, 207,743 shares remained available to purchase under that program. There were no transactions pursuant to the repurchase program in the three month period ended September 30, 2023. On October 24, 2023, the Company repurchased 27,000 shares leaving 180,743 shares available to purchase under that program.

No repurchase plan or program expired during the quarter. The Company has no stock repurchase plan or program that it has determined to terminate prior to expiration or under which it does not intend to make further purchases.

Item 3.        DEFAULTS UPON SENIOR SECURITIES

Not applicable

Item 4.        MINE SAFETY DISCLOSURES

Not applicable

Item 5.        OTHER INFORMATION

None

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Item 6.       EXHIBITS

3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3(i) to the Company’s Current Report on Form 8-K filed with the SEC on November 12, 2015)
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3(ii) to the Company’s Current Report on Form 8-K filed with the SEC on February 17, 2022)
31.1	Rule 13a – 14(a)/15d – 14(a) Certification of President and Chief Executive Officer
31.2	Rule 13a – 14(a)/15d – 14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of President and Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer
101.INS	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

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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.

		Juniata Valley Financial Corp.
		(Registrant)
Date:	NOVEMBER 13, 2023	By:	/s/ Marcie A. Barber
			Marcie A. Barber, President
			Chief Executive Officer
			(Principal Executive Officer)
Date:	November 13, 2023	By:	/s/ Michael W. Wolf
			Michael W. Wolf
			Chief Financial Officer
			(Principal Accounting Officer and
			Principal Financial Officer)

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EX-31.1

Exhibit 31.1

Rule 13a – 14(a)/15d – 14(a) Certification of President and Chief Executive Officer

I, Marcie A. Barber, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	November 13, 2023	By:	/s/ Marcie A. Barber
			Marcie A. Barber, President
			Chief Executive Officer

EX-31.2

Exhibit 31.2

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

I, Michael W. Wolf, certify that:

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

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

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

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

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

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

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

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

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

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

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

Ay
Date:	November 13, 2023	By:	/s/ Michael W. Wolf
			Michael W. Wolf
			Chief Financial Officer

EX-32.1

EXHIBIT 32.1

SECTION 1350 CERTIFICATION of PRESIDENT AND CHIEF EXECUTIVE OFFICER

The undersigned herby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on Form 10-Q, that:

·           the report fully complies with the requirements of Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

·           the information contained in the report fairly presents, in all material respects, the Company’s consolidated financial condition and results of operations.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the report or as a separate disclosure document.

/s/ Marcie A. Barber
Marcie A. Barber
President and Chief Executive Officer
Dated:	November 13, 2023

EX-32.2

EXHIBIT 32.2

SECTION 1350 CERTIFICATION of CHIEF FINANCIAL OFFICER

The undersigned herby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on Form 10-Q, that:

·           the report fully complies with the requirements of Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

·           the information contained in the report fairly presents, in all material respects, the Company’s consolidated financial condition and results of operations.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the report or as a separate disclosure document.

/s/ Michael W. Wolf
Michael W. Wolf
Chief Financial Officer
Dated:	November 13, 2023

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2023	Oct. 31, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	000-13232
Entity Registrant Name	JUNIATA VALLEY FINANCIAL CORP
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	23-2235254
Entity Address, Address Line One	Bridge and Main Streets
Entity Address, City or Town	Mifflintown
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	17059
City Area Code	855
Local Phone Number	582-5101
Title of 12(b) Security	NONE
No Trading Symbol Flag	true
Security Exchange Name	NONE
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		4,991,129
Entity Central Index Key	0000714712
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Consolidated Statements of Financial Condition - USD ($)	Sep. 30, 2023	Dec. 31, 2022
ASSETS
Cash and due from banks	$ 27,377,000	$ 10,856,000
Interest bearing deposits with banks	390,000	143,000
Cash and cash equivalents	27,767,000	10,999,000
Equity securities	978,000	1,056,000
Debt securities available for sale	66,527,000	73,536,000
Debt securities held to maturity (fair value $189,221 and $209,887, respectively)	202,646,000	209,565,000
Restricted investment in bank stock	2,476,000	3,666,000
Total loans	514,132,000	484,512,000
Less: Allowance for credit losses	(5,586,000)	(4,027,000)
Total loans, net of allowance for credit losses	508,546,000	480,485,000
Premises and equipment, net	8,131,000	8,190,000
Other real estate owned	39,000	0
Bank owned life insurance and annuities	14,783,000	15,197,000
Investment in low income housing partnerships	1,234,000	1,507,000
Core deposit and other intangible assets	368,000	121,000
Goodwill	9,812,000	9,047,000
Mortgage servicing rights	84,000	92,000
Deferred tax asset	12,099,000	11,838,000
Accrued interest receivable and other assets	7,178,000	5,576,000
Total assets	862,668,000	830,875,000
Liabilities:
Non-interest bearing	200,619,000	199,131,000
Interest bearing	556,823,000	512,381,000
Total deposits	757,442,000	711,512,000
Short-term borrowings and repurchase agreements	39,638,000	55,710,000
Long-term debt	20,000,000	20,000,000
Other interest bearing liabilities	941,000	1,011,000
Accrued interest payable and other liabilities	6,512,000	5,693,000
Total liabilities	824,533,000	793,926,000
Commitments and contingent liabilities
Stockholders' Equity:
Preferred stock, no par value: Authorized - 500,000 shares, none issued	0	0
Common stock, par value $1.00 per share: Authorized 20,000,000 shares; Issued - 5,151,279 shares at September 30, 2023 and December 31, 2022; Outstanding - 5,018,129 shares at September 30, 2023 and 5,003,059 shares at December 31, 2022	5,151,000	5,151,000
Surplus	24,887,000	24,986,000
Retained earnings	51,978,000	51,217,000
Accumulated other comprehensive loss	(41,601,000)	(41,867,000)
Cost of common stock in Treasury: 133,150 shares at September 30, 2023; 148,220 shares at December 31, 2022	(2,280,000)	(2,538,000)
Total stockholders' equity	38,135,000	36,949,000
Total liabilities and stockholders' equity	$ 862,668,000	$ 830,875,000

XML

Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Consolidated Statements of Financial Condition
Securities held-to-maturity, fair value	$ 189,221	$ 209,887
Preferred stock, no par value	$ 0	$ 0
Preferred stock, authorized	500,000	500,000
Preferred Stock, Shares Issued	0	0
Common Stock, Par or Stated Value Per Share	$ 1.00	$ 1.00
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Shares Issued	5,151,279	5,151,279
Common Stock, Shares, Outstanding	5,018,129	5,003,059
Treasury Stock, Shares	133,150	148,220

XML

Consolidated Statements of Income - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Interest and dividend income:
Loans, including fees	$ 6,940,000	$ 5,286,000	$ 19,569,000	$ 15,446,000
Taxable securities	1,525,000	1,493,000	4,684,000	4,479,000
Tax-exempt securities	36,000	37,000	109,000	117,000
Other interest income	24,000	55,000	69,000	80,000
Total interest income	8,525,000	6,871,000	24,431,000	20,122,000
Interest expense:
Deposits	2,286,000	680,000	5,614,000	1,692,000
Short-term borrowings and repurchase agreements	431,000	70,000	1,314,000	105,000
Long-term debt	119,000	118,000	353,000	352,000
Other interest bearing liabilities	9,000	4,000	29,000	6,000
Total interest expense	2,845,000	872,000	7,310,000	2,155,000
Net interest income	5,680,000	5,999,000	17,121,000	17,967,000
Provision for credit losses	121,000	100,000	411,000	350,000
Net interest income after provision for credit losses	5,559,000	5,899,000	16,710,000	17,617,000
Non-interest income:
Earnings on bank-owned life insurance and annuities	57,000	53,000	167,000	164,000
Gain (loss) on sales and calls of securities		(378,000)	0	(1,452,000)
Change in value of equity securities	(14,000)	(30,000)	(78,000)	(110,000)
Gain from life insurance proceeds		329,000	161,000	380,000
Other non-interest income	120,000	75,000	366,000	1,450,000
Total non-interest income	1,301,000	1,310,000	3,893,000	3,968,000
Non-interest expense:
Employee compensation expense	2,167,000	2,112,000	6,333,000	6,347,000
Employee benefits	429,000	544,000	1,913,000	1,858,000
Occupancy	312,000	298,000	964,000	948,000
Equipment	162,000	187,000	493,000	546,000
Data processing expense	699,000	665,000	2,226,000	1,894,000
Professional fees	211,000	223,000	634,000	587,000
Taxes, other than income	(7,000)	106,000	158,000	370,000
FDIC Insurance premiums	157,000	143,000	352,000	307,000
Gain on other real estate owned			0	(7,000)
Amortization of intangible assets	25,000	14,000	56,000	41,000
Amortization of investment in low-income housing partnerships	81,000	200,000	273,000	600,000
Merger and acquisition expense	18,000		227,000	0
Other non-interest expense	505,000	495,000	1,344,000	1,388,000
Total non-interest expense	4,759,000	4,987,000	14,973,000	14,879,000
Income before income taxes	2,101,000	2,222,000	5,630,000	6,706,000
Income tax provision	310,000	102,000	708,000	488,000
Net income	$ 1,791,000	$ 2,120,000	$ 4,922,000	$ 6,218,000
Earnings per share
Basic	$ 0.36	$ 0.42	$ 0.98	$ 1.24
Diluted	$ 0.36	$ 0.42	$ 0.98	$ 1.24
Customer Service Fees
Non-interest income:
Non-interest income	$ 356,000	$ 394,000	$ 1,018,000	$ 1,113,000
Debit Card fee Income
Non-interest income:
Non-interest income	436,000	422,000	1,293,000	1,267,000
Trust Fees
Non-interest income:
Non-interest income	123,000	128,000	381,000	378,000
Commissions from Sales of Non-Deposit Products
Non-interest income:
Non-interest income	87,000	86,000	255,000	302,000
Fees Derived From Loan Activity
Non-interest income:
Non-interest income	124,000	220,000	295,000	452,000
Mortgage Banking Income
Non-interest income:
Non-interest income	$ 12,000	$ 11,000	$ 35,000	$ 24,000

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Consolidated Statements of Comprehensive Income (Loss) [Abstract]
Net income: Pre-Tax Amount	$ 2,101	$ 2,222	$ 5,630	$ 6,706
Tax effect	(310)	(102)	(708)	(488)
Net income	1,791	2,120	4,922	6,218
Other comprehensive income (loss):
Unrealized holding loss arising during the period, Pre-Tax Amount	(684)	(16,284)	(2,925)	(51,349)
Unrealized holding loss arising during the period, Tax Effect	144	3,419	614	10,783
Unrealized holding loss arising during the period, Net-of-Tax Amount	(540)	(12,865)	(2,311)	(40,566)
Reclassification adjustment for losses included in net income, Pre-Tax Amount		378		1,452
Reclassification adjustment for losses included in net income, Tax Effect		(79)		(305)
Reclassification adjustment for loss included in net income, Net-of-Tax Amount		299		1,147
Amortization of unrealized holding losses on held to maturity securities, Pre-Tax Amount	1,217		3,563
Amortization of unrealized holding losses on held to maturity securities, Tax Effect	(265)		(775)
Amortization of unrealized holding losses on held to maturity securities, Net-of-Tax Amount	952		2,788
Unrealized gain on cash flow hedge, Pre-Tax Amount		81	2	1,195
Unrealized gain on cash flow hedge, Tax Effect		(17)	(1)	(251)
Unrealized gain on cash flow hedge, Net-of-Tax Amount		64	1	944
Reclassification adjustment for gain included in net income, Pre-Tax Amount		(86)	(269)	(1,317)
Reclassification adjustment for gain included in net income, Tax Effect		18	57	277
Reclassification adjustment for gain included in net income, Net-of-Tax		(68)	(212)	(1,040)
Other comprehensive income (loss), Pre-Tax Amount	533	(15,911)	371	(50,019)
Other comprehensive income (loss), Tax Effect	(121)	3,341	(105)	10,504
Net current period other comprehensive income (loss)	412	(12,570)	266	(39,515)
Total comprehensive income (loss), Pre-Tax Amount	2,634	(13,689)	6,001	(43,313)
Total comprehensive income (loss), Tax Effect	(431)	3,239	(813)	10,016
Total comprehensive income (loss), Net-of-Tax Amount	$ 2,203	$ (10,450)	$ 5,188	$ (33,297)

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Surplus	Retained Earnings Impact of adopting ASC 326	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Impact of adopting ASC 326	Total
Beginning balance at Dec. 31, 2021	$ 5,151	$ 25,008		$ 47,298	$ (3,365)	$ (2,802)		$ 71,290
Beginning balance, shares at Dec. 31, 2021	4,988,542
Net income				6,218				6,218
Other comprehensive income (loss)					(39,515)			(39,515)
Cash dividends				(3,300)				(3,300)
Stock-based compensation		146						146
Purchase of treasury stock						(3)		(3)
Purchase of treasury stock, shares	(995)
Treasury stock issued for stock plans		(198)				267		69
Treasury stock issued for stock plans, shares	15,512
Ending balance at Sep. 30, 2022	$ 5,151	24,956		50,216	(42,880)	(2,538)		34,905
Ending balance, shares at Sep. 30, 2022	5,003,059
Beginning balance at Jun. 30, 2022	$ 5,151	24,926		49,196	(30,310)	(2,538)		46,425
Beginning balance, shares at Jun. 30, 2022	5,003,059
Net income				2,120				2,120
Other comprehensive income (loss)					(12,570)			(12,570)
Cash dividends				(1,100)				(1,100)
Stock-based compensation		30						30
Ending balance at Sep. 30, 2022	$ 5,151	24,956		50,216	(42,880)	(2,538)		34,905
Ending balance, shares at Sep. 30, 2022	5,003,059
Beginning balance at Dec. 31, 2022	$ 5,151	24,986	$ (854)	51,217	(41,867)	(2,538)	$ (854)	$ 36,949
Beginning balance, shares at Dec. 31, 2022	5,003,059							5,003,059
Net income				4,922				$ 4,922
Other comprehensive income (loss)					266			266
Cash dividends				(3,307)				(3,307)
Stock-based compensation		106						106
Purchase of treasury stock						(9)		(9)
Purchase of treasury stock, shares	(569)
Treasury stock issued for stock plans		(205)				267		62
Treasury stock issued for stock plans, shares	15,639
Ending balance at Sep. 30, 2023	$ 5,151	24,887		51,978	(41,601)	(2,280)		$ 38,135
Ending balance, shares at Sep. 30, 2023	5,018,129							5,018,129
Beginning balance at Jun. 30, 2023	$ 5,151	24,852		51,291	(42,013)	(2,280)		$ 37,001
Beginning balance, shares at Jun. 30, 2023	5,018,129
Net income				1,791				1,791
Other comprehensive income (loss)					412			412
Cash dividends				(1,104)				(1,104)
Stock-based compensation		35						35
Ending balance at Sep. 30, 2023	$ 5,151	$ 24,887		$ 51,978	$ (41,601)	$ (2,280)		$ 38,135
Ending balance, shares at Sep. 30, 2023	5,018,129							5,018,129

XML

Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Consolidated Statements of in Stockholders' Equity [Abstract]
Cash Dividends per share	$ 0.22	$ 0.22	$ 0.66	$ 0.66

XML

Consolidated Statements of Cash Flows - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Operating activities:
Net income			$ 4,922,000	$ 6,218,000
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	$ 121,000	$ 100,000	411,000	350,000
Depreciation			429,000	480,000
Net amortization of securities premiums			101,000	370,000
Net amortization of loan origination (costs) fees			(85,000)	405,000
Deferred net loan origination costs			(402,000)	(468,000)
Amortization of intangibles	25,000	14,000	56,000	41,000
Amortization of investment in low-income housing partnerships	81,000	200,000	273,000	600,000
Net amortization of purchase fair value adjustments			(5,000)	(84,000)
Net realized (gain) loss on sales and calls of available for sale securities			0	1,452,000
Change in value of equity securities	14,000	30,000	78,000	110,000
Net gain on other real estate owned			0	(7,000)
Earnings on bank owned life insurance and annuities	(57,000)	(53,000)	(167,000)	(164,000)
Deferred income tax expense (benefit)			25,000	(49,000)
Stock-based compensation expense	35,000	30,000	106,000	146,000
Proceeds from mortgage loans sold to others			42,000	48,000
Mortgage banking income			(35,000)	(24,000)
Gain from life insurance proceeds			(161,000)	(380,000)
Increase in accrued interest receivable and other assets			(2,001,000)	(1,251,000)
Decrease in accrued interest payable and other liabilities			743,000	87,000
Net cash provided by operating activities			4,330,000	7,880,000
Investing activities:
Securities available for sale			0	(53,295,000)
FHLB stock			0	(988,000)
Premises and equipment			(140,000)	(362,000)
Bank owned life insurance and annuities			(28,000)	(28,000)
Sales of debt securities available for sale			0	23,271,000
Maturities of and principal repayments on securities available for sale			3,984,000	26,478,000
Maturities of and principal repayments on securities held to maturity			10,481,000	0
Redemption of FHLB stock			1,190,000	0
Life insurance claims			770,000	2,285,000
Sale of other real estate owned			0	94,000
Sale of fixed assets			21,000	0
Net decrease in interest bearing time deposits with banks			0	735,000
Net increase in loans			(29,121,000)	(43,964,000)
Net cash received in acquisition			17,384,000	0
Net cash provided by (used in) investing activities			4,541,000	(45,774,000)
Financing activities:
Net increase in deposits			27,223,000	9,387,000
Net (decrease) increase in short-term borrowings and securities sold under agreements to repurchase			(16,072,000)	31,642,000
Cash dividends			(3,307,000)	(3,300,000)
Purchase of treasury stock			(9,000)	(3,000)
Treasury stock issued for employee stock plans			62,000	69,000
Net cash provided by financing activities			7,897,000	37,795,000
Net increase (decrease) in cash and cash equivalents			16,768,000	(99,000)
Cash and cash equivalents at beginning of year			10,999,000	13,526,000	$ 13,526,000
Cash and cash equivalents at end of period	$ 27,767,000	$ 13,427,000	27,767,000	13,427,000	$ 10,999,000
Supplemental information:
Interest paid			6,552,000	2,169,000
Income tax paid			710,000	400,000
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to other real estate owned			$ 39,000	$ 30,000

XML

BASIS OF PRESENTATION AND ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2023

BASIS OF PRESENTATION AND ACCOUNTING POLICIES

BASIS OF PRESENTATION AND ACCOUNTING POLICIES

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The consolidated financial statements include the accounts of Juniata Valley Financial Corp. (the “Company” or “Juniata”) and its wholly owned subsidiary, The Juniata Valley Bank (the “Bank” or “JVB”). All significant intercompany accounts and transactions have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences could be material to the financial statements. Estimates that are particularly susceptible to material change include the determination of the allowance for credit losses, and possible impairment of goodwill and other intangible assets. 

In the opinion of management, all adjustments considered necessary for fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2023 are not necessarily indicative of the results that can be expected for the year ending December 31, 2023. For further information, refer to the consolidated financial statements and notes thereto included in Juniata Valley Financial Corp.’s Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2022.

The Company has evaluated events and transactions occurring subsequent to the consolidated statement of financial condition date of September 30, 2023 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

XML

RECENT ACCOUNTING STANDARDS UPDATES

9 Months Ended

Sep. 30, 2023

RECENT ACCOUNTING STANDARDS UPDATES

RECENT ACCOUNTING STANDARDS UPDATES

2. RECENT ACCOUNTING STANDARDS UPDATES

Adoption of New Accounting Standards:

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

On, January 1, 2023, the Company adopted ASC 326, as amended, which replaces the incurred loss methodology with an expected loss methodology referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including  held to maturity debt securities and loan receivables (see Notes 5 and 6, respectively). It also applies to certain off-balance sheet (“OBS”) credit exposures such as unfunded commitments. In addition, ASC 326 made changes to the accounting for available for sale debt securities. One such change is to require credit losses on such securities to be presented as an allowance rather than as a write-down on available for sale debt securities that management does not intend to sell or does not believe will be required to be sold.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and OBS credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP standards. The Company recorded a net decrease to retained earnings of $854,000 as of January 1, 2023 for the cumulative effect of adopting ASC 326. At adoption of ASC 326, management did not record an allowance for credit losses for the held to maturity or the available for sale debt securities portfolio.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $354,000 to the allowance for credit losses.

The following table illustrates the impact of ASC 326.

	January 1, 2023
	As Reported				Impact of
(Dollars in thousands)	Under		Pre-ASC 326		ASC 326
	ASC 326		Adoption		Adoption
Assets:
Loans
Commercial, financial and agricultural	$	634	$	297	$	337
Real estate - commercial		2,421		1,110		1,311
Real estate - construction:
1-4 family residential construction		183		69		114
Other construction loans		670		1,077		(407)
Real estate - mortgage		1,136		1,385		(249)
Obligations of states and political subdivisions		45		54		(9)
Personal		49		35		14
Allowance for credit losses on loans	$	5,138	$	4,027	$	1,111
Liabilities:
Allowance for credit losses on OBS credit exposures	$	448	$	8	$	440

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326); Troubled Debt Restructurings and Vintage Disclosures

On, January 1, 2023, the Company also adopted ASU 2022-02, which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted ASC 326. Due to the removal of the TDR accounting model, all loan modifications will now be accounted for under the general loan modification guidance in Subtopic 310-20. In addition, on a prospective basis, the Company is subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. Vintage disclosure requirements are also required to prospectively disclose current period gross write-off information by vintage (see Note 6).

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

9 Months Ended

Sep. 30, 2023

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of accumulated other comprehensive income (loss), net of tax, consisted of the following:

			Unrealized		Unrealized
	Gains		Gains		Gains
(Dollars in thousands)	(Losses) on		(Losses) on		(Losses) on
	Cash Flow		AFS		HTM
September 30, 2023	Hedges		Securities		Securities		Total
Beginning balance, December 31, 2022	$	211	$	(6,161)	$	(35,917)	$	(41,867)
Current period other comprehensive income (loss):
Other comprehensive income before reclassification		1		(2,311)		—		(2,310)
Amounts reclassified from accumulated other comprehensive income (loss)		(212)		—		2,788		2,576
Net current period other comprehensive income (loss)		(211)		(2,311)		2,788		266
Ending balance, September 30, 2023	$	—	$	(8,472)	$	(33,129)	$	(41,601)

			Unrealized
	Gains		Gains
(Dollars in thousands)	(Losses) on		(Losses) on
	Cash Flow		AFS
September 30, 2022	Hedges		Securities		Total
Beginning balance, December 31, 2021	$	427	$	(3,792)	$	(3,365)
Current period other comprehensive income (loss):
Other comprehensive income (loss) before reclassification		944		(40,566)		(39,622)
Amounts reclassified from accumulated other comprehensive income (loss)		(1,040)		1,147		107
Net current period other comprehensive loss		(96)		(39,419)		(39,515)
Ending balance, September 30, 2022	$	331	$	(43,211)	$	(42,880)

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2023

EARNINGS PER SHARE

EARNINGS PER SHARE

4. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilutive effect on EPS that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, increasing the total number of shares outstanding. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

The following tables set forth the computation of basic and diluted earnings per share:

(Amounts in thousands, except earnings per share data)	Three Months Ended September 30,
	2023		2022
Net income	$	1,791	$	2,120
Weighted-average common shares outstanding		5,018		5,003
Basic earnings per share		0.36		0.42
Weighted-average common shares outstanding	$	5,018	$	5,003
Common stock equivalents due to effect of stock options		9		9
Total weighted-average common shares and equivalents	$	5,027	$	5,012
Diluted earnings per share	$	0.36	$	0.42
Anti-dilutive stock options outstanding		—		—

(Amounts in thousands, except earnings per share data)	Nine months ended September 30,
	2023		2022
Net income	$	4,922	$	6,218
Weighted-average common shares outstanding		5,014		4,999
Basic earnings per share		0.98		1.24
Weighted-average common shares outstanding	$	5,014	$	4,999
Common stock equivalents due to effect of stock options		8		9
Total weighted-average common shares and equivalents	$	5,022	$	5,008
Diluted earnings per share	$	0.98	$	1.24
Anti-dilutive stock options outstanding		2		1

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SECURITIES

9 Months Ended

Sep. 30, 2023

SECURITIES

SECURITIES

5. SECURITIES

Equity Securities

Equity securities owned by the Company consist of common stock of various financial services providers. ASC Topic 321, Investments – Equity Securities requires all equity securities within its scope to be measured at fair value with changes in fair value recognized in net income. As of September 30, 2023, the Company had $978,000 in equity securities recorded at fair value and $1.1 million in equity securities were recorded at fair value at December 31, 2022. The Company recorded net losses of $14,000 and $78,000 during the three and nine months ended September 30, 2023 and net losses of $30,000 and $110,000 during the three and nine months ended September 30 2022, due to changes in the fair value of the Company’s portfolio of equity securities during the applicable periods.

Debt Securities

Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities that are not classified as held to maturity or trading are classified as available for sale. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

The Company reassessed classification of certain investments and, effective October 1, 2022, transferred $28.4 million of obligations of U.S. Government sponsored enterprises and $183.9 million in mortgage-backed securities from the available for sale to the held to maturity security classification. The transfer occurred at fair value. The combined related unrealized loss of $46.8 million, included in other comprehensive income, remained in other comprehensive income following the transfer and is being amortized out of other comprehensive income with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities. No gain or loss was recorded at the time of transfer.

The Company’s debt securities portfolio includes primarily bonds issued by U.S. Government sponsored enterprises (approximately 16% of the investment portfolio), mortgage-backed securities issued by Government-sponsored entities and backed by residential mortgages (approximately 76%), corporate debt securities (approximately 5%) and municipal bonds (approximately 3%) as of September 30, 2023. Most of the municipal bonds are general obligation bonds with maturities or pre-refunding dates within 5 years.

At each of September 30, 2023 and December 31, 2022, excluding securities of the U.S. Government and its agencies, the Company had holdings of securities from two issuers in excess of 10% of stockholders’ equity; holdings in Federal Farm Credit Bank and Pennsylvania Housing Finance securities had fair values of $10.8 million and $5.1 million, respectively, as of September 30, 2023, and $10.9 million and $6.1 million, respectively, as of December 31, 2022.

The amortized cost and fair value of debt securities as of September 30, 2023 and December 31, 2022, by contractual maturity, are shown in the tables below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid, with or without prepayment penalties. Securities not due at a single maturity date are shown separately.

(Dollars in thousands)	September 30, 2023
					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Debt Securities Available for Sale	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,500	$	13,727	$	—	$	(1,773)
		15,500		13,727		—		(1,773)
Obligations of state and political subdivisions
Within one year		490		490		—		—
After one year but within five years		2,761		2,595		—		(166)
After five years but within ten years		4,613		3,628		—		(985)
		7,864		6,713		—		(1,151)
Corporate debt securities
After one year but within five years		4,625		3,962		—		(663)
After five years but within ten years		13,000		9,412		—		(3,588)
		17,625		13,374		—		(4,251)
Mortgage-backed securities		36,263		32,713		—		(3,550)
Total	$	77,252	$	66,527	$	—	$	(10,725)

(Dollars in thousands)	September 30, 2023
					Gross		Gross
	Amortized		Fair		Unrecognized		Unrecognized
Debt Securities Held to Maturity	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,766	$	15,316	$	—	$	(450)
After five years but within ten years		13,517		12,949		—		(568)
		29,283		28,265		—		(1,018)
Mortgage-backed securities		173,363		160,956		—		(12,407)
Total	$	202,646	$	189,221	$	—	$	(13,425)

(Dollars in thousands)	December 31, 2022
					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Debt Securities Available for Sale	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,500	$	13,705	$	—	$	(1,795)
		15,500		13,705		—		(1,795)
Obligations of state and political subdivisions
After one year but within five years		4,076		3,924		—		(152)
After five years but within ten years		4,608		3,755		—		(853)
		8,684		7,679		—		(1,005)
Corporate debt securities
After one year but within five years		4,673		4,190		—		(483)
After five years but within ten years		13,000		11,151		—		(1,849)
		17,673		15,341		—		(2,332)
Mortgage-backed securities		39,479		36,811		—		(2,668)
Total	$	81,336	$	73,536	$	—	$	(7,800)

(Dollars in thousands)	December 31, 2022
					Gross		Gross
	Amortized		Fair		Unrecognized		Unrecognized
Debt Securities Held to Maturity	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	13,039	$	13,067	$	28	$	—
After five years but within ten years		15,561		15,605		56		(12)
		28,600		28,672		84		(12)
Mortgage-backed securities		180,965		181,215		1,682		(1,432)
Total	$	209,565	$	209,887	$	1,766	$	(1,444)

Certain obligations of the U.S. Government and state and political subdivisions, as well as mortgage-backed securities are pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law. The carrying value of the pledged assets was $174.3 million and $102.3 million on September 30, 2023 and December 31, 2022, respectively.

In addition to cash received from the scheduled maturities of investment securities, some securities available for sale are sold or called at current market values during normal operations. The Bank sold $24.7 million, par value, of subordinated debt of unconsolidated financial institutions, classified as corporate debt securities, at a loss of $1.5 million during the nine months ended September 30, 2022 due to the adverse regulatory impact of substantial (relative to capital) holdings of subordinated debt.

There were no sales of securities during the three or nine months ended September 30, 2023. There was one called security during the three months ended September 30, 2023 and two called securities during the nine months ended September 30, 2023. The proceeds from these calls were immaterial to the financial statements. The following table summarizes proceeds received from sales or calls of available for sale investment securities transactions and the resulting realized gains and losses during the three and nine months ended September 30, 2022.

(Dollars in thousands)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Gross proceeds from sales and calls of securities	$	—	$	6,137	$	—	$	23,271
Gross realized gains from sold and called securities	$	—	$	—		—		25
Gross realized losses from sold and called securities		—		(378)		—		(1,477)
Net gains (losses) from sales and calls of securities	$	—	$	(378)	$	—	$	(1,452)

The following tables summarize debt securities with unrealized and unrecognized losses at September 30, 2023 and December 31, 2022, aggregated by category and length of time in a continuous unrealized loss position.

	Unrealized Losses at September 30, 2023
	Less Than 12 Months					12 Months or More					Total
(Dollars in thousands)	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Securities available for sale
Obligations of U.S. Government sponsored enterprises	—	$	—	$	—	3	$	13,727	$	(1,773)	3	$	13,727	$	(1,773)
Obligations of state and political subdivisions	2		1,429		(48)	7		4,794		(1,103)	9		6,223		(1,151)
Corporate debt securities	—		—		—	9		13,374		(4,251)	9		13,374		(4,251)
Mortgage-backed securities	—		—		—	34		32,713		(3,550)	34		32,713		(3,550)
Total temporarily impaired securities available for sale	2	$	1,429	$	(48)	53	$	64,608	$	(10,677)	55	$	66,037	$	(10,725)
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	7	$	28,265	$	(1,018)	—	$	—	$	—	7	$	28,265	$	(1,018)
Mortgage-backed securities	35		114,476		(5,763)	15		46,480		(6,644)	50		160,956		(12,407)
Total temporarily impaired securities held to maturity	42	$	142,741	$	(6,781)	15	$	46,480	$	(6,644)	57	$	189,221	$	(13,425)
Total	44	$	144,170	$	(6,829)	68	$	111,088	$	(17,321)	112	$	255,258	$	(24,150)

	Unrealized Losses at December 31, 2022
	Less Than 12 Months					12 Months or More					Total
(Dollars in thousands)	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Securities available for sale
Obligations of U.S. Government sponsored enterprises	1	$	2,456	$	(44)	2	$	11,248	$	(1,751)	3	$	13,704	$	(1,795)
Obligations of state and political subdivisions	4		2,781		(20)	7		4,898		(985)	11		7,679		(1,005)
Corporate debt securities	5		9,831		(1,669)	4		5,510		(663)	9		15,341		(2,332)
Mortgage-backed securities	33		36,493		(2,630)	1		319		(38)	34		36,812		(2,668)
Total temporarily impaired securities available for sale	43	$	51,561	$	(4,363)	14	$	21,975	$	(3,437)	57	$	73,536	$	(7,800)
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	1	$	3,463	$	(12)	—	$	—	$	—	1	$	3,463	$	(12)
Mortgage-backed securities	9		21,643		(392)	12		48,788		(1,040)	21		70,431		(1,432)
Total temporarily impaired securities held to maturity	10	$	25,106	$	(404)	12	$	48,788	$	(1,040)	22	$	73,894	$	(1,444)
Total	53	$	76,667	$	(4,767)	26	$	70,763	$	(4,477)	79	$	147,430	$	(9,244)

At September 30, 2023, ten obligations of U.S. Government sponsored enterprises, nine obligations of state and political subdivisions, nine corporate debt securities, and eighty-four mortgage-backed securities had unrealized losses. Sixty-eight of these securities have been in a continuous loss position for twelve months or more. The mortgage-backed securities in the Company’s portfolio are government sponsored enterprise (“GSE”) pass-through instruments issued by the Federal National Mortgage Association (“FNMA”) or Federal Home Loan Mortgage Corporation (“FHLMC”), which guarantees the timely payment of principal on these investments.

ASC 326 made targeted improvements to the accounting for credit losses on securities available for sale. The concept of other-than-temporarily impaired securities has been replaced with the allowance for credit losses. Unlike held to maturity debt securities, available for sale securities are evaluated on an individual level and pooling of securities is not allowed.

For available for sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is 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 debt securities available for sale that do not meet the criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management 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 assessment 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 the 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, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. As of September 30, 2023, management determined that an immaterial credit loss existed because the decline in fair value of the available for sale debt securities was mostly attributable to changes in  interest rates and other market conditions, rather than erosion of issuer credit quality and, as a

result, timely payment of contractual cash flows, including principal and interest, has continued and is not considered at risk.

Included in corporate debt securities is $1.5 million par value of PacWest Bancorp (“PACW”) subordinated debt. In August 2022, Fitch Ratings downgraded PACW’s subordinated debt Viability Rating to BB+ from BBB-, and further downgraded the rating to BB in April 2023. Since early May 2023, PACW has taken steps to improve capital and liquidity. On July 25, 2023, PACW announced a merger with Banc of California, Inc. (“BANC”) and will operate under the BANC name and brand. The merger is an all-stock transaction. BANC also announced that it has entered into investment agreements to issue $400.0 million of equity securities in conjunction with the merger. Management believes that this capital infusion and planned repositioning of the balance sheet reduces credit risk associated with the $1.5 million PACW subordinated debt owned by the Company. These steps have led to a generally upward trend for PACW’s common stock. The Company monitors this situation and, at September 30, 2023, determined any credit loss associated with the PACW subordinated debt was immaterial.

Credit Quality Indicators

All the Company’s held to maturity debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities are either explicitly or implicitly guaranteed by the U.S. government, except for the Federal Farm Credit Bank securities, but all are highly rated by major rating agencies and have a long history of no credit losses. Therefore, the Company did not record an allowance for credit losses for these securities as of September 30, 2023.

The Company monitors the credit quality of held to maturity debt securities using credit ratings. The credit ratings are sourced from nationally recognized rating agencies. All held to maturity debt securities were current in their payment of principal and interest as of September 30, 2023.

The following table summarizes the amortized cost of held to maturity debt securities aggregated by credit quality indicator based on the latest information available as of September 30, 2023.

(Dollars in thousands)
September 30, 2023	AAA		Total
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	$	29,283	$	29,283
Mortgage-backed securities		173,363		173,363
	$	202,646	$	202,646

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

9 Months Ended

Sep. 30, 2023

LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

6. LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

Loans that the Company originated and has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the outstanding unpaid principal balances, net of any deferred fees or costs and the allowance for credit losses. Interest income on all loans, other than nonaccrual loans, is accrued over the term of the loans based on the amount of principal outstanding. Unearned income is amortized to income over the life of the loans, using the interest method.

The loan portfolio includes the following classes: (1) commercial, financial and agricultural, (2) real estate - commercial, (3) real estate - construction, (4) real estate – mortgage, (5) obligations of states and political subdivisions, and (6) personal loans.

The Company originates loans in the portfolio with the intent to hold them until maturity. Should the Company no longer intend to hold loans to maturity based on asset/liability management practices, the Company transfers loans from its portfolio to held for sale at fair value. Any write-down recorded upon transfer is charged against the allowance for credit

losses. Any write-downs recorded after the initial transfers are recorded as a charge to other non-interest expense. Gains or losses recognized upon sale are included in gains on sales of loans, which is a component of non-interest income.

Loans Held for Sale

The Company has originated residential mortgage loans with the intent to sell. These individual loans are normally sold to the buyer immediately. The Company maintains servicing rights on these loans.

When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. Under the fair value measurement method, the Company measures servicing rights at fair value at each reporting date and reports changes in fair value of servicing assets in earnings in the period in which the changes occur, which are included with mortgage banking income on the income statement. The fair values of servicing rights are subject to fluctuations because of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the income statement as mortgage banking income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. Late fees and ancillary fees related to loan servicing are not material.

Allowance for Credit Losses (“ACL”)

The Company adopted ASU 2013-13 on January 1, 2023 to calculate the ACL, which requires a projection of credit losses estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a loan modification will be executed with an individual borrower, or the extension or renewal options are included in the original or modified contract at the reporting date and not unconditionally cancellable by the Company. The allowance for credit losses is a valuation account that is deducted from the loan’s amortized cost basis to present the net amount expected to be collected on the loan. The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans.

Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions and reasonable and supportable forecasts of certain macro-economic variables. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, lending personnel, delinquency trends, credit concentrations, loan review results, changes in collateral values, as well as the impact of changes in the regulatory and business environment or other relevant factors.

The Company utilizes the Discounted Cash Flow (“DCF”) method to analyze most loan segments, particularly loan segments with longer average lives and regular payment structures, as it allows for the effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner. The DCF model has two key components; a loss driver analysis combined with a cash flow analysis. The contractual cash flow is adjusted for probability of default/loss given defaults (“PD/LGD”) and prepayment speed to establish a reserve level. The prepayment and curtailment studies are updated quarterly by a third-party for each applicable pool of loans. The Company estimates losses over a four quarter forecast period using Federal Open Market Committee (“FOMC”) estimates for real GDP and unemployment rate. Based on the final values in the forecast and the uncertainty of a post-pandemic economic recovery, management has elected to revert to historical loss experience over four quarters. The economic factors considered as part of the ACL were selected after a rigorous regression analysis and model selection process. Additionally, the Company uses reasonable credit risk assumptions based on an annual report produced by Moody’s for the obligations of states and political subdivisions segment.

The Weighted Average Remaining Life (“WARM”) method is used to analyze the personal loan segment, which includes revolving credit plans, automobile loans and other consumer loans, because this segment contains loans with many different structures, payment streams and collateral. The WARM method uses an average annual charge-off rate applied to the contractual term, further adjusted for estimated prepayments to determine the unadjusted historical charge-off rate for the remaining balance of assets.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods:

Portfolio Segments	Methodology	Loss Drivers
Commercial, financial and agricultural	DCF	National unemployment
Real estate - commercial	DCF	National unemployment & national GDP
Real estate - construction:
1-4 family residential construction	DCF	National unemployment & national GDP
Other construction loans	DCF	National unemployment & national GDP
Real estate - mortgage	DCF	National unemployment & national GDP
Obligations of states and political subdivisions	DCF	Moody's report
Personal	Remaining Life	Call report loss history

According to ASC 326, an entity may make an accounting policy election not to measure an allowance for credit losses for accrued interest receivable if the entity writes off the applicable accrued interest receivable balance in a timely manner. The Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivable for all loan segments. Accrual of interest on loans is discontinued when the payment of principal or interest is in doubt or when a loan becomes contractually past due by 90 days or more with respect to principal or interest, except for loans that are well-secured and in the process of collection. When a loan is placed on nonaccrual status, any accrued but uncollected interest is reversed from current income.

ASC 326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. At September 30, 2023, the Company had $55.0 million in unfunded commitments and $292,000 in anticipated credit losses in the reserve for unfunded lending commitments subject to ASC 326 requirements; the reserve is recorded in other liabilities on the Consolidated Balance Sheets as opposed to in the ACL. Provisions to the reserve for unfunded lending commitments are recorded as other noninterest expense on the Consolidated Statements of Income.

The determination of the ACL is complex, and the Company makes decisions on the effects of matters that are inherently uncertain. Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgements as to the facts and circumstances related to particular situations or credits. There may be significant changes in the ACL in future periods determined by factors prevailing at that point in time along with future forecasts.

Risks associated with each portfolio segment are as follows:

Commercial, Financial and Agricultural Lending:

The Company originates commercial, financial and agricultural loans primarily to businesses located in its primary market area and surrounding areas. These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment purchases, inventory and accounts receivable. Generally, the maximum term

for loans extended on machinery and equipment is shorter and does not exceed the projected useful life of such machinery and equipment. Most business lines of credit are written with a five year maturity, subject to an annual credit review.

Commercial loans are generally secured with short-term assets; however, in many cases, additional collateral, such as real estate, is provided as additional security for the loan. Loan-to-value maximum values have been established by the Company and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, collateral appraisals, and other methods.

In underwriting commercial loans, the Company performs an analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral, and conditions affecting the borrower. Evaluation of the borrower’s past, present and future cash flows is also an important aspect of the Company’s analysis.

Concentration analysis assists in identifying industry specific risk inherent in commercial, financial and agricultural lending. Mitigants include the identification of secondary and tertiary sources of repayment and appropriate increases in oversight.

Commercial, financial and agricultural loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Real Estate - Commercial Lending:

The Company engages in real estate - commercial lending in its primary market area and surrounding areas. The Company’s real estate - commercial portfolio is secured primarily by residential housing, commercial buildings, raw land and hotels. Generally, real estate - commercial loans have terms that do not exceed 20 years, have loan-to-value ratios of up to 80% of the appraised value of the property and are typically secured by personal guarantees of the borrowers.

As economic conditions deteriorate, the Company reduces its exposure in real estate loans with higher risk characteristics. In underwriting these loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Real estate - commercial loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Real Estate - Construction Lending:

The Company engages in real estate - construction lending in its primary market area and surrounding areas. The Company’s real estate - construction lending consists of 1-4 family residential construction loans and other construction loans, which are construction loans for purposes other than constructing 1-4 family residential properties such as land development and commercial building construction loans.

The Company’s 1-4 family residential construction loans are loans for constructing 1-4 family residential properties, which will secure the loan. Other construction loans are generally secured with the subject property, and advances are made in conformity with a pre-determined draw schedule supported by independent inspections. Terms of construction loans depend on the specifics of the project, such as estimated absorption rates, estimated time to complete, etc.

In underwriting real estate - construction loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history and, when applicable, the reliability and predictability of the cash flow generated by the project using feasibility studies, market data, and other resources. Most appraisals on properties securing real estate - construction loans originated by the Company are performed by independent appraisers.

Real estate - construction loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. The difficulty of estimating total construction costs adds to the risk as well.

Real Estate - Mortgage Lending:

The Company’s real estate - mortgage portfolio is comprised of 1-4 family residential mortgages and business loans secured by 1-4 family properties. One-to-four family residential mortgage loan originations, including home equity installment and home equity lines of credit loans, are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within the Company’s market area or with customers primarily from the market area.

The Company offers fixed-rate and adjustable rate real estate - mortgage loans with a term up to a maximum of 25-years for both permanent structures and those under construction. The Company’s 1-4 family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas. Most of the Company’s residential real estate - mortgage loans originate with a loan-to-value of 80% or less. Home equity installment loans are secured by the borrower’s primary residence with a maximum loan-to-value of 80% and a maximum term of 15 years. Home equity lines of credit are secured by the borrower’s primary residence with a maximum loan-to-value of 90% and a maximum term of 20 years.

In underwriting 1-4 family residential real estate loans, the Company evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral or security. Most properties securing real estate loans made by the Company are appraised by independent fee appraisers. The Company generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title insurance and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. The Company does not engage in sub-prime residential mortgage originations.

Residential mortgage loans and home equity loans generally present a lower level of risk than certain other types of consumer loans because they are secured by the borrower’s primary residence. Risk is increased when the Company is in a subordinate position for the loan collateral.

Obligations of States and Political Subdivisions:

The Company lends to local municipalities and other tax-exempt organizations. These loans are primarily tax-anticipation notes and, as such, carry minimal risk. Historically, the Company has never had a loss on any loan of this type.

Personal Lending:

The Company offers a variety of secured and unsecured personal loans, including vehicle loans, mobile home loans and loans secured by savings deposits as well as other types of personal loans.

Personal loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting personal loans, a thorough analysis of the borrower’s willingness and financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background.

Personal loans may entail greater credit risk than do residential mortgage loans, particularly in the case of personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted personal loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation. In addition, personal loan

collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

Loan Portfolio Classification

The following table presents the loan portfolio by class at September 30, 2023 and December 31, 2022.

(Dollars in thousands)
	September 30, 2023		December 31, 2022
Commercial, financial and agricultural	$	63,265	$	61,458
Real estate - commercial		212,816		199,206
Real estate - construction:
1-4 family residential construction		6,788		7,995
Other construction loans		46,852		42,753
Real estate - mortgage		160,036		150,290
Obligations of states and political subdivisions		19,985		18,770
Personal		4,390		4,040
Total	$	514,132	$	484,512

The following table discloses allowance for credit loss activity by loan class for the three and nine months ended September 30, 2023.

					Real estate-				Obligations
	Commercial,				construction		Real estate-		of states
(Dollars in thousands)	financial and		Real estate-		1-4 family		construction		and political		Real estate-
	agricultural		commercial		residential		other		subdivisions		mortgage		Personal		Total
Three Months Ended
September 30, 2023
Allowance for credit losses:
Balance, beginning of period	$	677	$	2,677	$	113	$	720	$	41	$	1,150	$	64	$	5,442
Provision for credit losses (1)		33		25		31		31		—		8		(7)		121
Loans charged off		—		—		—		—		—		—		(11)		(11)
Recoveries collected		—		—		—		—		—		19		15		34
Total ending allowance balance (1)	$	710	$	2,702	$	144	$	751	$	41	$	1,177	$	61	$	5,586
Nine Months Ended
September 30, 2023
Allowance for credit losses:
Beginning balance, prior to ASC 326 adoption	$	297	$	1,110	$	69	$	1,077	$	54	$	1,385	$	35	$	4,027
Impact of adopting ASC 326		337		1,204		114		(407)		(9)		(497)		15		757
Initial allowance on loans purchased with credit deterioration		—		106		—		—		—		248		—		354
Provision for credit losses (1)		76		282		(39)		81		(4)		4		11		411
Loans charged off		—		—		—		—		—		(19)		(19)		(38)
Recoveries collected		—		—		—		—		—		56		19		75
Total ending allowance balance (1)	$	710	$	2,702	$	144	$	751	$	41	$	1,177	$	61	$	5,586

(1) Allowance/provision for credit losses in 2023 are not comparable to prior periods due to the adoptions of ASC 326.

The following table discloses allowance for credit loss activity by loan class for the three and nine months ended September 30, 2022, prior to the adoption of ASC 326.

							Obligations
	Commercial,						of states
(Dollars in thousands)	financial and		Real estate-		Real estate-		and political		Real estate-
	agricultural		commercial		construction		subdivisions		mortgage		Personal		Total
Three Months Ended
September 30, 2022
Allowance for loan losses:
Beginning balance	$	286	$	934	$	1,208	$	56	$	1,294	$	35	$	3,813
Provision for loan losses		(4)		129		(123)		—		94		4		100
Loans charged off		—		—		—		—		(22)		(4)		(26)
Recoveries collected		—		—		—		—		18		—		18
Total ending allowance balance	$	282	$	1,063	$	1,085	$	56	$	1,384	$	35	$	3,905
Nine Months Ended
September 30, 2022
Allowance for loan losses:
Beginning balance	$	251	$	1,020	$	884	$	45	$	1,269	$	39	$	3,508
Provision for loan losses		31		43		201		11		61		3		350
Loans charged off		—		—		—		—		(23)		(9)		(32)
Recoveries collected		—		—		—		—		77		2		79
Total ending allowance balance	$	282	$	1,063	$	1,085	$	56	$	1,384	$	35	$	3,905

The following table summarizes loans by loan class, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, 2022, prior to the adoption of ASC 326.

							Obligations
	Commercial,						of states
(Dollars in thousands)	financial and		Real estate-		Real estate-		and political		Real estate-
	agricultural		commercial		construction		subdivisions		mortgage		Personal		Total
December 31, 2022
Loans allocated by:
Individually evaluated for impairment	$	—	$	2,025	$	—	$	—	$	377	$	—	$	2,402
Acquired with credit deterioration		—		334		—		—		419		—		753
Collectively evaluated for impairment		61,458		196,847		50,748		18,770		149,494		4,040		481,357
	$	61,458	$	199,206	$	50,748	$	18,770	$	150,290	$	4,040	$	484,512
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Acquired with credit deterioration		—		—		—		—		—		—		—
Collectively evaluated for impairment		297		1,110		1,146		54		1,385		35		4,027
	$	297	$	1,110	$	1,146	$	54	$	1,385	$	35	$	4,027

There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of September 30, 2023. As of December 31, 2022, there was $123,000 in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process. Charge-offs will occur when a confirmed loss is identified. Professional appraisals of collateral, discounted for expected selling costs, appraisal age, economic conditions and other known factors, are used to determine the charge-off amount.

Following the adoption of ASC 326 as of January 1, 2023, the definitions of impairment and related impaired loan disclosures were removed. However, under ASC 326, loans that do not share risk characteristics are not evaluated collectively and are instead individually evaluated.  When management determines foreclosure is probable, expected credit losses are based on the fair value of the collateral, adjusted for selling costs as appropriate.  

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of September 30, 2023.

(Dollars in thousands)
	Real Estate
Real estate - mortgage	$	57
Total	$	57

The following table summarizes information regarding impaired loans by portfolio class as of December 31, 2022, prior to the adoption of ASC 326.

(Dollars in thousands)	As of December 31, 2022
	Recorded		Unpaid Principal		Related
	Investment		Balance		Allowance
Impaired loans
With no related allowance recorded:
Real estate - commercial	$	2,025	$	2,471	$	—
Acquired with credit deterioration		334		344		—
Real estate - mortgage		377		993		—
Acquired with credit deterioration		419		634		—
Total:
Real estate - commercial	$	2,025	$	2,471	$	—
Acquired with credit deterioration		334		344		—
Real estate – mortgage		377		993		—
Acquired with credit deterioration		419		634		—
	$	3,155	$	4,442	$	—

Average recorded investment of impaired loans and related interest income recognized for the three and nine months ended September 30, 2022 are summarized in the tables below, prior to the adoption of ASC 326.

(Dollars in thousands)	Three Months Ended September 30, 2022
	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Income
Impaired loans
With no related allowance recorded:
Real estate - commercial	$	2,058	$	98	$	—
Acquired with credit deterioration		341		—		—
Real estate - mortgage		348		4		19
Acquired with credit deterioration		440		—		—
Total:
Real estate - commercial	$	2,058	$	98	$	—
Acquired with credit deterioration		341		—		—
Real estate - mortgage		348		4		19
Acquired with credit deterioration		440		—		—
	$	3,187	$	102	$	19

(Dollars in thousands)	Nine Months Ended September 30, 2022
	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Income
Impaired Loans
With no related allowance recorded:
Real estate - commercial	$	4,187	$	161	$	—
Acquired with credit deterioration		347		—		—
Real estate - mortgage		397		7		29
Acquired with credit deterioration		455		—		—
Total:
Real estate - commercial	$	4,187	$	161	$	—
Acquired with credit deterioration		347		—		—
Real estate - mortgage		397		7		29
Acquired with credit deterioration		455		—		—
	$	5,386	$	168	$	29

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due if (1) they are guaranteed or well secured and (2) there is an effective means of timely collection in process.

When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income, and unpaid interest accrued in prior years is charged against the allowance for credit losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The Company’s nonaccrual and charge-off policies are the same, regardless of the loan type.

The following tables present the amortized cost basis of loans on nonaccrual status, including nonaccrual status loans with no allowance, and loans past due over 89 days still accruing as of September 30, 2023 and December 31, 2022, respectively.

(Dollars in thousands)	Nonaccrual with				Loans Past Due
	No Allowance				Over 89 Days
As of September 30, 2023	for Credit Loss		Nonaccrual		Still Accruing(1)
Commercial, financial and agricultural	$	—	$	20	$	—
Real estate - mortgage		57		—		—
Total	$	57	$	20	$	—

(Dollars in thousands)					Loans Past Due
	Nonaccrual with				Over 89 Days
As of December 31, 2022	No Allowance		Nonaccrual		Still Accruing(1)
Commercial, financial and agricultural	$	—	$	—	$	24
Real estate - commercial		—		—		7
Real estate - mortgage		—		139		4
Personal		—		—		4
Total	$	—	$	139	$	39

(1) These loans are guaranteed, or well-secured, and there is an effective means of collection in process.

The Company recognized $11,000 and $33,000 in interest income on nonaccrual loans during the three and nine months ended September 30, 2023, respectively.

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. Past due status is determined by the contractual terms of the loan. The following tables present the classes of the loan portfolio, summarized by the past due status as of September 30, 2023 and December 31, 2022, respectively.

(Dollars in thousands)					Greater
	30‑59 Days		60‑89 Days		Than 89 Days		Total Past
As of September 30, 2023	Past Due(1)		Past Due		Past Due		Due
Commercial, financial and agricultural	$	19	$	—	$	—	$	19
Real estate - commercial		122		—		—		122
Real estate - mortgage		673		8		14		695
Total	$	814	$	8	$	14	$	836

(Dollars in thousands)					Greater
	30‑59 Days		60‑89 Days		Than 89 Days		Total Past
As of December 31, 2022	Past Due(1)		Past Due		Past Due		Due
Commercial, financial and agricultural	$	75	$	—	$	24	$	99
Real estate - commercial		—		104		7		111
Real estate - mortgage		205		36		142		383
Personal		27		1		4		32
Total	$	307	$	141	$	177	$	625

(1) Loans are considered past due when the borrower is in arrears on two or more monthly payments.

Occasionally, the Company modifies loans to borrowers in financial difficulty by providing principal forgiveness, term extension, an other-then-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 may provide 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. There were no loans modified to borrowers experiencing financial difficulty during the three or nine months ended September 30, 2023 and, as such, there were no payment defaults on loans modified to borrowers experiencing financial difficulty during the three or nine months ended September 30, 2023.

If the Company determines a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

As of December 31, 2022, the Company had a recorded investment in troubled debt restructurings of $2.3 million with no specific reserves or any charge-offs related to the troubled debt restructured loans and no commitments to lend additional amounts to these customers as of December 31, 2022. There were no troubled debt restructured loans in default within 12 months of restructure during the year ended December 31, 2022, nor were there any loans whose terms were modified, resulting in troubled debt  restructurings during 2022.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans to commercial customers with an aggregate loan exposure greater than $500,000 and for lines of credit more than $50,000. This analysis is performed on a continuing basis, with all such loans reviewed annually. The Company uses the following definitions for risk ratings:

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Loans in this category are reviewed no less than quarterly.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans in this category are reviewed no less than monthly.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable. Loans in this category are reviewed no less than monthly.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of September 30, 2023 and December 31, 2022, respectively.

(Dollars in thousands)			Special
As of September 30, 2023	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	63,104	$	142	$	19	$	—	$	63,265
Real estate - commercial		197,506		14,374		936		—		212,816
Real estate - construction:
1-4 family residential construction		6,788		—		—		—		6,788
Other construction loans		42,159		4,693		—		—		46,852
Real estate - mortgage		159,756		223		57		—		160,036
Obligations of states and political subdivisions		19,985		—		—		—		19,985
Personal		4,390		—		—		—		4,390
Total	$	493,688	$	19,432	$	1,012	$	—	$	514,132

(Dollars in thousands)			Special
As of December 31, 2022	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	60,990	$	468	$	—	$	—	$	61,458
Real estate - commercial		186,977		9,802		2,427		—		199,206
Real estate - construction		50,008		740						50,748
Real estate - mortgage		149,272		222		796		—		150,290
Obligations of states and political subdivisions		18,770		—		—		—		18,770
Personal		4,040		—		—		—		4,040
Total	$	470,057	$	11,232	$	3,223	$	—	$	484,512

Based on the most recent analysis performed, the amortized cost basis by risk category of loans by class of loan and by origination year is as follows:

													Revolving		Revolving
(Dollars in thousands)													Loans		Loans
													Amortized		Converted
As of September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial, financial and agricultural:
Risk Rating
Pass	$	10,032	$	6,361	$	12,451	$	5,403	$	4,141	$	1,569	$	23,147	$	—	$	63,104
Special Mention		70		—		—		—		72		—		—		—		142
Substandard		—		—		—		—		—		19		—		—		19
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial, financial and agricultural loans	$	10,102	$	6,361	$	12,451	$	5,403	$	4,213	$	1,588	$	23,147	$	—	$	63,265
Commercial, financial and agricultural loans:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - commercial:
Risk Rating
Pass	$	17,355	$	58,584	$	23,947	$	16,208	$	18,052	$	59,570	$	3,789	$	1	$	197,506
Special Mention		—		—		—		9,001		421		4,952		—		—		14,374
Substandard		—		—		—		—		—		936		—		—		936
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - commercial loans	$	17,355	$	58,584	$	23,947	$	25,209	$	18,473	$	65,458	$	3,789	$	1	$	212,816
Real estate - commercial:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - construction - 1-4 family residential:
Risk Rating
Pass	$	2,818	$	3,411	$	—	$	—	$	—	$	559	$	—	$	—	$	6,788
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - construction - 1-4 family residential loans	$	2,818	$	3,411	$	—	$	—	$	—	$	559	$	—	$	—	$	6,788
Real estate - construction - 1-4 family residential:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - construction - other:
Risk Rating
Pass	$	2,280	$	6,732	$	17,646	$	2,469	$	393	$	3,303	$	9,336	$	—	$	42,159
Special Mention		—		—		2		4,691		—		—		—		—		4,693
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - construction - other loans	$	2,280	$	6,732	$	17,648	$	7,160	$	393	$	3,303	$	9,336	$	—	$	46,852
Real estate - construction - other:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

													Revolving		Revolving
(Dollars in thousands)													Loans		Loans
													Amortized		Converted
As of September 30, 2023 (cont.)	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Real estate - mortgage:
Risk Rating
Pass	$	17,922	$	44,975	$	19,869	$	15,003	$	5,627	$	47,730	$	8,510	$	120	$	159,756
Special Mention		—		—		—		—		—		223		—		—		223
Substandard		—		—		—		—		—		57		—		—		57
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - mortgage loans	$	17,922	$	44,975	$	19,869	$	15,003	$	5,627	$	48,010	$	8,510	$	120	$	160,036
Real estate - mortgage:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	(19)	$	—	$	—	$	(19)
Obligations of states and political subdivisions:
Risk Rating
Pass	$	2,741	$	3,882	$	2,456	$	5,106	$	12	$	5,787	$	1	$	—	$	19,985
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Obligations of states and political subdivisions	$	2,741	$	3,882	$	2,456	$	5,106	$	12	$	5,787	$	1	$	—	$	19,985
Obligations of states and political subdivisions:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Personal:
Risk Rating
Pass	$	1,997	$	1,339	$	466	$	116	$	127	$	231	$	110	$	4	$	4,390
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total personal loans	$	1,997	$	1,339	$	466	$	116	$	127	$	231	$	110	$	4	$	4,390
Personal:
Current period gross write offs	$	—	$	—	$	—	$	(4)	$	—	$	(15)	$	—	$	—	$	(19)

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GOODWILL AND OTHER INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2023

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

On September 8, 2006, the Company acquired a branch office in Richfield, PA. Goodwill associated with this transaction is carried at $2.0 million. On November 30, 2015, the Company acquired FNBPA Bancorp, Inc. and, as a result, the Company carries goodwill of $3.4 million relating to the acquisition. On April 30, 2018, the Company acquired the remainder of the outstanding common stock of Liverpool Community Bank and, as a result, the Company carries goodwill of $3.6 million relating to the acquisition. On May 12, 2023, the Company acquired a branch office (“Path Valley”) in Spring Run, Pennsylvania. Goodwill associated with this transaction is carried at $765,000.

Total goodwill at September 30, 2023 and December 31, 2022 was $9.8 million and $9.0 million, respectively. Goodwill is not amortized but is tested annually for impairment as of December 31, or more frequently if certain events occur which might indicate goodwill has been impaired. There was no goodwill impairment during the nine months ended September 30, 2023 or September 30, 2022.

Intangible Assets

On November 30, 2015, a core deposit intangible in the amount of $303,000 associated with the FNBPA Bancorp, Inc. acquisition was recorded and is being amortized over a ten-year period using a sum of the years’ digits basis. Amortization expense recognized for the intangibles related to the FNBPA acquisition for the three and nine months ended September 30, 2023 was $4,000 and $12,000, respectively, and for the three and nine months ended September 30, 2022 was $5,000 and $16,000, respectively.

On April 30, 2018, a core deposit intangible in the amount of $289,000 associated with the Liverpool Community Bank acquisition was recorded and is being amortized over a ten-year period using a sum of the years’ digit basis. Amortization expense recognized for the intangible related to the Liverpool Community Bank acquisition for the three and nine months ended September 30, 2023 was $7,000 and $21,000, respectively, and for the three and nine months ended September 30, 2022 was $9,000 and $25,000, respectively.

On May 12, 2023, a core deposit intangible in the amount of $303,000 associated with the Path Valley branch acquisition was recorded and is being amortized over a ten-year period using a sum of the years’ digit basis. Amortization expense recognized for the intangible related to the Path Valley branch acquisition for the three and nine months ended September 30, 2023 was $14,000 and $23,000, respectively, while no amortization expense was recorded for the three and nine months ended September 30, 2022.

The following table shows the amortization schedule for each of the intangible assets recorded.

(Dollars in thousands)	Path Valley		FNBPA		LCB
	Acquisition		Acquisition		Acquisition
	Core		Core		Core
	Deposit		Deposit		Deposit
	Intangible		Intangible		Intangible
Beginning Balance at Acquisition Date	$	303	$	303	$	289
Amortization expense recorded prior to January 1, 2022		—		250		167
Amortization expense recorded in the twelve months
ended December 31, 2022		—		21		33
Unamortized balance as of December 31, 2022		—		32		89
Amortization expense recorded in the
nine months ended September 30, 2023		23		12		21
Unamortized balance as of September 30, 2023	$	280	$	20	$	68
Scheduled remaining amortization expense for years ended:
December 31, 2023	$	14	$	4	$	7
December 31, 2024		51		11		23
December 31, 2025		46		5		17
December 31, 2026		40		—		12
December 31, 2027		35		—		7
Thereafter		94		—		2

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DEPOSITS

9 Months Ended

Sep. 30, 2023

DEPOSITS

DEPOSITS

8. DEPOSITS

At September 30, 2023 and December 31, 2022, time deposits that met or exceeded the FDIC insurance limit of $250,000 were $33.0 million and $13.2 million, respectively.

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BORROWINGS

9 Months Ended

Sep. 30, 2023

BORROWINGS

BORROWINGS

9. BORROWINGS

Borrowings consisted of the following as of September 30, 2023 and December 31, 2022.

(Dollars in thousands)	September 30,		December 31,
	2023		2022
Securities sold under agreements to repurchase	$	11,638	$	7,585
Overnight advances with FHLB		12,000		28,125
Short-term debt		16,000		20,000
Long-term debt with FHLB		20,000		20,000
	$	59,638	$	75,710

Long-term debt is comprised only of Federal Home Loan Bank (“FHLB”) advances with an original maturity of one year or more. The following table summarizes the scheduled maturities of long-term debt as of September 30, 2023.

(Dollars in thousands)	Scheduled		Weighted Average
Year	Maturities		Interest Rate
2023	$	—	—	%
2024		15,000	2.29
2025		5,000	2.41
2026		—	—
2027		—	—
Thereafter		—	—
	$	20,000	2.32	%

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STOCK COMPENSATION PLAN

9 Months Ended

Sep. 30, 2023

STOCK COMPENSATION PLAN

STOCK COMPENSATION PLAN

10. STOCK COMPENSATION PLAN

Long-Term Incentive Plan

The Company maintains the 2016 Long-Term Incentive Plan (the “Plan”); the Plan amended and restated the former 2011 Stock Option Plan (the “2011 Plan”). The Plan continues in effect for any outstanding awards under the 2011 Plan in accordance with the terms and conditions governing such awards immediately prior to the effective date of the Plan. The Plan expanded the types of awards authorized by the 2011 Plan to include, among others, restricted stock. Under the provisions of the Plan, awards may consist of grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and performance shares to officers and key employees of the Company, as well as directors. The Plan is administered by a committee of the Board of Directors.

The maximum number of shares of common stock that may be issued under the Plan is 300,000 shares, and 162,503 shares remained available for grant as of September 30, 2023. Shares of common stock issued under the Plan may be treasury shares or authorized but unissued shares. Forfeited awards are returned to the pool of shares available for grant for future awards.

Through the nine months ended September 30, 2023, 11,409 restricted shares were awarded to certain officers and all directors. Each of the awards vest after three-years, with no interim vesting. As of September 30, 2023, there was $253,000 of unrecognized compensation cost related to all non-vested restricted stock awards. This cost is expected to be recognized over the vesting period through February 2026.

Compensation expense for stock options granted and restricted stock awarded is measured using the fair value of the award on the grant date and is recognized over the vesting period. The Company recognized stock-based compensation expense for the three and nine months ended September 30, 2023 of $35,000 and $106,000, respectively, and for the three and nine months ended September 30, 2022 of $30,000 and $146,000, respectively.

The following table presents a summary of the status of the Company’s non-vested restricted stock awards as of September 30, 2023. Changes during the period then ended are presented further below:

		Weighted
		Average
		Grant Date
	Shares	Fair Value
Non-vested at January 1, 2023	20,975	$	17.10
Vested	(6,739)		19.05
Forfeited	—		—
Granted	11,409		16.25
Non-vested at September 30, 2023	25,645	$	16.21

No stock options were awarded during the nine months ended September 30, 2023. Previously granted stock options vest over a period of three to five years and are exercisable at the grant price, which is at least the fair market value of the stock on the grant date. The Plan provides that the option price per share may not be less than the fair market value of the stock on the day the option was granted, and in no event less than the par value of such stock. Options granted under the Plan are exercisable no earlier than one year after the date of grant and expire ten years after the date of the grant. All options previously granted under the Plans are scheduled to expire by February 17, 2025.

Total options outstanding as of September 30, 2023 have exercise prices between $17.72 and $17.80, with a weighted average exercise price of $17.76 and a weighted average remaining contractual life of 1.16 years.

As of September 30, 2023, there was no unrecognized compensation cost related to options granted under the Plan, and no options were exercised under the Plan during the period.

A summary of the status of the outstanding stock options as of September 30, 2023, and changes during the period then ended, is presented below:

		Weighted
		Average
		Exercise
	Shares	Price
Outstanding at beginning of year	60,347	$	17.74
Granted	—		—
Exercised	—		—
Expired	(9,922)		17.65
Outstanding at end of year	50,425	$	17.76

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan under which employees, through payroll deductions, may purchase shares of Company stock annually. The option price of the stock purchases is between 95% and 100% of the fair market value of the stock on the offering termination date as determined annually by the Board of Directors. The maximum number of shares which employees may purchase under the Plan is 250,000; however, the annual issuance of shares may not exceed 5,000 shares plus any unissued shares from prior offerings. There were 4,230 and 5,026 shares issued from treasury under this plan during the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there were 152,420 shares reserved for issuance under the Employee Stock Purchase Plan.

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FAIR VALUE MEASUREMENT

9 Months Ended

Sep. 30, 2023

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

11. FAIR VALUE MEASUREMENT

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. Additional guidance is provided on determining when the volume and level of activity for the asset or liability has significantly decreased. The guidance also includes instruction on identifying circumstances when a transaction may not be considered orderly.

Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes that there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed, and significant adjustments to the related prices may be necessary to estimate fair value in accordance with fair value measurement and disclosure guidance.

This guidance clarifies that, when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

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

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

An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities 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 and 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.

Equity Securities – The fair value of equity securities is based upon quoted prices in active markets and is reported using Level 1 inputs.

Debt Securities – For debt securities where quoted prices are not available, fair values are calculated based on market prices of similar securities and are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurement from an independent pricing service. The fair value measurements 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 debt securities’ terms and conditions, among other things. For debt securities where quoted prices or market prices of similar securities are not available, fair values are calculated using other market indicators and are reported at fair value utilizing Level 3 inputs.

Derivatives – The fair values of derivatives are based on valuation models using observable market data as of the measurement date utilizing Level 2 inputs. The Company’s derivatives were comprised of interest rate swaps traded in an over-the-counter market where quoted market prices were not always available; therefore, the fair values were determined using quantitative models that utilize multiple market inputs. The inputs varied based on the type of yield curves, prepayment rates and volatility factors used to value the position. Most market inputs were actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

Other Real Estate Owned – Certain assets included in other real estate owned are carried at fair value as a result of impairment and accordingly are presented as measured on a non-recurring basis. Values are estimated using Level 3 inputs, based on appraisals that consider the sales prices of property in the proximate vicinity.

Mortgage Servicing Rights – The fair value of servicing assets is based on the present value of estimated future cash flows on pools of mortgages stratified by rate and maturity date and are considered Level 3 inputs.

The following tables summarize financial assets and financial liabilities measured at fair value as of September 30, 2023 and December 31, 2022 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. There were no assets measured at fair value on a non-recurring basis as of September 30, 2023 or December 31, 2022.

	(Level 1)		(Level 2)		(Level 3)
	Quoted Prices in		Significant		Significant
(Dollars in thousands)	Active Markets		Other		Other
	for Identical		Observable		Unobservable
September 30, 2023	Assets		Inputs		Inputs		Total
Assets measured at fair value on a recurring basis:
Debt securities available for sale:
Obligations of U.S. Government agencies and corporations	$	—	$	13,727	$	—	$	13,727
Obligations of state and political subdivisions		—		6,713		—		6,713
Corporate debt securities		—		7,466		5,908		13,374
Mortgage-backed securities		—		32,713		—		32,713
Total debt securities available for sale	$	—	$	60,619	$	5,908	$	66,527
Equity securities	$	978	$	—	$	—	$	978
Mortgage servicing rights	$	—	$	—	$	84	$	84

	(Level 1)		(Level 2)		(Level 3)
	Quoted Prices in		Significant		Significant
(Dollars in thousands)	Active Markets		Other		Other
	for Identical		Observable		Unobservable
December 31, 2022	Assets		Inputs		Inputs		Total
Assets measured at fair value on a recurring basis:
Debt securities available for sale:
Obligations of U.S. Government agencies and corporations	$	—	$	13,705	$	—	$	13,705
Obligations of state and political subdivisions		—		7,679		—		7,679
Corporate debt securities		—		8,196		7,145		15,341
Mortgage-backed securities		—		36,811		—		36,811
Total debt securities available for sale	$	—	$	66,391	$	7,145	$	73,536
Equity securities	$	1,056	$	—	$	—	$	1,056
Mortgage servicing rights	$	—	$	—	$	92	$	92
Interest rate swaps	$	—	$	268	$	—	$	268

The table below presents a reconciliation of the beginning and ending balances of investment securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three month periods ended September 30, 2023 and 2022.

	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30,				September 30,
	2023		2022		2023		2022
Investment Securities:
Beginning balance	$	5,908	$	7,788	$	7,145	$	4,520
Total gains (loss) included in OCI		—		(440)		(1,237)		(1,172)
Purchases		—		—		—		4,000
Principal payments and other		—		—		—		—
Sales		—		—		—		—
Balance, end of period	$	5,908	$	7,348	$	5,908	$	7,348

Mortgage servicing rights and assets measured at fair value on a nonrecurring basis for which Level 3 inputs have been used to determine fair value are immaterial to the Company’s consolidated financial statements.

Fair Value of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, the fair value estimates reported herein are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates indicated. The estimated fair value amounts have been measured as of their respective year ends and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments after the respective reporting dates may be different from the amounts reported at each quarter end.

The information presented below should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is provided only for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows:

	Financial Instruments
(Dollars in thousands)	September 30, 2023				December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and due from banks	$	27,377	$	27,377	$	10,856	$	10,856
Interest bearing deposits with banks		390		390		143		143
Debt securities available for sale		66,527		66,527		73,536		73,536
Debt securities held to maturity		202,646		189,221		209,565		209,887
Restricted investment in bank stock		2,476		N/A		3,666		N/A
Loans, net of allowance for credit losses		508,546		500,250		480,485		467,667
Interest rate swaps		—		—		268		268
Accrued interest receivable		2,509		2,509		2,124		2,124
Financial liabilities:
Time deposits	$	195,169	$	189,481	$	142,271	$	134,417
Securities sold under agreements to repurchase		11,638		N/A		7,585		N/A
Short-term borrowings		28,000		27,901		48,125		48,122
Long-term debt		20,000		19,412		20,000		19,156
Other interest bearing liabilities		941		937		1,011		1,009
Accrued interest payable		1,091		1,091		333		333
Off-balance sheet financial instruments:
Commitments to extend credit	$	—	$	—	$	—	$	—
Letters of credit		—		—		—		—

The following tables present the carrying amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments not previously disclosed as of September 30, 2023 and December 31, 2022. The tables exclude financial instruments for which the carrying amount approximates fair value.

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
September 30, 2023
Financial instruments – Assets
Debt securities held to maturity	$	202,646	$	189,221	$	—	$	189,221	$	—
Loans, net of allowance for credit losses		508,546		500,250		—		—		500,250
Financial instruments – Liabilities
Time deposits	$	195,169	$	189,481	$	—	$	189,481	$	—
Long-term debt		20,000		19,412		—		19,412		—
Other interest bearing liabilities		941		937		—		937		—

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
December 31, 2022
Financial instruments – Assets
Debt securities held to maturity	$	209,565	$	209,887	$	—	$	209,887	$	—
Loans, net of allowance for credit losses		480,485		467,667		—		—		467,667
Financial instruments – Liabilities
Time deposits	$	142,271	$	134,417	$	—	$	134,417	$	—
Long-term debt		20,000		19,156		—		19,156		—
Other interest bearing liabilities		1,011		1,009		—		1,009		—

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COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES

9 Months Ended

Sep. 30, 2023

COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES

COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES

12. COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES

In the ordinary course of business, the Company makes commitments to extend credit to its customers through letters of credit, loan commitments and lines of credit. At September 30, 2023, the Company had $111.5 million outstanding in loan commitments and other unused lines of credit extended to its customers as compared to $116.1 million at December 31, 2022.

The Company does not issue any guarantees that would require liability recognition or disclosure, other than its letters of credit. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. Generally, financial and performance letters of credit have expiration dates within one year of issuance, while commercial letters of credit have longer term commitments. The credit risk involved in issuing letters of credit is essentially the same as the risks that are involved in extending loan facilities to customers. The Company generally holds collateral and/or personal guarantees supporting these commitments. The Company had outstanding $2.5 million and  $2.6 million of financial and performance letters of credit commitments as of September 30, 2023 and December 31, 2022, respectively. Commercial letters of credit as of September 30, 2023 and December 31, 2022 totaled $9.3 million and $9.8 million, respectively. Management believes the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential number of future payments required under the corresponding guarantees. The amount of the liability as of September 30, 2023 for payments under letters of credit issued was not material. Because these instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk.

Additionally, the Company has sold qualifying residential mortgage loans to the FHLB as part of its Mortgage Partnership Finance Program (“Program”). Under the terms of the Program, there is limited recourse back to the Company for loans that do not perform in accordance with the terms of the loan agreement. Each loan sold under the Program is “credit enhanced” such that the individual loan’s rating is raised to “BBB”, as determined by the FHLB. The Program can be terminated by either the FHLB or the Company, without cause. The FHLB has no obligation to commit to purchase any mortgage loans through, or from, the Company.

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DERIVATIVES

9 Months Ended

Sep. 30, 2023

DERIVATIVES

DERIVATIVES

13. DERIVATIVES

The Company may use interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. As of September 30, 2023, the Company had no interest rate swaps as the remaining cash flow hedge matured in April 2023. As of December 31, 2022, an interest rate swap with a notional amount of $20.0 million was designated as a cash flow hedge of a short-term FHLB advance. The notional amount of the interest rate swap did not represent amounts exchanged by the parties. The amount exchanged was determined by reference to the notional amount and the other terms of the individual interest rate swap agreement. The aggregate fair value of the swap was $268,000 as of December 31, 2022 and was recorded in other assets on the Consolidated Statements of Condition, with changes in fair value recorded in other comprehensive income.

The Interest rate swap was determined to be fully effective during the periods presented and, as such, no amount of ineffectiveness was included in net income.

The effect of cash flow hedge accounting on accumulated other comprehensive income for the periods ended September 30, 2023 and December 31, 2022 were as follows:

(Dollars in thousands)	September 30, 2023
	Amount of Gain		Location of Gain	Amount of Gain
	Recognized in		Reclassified	Reclassified from
	OCI on Derivatives		from OCI into Income	OCI into Income
Interest rate contract	$	2	Interest expense on short-term borrowings and repurchase agreements	$	(269)
Total	$	2		$	(269)

(Dollars in thousands)	December 31, 2022
	Amount of Gain		Location of Gain	Amount of Gain
	Recognized in		Reclassified	Reclassified from
	OCI on Derivatives		from OCI into Income	OCI into Income
Interest rate contract	$	18	Interest expense on short-term borrowings and repurchase agreements	$	(291)
Swap termination gain		1,202	Other non-interest income		(1,202)
Total	$	1,220		$	(1,493)

The effect of cash flow hedge accounting on the Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022 was as follows:

Amount of Gain or Loss Recognized in Income on Cash Flow Hedging Relationships

	Income (Expense)				Income (Expense)
	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30,				September 30,
	2023		2022		2023		2022
Effects of cash flow hedging:
Gain on cash flow hedging relationships:
Amount reclassified from AOCI into income	$	—	$	99	$	269	$	115
Amount reclassified from AOCI into income for swap termination		—		(13)		—		1,202
Total	$	—	$	86	$	269	$	1,317

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BRANCH ACQUISITION

9 Months Ended

Sep. 30, 2023

BRANCH ACQUISITION

BRANCH ACQUISITION

14. BRANCH ACQUISITION

On May 12, 2023, the Company completed the acquisition of a branch office in Spring Run, Pennsylvania. The acquisition included real estate and deposits. The liabilities were recorded on the balance sheet at their estimated fair values as of May 12, 2023, and their results of operations of the branch have been included in the Consolidated Statement of Income since such date.

Included in the purchase price of the branch was goodwill and core deposit intangible of $765,000 and $303,000, respectively. The core deposit intangible is being amortized over a ten-year period using a sum of the years’ digit basis. The goodwill will not be amortized but will be measured annually for impairment.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed:

(Dollars in thousands)
Assets:
Cash received at settlement	$	17,384
Fixed assets		248
Goodwill		765
Core deposit intangible		303
Other assets purchased		3
	$	18,703
Liabilities:
Deposits purchased	$	18,697
Other liabilities assumed		6
	$	18,703

The estimated fair values of the assets and liabilities, including identifiable intangible assets, are subject to refinement. Subsequent adjustments to the estimated fair values of assets and liabilities acquired, and the resulting goodwill, is allowed for a period of up to one year after the acquisition date for new information that becomes available reflecting circumstances at the acquisition date.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2023

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

15. SUBSEQUENT EVENTS

On October 17, 2023, the Board of Directors declared a cash dividend of $0.22 per share to shareholders of record on November 16, 2023, payable on December 1, 2023.

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RECENT ACCOUNTING STANDARDS UPDATES (Policy)

9 Months Ended

Sep. 30, 2023

RECENT ACCOUNTING STANDARDS UPDATES

Adoption of New Accounting Standards

Adoption of New Accounting Standards:

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

On, January 1, 2023, the Company adopted ASC 326, as amended, which replaces the incurred loss methodology with an expected loss methodology referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including  held to maturity debt securities and loan receivables (see Notes 5 and 6, respectively). It also applies to certain off-balance sheet (“OBS”) credit exposures such as unfunded commitments. In addition, ASC 326 made changes to the accounting for available for sale debt securities. One such change is to require credit losses on such securities to be presented as an allowance rather than as a write-down on available for sale debt securities that management does not intend to sell or does not believe will be required to be sold.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and OBS credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP standards. The Company recorded a net decrease to retained earnings of $854,000 as of January 1, 2023 for the cumulative effect of adopting ASC 326. At adoption of ASC 326, management did not record an allowance for credit losses for the held to maturity or the available for sale debt securities portfolio.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $354,000 to the allowance for credit losses.

The following table illustrates the impact of ASC 326.

	January 1, 2023
	As Reported				Impact of
(Dollars in thousands)	Under		Pre-ASC 326		ASC 326
	ASC 326		Adoption		Adoption
Assets:
Loans
Commercial, financial and agricultural	$	634	$	297	$	337
Real estate - commercial		2,421		1,110		1,311
Real estate - construction:
1-4 family residential construction		183		69		114
Other construction loans		670		1,077		(407)
Real estate - mortgage		1,136		1,385		(249)
Obligations of states and political subdivisions		45		54		(9)
Personal		49		35		14
Allowance for credit losses on loans	$	5,138	$	4,027	$	1,111
Liabilities:
Allowance for credit losses on OBS credit exposures	$	448	$	8	$	440

Accounting Standards Update 2022-02

RECENT ACCOUNTING STANDARDS UPDATES

Adoption of New Accounting Standards

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326); Troubled Debt Restructurings and Vintage Disclosures

On, January 1, 2023, the Company also adopted ASU 2022-02, which eliminates the troubled debt restructuring (“TDR”) accounting model for creditors that have adopted ASC 326. Due to the removal of the TDR accounting model, all loan modifications will now be accounted for under the general loan modification guidance in Subtopic 310-20. In addition, on a prospective basis, the Company is subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. Vintage disclosure requirements are also required to prospectively disclose current period gross write-off information by vintage (see Note 6).

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RECENT ACCOUNTING STANDARDS UPDATES (Tables)

9 Months Ended

Sep. 30, 2023

RECENT ACCOUNTING STANDARDS UPDATES

Schedule of Error Corrections and Prior Period Adjustments

The following table illustrates the impact of ASC 326.

	January 1, 2023
	As Reported				Impact of
(Dollars in thousands)	Under		Pre-ASC 326		ASC 326
	ASC 326		Adoption		Adoption
Assets:
Loans
Commercial, financial and agricultural	$	634	$	297	$	337
Real estate - commercial		2,421		1,110		1,311
Real estate - construction:
1-4 family residential construction		183		69		114
Other construction loans		670		1,077		(407)
Real estate - mortgage		1,136		1,385		(249)
Obligations of states and political subdivisions		45		54		(9)
Personal		49		35		14
Allowance for credit losses on loans	$	5,138	$	4,027	$	1,111
Liabilities:
Allowance for credit losses on OBS credit exposures	$	448	$	8	$	440

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

9 Months Ended

Sep. 30, 2023

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of Accumulated Other Comprehensive Income

Components of accumulated other comprehensive income (loss), net of tax, consisted of the following:

			Unrealized		Unrealized
	Gains		Gains		Gains
(Dollars in thousands)	(Losses) on		(Losses) on		(Losses) on
	Cash Flow		AFS		HTM
September 30, 2023	Hedges		Securities		Securities		Total
Beginning balance, December 31, 2022	$	211	$	(6,161)	$	(35,917)	$	(41,867)
Current period other comprehensive income (loss):
Other comprehensive income before reclassification		1		(2,311)		—		(2,310)
Amounts reclassified from accumulated other comprehensive income (loss)		(212)		—		2,788		2,576
Net current period other comprehensive income (loss)		(211)		(2,311)		2,788		266
Ending balance, September 30, 2023	$	—	$	(8,472)	$	(33,129)	$	(41,601)

			Unrealized
	Gains		Gains
(Dollars in thousands)	(Losses) on		(Losses) on
	Cash Flow		AFS
September 30, 2022	Hedges		Securities		Total
Beginning balance, December 31, 2021	$	427	$	(3,792)	$	(3,365)
Current period other comprehensive income (loss):
Other comprehensive income (loss) before reclassification		944		(40,566)		(39,622)
Amounts reclassified from accumulated other comprehensive income (loss)		(1,040)		1,147		107
Net current period other comprehensive loss		(96)		(39,419)		(39,515)
Ending balance, September 30, 2022	$	331	$	(43,211)	$	(42,880)

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2023

EARNINGS PER SHARE

Computation of Basic and Diluted Earnings per Share

The following tables set forth the computation of basic and diluted earnings per share:

(Amounts in thousands, except earnings per share data)	Three Months Ended September 30,
	2023		2022
Net income	$	1,791	$	2,120
Weighted-average common shares outstanding		5,018		5,003
Basic earnings per share		0.36		0.42
Weighted-average common shares outstanding	$	5,018	$	5,003
Common stock equivalents due to effect of stock options		9		9
Total weighted-average common shares and equivalents	$	5,027	$	5,012
Diluted earnings per share	$	0.36	$	0.42
Anti-dilutive stock options outstanding		—		—

(Amounts in thousands, except earnings per share data)	Nine months ended September 30,
	2023		2022
Net income	$	4,922	$	6,218
Weighted-average common shares outstanding		5,014		4,999
Basic earnings per share		0.98		1.24
Weighted-average common shares outstanding	$	5,014	$	4,999
Common stock equivalents due to effect of stock options		8		9
Total weighted-average common shares and equivalents	$	5,022	$	5,008
Diluted earnings per share	$	0.98	$	1.24
Anti-dilutive stock options outstanding		2		1

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SECURITIES (Tables)

9 Months Ended

Sep. 30, 2023

SECURITIES

Schedule of Debt Securities Available for Sale and Held to Maturity

The amortized cost and fair value of debt securities as of September 30, 2023 and December 31, 2022, by contractual maturity, are shown in the tables below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid, with or without prepayment penalties. Securities not due at a single maturity date are shown separately.

(Dollars in thousands)	September 30, 2023
					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Debt Securities Available for Sale	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,500	$	13,727	$	—	$	(1,773)
		15,500		13,727		—		(1,773)
Obligations of state and political subdivisions
Within one year		490		490		—		—
After one year but within five years		2,761		2,595		—		(166)
After five years but within ten years		4,613		3,628		—		(985)
		7,864		6,713		—		(1,151)
Corporate debt securities
After one year but within five years		4,625		3,962		—		(663)
After five years but within ten years		13,000		9,412		—		(3,588)
		17,625		13,374		—		(4,251)
Mortgage-backed securities		36,263		32,713		—		(3,550)
Total	$	77,252	$	66,527	$	—	$	(10,725)

(Dollars in thousands)	September 30, 2023
					Gross		Gross
	Amortized		Fair		Unrecognized		Unrecognized
Debt Securities Held to Maturity	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,766	$	15,316	$	—	$	(450)
After five years but within ten years		13,517		12,949		—		(568)
		29,283		28,265		—		(1,018)
Mortgage-backed securities		173,363		160,956		—		(12,407)
Total	$	202,646	$	189,221	$	—	$	(13,425)

(Dollars in thousands)	December 31, 2022
					Gross		Gross
	Amortized		Fair		Unrealized		Unrealized
Debt Securities Available for Sale	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	15,500	$	13,705	$	—	$	(1,795)
		15,500		13,705		—		(1,795)
Obligations of state and political subdivisions
After one year but within five years		4,076		3,924		—		(152)
After five years but within ten years		4,608		3,755		—		(853)
		8,684		7,679		—		(1,005)
Corporate debt securities
After one year but within five years		4,673		4,190		—		(483)
After five years but within ten years		13,000		11,151		—		(1,849)
		17,673		15,341		—		(2,332)
Mortgage-backed securities		39,479		36,811		—		(2,668)
Total	$	81,336	$	73,536	$	—	$	(7,800)

(Dollars in thousands)	December 31, 2022
					Gross		Gross
	Amortized		Fair		Unrecognized		Unrecognized
Debt Securities Held to Maturity	Cost		Value		Gains		Losses
Obligations of U.S. Government sponsored enterprises
After one year but within five years	$	13,039	$	13,067	$	28	$	—
After five years but within ten years		15,561		15,605		56		(12)
		28,600		28,672		84		(12)
Mortgage-backed securities		180,965		181,215		1,682		(1,432)
Total	$	209,565	$	209,887	$	1,766	$	(1,444)

Summary of Proceeds Received from Sales or Calls of Available for Sale Securities

(Dollars in thousands)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Gross proceeds from sales and calls of securities	$	—	$	6,137	$	—	$	23,271
Gross realized gains from sold and called securities	$	—	$	—		—		25
Gross realized losses from sold and called securities		—		(378)		—		(1,477)
Net gains (losses) from sales and calls of securities	$	—	$	(378)	$	—	$	(1,452)

Schedule of Gross Unrealized Losses and Fair Value

The following tables summarize debt securities with unrealized and unrecognized losses at September 30, 2023 and December 31, 2022, aggregated by category and length of time in a continuous unrealized loss position.

	Unrealized Losses at September 30, 2023
	Less Than 12 Months					12 Months or More					Total
(Dollars in thousands)	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Securities available for sale
Obligations of U.S. Government sponsored enterprises	—	$	—	$	—	3	$	13,727	$	(1,773)	3	$	13,727	$	(1,773)
Obligations of state and political subdivisions	2		1,429		(48)	7		4,794		(1,103)	9		6,223		(1,151)
Corporate debt securities	—		—		—	9		13,374		(4,251)	9		13,374		(4,251)
Mortgage-backed securities	—		—		—	34		32,713		(3,550)	34		32,713		(3,550)
Total temporarily impaired securities available for sale	2	$	1,429	$	(48)	53	$	64,608	$	(10,677)	55	$	66,037	$	(10,725)
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	7	$	28,265	$	(1,018)	—	$	—	$	—	7	$	28,265	$	(1,018)
Mortgage-backed securities	35		114,476		(5,763)	15		46,480		(6,644)	50		160,956		(12,407)
Total temporarily impaired securities held to maturity	42	$	142,741	$	(6,781)	15	$	46,480	$	(6,644)	57	$	189,221	$	(13,425)
Total	44	$	144,170	$	(6,829)	68	$	111,088	$	(17,321)	112	$	255,258	$	(24,150)

	Unrealized Losses at December 31, 2022
	Less Than 12 Months					12 Months or More					Total
(Dollars in thousands)	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Securities available for sale
Obligations of U.S. Government sponsored enterprises	1	$	2,456	$	(44)	2	$	11,248	$	(1,751)	3	$	13,704	$	(1,795)
Obligations of state and political subdivisions	4		2,781		(20)	7		4,898		(985)	11		7,679		(1,005)
Corporate debt securities	5		9,831		(1,669)	4		5,510		(663)	9		15,341		(2,332)
Mortgage-backed securities	33		36,493		(2,630)	1		319		(38)	34		36,812		(2,668)
Total temporarily impaired securities available for sale	43	$	51,561	$	(4,363)	14	$	21,975	$	(3,437)	57	$	73,536	$	(7,800)
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	1	$	3,463	$	(12)	—	$	—	$	—	1	$	3,463	$	(12)
Mortgage-backed securities	9		21,643		(392)	12		48,788		(1,040)	21		70,431		(1,432)
Total temporarily impaired securities held to maturity	10	$	25,106	$	(404)	12	$	48,788	$	(1,040)	22	$	73,894	$	(1,444)
Total	53	$	76,667	$	(4,767)	26	$	70,763	$	(4,477)	79	$	147,430	$	(9,244)

Schedule of amortized cost of held to maturity debt securities by credit quality indicator

The following table summarizes the amortized cost of held to maturity debt securities aggregated by credit quality indicator based on the latest information available as of September 30, 2023.

(Dollars in thousands)
September 30, 2023	AAA		Total
Securities held to maturity
Obligations of U.S. Government sponsored enterprises	$	29,283	$	29,283
Mortgage-backed securities		173,363		173,363
	$	202,646	$	202,646

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Tables)

9 Months Ended

Sep. 30, 2023

LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

Loan Portfolio by Class

The following table presents the loan portfolio by class at September 30, 2023 and December 31, 2022.

(Dollars in thousands)
	September 30, 2023		December 31, 2022
Commercial, financial and agricultural	$	63,265	$	61,458
Real estate - commercial		212,816		199,206
Real estate - construction:
1-4 family residential construction		6,788		7,995
Other construction loans		46,852		42,753
Real estate - mortgage		160,036		150,290
Obligations of states and political subdivisions		19,985		18,770
Personal		4,390		4,040
Total	$	514,132	$	484,512

Activity in the Allowance for Loan Losses by Loan Class

The following table discloses allowance for credit loss activity by loan class for the three and nine months ended September 30, 2023.

					Real estate-				Obligations
	Commercial,				construction		Real estate-		of states
(Dollars in thousands)	financial and		Real estate-		1-4 family		construction		and political		Real estate-
	agricultural		commercial		residential		other		subdivisions		mortgage		Personal		Total
Three Months Ended
September 30, 2023
Allowance for credit losses:
Balance, beginning of period	$	677	$	2,677	$	113	$	720	$	41	$	1,150	$	64	$	5,442
Provision for credit losses (1)		33		25		31		31		—		8		(7)		121
Loans charged off		—		—		—		—		—		—		(11)		(11)
Recoveries collected		—		—		—		—		—		19		15		34
Total ending allowance balance (1)	$	710	$	2,702	$	144	$	751	$	41	$	1,177	$	61	$	5,586
Nine Months Ended
September 30, 2023
Allowance for credit losses:
Beginning balance, prior to ASC 326 adoption	$	297	$	1,110	$	69	$	1,077	$	54	$	1,385	$	35	$	4,027
Impact of adopting ASC 326		337		1,204		114		(407)		(9)		(497)		15		757
Initial allowance on loans purchased with credit deterioration		—		106		—		—		—		248		—		354
Provision for credit losses (1)		76		282		(39)		81		(4)		4		11		411
Loans charged off		—		—		—		—		—		(19)		(19)		(38)
Recoveries collected		—		—		—		—		—		56		19		75
Total ending allowance balance (1)	$	710	$	2,702	$	144	$	751	$	41	$	1,177	$	61	$	5,586

(1) Allowance/provision for credit losses in 2023 are not comparable to prior periods due to the adoptions of ASC 326.

The following table discloses allowance for credit loss activity by loan class for the three and nine months ended September 30, 2022, prior to the adoption of ASC 326.

							Obligations
	Commercial,						of states
(Dollars in thousands)	financial and		Real estate-		Real estate-		and political		Real estate-
	agricultural		commercial		construction		subdivisions		mortgage		Personal		Total
Three Months Ended
September 30, 2022
Allowance for loan losses:
Beginning balance	$	286	$	934	$	1,208	$	56	$	1,294	$	35	$	3,813
Provision for loan losses		(4)		129		(123)		—		94		4		100
Loans charged off		—		—		—		—		(22)		(4)		(26)
Recoveries collected		—		—		—		—		18		—		18
Total ending allowance balance	$	282	$	1,063	$	1,085	$	56	$	1,384	$	35	$	3,905
Nine Months Ended
September 30, 2022
Allowance for loan losses:
Beginning balance	$	251	$	1,020	$	884	$	45	$	1,269	$	39	$	3,508
Provision for loan losses		31		43		201		11		61		3		350
Loans charged off		—		—		—		—		(23)		(9)		(32)
Recoveries collected		—		—		—		—		77		2		79
Total ending allowance balance	$	282	$	1,063	$	1,085	$	56	$	1,384	$	35	$	3,905

The following table summarizes loans by loan class, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, 2022, prior to the adoption of ASC 326.

							Obligations
	Commercial,						of states
(Dollars in thousands)	financial and		Real estate-		Real estate-		and political		Real estate-
	agricultural		commercial		construction		subdivisions		mortgage		Personal		Total
December 31, 2022
Loans allocated by:
Individually evaluated for impairment	$	—	$	2,025	$	—	$	—	$	377	$	—	$	2,402
Acquired with credit deterioration		—		334		—		—		419		—		753
Collectively evaluated for impairment		61,458		196,847		50,748		18,770		149,494		4,040		481,357
	$	61,458	$	199,206	$	50,748	$	18,770	$	150,290	$	4,040	$	484,512
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Acquired with credit deterioration		—		—		—		—		—		—		—
Collectively evaluated for impairment		297		1,110		1,146		54		1,385		35		4,027
	$	297	$	1,110	$	1,146	$	54	$	1,385	$	35	$	4,027

Schedule of collateral dependent loans

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of September 30, 2023.

(Dollars in thousands)
	Real Estate
Real estate - mortgage	$	57
Total	$	57

Impaired Loans by Loan Portfolio Class

The following table summarizes information regarding impaired loans by portfolio class as of December 31, 2022, prior to the adoption of ASC 326.

(Dollars in thousands)	As of December 31, 2022
	Recorded		Unpaid Principal		Related
	Investment		Balance		Allowance
Impaired loans
With no related allowance recorded:
Real estate - commercial	$	2,025	$	2,471	$	—
Acquired with credit deterioration		334		344		—
Real estate - mortgage		377		993		—
Acquired with credit deterioration		419		634		—
Total:
Real estate - commercial	$	2,025	$	2,471	$	—
Acquired with credit deterioration		334		344		—
Real estate – mortgage		377		993		—
Acquired with credit deterioration		419		634		—
	$	3,155	$	4,442	$	—

Average recorded investment of impaired loans and related interest income recognized for the three and nine months ended September 30, 2022 are summarized in the tables below, prior to the adoption of ASC 326.

(Dollars in thousands)	Three Months Ended September 30, 2022
	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Income
Impaired loans
With no related allowance recorded:
Real estate - commercial	$	2,058	$	98	$	—
Acquired with credit deterioration		341		—		—
Real estate - mortgage		348		4		19
Acquired with credit deterioration		440		—		—
Total:
Real estate - commercial	$	2,058	$	98	$	—
Acquired with credit deterioration		341		—		—
Real estate - mortgage		348		4		19
Acquired with credit deterioration		440		—		—
	$	3,187	$	102	$	19

(Dollars in thousands)	Nine Months Ended September 30, 2022
	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Income
Impaired Loans
With no related allowance recorded:
Real estate - commercial	$	4,187	$	161	$	—
Acquired with credit deterioration		347		—		—
Real estate - mortgage		397		7		29
Acquired with credit deterioration		455		—		—
Total:
Real estate - commercial	$	4,187	$	161	$	—
Acquired with credit deterioration		347		—		—
Real estate - mortgage		397		7		29
Acquired with credit deterioration		455		—		—
	$	5,386	$	168	$	29

Nonaccrual Loans by Classes of the Loan Portfolio

The following tables present the amortized cost basis of loans on nonaccrual status, including nonaccrual status loans with no allowance, and loans past due over 89 days still accruing as of September 30, 2023 and December 31, 2022, respectively.

(Dollars in thousands)	Nonaccrual with				Loans Past Due
	No Allowance				Over 89 Days
As of September 30, 2023	for Credit Loss		Nonaccrual		Still Accruing(1)
Commercial, financial and agricultural	$	—	$	20	$	—
Real estate - mortgage		57		—		—
Total	$	57	$	20	$	—

(Dollars in thousands)					Loans Past Due
	Nonaccrual with				Over 89 Days
As of December 31, 2022	No Allowance		Nonaccrual		Still Accruing(1)
Commercial, financial and agricultural	$	—	$	—	$	24
Real estate - commercial		—		—		7
Real estate - mortgage		—		139		4
Personal		—		—		4
Total	$	—	$	139	$	39

(1) These loans are guaranteed, or well-secured, and there is an effective means of collection in process.

Loan Portfolio Summarized by the Past Due Status

(Dollars in thousands)					Greater
	30‑59 Days		60‑89 Days		Than 89 Days		Total Past
As of September 30, 2023	Past Due(1)		Past Due		Past Due		Due
Commercial, financial and agricultural	$	19	$	—	$	—	$	19
Real estate - commercial		122		—		—		122
Real estate - mortgage		673		8		14		695
Total	$	814	$	8	$	14	$	836

(Dollars in thousands)					Greater
	30‑59 Days		60‑89 Days		Than 89 Days		Total Past
As of December 31, 2022	Past Due(1)		Past Due		Past Due		Due
Commercial, financial and agricultural	$	75	$	—	$	24	$	99
Real estate - commercial		—		104		7		111
Real estate - mortgage		205		36		142		383
Personal		27		1		4		32
Total	$	307	$	141	$	177	$	625

(1) Loans are considered past due when the borrower is in arrears on two or more monthly payments.

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of September 30, 2023 and December 31, 2022, respectively.

(Dollars in thousands)			Special
As of September 30, 2023	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	63,104	$	142	$	19	$	—	$	63,265
Real estate - commercial		197,506		14,374		936		—		212,816
Real estate - construction:
1-4 family residential construction		6,788		—		—		—		6,788
Other construction loans		42,159		4,693		—		—		46,852
Real estate - mortgage		159,756		223		57		—		160,036
Obligations of states and political subdivisions		19,985		—		—		—		19,985
Personal		4,390		—		—		—		4,390
Total	$	493,688	$	19,432	$	1,012	$	—	$	514,132

(Dollars in thousands)			Special
As of December 31, 2022	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	60,990	$	468	$	—	$	—	$	61,458
Real estate - commercial		186,977		9,802		2,427		—		199,206
Real estate - construction		50,008		740						50,748
Real estate - mortgage		149,272		222		796		—		150,290
Obligations of states and political subdivisions		18,770		—		—		—		18,770
Personal		4,040		—		—		—		4,040
Total	$	470,057	$	11,232	$	3,223	$	—	$	484,512

Based on the most recent analysis performed, the amortized cost basis by risk category of loans by class of loan and by origination year is as follows:

													Revolving		Revolving
(Dollars in thousands)													Loans		Loans
													Amortized		Converted
As of September 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial, financial and agricultural:
Risk Rating
Pass	$	10,032	$	6,361	$	12,451	$	5,403	$	4,141	$	1,569	$	23,147	$	—	$	63,104
Special Mention		70		—		—		—		72		—		—		—		142
Substandard		—		—		—		—		—		19		—		—		19
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial, financial and agricultural loans	$	10,102	$	6,361	$	12,451	$	5,403	$	4,213	$	1,588	$	23,147	$	—	$	63,265
Commercial, financial and agricultural loans:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - commercial:
Risk Rating
Pass	$	17,355	$	58,584	$	23,947	$	16,208	$	18,052	$	59,570	$	3,789	$	1	$	197,506
Special Mention		—		—		—		9,001		421		4,952		—		—		14,374
Substandard		—		—		—		—		—		936		—		—		936
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - commercial loans	$	17,355	$	58,584	$	23,947	$	25,209	$	18,473	$	65,458	$	3,789	$	1	$	212,816
Real estate - commercial:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - construction - 1-4 family residential:
Risk Rating
Pass	$	2,818	$	3,411	$	—	$	—	$	—	$	559	$	—	$	—	$	6,788
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - construction - 1-4 family residential loans	$	2,818	$	3,411	$	—	$	—	$	—	$	559	$	—	$	—	$	6,788
Real estate - construction - 1-4 family residential:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - construction - other:
Risk Rating
Pass	$	2,280	$	6,732	$	17,646	$	2,469	$	393	$	3,303	$	9,336	$	—	$	42,159
Special Mention		—		—		2		4,691		—		—		—		—		4,693
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - construction - other loans	$	2,280	$	6,732	$	17,648	$	7,160	$	393	$	3,303	$	9,336	$	—	$	46,852
Real estate - construction - other:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

													Revolving		Revolving
(Dollars in thousands)													Loans		Loans
													Amortized		Converted
As of September 30, 2023 (cont.)	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Real estate - mortgage:
Risk Rating
Pass	$	17,922	$	44,975	$	19,869	$	15,003	$	5,627	$	47,730	$	8,510	$	120	$	159,756
Special Mention		—		—		—		—		—		223		—		—		223
Substandard		—		—		—		—		—		57		—		—		57
Doubtful		—		—		—		—		—		—		—		—		—
Total real estate - mortgage loans	$	17,922	$	44,975	$	19,869	$	15,003	$	5,627	$	48,010	$	8,510	$	120	$	160,036
Real estate - mortgage:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	(19)	$	—	$	—	$	(19)
Obligations of states and political subdivisions:
Risk Rating
Pass	$	2,741	$	3,882	$	2,456	$	5,106	$	12	$	5,787	$	1	$	—	$	19,985
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Obligations of states and political subdivisions	$	2,741	$	3,882	$	2,456	$	5,106	$	12	$	5,787	$	1	$	—	$	19,985
Obligations of states and political subdivisions:
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Personal:
Risk Rating
Pass	$	1,997	$	1,339	$	466	$	116	$	127	$	231	$	110	$	4	$	4,390
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total personal loans	$	1,997	$	1,339	$	466	$	116	$	127	$	231	$	110	$	4	$	4,390
Personal:
Current period gross write offs	$	—	$	—	$	—	$	(4)	$	—	$	(15)	$	—	$	—	$	(19)

XML

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2023

GOODWILL AND OTHER INTANGIBLE ASSETS

Amortization Schedule for Intangible Assets

The following table shows the amortization schedule for each of the intangible assets recorded.

(Dollars in thousands)	Path Valley		FNBPA		LCB
	Acquisition		Acquisition		Acquisition
	Core		Core		Core
	Deposit		Deposit		Deposit
	Intangible		Intangible		Intangible
Beginning Balance at Acquisition Date	$	303	$	303	$	289
Amortization expense recorded prior to January 1, 2022		—		250		167
Amortization expense recorded in the twelve months
ended December 31, 2022		—		21		33
Unamortized balance as of December 31, 2022		—		32		89
Amortization expense recorded in the
nine months ended September 30, 2023		23		12		21
Unamortized balance as of September 30, 2023	$	280	$	20	$	68
Scheduled remaining amortization expense for years ended:
December 31, 2023	$	14	$	4	$	7
December 31, 2024		51		11		23
December 31, 2025		46		5		17
December 31, 2026		40		—		12
December 31, 2027		35		—		7
Thereafter		94		—		2

XML

BORROWINGS (Tables)

9 Months Ended

Sep. 30, 2023

BORROWINGS

Schedule of Borrowings

Borrowings consisted of the following as of September 30, 2023 and December 31, 2022.

(Dollars in thousands)	September 30,		December 31,
	2023		2022
Securities sold under agreements to repurchase	$	11,638	$	7,585
Overnight advances with FHLB		12,000		28,125
Short-term debt		16,000		20,000
Long-term debt with FHLB		20,000		20,000
	$	59,638	$	75,710

Scheduled Maturities of Long-Term Debt

Long-term debt is comprised only of Federal Home Loan Bank (“FHLB”) advances with an original maturity of one year or more. The following table summarizes the scheduled maturities of long-term debt as of September 30, 2023.

(Dollars in thousands)	Scheduled		Weighted Average
Year	Maturities		Interest Rate
2023	$	—	—	%
2024		15,000	2.29
2025		5,000	2.41
2026		—	—
2027		—	—
Thereafter		—	—
	$	20,000	2.32	%

XML

STOCK COMPENSATION PLAN (Tables)

9 Months Ended

Sep. 30, 2023

STOCK COMPENSATION PLAN

Summary of Non-Vested Restricted Shares Activity

The following table presents a summary of the status of the Company’s non-vested restricted stock awards as of September 30, 2023. Changes during the period then ended are presented further below:

		Weighted
		Average
		Grant Date
	Shares	Fair Value
Non-vested at January 1, 2023	20,975	$	17.10
Vested	(6,739)		19.05
Forfeited	—		—
Granted	11,409		16.25
Non-vested at September 30, 2023	25,645	$	16.21

Schedule of Stock Options Activity

A summary of the status of the outstanding stock options as of September 30, 2023, and changes during the period then ended, is presented below:

		Weighted
		Average
		Exercise
	Shares	Price
Outstanding at beginning of year	60,347	$	17.74
Granted	—		—
Exercised	—		—
Expired	(9,922)		17.65
Outstanding at end of year	50,425	$	17.76

XML

FAIR VALUE MEASUREMENT (Tables)

9 Months Ended

Sep. 30, 2023

FAIR VALUE MEASUREMENT

Fair Value Measurements by Level of Valuation Inputs

The following tables summarize financial assets and financial liabilities measured at fair value as of September 30, 2023 and December 31, 2022 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. There were no assets measured at fair value on a non-recurring basis as of September 30, 2023 or December 31, 2022.

	(Level 1)		(Level 2)		(Level 3)
	Quoted Prices in		Significant		Significant
(Dollars in thousands)	Active Markets		Other		Other
	for Identical		Observable		Unobservable
September 30, 2023	Assets		Inputs		Inputs		Total
Assets measured at fair value on a recurring basis:
Debt securities available for sale:
Obligations of U.S. Government agencies and corporations	$	—	$	13,727	$	—	$	13,727
Obligations of state and political subdivisions		—		6,713		—		6,713
Corporate debt securities		—		7,466		5,908		13,374
Mortgage-backed securities		—		32,713		—		32,713
Total debt securities available for sale	$	—	$	60,619	$	5,908	$	66,527
Equity securities	$	978	$	—	$	—	$	978
Mortgage servicing rights	$	—	$	—	$	84	$	84

	(Level 1)		(Level 2)		(Level 3)
	Quoted Prices in		Significant		Significant
(Dollars in thousands)	Active Markets		Other		Other
	for Identical		Observable		Unobservable
December 31, 2022	Assets		Inputs		Inputs		Total
Assets measured at fair value on a recurring basis:
Debt securities available for sale:
Obligations of U.S. Government agencies and corporations	$	—	$	13,705	$	—	$	13,705
Obligations of state and political subdivisions		—		7,679		—		7,679
Corporate debt securities		—		8,196		7,145		15,341
Mortgage-backed securities		—		36,811		—		36,811
Total debt securities available for sale	$	—	$	66,391	$	7,145	$	73,536
Equity securities	$	1,056	$	—	$	—	$	1,056
Mortgage servicing rights	$	—	$	—	$	92	$	92
Interest rate swaps	$	—	$	268	$	—	$	268

Reconciliation of Investment Securities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

The table below presents a reconciliation of the beginning and ending balances of investment securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three month periods ended September 30, 2023 and 2022.

	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30,				September 30,
	2023		2022		2023		2022
Investment Securities:
Beginning balance	$	5,908	$	7,788	$	7,145	$	4,520
Total gains (loss) included in OCI		—		(440)		(1,237)		(1,172)
Purchases		—		—		—		4,000
Principal payments and other		—		—		—		—
Sales		—		—		—		—
Balance, end of period	$	5,908	$	7,348	$	5,908	$	7,348

Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows:

	Financial Instruments
(Dollars in thousands)	September 30, 2023				December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and due from banks	$	27,377	$	27,377	$	10,856	$	10,856
Interest bearing deposits with banks		390		390		143		143
Debt securities available for sale		66,527		66,527		73,536		73,536
Debt securities held to maturity		202,646		189,221		209,565		209,887
Restricted investment in bank stock		2,476		N/A		3,666		N/A
Loans, net of allowance for credit losses		508,546		500,250		480,485		467,667
Interest rate swaps		—		—		268		268
Accrued interest receivable		2,509		2,509		2,124		2,124
Financial liabilities:
Time deposits	$	195,169	$	189,481	$	142,271	$	134,417
Securities sold under agreements to repurchase		11,638		N/A		7,585		N/A
Short-term borrowings		28,000		27,901		48,125		48,122
Long-term debt		20,000		19,412		20,000		19,156
Other interest bearing liabilities		941		937		1,011		1,009
Accrued interest payable		1,091		1,091		333		333
Off-balance sheet financial instruments:
Commitments to extend credit	$	—	$	—	$	—	$	—
Letters of credit		—		—		—		—

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following tables present the carrying amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments not previously disclosed as of September 30, 2023 and December 31, 2022. The tables exclude financial instruments for which the carrying amount approximates fair value.

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
September 30, 2023
Financial instruments – Assets
Debt securities held to maturity	$	202,646	$	189,221	$	—	$	189,221	$	—
Loans, net of allowance for credit losses		508,546		500,250		—		—		500,250
Financial instruments – Liabilities
Time deposits	$	195,169	$	189,481	$	—	$	189,481	$	—
Long-term debt		20,000		19,412		—		19,412		—
Other interest bearing liabilities		941		937		—		937		—

					(Level 1)		(Level 2)		(Level 3)
					Quoted Prices in		Significant		Significant
(Dollars in thousands)					Active Markets		Other		Other
	Carrying				for Identical		Observable		Unobservable
	Amount		Fair Value		Assets or Liabilities		Inputs		Inputs
December 31, 2022
Financial instruments – Assets
Debt securities held to maturity	$	209,565	$	209,887	$	—	$	209,887	$	—
Loans, net of allowance for credit losses		480,485		467,667		—		—		467,667
Financial instruments – Liabilities
Time deposits	$	142,271	$	134,417	$	—	$	134,417	$	—
Long-term debt		20,000		19,156		—		19,156		—
Other interest bearing liabilities		1,011		1,009		—		1,009		—

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DERIVATIVES (Tables)

9 Months Ended

Sep. 30, 2023

DERIVATIVES

Schedule of Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income

The effect of cash flow hedge accounting on accumulated other comprehensive income for the periods ended September 30, 2023 and December 31, 2022 were as follows:

(Dollars in thousands)	September 30, 2023
	Amount of Gain		Location of Gain	Amount of Gain
	Recognized in		Reclassified	Reclassified from
	OCI on Derivatives		from OCI into Income	OCI into Income
Interest rate contract	$	2	Interest expense on short-term borrowings and repurchase agreements	$	(269)
Total	$	2		$	(269)

(Dollars in thousands)	December 31, 2022
	Amount of Gain		Location of Gain	Amount of Gain
	Recognized in		Reclassified	Reclassified from
	OCI on Derivatives		from OCI into Income	OCI into Income
Interest rate contract	$	18	Interest expense on short-term borrowings and repurchase agreements	$	(291)
Swap termination gain		1,202	Other non-interest income		(1,202)
Total	$	1,220		$	(1,493)

Schedule of Effect of Cash Flow Hedge Accounting on the Consolidated Statements of Income

The effect of cash flow hedge accounting on the Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022 was as follows:

Amount of Gain or Loss Recognized in Income on Cash Flow Hedging Relationships

	Income (Expense)				Income (Expense)
	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30,				September 30,
	2023		2022		2023		2022
Effects of cash flow hedging:
Gain on cash flow hedging relationships:
Amount reclassified from AOCI into income	$	—	$	99	$	269	$	115
Amount reclassified from AOCI into income for swap termination		—		(13)		—		1,202
Total	$	—	$	86	$	269	$	1,317

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BRANCH ACQUISITIONS (Tables)

9 Months Ended

Sep. 30, 2023

BRANCH ACQUISITION

Summary of estimated fair value of the assets acquired and liabilities assumed

(Dollars in thousands)
Assets:
Cash received at settlement	$	17,384
Fixed assets		248
Goodwill		765
Core deposit intangible		303
Other assets purchased		3
	$	18,703
Liabilities:
Deposits purchased	$	18,697
Other liabilities assumed		6
	$	18,703

The estimated fair values of the assets and liabilities, including identifiable intangible assets, are subject to refinement. Subsequent adjustments to the estimated fair values of assets and liabilities acquired, and the resulting goodwill, is allowed for a period of up to one year after the acquisition date for new information that becomes available reflecting circumstances at the acquisition date.

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RECENT ACCOUNTING STANDARDS UPDATES (Details) - USD ($)	Jan. 01, 2023	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Net decrease to retained earnings		$ 38,135,000	$ 37,001,000	$ 36,949,000	$ 34,905,000	$ 46,425,000	$ 71,290,000
Impact of adopting ASC 326
Net decrease to retained earnings				$ (854,000)
Impact of adopting ASC 326 | Accounting Standards Update 2016-13
Net decrease to retained earnings	$ (854,000)
Addition to allowance for credit losses	$ 354,000

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RECENT ACCOUNTING STANDARDS UPDATES (Impact of ASC 326) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Jan. 01, 2023	Dec. 31, 2022
Assets:
Allowance for credit losses on loans	$ 5,586	$ 5,442		$ 4,027
Liabilities:
Allowance for credit losses on OBS credit exposures				8
Commercial Portfolio Segment | Commercial, Financial and Agricultural
Assets:
Allowance for credit losses on loans	710	677		297
Commercial Portfolio Segment | Commercial Loan
Assets:
Allowance for credit losses on loans	2,702	2,677		1,110
Commercial Portfolio Segment | Construction Loan
Assets:
Allowance for credit losses on loans				1,146
Commercial Portfolio Segment | 1-4 family residential construction
Assets:
Allowance for credit losses on loans	144	113		69
Commercial Portfolio Segment | Other construction loans
Assets:
Allowance for credit losses on loans	751	720		1,077
Commercial Portfolio Segment | Obligations of State and Political Subdivisions
Assets:
Allowance for credit losses on loans	41	41		54
Consumer Portfolio Segment | Mortgage Loan
Assets:
Allowance for credit losses on loans	1,177	1,150		1,385
Consumer Portfolio Segment | Personal Loan
Assets:
Allowance for credit losses on loans	$ 61	$ 64		$ 35
Impact of adopting ASC 326
Assets:
Allowance for credit losses on loans			$ 5,138
Liabilities:
Allowance for credit losses on OBS credit exposures			448
Impact of adopting ASC 326 | Commercial Portfolio Segment | Commercial, Financial and Agricultural
Assets:
Allowance for credit losses on loans			634
Impact of adopting ASC 326 | Commercial Portfolio Segment | Commercial Loan
Assets:
Allowance for credit losses on loans			2,421
Impact of adopting ASC 326 | Commercial Portfolio Segment | 1-4 family residential construction
Assets:
Allowance for credit losses on loans			183
Impact of adopting ASC 326 | Commercial Portfolio Segment | Other construction loans
Assets:
Allowance for credit losses on loans			670
Impact of adopting ASC 326 | Commercial Portfolio Segment | Obligations of State and Political Subdivisions
Assets:
Allowance for credit losses on loans			45
Impact of adopting ASC 326 | Consumer Portfolio Segment | Mortgage Loan
Assets:
Allowance for credit losses on loans			1,136
Impact of adopting ASC 326 | Consumer Portfolio Segment | Personal Loan
Assets:
Allowance for credit losses on loans			49
Cumulative effect, period of adoption, adjusted balance
Assets:
Allowance for credit losses on loans			1,111
Liabilities:
Allowance for credit losses on OBS credit exposures			440
Cumulative effect, period of adoption, adjusted balance | Commercial Portfolio Segment | Commercial, Financial and Agricultural
Assets:
Allowance for credit losses on loans			337
Cumulative effect, period of adoption, adjusted balance | Commercial Portfolio Segment | Commercial Loan
Assets:
Allowance for credit losses on loans			1,311
Cumulative effect, period of adoption, adjusted balance | Commercial Portfolio Segment | 1-4 family residential construction
Assets:
Allowance for credit losses on loans			114
Cumulative effect, period of adoption, adjusted balance | Commercial Portfolio Segment | Other construction loans
Assets:
Allowance for credit losses on loans			(407)
Cumulative effect, period of adoption, adjusted balance | Commercial Portfolio Segment | Obligations of State and Political Subdivisions
Assets:
Allowance for credit losses on loans			(9)
Cumulative effect, period of adoption, adjusted balance | Consumer Portfolio Segment | Mortgage Loan
Assets:
Allowance for credit losses on loans			(249)
Cumulative effect, period of adoption, adjusted balance | Consumer Portfolio Segment | Personal Loan
Assets:
Allowance for credit losses on loans			$ 14

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Components of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Beginning balance	$ 37,001	$ 46,425	$ 36,949	$ 71,290
Net current period other comprehensive income (loss)	412	(12,570)	266	(39,515)
Ending balance	38,135	34,905	38,135	34,905
Accumulated Other Comprehensive Income (Loss)
Beginning balance	(42,013)	(30,310)	(41,867)	(3,365)
Other comprehensive income (loss) before reclassification			(2,310)
Amounts reclassified from accumulated other comprehensive income (loss)			2,576
Net current period other comprehensive income (loss)	412	(12,570)	266	(39,515)
Ending balance	(41,601)	(42,880)	(41,601)	(42,880)
Gains Losses on Cash Flow Hedges
Beginning balance			211	427
Other comprehensive income (loss) before reclassification			1	944
Amounts reclassified from accumulated other comprehensive income (loss)			(212)	(1,040)
Net current period other comprehensive income (loss)			(211)	(96)
Ending balance		331		331
Unrealized Gains Losses on Securities
Beginning balance				(3,365)
Other comprehensive income (loss) before reclassification				(39,622)
Amounts reclassified from accumulated other comprehensive income (loss)				107
Net current period other comprehensive income (loss)				(39,515)
Ending balance		(42,880)		(42,880)
Unrealized Gains (Losses) on AFS Securities
Beginning balance			(6,161)	(3,792)
Other comprehensive income (loss) before reclassification			(2,311)	(40,566)
Amounts reclassified from accumulated other comprehensive income (loss)				1,147
Net current period other comprehensive income (loss)			(2,311)	(39,419)
Ending balance	(8,472)	$ (43,211)	(8,472)	$ (43,211)
AOCI, Accumulated Gain (Loss), Debt Securities, Held to Maturity, Parent
Beginning balance			(35,917)
Amounts reclassified from accumulated other comprehensive income (loss)			2,788
Net current period other comprehensive income (loss)			2,788
Ending balance	$ (33,129)		$ (33,129)

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EARNINGS PER SHARE (Computation of Basic and Diluted Earnings per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
EARNINGS PER SHARE
Net income	$ 1,791	$ 2,120	$ 4,922	$ 6,218
Weighted-average common shares outstanding	5,018	5,003	5,014	4,999
Basic earnings per share	$ 0.36	$ 0.42	$ 0.98	$ 1.24
Common stock equivalents due to effect of stock options	9	9	8	9
Total weighted-average common shares and equivalents	5,027	5,012	5,022	5,008
Diluted earnings per share	$ 0.36	$ 0.42	$ 0.98	$ 1.24
Anti-dilutive stock options outstanding			2	1

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SECURITIES (Details)		3 Months Ended		9 Months Ended
	Oct. 01, 2022 USD ($)	Sep. 30, 2023 USD ($) security	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) security	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($) security
Debt securities available for sale		$ 66,527,000		$ 66,527,000		$ 73,536,000
Unrealized Loss	$ 46,800,000
Transfer from available for sale	0
Carrying value of pledged assets		174,300,000		174,300,000		102,300,000
Equity securities		978,000		978,000		1,056,000
Held-to-maturity securities		$ 202,646,000		$ 202,646,000		$ 209,565,000
Securities in unrealized loss position | security		55		55		57
Realized gain (loss) on equity securities		$ (14,000)	$ (30,000)	$ (78,000)	$ (110,000)
Proceeds from sales or calls of securities		0	6,137,000	0	23,271,000
Merger with Banc of California, Inc
Subordinated debt		1,500,000		1,500,000
Amount in investment agreements to issue		$ 400,000,000.0		$ 400,000,000.0
Obligations of U.S. Government Agencies and Corporations
Investment portfolio percentage		16.00%		16.00%
Debt securities available for sale		$ 13,727,000		$ 13,727,000		$ 13,705,000
Held-to-maturity securities		$ 29,283,000		$ 29,283,000		$ 28,600,000
Securities in unrealized loss position | security		3		3		3
Securities in unrealized loss position | security		10		10
U.S. Government Sponsored Agencies
Transfer of securities from available for sale to held to maturity	28,400,000
Obligations of State and Political Subdivisions
Investment portfolio percentage		3.00%		3.00%
Debt securities available for sale		$ 6,713,000		$ 6,713,000		$ 7,679,000
Debt Securities Maturity Term				5 years
Securities in unrealized loss position | security		9		9		11
Corporate Debt Securities
Investment portfolio percentage		5.00%		5.00%
Debt securities available for sale		$ 13,374,000		$ 13,374,000		$ 15,341,000
Securities in unrealized loss position | security		9		9		9
Mortgage-Backed Securities
Investment portfolio percentage		76.00%		76.00%
Transfer of securities from available for sale to held to maturity	$ 183,900,000
Held-to-maturity securities		$ 173,363,000		$ 173,363,000
Securities in unrealized loss position | security		34		34		34
Securities in unrealized loss position | security		84		84
Federal Farm Credit Bank
Available-for-sale and held-to-maturity securities greater than 10% of stockholders equity		$ 10,800,000		$ 10,800,000		$ 10,900,000
Pennsylvania Housing Finance
Available-for-sale and held-to-maturity securities greater than 10% of stockholders equity		5,100,000		5,100,000		$ 6,100,000
Subordinated Debt
Debt security			$ 24,700,000		24,700,000
Realized gain (loss) on debt securities					$ (1,500,000)
Subordinated Debt | Pacific Western Bank
Debt securities available for sale		$ 1,500,000		$ 1,500,000

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SECURITIES (Debt Securities Available for Sale) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Schedule of Available-for-sale Securities
Amortized Cost of AFS Securities, Total	$ 77,252	$ 81,336
Fair Value of AFS Securities, Total	66,527	73,536
Gross Unrealized Gains on AFS Securities, Total	0	0
Gross Unrealized Losses on AFS Securities, Total	(10,725)	(7,800)
Obligations of U.S. Government Agencies and Corporations
Schedule of Available-for-sale Securities
Amortized Cost of AFS Securities Maturing After One Year But Within Five Years	15,500	15,500
Amortized Cost of AFS Securities, Total	15,500	15,500
Fair Value of AFS Securities Maturing After One Year But Within Five Years	13,727	13,705
Fair Value of AFS Securities, Total	13,727	13,705
Gross Unrealized Gains on AFS Securities Maturing After One Year But Within Five Years	0	0
Gross Unrealized Gains on AFS Securities, Total	0	0
Gross Unrealized Losses on AFS Securities Maturing After One Year But Within Five Years	(1,773)	(1,795)
Gross Unrealized Losses on AFS Securities, Total	(1,773)	(1,795)
Obligations of State and Political Subdivisions
Schedule of Available-for-sale Securities
Amortized Cost of AFS Securities Maturing Within One Year	490
Amortized Cost of AFS Securities Maturing After One Year But Within Five Years	2,761	4,076
Amortized Cost of AFS Securities Maturing After Five Years But Within Ten Years	4,613	4,608
Amortized Cost of AFS Securities, Total	7,864	8,684
Fair Value of AFS Securities Maturing Within One Year	490
Fair Value of AFS Securities Maturing After One Year But Within Five Years	2,595	3,924
Fair Value of AFS Securities Maturing After Five Years But Within Ten Years	3,628	3,755
Fair Value of AFS Securities, Total	6,713	7,679
Gross Unrealized Gains on AFS Securities Maturing Within One Year	0
Gross Unrealized Gains on AFS Securities Maturing After One Year But Within Five Years	0	0
Gross Unrealized Gains on AFS Securities Maturing After Five Years But Within ten Years	0	0
Gross Unrealized Gains on AFS Securities, Total	0	0
Gross Unrealized Losses on AFS Securities Maturing After One Year But Within Five Years	(166)	(152)
Gross Unrealized Losses on AFS Securities Maturing After Five Years But Within Ten Years	(985)	(853)
Gross Unrealized Losses on AFS Securities, Total	(1,151)	(1,005)
Corporate Debt Securities
Schedule of Available-for-sale Securities
Amortized Cost of AFS Securities Maturing After One Year But Within Five Years	4,625	4,673
Amortized Cost of AFS Securities Maturing After Five Years But Within Ten Years	13,000	13,000
Amortized Cost of AFS Securities, Total	17,625	17,673
Fair Value of AFS Securities Maturing After One Year But Within Five Years	3,962	4,190
Fair Value of AFS Securities Maturing After Five Years But Within Ten Years	9,412	11,151
Fair Value of AFS Securities, Total	13,374	15,341
Gross Unrealized Gains on AFS Securities Maturing After One Year But Within Five Years	0	0
Gross Unrealized Gains on AFS Securities Maturing After Five Years But Within ten Years	0	0
Gross Unrealized Gains on AFS Securities, Total	0	0
Gross Unrealized Losses on AFS Securities Maturing After One Year But Within Five Years	(663)	(483)
Gross Unrealized Losses on AFS Securities Maturing After Five Years But Within Ten Years	(3,588)	(1,849)
Gross Unrealized Losses on AFS Securities, Total	(4,251)	(2,332)
Mortgage-Backed Securities
Schedule of Available-for-sale Securities
Amortized Cost of AFS Securities Without Single Maturity Date	36,263	39,479
Fair Value of AFS Securities Without Single Maturity Date	32,713	36,811
Gross Unrealized Gains on AFS Securities Without Single Maturity Date	0	0
Gross Unrealized Losses on AFS Securities Without Single Maturity Date	$ (3,550)	$ (2,668)

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SECURITIES (Held to Maturity) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities, Total	$ 202,646	$ 209,565
Fair Value of HTM Securities, Total	189,221	209,887
Gross Unrealized Gains on HTM Securities, Total		1,766
Gross Unrealized Losses on HTM Securities, Total	(13,425)	(1,444)
Obligations of U.S. Government Agencies and Corporations
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities Maturing After One Year But Within Five Years	15,766	13,039
Amortized Cost of HTM Securities Maturing After Five Years But Within Ten Years	13,517	15,561
Amortized Cost of HTM Securities, Total	29,283	28,600
Fair Value of HTM Securities Maturing After One Year But Within Five Years	15,316	13,067
Fair Value of HTM Securities Maturing After Five Years But Within Ten Years	12,949	15,605
Fair Value of HTM Securities, Total	28,265	28,672
Gross Unrealized Gains on HTM Securities Maturing After one year but within five years		28
Gross Unrealized Gains on HTM Securities Maturing After five years but within ten years		56
Gross Unrealized Gains on HTM Securities, Total		84
Gross Unrealized Losses on HTM Securities Maturing After one year but within five years	(450)
Gross Unrealized Losses on HTM Securities Maturing After five years but within ten years	(568)	(12)
Gross Unrealized Losses on HTM Securities, Total	(1,018)	(12)
Mortgage-Backed Securities
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities, Total	173,363
Amortized Cost of HTM Securities Without Single Maturity Date	173,363	180,965
Fair Value of HTM Securities Without Single Maturity Date	160,956	181,215
Gross Unrealized Gains on HTM Securities Without Single Maturity Date		1,682
Gross Unrealized Losses on HTM Securities Without Single Maturity Date	$ (12,407)	$ (1,432)

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SECURITIES (Summary of Proceeds Received from Sales or Calls of Available for Sale Securities) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023 USD ($) security	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) security	Sep. 30, 2022 USD ($)
SECURITIES
Number of called securities | security	1		2
Gross proceeds from sales and calls of securities	$ 0	$ 6,137	$ 0	$ 23,271
Gross realized gains from sold and called securities				25
Gross realized losses from sold and called securities		(378)		(1,477)
Net gains (losses) from sales and calls of securities		$ (378)	$ 0	$ (1,452)

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SECURITIES (Schedule of Unrealized Losses) (Details) $ in Thousands	Sep. 30, 2023 USD ($) security	Dec. 31, 2022 USD ($) security
Schedule of Available-for-sale Securities
Number of Securities, Less Than 12 Months | security	2	43
Fair Value, Less Than 12 Months	$ 1,429	$ 51,561
Unrealized Losses, Less Than 12 Months	$ (48)	$ (4,363)
Number of Securities, 12 Months or More | security	53	14
Fair Value, 12 Months or More	$ 64,608	$ 21,975
Unrealized Losses, 12 Months or More	$ (10,677)	$ (3,437)
Number of Securities, Total | security	55	57
Fair Value, Total	$ 66,037	$ 73,536
Unrealized Losses, Total	$ (10,725)	$ (7,800)
Number of Securities, Less Than 12 Months. | security	42	10
Fair Value, Less Than 12 Months	$ 142,741	$ 25,106
Unrealized Losses, Less Than 12 Months	$ (6,781)	$ (404)
Number of Securities, 12 Months or More | security	15	12
Fair Value, 12 Months or More	$ 46,480	$ 48,788
Unrealized Losses, 12 Months or More	$ (6,644)	$ (1,040)
Number of Securities, Total | security	57	22
Fair Value, Total	$ 189,221	$ 73,894
Unrealized Losses, Total	$ (13,425)	$ (1,444)
Number of Securities, Less Than 12 Months. | security	44	53
Fair Value, Less Than 12 Months	$ 144,170	$ 76,667
Unrealized Losses, Less Than 12 Months	$ (6,829)	$ (4,767)
Number of Securities, 12 Months or More | security	68	(26)
Fair Value, 12 Months or More	$ 111,088	$ 70,763
Unrealized Losses, 12 Months or More	$ (17,321)	$ (4,477)
Number of Securities, Total | security	112	79
Fair Value, Total	$ 255,258	$ 147,430
Unrealized Losses, Total	$ (24,150)	$ (9,244)
Obligations of U.S. Government Agencies and Corporations
Schedule of Available-for-sale Securities
Number of Securities, Less Than 12 Months | security		1
Fair Value, Less Than 12 Months		$ 2,456
Unrealized Losses, Less Than 12 Months		$ (44)
Number of Securities, 12 Months or More | security	3	2
Fair Value, 12 Months or More	$ 13,727	$ 11,248
Unrealized Losses, 12 Months or More	$ (1,773)	$ (1,751)
Number of Securities, Total | security	3	3
Fair Value, Total	$ 13,727	$ 13,704
Unrealized Losses, Total	$ (1,773)	$ (1,795)
Number of Securities, Less Than 12 Months. | security	7	1
Fair Value, Less Than 12 Months	$ 28,265	$ 3,463
Unrealized Losses, Less Than 12 Months	$ (1,018)	$ (12)
Number of Securities, 12 Months or More | security	0	0
Fair Value, 12 Months or More	$ 0	$ 0
Unrealized Losses, 12 Months or More	$ 0	$ 0
Number of Securities, Total | security	7	1
Fair Value, Total	$ 28,265	$ 3,463
Unrealized Losses, Total	$ (1,018)	$ (12)
Obligations of State and Political Subdivisions
Schedule of Available-for-sale Securities
Number of Securities, Less Than 12 Months | security	2	4
Fair Value, Less Than 12 Months	$ 1,429	$ 2,781
Unrealized Losses, Less Than 12 Months	$ (48)	$ (20)
Number of Securities, 12 Months or More | security	7	7
Fair Value, 12 Months or More	$ 4,794	$ 4,898
Unrealized Losses, 12 Months or More	$ (1,103)	$ (985)
Number of Securities, Total | security	9	11
Fair Value, Total	$ 6,223	$ 7,679
Unrealized Losses, Total	$ (1,151)	$ (1,005)
Corporate Debt Securities
Schedule of Available-for-sale Securities
Number of Securities, Less Than 12 Months | security		5
Fair Value, Less Than 12 Months		$ 9,831
Unrealized Losses, Less Than 12 Months		$ (1,669)
Number of Securities, 12 Months or More | security	9	4
Fair Value, 12 Months or More	$ 13,374	$ 5,510
Unrealized Losses, 12 Months or More	$ (4,251)	$ (663)
Number of Securities, Total | security	9	9
Fair Value, Total	$ 13,374	$ 15,341
Unrealized Losses, Total	$ (4,251)	$ (2,332)
Mortgage-Backed Securities
Schedule of Available-for-sale Securities
Number of Securities, Less Than 12 Months | security		33
Fair Value, Less Than 12 Months		$ 36,493
Unrealized Losses, Less Than 12 Months		$ (2,630)
Number of Securities, 12 Months or More | security	34	1
Fair Value, 12 Months or More	$ 32,713	$ 319
Unrealized Losses, 12 Months or More	$ (3,550)	$ (38)
Number of Securities, Total | security	34	34
Fair Value, Total	$ 32,713	$ 36,812
Unrealized Losses, Total	$ (3,550)	$ (2,668)
Number of Securities, Less Than 12 Months. | security	35	9
Fair Value, Less Than 12 Months	$ 114,476	$ 21,643
Unrealized Losses, Less Than 12 Months	$ (5,763)	$ (392)
Number of Securities, 12 Months or More | security	15	12
Fair Value, 12 Months or More	$ 46,480	$ 48,788
Unrealized Losses, 12 Months or More	$ (6,644)	$ (1,040)
Number of Securities, Total | security	50	21
Fair Value, Total	$ 160,956	$ 70,431
Unrealized Losses, Total	$ (12,407)	$ (1,432)

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SECURITIES (Aggregation by credit quality indicator) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities, Total	$ 202,646	$ 209,565
Obligations of U.S. Government Agencies and Corporations
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities, Total	29,283	$ 28,600
Mortgage-Backed Securities
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities, Total	173,363
Fitch, AAA Rating
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities, Total	202,646
Fitch, AAA Rating | Obligations of U.S. Government Agencies and Corporations
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities, Total	29,283
Fitch, AAA Rating | Mortgage-Backed Securities
Schedule of Held-to-Maturity Securities
Amortized Cost of HTM Securities, Total	$ 173,363

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Details) - USD ($)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2023	Dec. 31, 2022
Financing Receivable, Allowance for Credit Losses
Troubled debt restructured loan			$ 2,300,000
Reserves relating to TDR			0
Restructured loan balance in default status			0
Credit quality indicators information		This analysis includes loans to commercial customers with an aggregate loan exposure greater than $500,000 and for lines of credit more than $50,000.
Unfunded commitments	$ 55,000,000.0	$ 55,000,000.0
Unfunded commitments, allowance for credit loss	292,000	292,000
Interest income on nonaccrual loans	11,000	$ 33,000
Home Equity Lines of Credit
Financing Receivable, Allowance for Credit Losses
Maximum loan-to-value ratio		90.00%
Home Equity Installments
Financing Receivable, Allowance for Credit Losses
Maximum loan-to-value ratio		80.00%
Commercial Portfolio Segment | Commercial Loan
Financing Receivable, Allowance for Credit Losses
Maximum loan-to-value ratio		80.00%
Commercial Portfolio Segment | Home Equity Lines of Credit
Financing Receivable, Allowance for Credit Losses
Loan period for lending, maximum		20 years
Commercial Portfolio Segment | Home Equity Installments
Financing Receivable, Allowance for Credit Losses
Loan period for lending, maximum		15 years
Consumer Portfolio Segment | Mortgage Loan
Financing Receivable, Allowance for Credit Losses
Maximum loan-to-value ratio		80.00%
Loan period for lending, maximum		25 years
Loan balance in the process of foreclosure	$ 0	$ 0	$ 123,000
Real Estate Portfolio Segment | Commercial Loan
Financing Receivable, Allowance for Credit Losses
Loan period for lending, maximum		20 years

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Loan Portfolio by Class) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	$ 514,132	$ 484,512
Commercial, Financial and Agricultural | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	63,265	61,458
Commercial Loan | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	212,816	199,206
Construction Loan | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross		50,748
1-4 family residential construction | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	6,788	7,995
Other construction loans | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	46,852	42,753
Mortgage Loan | Consumer Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	160,036	150,290
Obligations of State and Political Subdivisions | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	19,985	18,770
Personal Loan | Consumer Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	$ 4,390	$ 4,040

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Activity in the Allowance for Loan Losses by Loan Class) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2023	Dec. 31, 2022
Financing Receivable, Allowance for Credit Losses
Beginning Balance		$ 3,813	$ 4,027	$ 3,508
Provision for loan losses	$ 121	100	411	350
Charge-offs		(26)		(32)
Recoveries		18		79
Ending balance	5,586	3,905	5,586	3,905
Loans allocated by: individually evaluated for impairment						$ 2,402
Loans allocated by: collectively evaluated for impairment						481,357
Total loans	514,132		514,132			484,512
Allowance for loan losses allocated by: collectively evaluated for impairment						4,027
Financing receivable - Allowance for loan losses	5,586		5,586		$ 5,442	4,027
Commercial, Financial and Agricultural | Commercial Portfolio Segment
Financing Receivable, Allowance for Credit Losses
Beginning Balance		286	297	251
Provision for loan losses		(4)		31
Ending balance		282		282
Loans allocated by: collectively evaluated for impairment						61,458
Total loans	63,265		63,265			61,458
Allowance for loan losses allocated by: collectively evaluated for impairment						297
Financing receivable - Allowance for loan losses	710		710		677	297
Commercial Loan | Commercial Portfolio Segment
Financing Receivable, Allowance for Credit Losses
Beginning Balance		934	1,110	1,020
Provision for loan losses		129		43
Ending balance		1,063		1,063
Loans allocated by: individually evaluated for impairment						2,025
Loans allocated by: collectively evaluated for impairment						196,847
Total loans	212,816		212,816			199,206
Allowance for loan losses allocated by: collectively evaluated for impairment						1,110
Financing receivable - Allowance for loan losses	2,702		2,702		2,677	1,110
Construction Loan | Commercial Portfolio Segment
Financing Receivable, Allowance for Credit Losses
Beginning Balance		1,208		884
Provision for loan losses		(123)		201
Ending balance		1,085		1,085
Loans allocated by: collectively evaluated for impairment						50,748
Total loans						50,748
Allowance for loan losses allocated by: collectively evaluated for impairment						1,146
Financing receivable - Allowance for loan losses						1,146
Obligations of State and Political Subdivisions | Commercial Portfolio Segment
Financing Receivable, Allowance for Credit Losses
Beginning Balance		56	54	45
Provision for loan losses				11
Ending balance		56		56
Loans allocated by: collectively evaluated for impairment						18,770
Total loans	19,985		19,985			18,770
Allowance for loan losses allocated by: collectively evaluated for impairment						54
Financing receivable - Allowance for loan losses	41		41		41	54
Mortgage Loan | Consumer Portfolio Segment
Financing Receivable, Allowance for Credit Losses
Beginning Balance		1,294	1,385	1,269
Provision for loan losses		94		61
Charge-offs		(22)		(23)
Recoveries		18		77
Ending balance		1,384		1,384
Loans allocated by: individually evaluated for impairment						377
Loans allocated by: collectively evaluated for impairment						149,494
Total loans	160,036		160,036			150,290
Allowance for loan losses allocated by: collectively evaluated for impairment						1,385
Financing receivable - Allowance for loan losses	1,177		1,177		1,150	1,385
Personal Loan | Consumer Portfolio Segment
Financing Receivable, Allowance for Credit Losses
Beginning Balance		35	35	39
Provision for loan losses		4		3
Charge-offs		(4)		(9)
Recoveries				2
Ending balance		$ 35		$ 35
Loans allocated by: collectively evaluated for impairment						4,040
Total loans	4,390		4,390			4,040
Allowance for loan losses allocated by: collectively evaluated for impairment						35
Financing receivable - Allowance for loan losses	$ 61		$ 61		$ 64	35
Acquired with Credit Deterioration
Financing Receivable, Allowance for Credit Losses
Loans allocated by: individually evaluated for impairment						753
Acquired with Credit Deterioration | Commercial Loan | Commercial Portfolio Segment
Financing Receivable, Allowance for Credit Losses
Loans allocated by: individually evaluated for impairment						334
Acquired with Credit Deterioration | Mortgage Loan | Consumer Portfolio Segment
Financing Receivable, Allowance for Credit Losses
Loans allocated by: individually evaluated for impairment						$ 419

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Allowance for Credit Loss Activity By Loan Class) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2023
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 5,442	$ 4,027
Initial allowance on loans purchased with credit deterioration		354
Credit loss expense	121	411
Loans charged off	(11)	(38)
Recoveries collected	34	75
Total ending allowance balance	5,586	5,586
Prior adaption
Beginning Balance		4,027
Impact of adopting ASC 326
Prior adaption
Beginning Balance		757
Commercial, Financial and Agricultural | Commercial Portfolio Segment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	677	297
Credit loss expense	33	76
Total ending allowance balance	710	710
Prior adaption
Beginning Balance		297
Commercial, Financial and Agricultural | Commercial Portfolio Segment | Impact of adopting ASC 326
Prior adaption
Beginning Balance		337
Commercial Loan | Commercial Portfolio Segment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	2,677	1,110
Initial allowance on loans purchased with credit deterioration		106
Credit loss expense	25	282
Total ending allowance balance	2,702	2,702
Prior adaption
Beginning Balance		1,110
Commercial Loan | Commercial Portfolio Segment | Impact of adopting ASC 326
Prior adaption
Beginning Balance		1,204
Construction Loan | Commercial Portfolio Segment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance		1,146
1-4 family residential construction | Commercial Portfolio Segment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	113	69
Credit loss expense	31	(39)
Total ending allowance balance	144	144
Prior adaption
Beginning Balance		69
1-4 family residential construction | Commercial Portfolio Segment | Impact of adopting ASC 326
Prior adaption
Beginning Balance		114
Other construction loans | Commercial Portfolio Segment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	720	1,077
Credit loss expense	31	81
Total ending allowance balance	751	751
Prior adaption
Beginning Balance		1,077
Other construction loans | Commercial Portfolio Segment | Impact of adopting ASC 326
Prior adaption
Beginning Balance		(407)
Mortgage Loan | Consumer Portfolio Segment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	1,150	1,385
Initial allowance on loans purchased with credit deterioration		248
Credit loss expense	8	4
Loans charged off		(19)
Recoveries collected	19	56
Total ending allowance balance	1,177	1,177
Prior adaption
Beginning Balance		1,385
Mortgage Loan | Consumer Portfolio Segment | Impact of adopting ASC 326
Prior adaption
Beginning Balance		(497)
Obligations of State and Political Subdivisions | Commercial Portfolio Segment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	41	54
Credit loss expense		(4)
Total ending allowance balance	41	41
Prior adaption
Beginning Balance		54
Obligations of State and Political Subdivisions | Commercial Portfolio Segment | Impact of adopting ASC 326
Prior adaption
Beginning Balance		(9)
Personal Loan | Consumer Portfolio Segment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	64	35
Credit loss expense	(7)	11
Loans charged off	(11)	(19)
Recoveries collected	15	19
Total ending allowance balance	$ 61	61
Prior adaption
Beginning Balance		35
Personal Loan | Consumer Portfolio Segment | Impact of adopting ASC 326
Prior adaption
Beginning Balance		$ 15

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSS (Collateral-Dependent Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	$ 514,132	$ 484,512
Real Estate
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	57
Commercial, Financial and Agricultural | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	63,265	61,458
Commercial Loan | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	212,816	199,206
Construction Loan | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross		50,748
1-4 family residential construction | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	6,788	7,995
Other construction loans | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	46,852	42,753
Mortgage Loan | Consumer Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	160,036	150,290
Mortgage Loan | Real Estate | Consumer Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	57
Obligations of State and Political Subdivisions | Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	19,985	18,770
Personal Loan | Consumer Portfolio Segment
Accounts, Notes, Loans and Financing Receivable
Financing receivables, gross	$ 4,390	$ 4,040

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Impaired Loans and Related Interest Income by Loan Portfolio Class) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, Total	$ 3,187	$ 5,386
Interest Income Recognized, Total	102	168
Cash Basis Interest Income, Total	19	29
Commercial Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance, Average Recorded Investment	2,058	4,187
Impaired Loans with No Allowance, Interest Income Recognized	98	161
Impaired Loans with No Allowance, Cash Basis Interest Income	0	0
Average Recorded Investment, Total	2,058	4,187
Interest Income Recognized, Total	98	161
Cash Basis Interest Income, Total	0	0
Mortgage Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance, Average Recorded Investment	348	397
Impaired Loans with No Allowance, Interest Income Recognized	4	7
Impaired Loans with No Allowance, Cash Basis Interest Income	19	29
Average Recorded Investment, Total	348	397
Interest Income Recognized, Total	4	7
Cash Basis Interest Income, Total	19	29
Acquired with Credit Deterioration [Member] | Commercial Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance, Average Recorded Investment	341	347
Impaired Loans with No Allowance, Interest Income Recognized	0	0
Impaired Loans with No Allowance, Cash Basis Interest Income	0	0
Average Recorded Investment, Total	341	347
Interest Income Recognized, Total	0	0
Cash Basis Interest Income, Total	0	0
Acquired with Credit Deterioration [Member] | Mortgage Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance, Average Recorded Investment	440	455
Impaired Loans with No Allowance, Interest Income Recognized	0	0
Impaired Loans with No Allowance, Cash Basis Interest Income	0	0
Average Recorded Investment, Total	440	455
Interest Income Recognized, Total	0	0
Cash Basis Interest Income, Total	$ 0	$ 0

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Impaired Loans by Loan Portfolio Class) (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Financing Receivable, Impaired [Line Items]
Recorded Investment, Total	$ 3,155
Unpaid Principal Balance, Total	4,442
Commercial Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	2,025
Impaired Loans with No Allowance: Unpaid Principal Balance	2,471
Impaired Loans: Related Allowance	0
Recorded Investment, Total	2,025
Unpaid Principal Balance, Total	2,471
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	334
Impaired Loans with No Allowance: Unpaid Principal Balance	344
Impaired Loans: Related Allowance	0
Recorded Investment, Total	334
Unpaid Principal Balance, Total	344
Mortgage Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	377
Impaired Loans with No Allowance: Unpaid Principal Balance	993
Impaired Loans: Related Allowance	0
Recorded Investment, Total	377
Unpaid Principal Balance, Total	993
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Acquired with Credit Deterioration [Member]
Financing Receivable, Impaired [Line Items]
Impaired Loans with No Allowance: Recorded Investment	419
Impaired Loans with No Allowance: Unpaid Principal Balance	634
Impaired Loans: Related Allowance	0
Recorded Investment, Total	419
Unpaid Principal Balance, Total	$ 634

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES - Amortized Cost Basis of Loans Nonaccrual Status (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual with No Allowance for Credit Loss	$ 57
Nonaccrual	20	$ 139
Loans Past Due Greater than 90 Days and Accruing		39
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual	20
Loans Past Due Greater than 90 Days and Accruing		24
Commercial Loan [Member] | Commercial Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Past Due Greater than 90 Days and Accruing		7
Mortgage Loan [Member] | Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual with No Allowance for Credit Loss	$ 57
Nonaccrual		139
Loans Past Due Greater than 90 Days and Accruing		4
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans Past Due Greater than 90 Days and Accruing		$ 4

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Loan Portfolio Summarized by the Past Due Status) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	$ 514,132	$ 484,512
Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	836	625
30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	814	307
60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	8	141
Greater than 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	14	177
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	63,265	61,458
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	19	99
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	19	75
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Greater than 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross		24
Commercial Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	212,816	199,206
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	122	111
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	122
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross		104
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Greater than 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross		7
Construction Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross		50,748
Mortgage Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	160,036	150,290
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	695	383
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	673	205
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	8	36
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Greater than 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	14	142
Obligations of State and Political Subdivisions [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	19,985	18,770
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross	$ 4,390	4,040
Personal Loan [Member] | Consumer Portfolio Segment [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross		32
Personal Loan [Member] | Consumer Portfolio Segment [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross		27
Personal Loan [Member] | Consumer Portfolio Segment [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross		1
Personal Loan [Member] | Consumer Portfolio Segment [Member] | Greater than 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivables, gross		$ 4

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LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	$ 514,132	$ 484,512
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	493,688	470,057
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	19,432	11,232
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	1,012	3,223
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	63,265	61,458
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	63,104	60,990
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	142	468
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	19
Commercial Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	212,816	199,206
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	197,506	186,977
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	14,374	9,802
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	936	2,427
Construction Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross		50,748
Construction Loan [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross		50,008
Construction Loan [Member] | Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross		740
1-4 family residential construction | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	6,788	7,995
1-4 family residential construction | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	6,788
Other construction loans | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	46,852	42,753
Other construction loans | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	42,159
Other construction loans | Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	4,693
Mortgage Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	160,036	150,290
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	159,756	149,272
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	223	222
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	57	796
Obligations of State and Political Subdivisions [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	19,985	18,770
Obligations of State and Political Subdivisions [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	19,985	18,770
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	4,390	4,040
Personal Loan [Member] | Consumer Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables, gross	$ 4,390	$ 4,040

XML

LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES (Amortized Cost Basis by Risk Category ) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	$ 10,102
2022	6,361
2021	12,451
2020	5,403
2019	4,213
Prior	1,588
Revolving Loans Amortized Cost Basis	23,147
Total	63,265
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	10,032
2022	6,361
2021	12,451
2020	5,403
2019	4,141
Prior	1,569
Revolving Loans Amortized Cost Basis	23,147
Total	63,104
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	70
2019	72
Total	142
Commercial, Financial and Agricultural [Member] | Commercial Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Prior	19
Total	19
Commercial Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	17,355
2022	58,584
2021	23,947
2020	25,209
2019	18,473
Prior	65,458
Revolving Loans Amortized Cost Basis	3,789
Revolving Loans Converted to Term	1
Total	212,816
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	17,355
2022	58,584
2021	23,947
2020	16,208
2019	18,052
Prior	59,570
Revolving Loans Amortized Cost Basis	3,789
Revolving Loans Converted to Term	1
Total	197,506
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2020	9,001
2019	421
Prior	4,952
Total	14,374
Commercial Loan [Member] | Commercial Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Prior	936
Total	936
1-4 family residential construction | Commercial Portfolio Segment [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,818
2022	3,411
Prior	559
Total	6,788
1-4 family residential construction | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,818
2022	3,411
Prior	559
Total	6,788
Other construction loans | Commercial Portfolio Segment [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,280
2022	6,732
2021	17,648
2020	7,160
2019	393
Prior	3,303
Revolving Loans Amortized Cost Basis	9,336
Total	46,852
Other construction loans | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,280
2022	6,732
2021	17,646
2020	2,469
2019	393
Prior	3,303
Revolving Loans Amortized Cost Basis	9,336
Total	42,159
Other construction loans | Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2021	2
2020	4,691
Total	4,693
Mortgage Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	17,922
2022	44,975
2021	19,869
2020	15,003
2019	5,627
Prior	48,010
Revolving Loans Amortized Cost Basis	8,510
Revolving Loans Converted to Term	120
Total	160,036
Financing Receivable Excluding Accrued Interest Allowance For Credit Loss Write-off By Origination Year [Abstract
Prior	(19)
Total	(19)
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	17,922
2022	44,975
2021	19,869
2020	15,003
2019	5,627
Prior	47,730
Revolving Loans Amortized Cost Basis	8,510
Revolving Loans Converted to Term	120
Total	159,756
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Prior	223
Total	223
Mortgage Loan [Member] | Consumer Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Prior	57
Total	57
Obligations of State and Political Subdivisions [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,741
2022	3,882
2021	2,456
2020	5,106
2019	12
Prior	5,787
Revolving Loans Amortized Cost Basis	1
Total	19,985
Obligations of State and Political Subdivisions [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,741
2022	3,882
2021	2,456
2020	5,106
2019	12
Prior	5,787
Revolving Loans Amortized Cost Basis	1
Total	19,985
Personal Loan [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,997
2022	1,339
2021	466
2020	116
2019	127
Prior	231
Revolving Loans Amortized Cost Basis	110
Revolving Loans Converted to Term	4
Total	4,390
Financing Receivable Excluding Accrued Interest Allowance For Credit Loss Write-off By Origination Year [Abstract
2020	(4)
Prior	(15)
Total	(19)
Personal Loan [Member] | Consumer Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,997
2022	1,339
2021	466
2020	116
2019	127
Prior	231
Revolving Loans Amortized Cost Basis	110
Revolving Loans Converted to Term	4
Total	$ 4,390

XML

GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($)				3 Months Ended		9 Months Ended
	Apr. 30, 2018	Nov. 30, 2015	Sep. 08, 2006	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	May 12, 2023	Dec. 31, 2022
Goodwill included in acquisition price				$ 9,812,000		$ 9,812,000			$ 9,047,000
Amortization of intangible assets				25,000	$ 14,000	56,000	$ 41,000
Goodwill impairment loss						0	0
Branch Office in Richfield, PA [Member]
Acquisition date			Sep. 08, 2006
Goodwill included in acquisition price			$ 2,000,000.0
FNBPA Bancorp, Inc [Member]
Acquisition date		Nov. 30, 2015
Goodwill included in acquisition price		$ 3,400,000
Core deposit intangible		$ 303,000
Intangible assets amortization period		10 years
Amortization of intangible assets				4,000	5,000	12,000	16,000
Liverpool Community Bank [Member]
Acquisition date	Apr. 30, 2018
Goodwill included in acquisition price	$ 3,600,000
Core deposit intangible	$ 289,000
Intangible assets amortization period	10 years
Amortization of intangible assets				7,000	9,000	21,000	25,000
Path Valley Branch office Acquisition [Member]
Goodwill included in acquisition price								$ 765,000
Core deposit intangible								$ 303,000
Intangible assets amortization period								10 years
Amortization of intangible assets				$ 14,000	$ 0	$ 23,000,000	$ 0

XML

GOODWILL AND OTHER INTANGIBLE ASSETS (Amortization Schedule for Intangible Assets) (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Dec. 31, 2021	May 12, 2023	Apr. 30, 2018	Nov. 30, 2015
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 25,000	$ 14,000	$ 56,000	$ 41,000
Path Valley Branch office Acquisition [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date							$ 303,000
Amortization of intangible assets	14,000	0	23,000,000	0
Path Valley Branch office Acquisition [Member] | Core Deposits [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date									$ 303,000
Amortization of intangible assets			23,000
Unamortized balance	280,000		280,000
Scheduled remaining amortization expense for years ended:
December 31, 2023	14,000		14,000
December 31, 2024	51,000		51,000
December 31, 2025	46,000		46,000
December 31, 2026	40,000		40,000
December 31, 2027	35,000		35,000
Thereafter	94,000		94,000
FNBPA Bancorp, Inc [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date									303,000
Amortization of intangible assets	4,000	5,000	12,000	16,000
FNBPA Bancorp, Inc [Member] | Core Deposits [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date									$ 303,000
Amortization of intangible assets			12,000		$ 21,000	$ 250,000
Unamortized balance	20,000		20,000		32,000
Scheduled remaining amortization expense for years ended:
December 31, 2023	4,000		4,000
December 31, 2024	11,000		11,000
December 31, 2025	5,000		5,000
Liverpool Community Bank [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date								$ 289,000
Amortization of intangible assets	7,000	$ 9,000	21,000	$ 25,000
Liverpool Community Bank [Member] | Core Deposits [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning Balance at Acquisition Date								$ 289,000
Amortization of intangible assets			21,000		33,000	$ 167,000
Unamortized balance	68,000		68,000		$ 89,000
Scheduled remaining amortization expense for years ended:
December 31, 2023	7,000		7,000
December 31, 2024	23,000		23,000
December 31, 2025	17,000		17,000
December 31, 2026	12,000		12,000
December 31, 2027	7,000		7,000
Thereafter	$ 2,000		$ 2,000

XML

DEPOSITS (Details) - USD ($) $ in Millions	Sep. 30, 2023	Dec. 31, 2022
DEPOSITS
Time deposits at or above FDIC limit	$ 33.0	$ 13.2

XML

BORROWINGS (Schedule of Borrowings) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
BORROWINGS
Securities sold under agreements to repurchase	$ 11,638	$ 7,585
Overnight advances with FHLB	12,000	28,125
Short-term debt	16,000	20,000
Long-term debt with FHLB	20,000	20,000
Total borrowings	$ 59,638	$ 75,710

XML

BORROWINGS (Scheduled Maturities of Long-Term Debt) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Scheduled Maturities
2023	$ 0
2024	15,000
2025	5,000
2026	0
2027	0
Thereafter	0
Long-term Debt, Total	$ 20,000	$ 20,000
Weighted Average Interest Rate
2023	0.00%
2024	2.29%
2025	2.41%
2026	0.00%
2027	0.00%
Thereafter	0.00%
Weighted average interest rate	2.32%

XML

STOCK COMPENSATION PLAN (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Stock-based compensation expense	$ 35,000	$ 30,000	$ 106,000	$ 146,000
Weighted average exercise price	$ 17.76		$ 17.76		$ 17.74
Long-Term Incentive Plan [Member]
Shares available for grant	162,503		162,503
Long-Term Incentive Plan [Member] | Maximum [Member]
Shares authorized under share-based payment awards	300,000		300,000
Employee Stock Purchase Plan [Member]
Number of share per year in addition to prior unissued shares			5,000
Shares issued during period under employee stock purchase plans			4,230	5,026
Shares reserved for future issuance	152,420		152,420
Employee Stock Purchase Plan [Member] | Maximum [Member]
Shares authorized under share-based payment awards	250,000		250,000
Option price as a percentage of fair value			100.00%
Employee Stock Purchase Plan [Member] | Minimum [Member]
Option price as a percentage of fair value			95.00%
Employee Stock Option [Member]
Stock options awarded			0
Employee Stock Option [Member] | Long-Term Incentive Plan [Member]
Stock Options compensation costs not yet recognized	$ 0		$ 0
Award expiration period			10 years
Award expiration date			Feb. 17, 2025
Exercise price, lower range limit			$ 17.72
Exercise price, upper range limit			17.80
Weighted average exercise price	$ 17.76		$ 17.76
Weighted average remaining contractual life			1 year 1 month 28 days
Cash received from option exercises			$ 0
Employee Stock Option [Member] | Long-Term Incentive Plan [Member] | Maximum [Member]
Award vesting period			5 years
Employee Stock Option [Member] | Long-Term Incentive Plan [Member] | Minimum [Member]
Award vesting period			3 years
Restricted Stock [Member]
Number of shares awarded			11,409
Award vesting period			3 years
Restricted stocks. compensation costs not yet recognized	$ 253,000		$ 253,000
Compensation cost not yet recognized, period for recognition			3 years

XML

STOCK COMPENSATION PLAN (Non-Vested Restricted Shares Activity) (Details) - Restricted Stock [Member]	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Number of shares
Beginning Balance | shares	20,975
Vested | shares	(6,739)
Forfeited | shares	0
Granted | shares	11,409
Ending Balance | shares	25,645
Weighted Average Grant Date Fair Value
Beginning Balance | $ / shares	$ 17.10
Vested | $ / shares	19.05
Forfeited | $ / shares	0
Granted | $ / shares	16.25
Ending Balance | $ / shares	$ 16.21

XML

STOCK COMPENSATION PLAN (Stock Options Activity) (Details)	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding beginning balance, Shares | shares	60,347
Granted, Shares | shares	0
Exercised, Shares | shares	0
Forfeited, Shares | shares	(9,922)
Outstanding ending balance, Shares | shares	50,425
Beginning, weighted average exercise price | $ / shares	$ 17.74
Granted, Weighted average exercise price | $ / shares	0
Exercised, Weighted average exercise price | $ / shares	0
Expired, Weighted average exercise price | $ / shares	17.65
Ending, weighted average exercise price | $ / shares	$ 17.76

XML

FAIR VALUE MEASUREMENT (Fair Value Measurements by Level of Valuation Inputs) (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	$ 66,527,000	$ 73,536,000
Equity securities	978,000	1,056,000
Obligations of U.S. Government Agencies and Corporations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	13,727,000	13,705,000
Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	6,713,000	7,679,000
Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	13,374,000	15,341,000
Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	66,527,000	73,536,000
Interest rate swaps, assets		268,000
Fair Value, Measurements, Recurring [Member] | Obligations of U.S. Government Agencies and Corporations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	13,727,000	13,705,000
Fair Value, Measurements, Recurring [Member] | Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	6,713,000	7,679,000
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Equity securities	978,000	1,056,000
Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	13,374,000	15,341,000
Fair Value, Measurements, Recurring [Member] | Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	32,713,000	36,811,000
Fair Value, Measurements, Recurring [Member] | (Level 1) Quoted Prices in Active Markets for Identical Assets [Member] | Equity Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Equity securities	978,000	1,056,000
Fair Value, Measurements, Recurring [Member] | (Level 2) Significant Other Observable Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	60,619,000	66,391,000
Interest rate swaps, assets		268,000
Fair Value, Measurements, Recurring [Member] | (Level 2) Significant Other Observable Inputs [Member] | Obligations of U.S. Government Agencies and Corporations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	13,727,000	13,705,000
Fair Value, Measurements, Recurring [Member] | (Level 2) Significant Other Observable Inputs [Member] | Obligations of State and Political Subdivisions [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	6,713,000	7,679,000
Fair Value, Measurements, Recurring [Member] | (Level 2) Significant Other Observable Inputs [Member] | Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	7,466,000	8,196,000
Fair Value, Measurements, Recurring [Member] | (Level 2) Significant Other Observable Inputs [Member] | Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	32,713,000	36,811,000
Fair Value, Measurements, Recurring [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	5,908,000	7,145,000
Fair Value, Measurements, Recurring [Member] | (Level 3) Significant Other Unobservable Inputs [Member] | Corporate Debt Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities available for sale	5,908,000	7,145,000
Fair Value, Measurements, Recurring [Member] | Mortgage Servicing Rights [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Mortgage servicing rights	84,000	92,000
Fair Value, Measurements, Recurring [Member] | Mortgage Servicing Rights [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Mortgage servicing rights	$ 84,000	$ 92,000

XML

FAIR VALUE MEASUREMENT (Reconciliation of Investment Securities Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
FAIR VALUE MEASUREMENT
Beginning balance	$ 5,908	$ 7,788	$ 7,145	$ 4,520
Total gains (loss) included in OCI		(440)	(1,237)	(1,172)
Purchases				4,000
Principal payments and other
Sales
Ending balance	$ 5,908	$ 7,348	$ 5,908	$ 7,348

XML

FAIR VALUE MEASUREMENT (Carrying Amounts and Estimated Fair Values of Financial Instruments) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financial assets:
Interest bearing deposits with banks	$ 390	$ 143
Debt securities available for sale	66,527	73,536
Debt securities held to maturity	189,221	209,887
Restricted investment in bank stock	2,476	3,666
Financial liabilities:
Time deposits	556,823	512,381
Short-term borrowings	39,638	55,710
Long-term debt	20,000	20,000
Other interest bearing liabilities	941	1,011
Carrying Value [Member]
Financial assets:
Cash and due from banks	27,377	10,856
Interest bearing deposits with banks	390	143
Debt securities available for sale	66,527	73,536
Debt securities held to maturity	202,646	209,565
Restricted investment in bank stock	2,476	3,666
Loans, net of allowance for credit losses	508,546	480,485
Interest rate swaps, assets	0	268
Accrued interest receivable	2,509	2,124
Financial liabilities:
Time deposits	195,169	142,271
Securities sold under agreements to repurchase	11,638	7,585
Short-term borrowings	28,000	48,125
Long-term debt	20,000	20,000
Other interest bearing liabilities	941	1,011
Accrued interest payable	1,091	333
Off-balance sheet financial instruments:
Commitments to extend credit	0	0
Letters of credit	0	0
Fair Value [Member]
Financial assets:
Cash and due from banks	27,377	10,856
Interest bearing deposits with banks	390	143
Debt securities available for sale	66,527	73,536
Debt securities held to maturity	189,221	209,887
Loans, net of allowance for credit losses	500,250	467,667
Interest rate swaps, assets	0	268
Accrued interest receivable	2,509	2,124
Financial liabilities:
Time deposits	189,481	134,417
Short-term borrowings	27,901	48,122
Long-term debt	19,412	19,156
Other interest bearing liabilities	937	1,009
Accrued interest payable	1,091	333
Off-balance sheet financial instruments:
Commitments to extend credit	0	0
Letters of credit	$ 0	$ 0

XML

FAIR VALUE MEASUREMENT (Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities held to maturity	$ 189,221	$ 209,887
Time deposits	556,823	512,381
Long-term debt	20,000	20,000
Other interest bearing liabilities	941	1,011
Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities held to maturity	202,646	209,565
Loans, net of allowance for loan losses	508,546	480,485
Time deposits	195,169	142,271
Long-term debt	20,000	20,000
Other interest bearing liabilities	941	1,011
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities held to maturity	189,221	209,887
Loans, net of allowance for loan losses	500,250	467,667
Time deposits	189,481	134,417
Long-term debt	19,412	19,156
Other interest bearing liabilities	937	1,009
Fair Value [Member] | (Level 2) Significant Other Observable Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt securities held to maturity	189,221	209,887
Time deposits	189,481	134,417
Long-term debt	19,412	19,156
Other interest bearing liabilities	937	1,009
Fair Value [Member] | (Level 3) Significant Other Unobservable Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, net of allowance for loan losses	$ 500,250	$ 467,667

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COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Loss Contingencies [Line Items]
Letter of Credit expiration period	1 year
Commitments to Grant Loans [Member]
Loss Contingencies [Line Items]
Outstanding loans commitments and other unused lines of credit	$ 111.5	$ 116.1
Outstanding Letters of Credit [Member]
Loss Contingencies [Line Items]
Outstanding loans commitments and other unused lines of credit	2.5	2.6
Commercial Letter Of Credit [Member]
Loss Contingencies [Line Items]
Outstanding loans commitments and other unused lines of credit	$ 9.3	$ 9.8

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DERIVATIVES (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Interest Rate Swap [Member]
Notional Amount		$ 268,000
Designated as Hedging Instrument [Member]
Notional Amount	$ 0	$ 20,000,000.0
Interest rate swaps, ineffectiveness	no amount of ineffectiveness was included in net income

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DERIVATIVES (Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain Recognized in OCI on Derivatives	$ 81	$ 2	$ 1,195	$ 1,220
Amount of Gain reclassified from OCI into Income	$ (86)	(269)	$ (1,317)	(1,493)
Other Non Interest Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain reclassified from OCI into Income				(1,202)
Interest Rate Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain Recognized in OCI on Derivatives		2		18
Amount of Gain reclassified from OCI into Income		$ (269)		(291)
Swap Termination Gain [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain Recognized in OCI on Derivatives				$ 1,202

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DERIVATIVES (Effect of Cash Flow Hedge Accounting on the Consolidated Statements of Income) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Derivative Instruments, Gain (Loss) [Line Items]
Amount reclassified from AOCI into income	$ 86	$ 269	$ 1,317	$ 1,493
Interest Income (Expense) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount reclassified from AOCI into income	99	269	115
Total	86	$ 269	1,317
Swap Termination Gain [Member] | Interest Income (Expense) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount reclassified from AOCI into income	$ (13)		$ 1,202

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BRANCH ACQUISITION - Narratives (Details) - USD ($)	Sep. 30, 2023	May 12, 2023	Dec. 31, 2022
BRANCH ACQUISITION
Goodwill	$ 9,812,000		$ 9,047,000
Path Valley Branch office Acquisition
BRANCH ACQUISITION
Goodwill		$ 765,000
Core deposit intangible		$ 303,000
Core deposit intangible amortization period		10 years

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BRANCH ACQUISITION (Details) - USD ($)	Sep. 30, 2023	May 12, 2023	Dec. 31, 2022
Assets:
Goodwill	$ 9,812,000		$ 9,047,000
Total assets		$ 18,703,000
Liabilities:
Total liabilities		18,703,000
Path Valley Branch office Acquisition
Assets:
Cash received at settlement		17,384,000
Fixed assets		248,000
Goodwill		765,000
Core deposit intangible		303,000
Other assets purchased		3,000
Liabilities:
Deposits purchased		18,697,000
Other liabilities assumed		$ 6,000

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SUBSEQUENT EVENTS (Details) - Subsequent Event [Member]	Oct. 17, 2023 $ / shares
Subsequent Event [Line Items]
Dividends payable, date declared	Oct. 17, 2023
Dividends payable per share	$ 0.22
Dividends payable, date to be paid	Dec. 01, 2023