10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2024

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 001-38884

FRANKLIN FINANCIAL SERVICES CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1440803
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1500 Nitterhouse Drive, Chambersburg, PA	17201-0819
(Address of principal executive offices)	(Zip Code)

(717) 264-6116

(Registrant's telephone number, including area code)

Not Applicable

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

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

Title of class	Symbol	Name of exchange on which registered
Common stock	FRAF	Nasdaq Capital Market

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

There were 4,408,901 outstanding shares of the Registrant’s common stock as of July 31, 2024.

INDEX

Part I - FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (unaudited)	1
	Consolidated Statements of Income for the Three and Six Months ended June 30, 2024 and 2023 (unaudited)	2
	Consolidated Statements of Comprehensive Income for the Three and Six Months ended	3
	June 30, 2024 and 2023 (unaudited)
	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months	4
	ended June 30, 2024 and 2023 (unaudited)
	Consolidated Statements of Cash Flows for the Six Months ended June 30, 2024	5
	and 2023 (unaudited)
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2	Management’s Discussion and Analysis ofResults of Operations and Financial Condition	28
Item 3	Quantitative and Qualitative Disclosures about Market Risk	46
Item 4	Controls and Procedures	46
Part II - OTHER INFORMATION
Item 1	Legal Proceedings	48
Item 1A	Risk Factors	48
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3	Defaults Upon Senior Securities	48
Item 4	Mine Safety Disclosures	48
Item 5	Other Information	48
Item 6	Exhibits	49
SIGNATURE PAGE		49

Part I FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets

(Dollars in thousands, except share and per share data)	(unaudited)
	June 30,		December 31,
	2024		2023
Assets
Cash and due from banks	$	20,048	$	19,505
Short-term interest-earning deposits in other banks		159,679		3,635
Total cash and cash equivalents		179,727		23,140
Long-term interest-earning deposits in other banks		1,994		6,229
Debt securities available for sale, at fair value		454,465		472,503
Equity securities		352		427
Restricted stock		10,375		2,375
Loans held for sale		932		213
Loans		1,318,320		1,256,985
Allowance for credit losses		(17,018)		(16,052)
Net Loans		1,301,302		1,240,933
Premises and equipment, net		28,974		28,543
Right of use asset		4,380		4,680
Bank owned life insurance		22,502		22,758
Goodwill		9,016		9,016
Deferred tax asset, net		11,789		11,801
Other assets		13,318		13,421
Total assets	$	2,039,126	$	1,836,039
Liabilities
Deposits
Noninterest-bearing checking	$	282,964	$	273,050
Money management, savings, and interest checking		1,119,814		1,132,482
Time		183,680		132,446
Total deposits		1,586,458		1,537,978
Federal Reserve Bank borrowings		40,000		90,000
FHLB advances		240,000		40,000
Subordinate notes		19,680		19,661
Lease liability		4,527		4,816
Other liabilities		11,652		11,448
Total liabilities		1,902,317		1,703,903
Commitments and contingent liabilities
Shareholders' equity
Common stock, $1 par value per share,15,000,000 shares authorized with
4,710,972 shares issued and 4,412,374 shares outstanding at June 30, 2024 and
4,710,972 shares issued and 4,371,231 shares outstanding at December 31, 2023		4,711		4,711
Capital stock no par value, 5,000,000 shares authorized with no
shares issued and outstanding		—		—
Additional paid-in capital		43,547		43,646
Retained earnings		137,581		133,993
Accumulated other comprehensive loss		(40,881)		(40,940)
Treasury stock, 298,598 shares at June 30, 2024 and 339,741 shares at
December 31, 2023, at cost		(8,149)		(9,274)
Total shareholders' equity		136,809		132,136
Total liabilities and shareholders' equity	$	2,039,126	$	1,836,039

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

1

Consolidated Statements of Income

	For the Three Months Ended				For the Six Months Ended
(Dollars in thousands, except per share data) (unaudited)	June 30,				June 30,
	2024		2023		2024		2023
Interest income
Loans, including fees	$	18,059	$	14,069	$	35,281	$	26,405
Interest and dividends on investments:
Taxable interest		3,901		3,327		7,814		6,777
Tax exempt interest		274		313		549		679
Dividend income		205		11		250		19
Interest-earning deposits in other banks		2,293		791		4,647		1,214
Total interest income		24,732		18,511		48,541		35,094
Interest expense
Deposits		7,018		4,378		13,522		7,808
Federal Reserve Bank borrowings		480		677		1,440		728
FHLB overnight borrowings and advances		2,762		—		5,289		—
Subordinate notes		261		261		525		526
Total interest expense		10,521		5,316		20,776		9,062
Net interest income		14,211		13,195		27,765		26,032
Provision for credit losses - loans		560		524		1,050		991
(Reversal of) provision for credit losses - unfunded commitments		(14)		8		(52)		70
Total provision for credit losses		546		532		998		1,061
Net interest income after credit loss expense		13,665		12,663		26,767		24,971
Noninterest income
Wealth management fees		2,242		1,959		4,269		3,793
Loan service charges		181		120		387		422
Gain on sale of loans		116		45		174		118
Deposit service charges and fees		572		616		1,185		1,199
Other service charges and fees		523		430		1,010		862
Debit card income		571		547		1,106		1,050
Increase in cash surrender value of life insurance		112		111		224		220
Net losses on sales of debt securities		—		(517)		—		(1,119)
Change in fair value of equity securities		(34)		(8)		(75)		(32)
Other		67		226		258		241
Total noninterest income		4,350		3,529		8,538		6,754
Noninterest Expense
Salaries and employee benefits		8,405		7,283		16,132		14,220
Net occupancy		1,149		1,112		2,331		2,222
Marketing and advertising		617		550		1,137		1,069
Legal and professional		515		454		1,030		1,005
Data processing		1,459		1,118		2,882		2,178
Pennsylvania bank shares tax		119		174		244		397
FDIC Insurance		408		198		730		380
ATM/debit card processing		339		307		662		601
Telecommunications		108		98		220		197
Nonservice pension		(7)		(29)		(36)		(59)
Lease termination		—		495		—		495
Other		1,224		888		2,310		1,962
Total noninterest expense		14,336		12,648		27,642		24,667
Income before federal income taxes		3,679		3,544		7,663		7,058
Federal income tax expense		646		568		1,269		790
Net income	$	3,033	$	2,976	$	6,394	$	6,268
Per share
Basic earnings per share	$	0.67	$	0.68	$	1.43	$	1.43
Diluted earnings per share	$	0.66	$	0.68	$	1.43	$	1.42

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

2

Consolidated Statements of Comprehensive Income

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(Dollars in thousands) (unaudited)	2024		2023		2024		2023
Net Income	$	3,033	$	2,976	$	6,394	$	6,268
Debt Securities:
Unrealized gains (losses) arising during the period		447		(5,534)		74		3,092
Reclassification adjustment for losses included in net income (1)		—		517		—		1,119
Net unrealized gains (losses)		447		(5,017)		74		4,211
Tax effect		(94)		1,052		(15)		(885)
Net of tax amount		353		(3,965)		59		3,326
Total other comprehensive gain (loss)		353		(3,965)		59		3,326
Total Comprehensive Income (Loss)	$	3,386	$	(989)	$	6,453	$	9,594
(1) Reclassified to net losses on sales of debt securities

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

3

Consolidated Statements of Changes in Shareholders’ Equity

For the three and six months ended June 30, 2024 and 2023

								Accumulated
				Additional				Other
	Shares	Common		Paid-in		Retained		Comprehensive		Treasury
(Dollars in thousands, except per share data) (unaudited)	Outstanding	Stock		Capital		Earnings		Income (Loss)		Stock		Total
Balance at April 1, 2024	4,393,873	$	4,711	$	43,459	$	135,955	$	(41,234)	$	(8,654)	$	134,237
Net income			—		—		3,033		—		—		3,033
Other comprehensive loss			—		—		—		353		—		353
Cash dividends declared, $0.32 per share			—		—		(1,407)		—		—		(1,407)
Acquisition of treasury stock	(14,684)		—		—		—		—		(400)		(400)
Treasury shares issued under dividend reinvestment plan	31,255		—		(27)		—		—		853		826
Stock Compensation Plans:
Treasury shares issued	1,930		—		(52)		—		—		52		—
Compensation expense			—		167		—		—		—		167
Balance at June 30, 2024	4,412,374	$	4,711	$	43,547	$	137,581	$	(40,881)	$	(8,149)	$	136,809
Balance at January 1, 2024	4,371,231	$	4,711	$	43,646	$	133,993	$	(40,940)	$	(9,274)	$	132,136
Net income			—		—		6,394		—		—		6,394
Other comprehensive loss			—		—		—		59		—		59
Cash dividends declared, $0.64 per share			—		—		(2,806)		—		—		(2,806)
Acquisition of treasury stock	(16,202)		—		—		—		—		(440)		(440)
Treasury shares issued under dividend reinvestment plan	43,543		—		(33)		—		—		1,188		1,155
Stock Compensation Plans:
Treasury shares issued	13,802		—		(362)		—		—		377		15
Compensation expense			—		296		—		—		—		296
Balance at June 30, 2024	4,412,374	$	4,711	$	43,547	$	137,581	$	(40,881)	$	(8,149)	$	136,809

Balance at April 1, 2023	4,402,675	$	4,711	$	43,356	$	127,877	$	(43,996)	$	(8,365)	$	123,583
Net income			—		—		2,976		—		—		2,976
Other comprehensive income			—		—		—		(3,965)		—		(3,965)
Cash dividends declared, $0.32 per share			—		—		(1,401)		—		—		(1,401)
Acquisition of treasury stock	(74,306)		—		—		—		—		(2,078)		(2,078)
Treasury shares issued under dividend reinvestment plan	20,195		—		(17)		—		—		550		533
Stock Compensation Plans:
Treasury shares issued	1,424		—		(35)		—		—		39		4
Compensation expense			—		118		—		—		—		118
Balance at June 30, 2023	4,349,988	$	4,711	$	43,422	$	129,452	$	(47,961)	$	(9,854)	$	119,770
Balance at January 1, 2023	4,390,397	$	4,711	$	43,535	$	125,892	$	(51,287)	$	(8,654)	$	114,197
Cumulative change in accounting principle, net of tax			—		—		98		—		—		98
Net income			—		—		6,268		—		—		6,268
Other comprehensive income			—		—		—		3,326		—		3,326
Cash dividends declared, $0.64 per share			—		—		(2,806)		—		—		(2,806)
Acquisition of treasury stock	(84,414)		—		—		—		—		(2,394)		(2,394)
Treasury shares issued under dividend reinvestment plan	28,679		—		32		—		—		779		811
Stock Compensation Plans:
Treasury shares issued	15,326		—		(398)		—		—		415		17
Compensation expense			—		253		—		—		—		253
Balance at June 30, 2023	4,349,988	$	4,711	$	43,422	$	129,452	$	(47,961)	$	(9,854)	$	119,770

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

4

Consolidated Statements of Cash Flows

	Six Months Ended ‎June 30,
	2024		2023
(Dollars in thousands) (unaudited)
Cash flows from operating activities
Net income	$	6,394	$	6,268
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,040		988
Net amortization of loans and investment securities		1,775		1,720
Amortization of subordinate debt issuance costs		19		20
Provision for credit losses		998		1,061
Change in fair value of equity securities		75		32
Realized losses on sales of debt securities		—		1,119
Loans originated for sale		(13,227)		(8,341)
Proceeds from sale of loans		12,682		8,616
Gain on sale of loans held for sale		(174)		(118)
Increase in cash surrender value of life insurance		(224)		(220)
Gain from claims on life insurance policies		(78)		—
Change in fair value of derivative		(2)		—
Stock based compensation		296		253
Decrease in other assets		877		1,573
(Decrease) increase in other liabilities		(715)		414
Net cash provided by operating activities		9,736		13,385
Cash flows from investing activities
Net decrease in long-term interest-earning deposits in other banks		4,235		4,997
Proceeds from sales and calls of investment securities available for sale		—		40,117
Proceeds from maturities and pay-downs of securities available for sale		24,548		16,062
Purchase of investment securities available for sale		(8,025)		(7,248)
Increase in restricted stock		(8,000)		(50)
Net increase in loans		(61,419)		(94,417)
Proceeds from surrender of life insurance policies		559		—
Capital expenditures		(1,451)		(228)
Net cash used in investing activities		(49,553)		(40,767)
Cash flows from financing activities
Net decrease in demand deposits, interest-bearing checking, and savings accounts		(2,754)		(70,665)
Net increase in time deposits		51,234		32,352
Increase in long-term borrowings		200,000		70,000
Net decrease in short-term borrowings		(50,000)		—
Dividends paid		(2,806)		(2,806)
Purchase of Treasury shares		(440)		(2,394)
Cash received from option exercises		15		17
Treasury shares issued under dividend reinvestment plan		1,155		811
Net cash provided by financing activities		196,404		27,315
Increase (decrease) in cash and cash equivalents		156,587		(67)
Cash and cash equivalents at the beginning of the period		23,140		64,899
Cash and cash equivalents at the end of the period	$	179,727	$	64,832
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest on deposits and other borrowed funds	$	19,897	$	7,813
Income taxes		1,080		1,316
Noncash Activities
Noncash extinguishment of lease liability		—		537
Noncash decrease in right-of-use asset		—		507

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

5

FRANKLIN FINANCIAL SERVICES CORPORATION and SUBSIDIARIES

UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The consolidated financial statements include the accounts of Franklin Financial Services Corporation (the Corporation), and its wholly owned subsidiaries, Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc. Farmers and Merchants Trust Company of Chambersburg is a commercial bank that has one wholly owned subsidiary, Franklin Financial Properties Corp. Franklin Financial Properties Corp. holds real estate assets that are leased by the Bank. Franklin Future Fund Inc. is a non-bank investment company. The activities of the non-bank subsidiary are not significant to the consolidated totals. All significant intercompany transactions and account balances have been eliminated.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations, and cash flows as of June 30, 2024, and for all other periods presented have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2023 Annual Report on Form 10-K. The consolidated results of operations for the three and six month period ended June 30, 2024 are not necessarily indicative of the operating results for the full year. Management has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

The consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and cash items with original maturities less than 90 days.

Earnings per share are computed based on the weighted average number of shares outstanding during each period end. A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(Dollars and shares in thousands, except per share data)	2024		2023		2024		2023
Weighted average shares outstanding (basic)		4,555		4,380		4,465		4,388
Impact of common stock equivalents		7		8		8		13
Weighted average shares outstanding (diluted)		4,562		4,388		4,473		4,401
Anti-dilutive options excluded from calculation		—		74		—		25
Net income	$	3,033	$	2,976	$	6,394	$	6,268
Basic earnings per share	$	0.67	$	0.68	$	1.43	$	1.43
Diluted earnings per share	$	0.66	$	0.68	$	1.43	$	1.42

‎

6

Note 2. Recent Accounting Pronouncements 

Recently adopted accounting standards

ASU 2023-01, Leases (Topic 842): Common Control Arrangements
Description	This ASU requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is determined to be a lease, an entity must classify and account for the lease on the same basis as an arrangement with a related party (on the basis of legally enforceable terms and conditions).
Effective Date	January 1, 2024
Effect on the Consolidated Financial Statements	The Corporation adopted the ASU on January 1, 2024 and it did not have a material effect on the Corporation's financial statements.
ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
Description	This ASU permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.
Effective Date	January 1, 2024
Effect on the Consolidated Financial Statements	The Corporation adopted the ASU on January 1, 2024 and it did not have a material effect on the Corporation's financial statements.
Recently issued but not yet effective accounting standards
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
Description	This ASU is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation table and income taxes paid to be disaggregated by jurisdiction. It also includes certain amendments to improve the effectiveness of income tax disclosures.
Effective Date	January 1, 2025
Effect on the Consolidated Financial Statements	The ASU is not expected to have an impact on the Corporation's financial statements.
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
Description	This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.
Effective Date	Fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
Effect on the Consolidated Financial Statements	The Corporation is currently evaluating the impact the ASU will have on its consolidated financial statements.
ASU 2023-01, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative
Description	This ASU incorporates certain U.S. Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirement, and align the requirements in the Codification with the SEC's regulations.
Effective Date	The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.
Effect on the Consolidated Financial Statements	The ASU is not expected to have an impact on the Corporation's financial statements.

‎

7

Note 3. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive income (loss), net of income tax effects, included in shareholders' equity are as follows:

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Net unrealized losses on debt securities	$	(49,342)	$	(49,416)
Tax effect		10,362		10,377
Net of tax amount	$	(38,980)	$	(39,039)
Accumulated pension adjustment	$	(2,406)	$	(2,406)
Tax effect		505		505
Net of tax amount	$	(1,901)	$	(1,901)
Total accumulated other comprehensive (loss)	$	(40,881)	$	(40,940)

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of June 30, 2024 and December 31, 2023 are as follows:

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
June 30, 2024	cost		gains		losses		Value
U.S. Treasury	$	83,139	$	—	$	(10,119)	$	73,020
Municipal		158,445		—		(23,744)		134,701
Corporate		26,346		—		(2,658)		23,688
Agency mortgage & asset-backed		133,119		187		(9,523)		123,783
Non-Agency mortgage & asset-backed		102,758		34		(3,519)		99,273
Total	$	503,807	$	221	$	(49,563)	$	454,465

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2023	cost		gains		losses		value
U.S. Treasury	$	83,494	$	—	$	(9,403)	$	74,091
Municipal		161,339		—		(22,721)		138,618
Corporate		26,336		—		(3,138)		23,198
Agency mortgage & asset-backed		142,565		90		(10,064)		132,591
Non-Agency mortgage & asset-backed		108,185		48		(4,228)		104,005
Total	$	521,919	$	138	$	(49,554)	$	472,503

At June 30, 2024 and December 31, 2023, the fair value of debt securities pledged to secure public funds, trust deposits and FHLB loan commitments totaled $231.0 million and $207.4 million, respectively. The Bank has no investment in a single issuer that exceeds 10% of shareholders’ equity, except for securities issued by the U.S. Treasury and U.S. government sponsored entities.

8

The amortized cost and estimated fair value of debt securities at June 30, 2024, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities. Securities not due at a single maturity date are presented separately.

(Dollars in thousands)	Amortized ‎cost		Fair ‎value
Due in one year or less	$	—	$	—
Due after one year through five years		85,160		75,619
Due after five years through ten years		80,052		69,302
Due after ten years		102,718		86,488
		267,930		231,409
Mortgage & asset-backed		235,877		223,056
	$	503,807	$	454,465

The composition of the net realized gains (losses) on debt securities for the three and six months ended are as follows:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2024		2023		2024		2023
Proceeds	$	—	$	7,262	$	—	$	40,117
Gross gains realized	$	—	$	—	$	—	$	12
Gross losses realized		—		(517)		—		(1,131)
Net (losses) gains realized	$	—	$	(517)	$	—	$	(1,119)
Tax benefit (provision) on net (losses) gains realized	$	—	$	109	$	—	$	235

Credit Impairment:

The debt securities portfolio contained 551 securities, with a fair value of $437.0 million, and $49.6 million in gross unrealized losses at June 30, 2024, essentially unchanged from the prior year-end.

AFS securities in an unrealized loss position are evaluated for credit impairment at least quarterly. For these securities, the Bank considers: (1) the extent to which the fair value is less than amortized cost; (2) adverse conditions specifically related to the security, industry or geographic area; (3) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; (4) failure of the issuer of the security to make scheduled interest or principal payments; and (5) any changes to the rating of the security by a rating agency. In addition, the Bank considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. The Bank does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. The unrealized losses identified on debt securities and subject to evaluation at June 30, 2024, was determined not to be attributable to credit related factors; therefore, the Bank does not have an allowance for credit loss for these investments.

‎

9

The following table summarizes debt securities in the AFS portfolio in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category, length of time that individual securities have been in continuous unrealized loss position and the number of securities in each category as of June 30, 2024 and December 31, 2023:

	June 30, 2024
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Treasury	$	—	$	—	—	$	73,020	$	(10,119)	226	$	73,020	$	(10,119)	226
Municipal		—		—	—		134,701		(23,744)	50		134,701		(23,744)	50
Corporate		978		(5)	1		22,710		(2,653)	166		23,688		(2,658)	167
Agency mortgage & asset-backed		745		(10)	4		108,925		(9,513)	57		109,670		(9,523)	61
Non-Agency mortgage & asset-backed		38,658		(194)	19		57,302		(3,325)	28		95,960		(3,519)	47
Total temporarily impaired	$	40,381	$	(209)	24	$	396,658	$	(49,354)	527	$	437,039	$	(49,563)	551

	December 31, 2023
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Treasury	$	—	$	—	—	$	74,091	$	(9,403)	28	$	74,091	$	(9,403)	28
Municipal		—		—	—		138,618		(22,721)	168		138,618		(22,721)	168
Corporate		1,483		(167)	5		21,715		(2,971)	46		23,198		(3,138)	51
Agency mortgage & asset-backed		6,227		(186)	19		118,053		(9,878)	223		124,280		(10,064)	242
Non-Agency mortgage & asset-backed		47,928		(560)	19		50,071		(3,668)	56		97,999		(4,228)	75
Total temporarily impaired	$	55,638	$	(913)	43	$	402,548	$	(48,641)	521	$	458,186	$	(49,554)	564

Equity Securities at Fair Value

The Corporation owns one equity investment with a readily determinable fair value. At June 30, 2024 and December 31, 2023, this investment was reported at fair value of $352 thousand and $427 thousand, respectively, with changes in value reported through income.

Note 5. Loans

The Bank reports its loan portfolio based on the primary collateral of the loan. It further classifies these loans by the primary purpose, either consumer or commercial. The Bank’s mortgage loans include long-term loans to individuals and businesses secured by mortgages on the borrower’s real property. Construction loans are made to finance the purchase of land and the construction of residential and commercial buildings thereon and are secured by mortgages on real estate. Commercial loans are made to businesses of various sizes for a variety of purposes including construction, property, plant and equipment, and working capital. Commercial loans also include loans to government municipalities. Commercial lending is concentrated in the Bank’s primary market, but also includes purchased loan participations. Consumer loans are comprised of installment, home equity and unsecured personal lines of credit.

Each class of loans involves a different kind of risk. However, risk factors such as changes in interest rates, general economic conditions and changes in collateral values are common across all classes. The risk of each loan class is presented below.

Residential Real Estate 1-4 family

The largest risk in residential real estate loans to retail customers is the borrower’s inability to repay the loan due to the loss of the primary source of income. The Bank attempts to mitigate this risk through prudent underwriting standards including employment history, current financial condition and credit history. These loans are generally owner occupied and serve as the borrower’s primary residence. The Bank usually holds a first lien position on these properties but may hold a second lien position in some home equity loans or lines of credit. Commercial purpose loans, secured by residential real estate, are usually dependent upon repayment from the rental income or other business purposes. These loans are generally non-owner occupied. In addition to the real estate collateral, these loans may have personal guarantees or UCC filings on other business assets. If a payment default occurs on a 1-4 family residential real estate loan, the collateral serves as a source of repayment, but may be subject to a change in value due to economic conditions.

10

Residential Real Estate Construction

This class includes loans to individuals for construction of a primary residence and to contractors and developers to improve real estate and construct residential properties. Construction loans to individuals generally bear the same risk as 1-4 family residential loans. Additional risks may include cost overruns, delays in construction or contractor problems.

Loans to contractors and developers are primarily dependent on the sale of improved lots or finished homes for repayment. Risks associated with these loans include the borrower’s character and capacity to complete a development, the effect of economic conditions on the valuation of lots or homes, cost overruns, delays in construction or contractor problems. In addition to real estate collateral, these loans may have personal guarantees or UCC filings on other business assets, depending on the financial strength and experience of the developer. Real estate construction loans are monitored on a regular basis by either an independent third party or the responsible loan officer, depending on the size and complexity of the project. This monitoring process includes, at a minimum, the submission of invoices or AIA documents detailing the cost incurred by the borrower, on-site inspections, and an authorizing signature for disbursement of funds.

Commercial Real Estate

Commercial real estate loans may be secured by various types of commercial property including retail space, office buildings, warehouses, hotels and motels, manufacturing facilities and, agricultural land.

Commercial real estate loans present a higher level of risk than residential real estate loans. Repayment of these loans is normally dependent on cash flow generated by the operation of a business that utilizes the real estate. The successful operation of the business, and therefore repayment ability, may be affected by general economic conditions outside of the control of the operator. On most commercial real estate loans ongoing monitoring of cash flow and other financial performance indictors is completed annually through financial statement analysis. In addition, the value of the collateral may be negatively affected by economic conditions and may be insufficient to repay the loan in the event of default. In the event of foreclosure, commercial real estate may be more difficult to liquidate than residential real estate.

Commercial

Commercial loans are made for various business purposes to finance equipment, inventory, accounts receivables, and operating liquidity. These loans are generally secured by business assets or equipment, non-real estate collateral and/or personal guarantees.

Commercial loans present a higher level of credit risk than other loans because repayment ability is usually dependent on cash-flow from a business operation that can be affected by general economic conditions. On most commercial loans ongoing monitoring of cash flow and other financial performance indicators occur at least annually through financial statement analysis. In the event of a default, collateral for these loans may be more difficult to liquidate, and the valuation of the collateral may decline more quickly than loans secured by other types of collateral.

Loans to governmental municipalities are also included in the Commercial class. These loans generally have less risk than Commercial & Industrial (C&I) loans due to the taxing authority of the municipality and its ability to assess fees on services.

This class also includes loans made as part of the Paycheck Protection Program (PPP). The PPP is a small business loan program, administered by the Small Business Administration (SBA). The PPP loans are 100 percent guaranteed by the SBA and have a maturity of two years or five years with a fixed interest rate of 1.00% for the life of the loan. Because the PPP loans are 100% guaranteed by the SBA, they present no credit risk to the Bank once the SBA guarantee is fulfilled. However, if the SBA does not grant loan forgiveness, the PPP loan would present the same risk factors as any other commercial loan.

Consumer

These loans are made for a variety of reasons to consumers and include term loans and personal lines-of credit. The loans may be secured or unsecured. Repayment is primarily dependent on the income of the borrower and to a lesser extent the sale of collateral. The underwriting of these loans is based on the consumer’s ability and willingness to repay and is determined by the borrower’s employment history, current financial condition and credit history. Collateral for these loans, if any, usually depreciates quickly and therefore, may not be adequate to repay the loan if it is repossessed. Therefore, the overall health of the economy, including unemployment rates and wages, will have an effect on the credit quality in this loan class.

11

A summary of loans outstanding, by class, at the end of the reporting periods is as follows:

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Residential Real Estate 1-4 Family
Consumer first liens	$	159,806	$	142,017
Commercial first lien		61,032		63,271
Total first liens		220,838		205,288
Consumer junior liens and lines of credit		70,256		68,752
Commercial junior liens and lines of credit		5,296		3,809
Total junior liens and lines of credit		75,552		72,561
Total residential real estate 1-4 family		296,390		277,849
Residential real estate - construction
Consumer		15,804		13,837
Commercial		11,466		12,063
Total residential real estate construction		27,270		25,900
Commercial real estate		743,642		703,767
Commercial		243,628		242,654
Total commercial		987,270		946,421
Consumer		7,390		6,815
		1,318,320		1,256,985
Less: Allowance for credit losses		(17,018)		(16,052)
Net Loans	$	1,301,302	$	1,240,933
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	1,829	$	1,615
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	737,601	$	699,527
Federal Reserve Bank		77,268		83,482
	$	814,869	$	783,009
Paycheck Protection Program (included in commercial loans)	$	25	$	57

Note 6. Loan Quality and Allowance for Credit Losses

The Bank 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, and current economic trends, among other factors. Management utilizes a risk rating scale ranging from 1-Prime to 9-Loss to evaluate loan quality. This risk rating scale is used primarily for commercial purpose loans. Consumer purpose loans are identified as either performing or nonperforming based on the payment status of the loans. Nonperforming consumer loans are loans that are nonaccrual or 90 days or more past due and still accruing. The Bank uses the following definitions for risk ratings:

Pass (1-5): are considered pass credits with lower or average risk and are not otherwise classified.

Other Assets Especially Mentioned (OAEM) (6): Loans classified as OAEM 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 borrower’s credit position at some future date.

‎

12

Substandard (7): Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower 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 Bank will sustain some loss if the deficiencies are not corrected.

Doubtful (8): 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, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the pool evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the sale of the collateral, the expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for any discounts and selling costs as appropriate.

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the Allowance for Credit Loss for loans (ACL). The Bank begins enhanced monitoring of all loans rated 6–OAEM or worse and obtains a new appraisal or asset valuation for any loans placed on nonaccrual and rated 7 - Substandard or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Bank. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Enterprise Risk Management Committee of the Board of Directors. Management believes the ACL at June 30, 2024 is adequate.

‎

13

The following table presents loans by year of origination and internally assigned risk ratings:

(Dollars in thousands)													Revolving		Revolving
	Term Loans												Loans		Loans
	Amortized Cost Basis by Origination Year												Amortized		Converted
As of June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Residential real estate 1-4 family:
Commercial:
Risk rating:
Pass (1-5)	$	2,903	$	9,737	$	8,484	$	10,766	$	9,189	$	21,759	$	3,490	$	—	$	66,328
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		2,903		9,737		8,484		10,766		9,189		21,759		3,490		—		66,328
Consumer:
Performing		18,756		56,876		32,537		14,674		9,621		29,538		47,035		19,816		228,853
Nonperforming		—		—		106		280		—		436		387		—		1,209
Total Consumer		18,756		56,876		32,643		14,954		9,621		29,974		47,422		19,816		230,062
Total	$	21,659	$	66,613	$	41,127	$	25,720	$	18,810	$	51,733	$	50,912	$	19,816	$	296,390
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate construction:
Commercial:
Risk rating:
Pass (1-5)	$	1,980	$	6,128	$	1,059	$	1,071	$	184	$	1,044	$	—	$	—	$	11,466
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		1,980		6,128		1,059		1,071		184		1,044		—		—		11,466
Consumer:
Performing		4,811		10,993		—		—		—		—		—		—		15,804
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		4,811		10,993		—		—		—		—		—		—		15,804
Total	$	6,791	$	17,121	$	1,059	$	1,071	$	184	$	1,044	$	—	$	—	$	27,270
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Risk rating:
Pass (1-5)	$	31,739	$	205,456	$	105,602	$	96,075	$	34,467	$	236,387	$	9,962	$	—	$	719,688
OAEM (6)		—		2,927		1,794		1,722		6,732		1,646		594		—		15,415
Substandard (7)		—		6,004		—		—		—		2,535		—		—		8,539
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	31,739	$	214,387	$	107,396	$	97,797	$	41,199	$	240,568	$	10,556	$	—	$	743,642
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	(2)	$	—	$	—	$	(2)
Commercial:
Risk rating:
Pass (1-5)	$	8,962	$	30,446	$	30,653	$	41,822	$	20,944	$	65,039	$	43,050	$	—	$	240,916
OAEM (6)		—		12		448		1,586		14		—		240		—		2,300
Substandard (7)		—		—		215		—		1		—		196		—		412
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	8,962	$	30,458	$	31,316	$	43,408	$	20,959	$	65,039	$	43,486	$	—	$	243,628
Current period gross charge-offs	$	(7)	$	—	$	(80)	$	—	$	—	$	—	$	(62)	$	—	$	(149)
Consumer:
Performing		1,491		1,401		509		1,836		82		48		1,977		—		7,344
Nonperforming		—		23		—		—		2		—		21		—		46
Total	$	1,491	$	1,424	$	509	$	1,836	$	84	$	48	$	1,998	$	—	$	7,390
Current period gross charge-offs	$	(21)	$	—	$	(2)	$	(2)	$	(6)	$	(1)	$	(14)	$	—	$	(46)

‎

14

(Dollars in thousands)													Revolving		Revolving
	Term Loans												Loans		Loans
	Amortized Cost Basis by Origination Year												Amortized		Converted
As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate 1-4 family:
Commercial:
Risk rating:
Pass (1-5)	$	9,867	$	9,088	$	11,038	$	9,691	$	2,433	$	22,906	$	2,057	$	—	$	67,080
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		9,867		9,088		11,038		9,691		2,433		22,906		2,057		—		67,080
Consumer:
Performing		53,128		34,136		15,625		10,245		5,222		28,423		43,968		20,022		210,769
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		53,128		34,136		15,625		10,245		5,222		28,423		43,968		20,022		210,769
Total	$	62,995	$	43,224	$	26,663	$	19,936	$	7,655	$	51,329	$	46,025	$	20,022	$	277,849
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate construction:
Commercial:
Risk rating:
Pass (1-5)	$	6,845	$	2,209	$	1,289	$	214	$	—	$	1,506	$	—	$	—	$	12,063
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		6,845		2,209		1,289		214		—		1,506		—		—		12,063
Consumer:
Performing		13,837		—		—		—		—		—		—		—		13,837
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		13,837		—		—		—		—		—		—		—		13,837
Total	$	20,682	$	2,209	$	1,289	$	214	$	—	$	1,506	$	—	$	—	$	25,900
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Risk rating:
Pass (1-5)	$	180,052	$	110,886	$	98,540	$	34,307	$	38,603	$	214,179	$	10,567	$	—	$	687,134
OAEM (6)		2,955		1,350		1,000		6,823		—		2,182		139		—		14,449
Substandard (7)		—		—		—		—		—		2,134		50		—		2,184
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	183,007	$	112,236	$	99,540	$	41,130	$	38,603	$	218,495	$	10,756	$	—	$	703,767
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial:
Risk rating:
Pass (1-5)	$	34,851	$	33,983	$	45,754	$	22,847	$	3,579	$	64,542	$	36,508	$	—	$	242,064
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		317		—		—		—		—		273		—		590
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	34,851	$	34,300	$	45,754	$	22,847	$	3,579	$	64,542	$	36,781	$	—	$	242,654
Current period gross charge-offs	$	(125)	$	—	$	(130)	$	—	$	—	$	—	$	(50)	$	—	$	(305)
Consumer:
Performing		1,863		669		1,985		148		80		5		2,060		—		6,810
Nonperforming		—		—		—		—		—		—		5		—		5
Total	$	1,863	$	669	$	1,985	$	148	$	80	$	5	$	2,065	$	—	$	6,815
Current period gross charge-offs	$	(63)	$	—	$	(10)	$	(2)	$	(6)	$	—	$	(36)	$	—	$	(117)

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15

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days and still accruing as of June 30, 2024:

	June 30, 2024						December 31, 2023
(Dollars in thousands)	Nonaccrual and Loans Past Due Over 90 Days+						Nonaccrual and Loans Past Due Over 90 Days+
					Loans Past Due						Loans Past Due
	Nonaccrual		Nonaccrual		Over 90 Days		Nonaccrual		Nonaccrual		Over 90 Days
	Without ACL		With ACL		Still Accruing		Without ACL		With ACL		Still Accruing
June 30, 2024
Residential Real Estate 1-4 Family
First liens	$	—	$	—	$	41	$	—	$	—	$	—
Junior liens and lines of credit		—		—		30		—		—		—
Total		—		—		71		—		—		—
Residential real estate - construction		—		—		—		—		—		—
Commercial real estate		407		—		—		—		—		—
Commercial		316		—		88		147		—		—
Consumer		—		—		6		—		—		5
Total	$	723	$	—	$	165	$	147	$	—	$	5

At June 30, 2024 the company had $407 thousand of commercial real estate loans and $316 thousand of commercial loans that were considered to be collateral dependent. A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty, and the repayment is expected to be provided substantially through the operation or sale of collateral. These loans were secured by farmland and business assets, respectively. No loans were considered collateral dependent at December 31, 2023.

At June 30, 2024 and December 31, 2023, the Bank had $0 of residential properties in the process of foreclosure.

The following table presents the aging of payments of the loan portfolio:

(Dollars in thousands)	Loans Past Due						Total				Total
	30-59 Days		60-89 Days		90 Days+		Past Due		Current		Loans
June 30, 2024
Residential Real Estate 1-4 Family
First liens	$	—	$	799	$	41	$	840	$	219,998	$	220,838
Junior liens and lines of credit		339		—		30		369		75,183		75,552
Total		339		799		71		1,209		295,181		296,390
Residential real estate - construction		—		—		—		—		27,270		27,270
Commercial real estate		356		854		407		1,617		742,025		743,642
Commercial		193		—		404		597		243,031		243,628
Consumer		37		3		6		46		7,344		7,390
Total	$	925	$	1,656	$	888	$	3,469	$	1,314,851	$	1,318,320

	Loans Past Due						Total				Total
	30-59 Days		60-89 Days		90 Days+		Past Due		Current		Loans
December 31, 2023
Residential Real Estate 1-4 Family
First liens	$	62	$	394	$	—	$	456	$	204,832	$	205,288
Junior liens and lines of credit		239		228		—		467		72,094		72,561
Total		301		622		—		923		276,926		277,849
Residential real estate - construction		—		—		—		—		25,900		25,900
Commercial real estate		3,232		—		—		3,232		700,535		703,767
Commercial		542		112		147		801		241,853		242,654
Consumer		21		12		5		38		6,777		6,815
Total	$	4,096	$	746	$	152	$	4,994	$	1,251,991	$	1,256,985

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The following table presents, by class, the activity in the Allowance for Credit Losses (ACL) for the periods shown:

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
ACL at March 31, 2024	$	1,308	$	415	$	337	$	11,057	$	3,324	$	92	$	—	$	16,533
Charge-offs		—		—		—		—		(83)		(18)		—		(101)
Recoveries		—		—		3		—		20		3		—		26
Provision		76		14		(22)		366		103		23		—		560
ACL at June 30, 2024	$	1,384	$	429	$	318	$	11,423	$	3,364	$	100	$	—	$	17,018
ACL at December 31, 2023	$	1,296	$	419	$	296	$	10,657	$	3,290	$	94	$	—	$	16,052
Charge-offs		—		—		—		(2)		(149)		(46)		—		(197)
Recoveries		—		—		7		—		80		26		—		113
Provision		88		10		15		768		143		26		—		1,050
ACL at June 30, 2024	$	1,384	$	429	$	318	$	11,423	$	3,364	$	100	$	—	$	17,018
ACL at March 31, 2023	$	1,624	$	690	$	190	$	8,236	$	3,275	$	94	$	—	$	14,109
Charge-offs		—		—		—		—		(1)		(42)		—		(43)
Recoveries		—		—		3		—		12		10		—		25
Provision		96		(7)		(16)		847		(432)		36		—		524
ACL at June 30, 2023	$	1,720	$	683	$	177	$	9,083	$	2,854	$	98	$	—	$	14,615
ACL at December 31, 2022	$	459	$	234	$	343	$	7,493	$	4,846	$	133	$	667	$	14,175
Impact of adopting ASU 2016-13		1,096		493		(95)		584		(1,907)		(40)		(667)		(536)
Charge-offs		—		—		—		—		(87)		(76)		—		(163)
Recoveries		2		—		42		—		79		25		—		148
Provision		163		(44)		(113)		1,006		(77)		56		—		991
ACL at June 30, 2023	$	1,720	$	683	$	177	$	9,083	$	2,854	$	98	$	—	$	14,615

On January 1, 2023, The Bank adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

As of June 30, 2024 and December 31, 2023 there were no modifications made to borrowers experiencing financial difficulty.

Note 7. Leases

The Corporation leases various assets in the course of its operations that are subject to recognition on the balance sheet. The Corporation considers all of its leases to be operating leases and it has no finance leases. The leased assets may include equipment, and buildings and land (collectively real estate). The equipment leases are shorter-term than the real estate leases, and generally have a fixed payment over a defined term without renewal options. Certain equipment leases have purchase options and it was determined the option was not reasonably certain to be exercised. The real estate leases are longer-term and may contain renewal options after the initial term, but none of the real estate leases contain a purchase option. The renewal options on real estate leases were reviewed and if it was determined the option was reasonably certain to be renewed, the option term was considered in the determination of the lease liability. There is only one real estate lease with a variable payment based on an index included in the lease liability. None of the leases contain any restrictive covenants and there are no significant leases that have not yet commenced. The discount rate used to determine the lease liability is based on the Bank’s fully secured borrowing rate from the Federal Home Loan Bank for a term similar to the lease term. Operating lease expense is included in net occupancy expense in the consolidated statements of income.

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Lease costs:

The components of total lease cost were as follows:

	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
(Dollars in thousands)	2024		2023		2024		2023
Operating lease cost	$	195	$	212	$	389	$	429
Short-term lease cost		1		4		2		8
Variable lease cost		37		37		87		74
Total lease cost	$	233	$	253	$	478	$	511

Supplemental Lease Information:

	Six Months Ended ‎June 30,
(Dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	379	$	413
Weighted-average remaining lease term (years)		11.7		11.9
Weighted-average discount rate		3.43%		3.37%

Lease Obligations:

Future undiscounted lease payments for operating leases with initial terms of one year or more as of June 30, 2024, are as follows:

(Dollars in thousands)
2024	$	354
2025		666
2026		564
2027		421
2028		393
2029 and beyond		3,205
Undiscounted cash flow		5,603
Imputed Interest		(1,076)
Total lease liability	$	4,527

Note 8. Other Real Estate Owned

The Bank had no other real estate owned at June 30, 2024 and December 31, 2023.

Note 9. Derivatives

The Corporation is exposed to certain risks arising from both its business operations and economic conditions.  The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. 

The Corporation’s existing credit derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements.  Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders which participate in loans.

The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the Balance Sheet.

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		Fair Value of Derivative Instruments
		Derivative Liabilities
(Dollars in thousands)		June 30, 2024					December 31, 2023
		Notional amount	Balance Sheet Location		Fair Value		Notional amount	Balance Sheet Location		Fair Value
Derivatives not designated as hedging instruments
Other Contracts	$	6,167	Other Liabilities	$	—	$	6,268	Other Liabilities	$	2
Total derivatives not designated as hedging instruments				$	—				$	2

The table below presents the effect of the Corporation’s derivative financial instruments that are not designated as hedging instruments on the Income Statement.

Effect of Derivatives as Hedging Instruments on the Income Statement
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivatives
(Dollars in thousands)		Three Months Ended				Six Months Ended
		June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Other Contracts	Other income	$	-	$	2	$	1	$	-

As of June 30, 2024, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $0.

Note 10. Pension

The components of pension expense for the periods presented are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2024		2023		2024		2023
Components of net periodic cost:
Service cost	$	56	$	53	$	103	$	108
Interest cost		193		202		381		403
Expected return on plan assets		(215)		(231)		(432)		(462)
Recognized net actuarial loss		15		—		15		—
Total pension expense	$	49	$	24	$	67	$	49

The service cost component of pension expense is recorded in the salaries and employee benefits line and all other cost components are recorded in the nonservice pension line of the Consolidated Statements of Income. 

Note 11. Fair Value Measurements and Fair Values of Financial Instruments

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

FASB ASC Topic 820, “Financial Instruments”, requires disclosure of the fair value of financial assets and liabilities, including those financial assets and liabilities that are not measured and reported at fair value on a recurring and nonrecurring basis. The Corporation does not report any nonfinancial assets at fair value. FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority

19

to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1: Valuation is based on unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. There may be substantial differences in the assumptions used for securities within the same level. For example, prices for U.S. Agency securities have fewer assumptions and are closer to level 1 valuations than the private label mortgage-backed securities that require more assumptions and are closer to level 3 valuations.

Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Corporation’s assumptions regarding what market participants would assume when pricing a financial instrument.

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

The following information regarding the fair value of the Corporation’s financial instruments should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’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 Corporation’s disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Corporation’s financial instruments measured at fair value on a recurring and nonrecurring basis.

Equity Securities: Equity securities are valued using quoted market prices from nationally recognized markets (Level 1). Equity securities are measured at fair value on a recurring basis.

Investment securities: Fair values of investment securities available-for-sale were primarily measured using information from a third-party pricing service. This service provides pricing information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data from market research publications. Level 2 investment securities are primarily comprised of debt securities issued by states and municipalities, corporations, mortgage-backed securities issued by government agencies, and government-sponsored enterprises. Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models. Investment securities are measured at fair value on a recurring basis.

Collateral Dependent Loans: The fair value of collateral dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals conducted by an independent, licensed appraiser, less cost to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach (Level 2). If the appraiser makes an adjustment to account for differences between the comparable sales and income data available for similar loans, or if management adjusts the appraised value, then the fair value is considered Level 3. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral dependent loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy. No partial charge-offs on these loans were taken in the first quarter of 2024. Collateral dependent loans are measured at fair value on a nonrecurring basis.

‎

20

Recurring Fair Value Measurements

For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2024 and December 31, 2023 are as follows:

(Dollars in thousands)	Fair Value at June 30, 2024
Asset Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	352	$	—	$	—	$	352
Available for sale:
U.S. Treasury		73,020		—		—		73,020
Municipal		—		134,701		—		134,701
Corporate		—		23,688		—		23,688
Agency mortgage & asset-backed		—		123,783		—		123,783
Non-Agency mortgage & asset-backed		—		99,273		—		99,273
Total assets	$	73,372	$	381,445	$	—	$	454,817

(Dollars in thousands)	Fair Value at December 31, 2023
Asset Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	427	$	—	$	—	$	427
Available for sale:
U.S. Treasury		74,091		—		—		74,091
Municipal		—		138,618		—		138,618
Corporate		—		23,198		—		23,198
Agency mortgage and asset-backed		—		132,591		—		132,591
Non-Agency mortgage and asset-backed		—		104,005		—		104,005
Total assets	$	74,518	$	398,412	$	—	$	472,930

The fair value of derivative liabilities measured at fair value was $0 at June 30, 2024, $2 thousand at December 31, 2023 and was considered immaterial.

‎

21

Nonrecurring Fair Value Measurements

The Corporation did not record any assets or liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis at June 30, 2024. For financial assets and liabilities measured at fair value on a recurring basis, there were no transfers of financial assets or liabilities between Level 1 and Level 2 during the period ending June 30, 2024.

The carrying amounts and estimated fair value of financial instruments not carried at fair value are as follows:

	June 30, 2024
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	179,727	$	179,727	$	179,727	$	—	$	—
Long-term interest-earning deposits in other banks		1,994		1,994		1,994		—		—
Loans held for sale		932		947		—		947		—
Net loans		1,301,302		1,259,496		—		—		1,259,496
Accrued interest receivable		7,515		7,515		—		—		7,515
Financial liabilities:
Deposits	$	1,586,458	$	1,585,810	$	—	$	1,585,810	$	—
Federal Reserve Bank borrowings		40,000		39,891				39,891
FHLB advances		240,000		239,310		—		239,310		—
Subordinate notes		19,680		17,474		—		17,474		—
Accrued interest payable		4,735		4,735		—		4,735		—
	December 31, 2023
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	23,140	$	23,140	$	23,140	$	—	$	—
Long-term interest-earning deposits in other banks		6,229		6,229		6,229		—		—
Loans held for sale		213		213		—		213		—
Net loans		1,240,933		1,207,403		—		—		1,207,403
Accrued interest receivable		7,506		7,506		—		—		7,506
Financial liabilities:
Deposits	$	1,537,978	$	1,537,480	$	—	$	1,537,480	$	—
Federal Reserve Bank Borrowings		90,000		89,783				89,783
FHLB Advances		40,000		40,110				40,110
Subordinate notes		19,661		18,303		—		18,303		—
Accrued interest payable		3,856		3,856		—		3,856		—

Note 12. Deposits

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Noninterest-bearing checking	$	282,964	$	273,050
Interest-bearing checking		401,174		454,517
Money management		616,928		572,058
Savings		101,712		105,907
Total interest-bearing checking and savings		1,119,814		1,132,482
Time deposits		183,680		132,446
Total deposits	$	1,586,458	$	1,537,978
Overdrawn deposit accounts reclassified as loans	$	660	$	160

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Time deposits greater than $250,000 at June 30, 2024 and December 31, 2023 were $48.5 million and $44.4 million, respectively.

Note 13. Borrowings

At June 30, 2024, the Bank had $40.0 million borrowed from the Federal Reserve’s Bank Term Funding Program (BTFP) with a rate of 4.81% due January 10, 2025, compared to $90.0 million at December 31, 2023. At June 30, 2024, the fair value of debt securities pledged for the BTFP was $44.1 million.

At June 30, 2024, the Bank had $240.0 million in total borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB), compared to $40.0 million at December 31, 2023. The borrowings are comprised of $40.0 million in short-term borrowings with a blended rate of 5.80%, due during the third quarter of 2024, and $200.0 million in long-term borrowings with a rate of 4.32%, due January 12, 2027.

At June 30, 2024, the Corporation had $20.0 million of unsecured subordinated debt notes payable, $15.0 million which mature on September 1, 2030 and $5.0 million which mature on September 1, 2035. The notes are recorded on the consolidated balance sheet net of remaining debt issuance costs totaling $320 thousand at June 30, 2024, which is being amortized on a pro-rata basis, based on the maturity date of the notes, on an effective interest method. The subordinated notes totaling $15.0 million have a fixed interest rate of 5.00% through September 1, 2025, then convert to a variable rate of 90-day Secured Overnight Financing Rate (SOFR) plus 4.93% for the applicable interest periods through maturity. The subordinated notes totaling $5.0 million have a fixed interest rate of 5.25% through September 1, 2030, then convert to a variable rate of 90-day SOFR plus 4.92% for the applicable interest periods through maturity. The Corporation may, at its option, redeem the notes, in whole or in part, at any time 5-years prior to the maturity. The notes are structured to qualify as Tier 2 Capital for the Corporation and there are no debt covenants on the notes.

Note 14. Capital Ratios

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered “well capitalized” are: (1) Common Equity Tier 1 (CET1) of 6.5%, (2) Tier 1 Leverage of 5%, (3) Tier 1 Risk-Based Capital of 8%, and (4) Total Risk-Based Capital of 10%. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank’s capital conservation buffer at June 30, 2024 was 5.52% compared to the regulatory buffer of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of June 30, 2024, the Bank was “well capitalized.”

In 2019, the Community Bank Leverage Ratio (CBLR) was approved by federal banking agencies as an optional capital measure available to Qualifying Community Banking Organizations (QCBO). If a bank qualifies as a QCBO and maintains a CBLR of 9% or greater, the bank would be considered “well-capitalized” for regulatory capital purposes and exempt from complying with the risk-based capital rule described above. The CBLR rule took effect January 1, 2020 and banks could opt-in through an election in the first quarter 2020 regulatory filing. The Bank met the criteria of a QCBO but did not opt-in to the CBLR.

The consolidated asset limit on small bank holding companies is $3.0 billion and a company with assets under that limit is not subject to the consolidated capital rules but may file reports that include capital amounts and ratios. The Corporation has elected to file those reports.

‎

23

The following table summarizes the regulatory capital requirements and results as of June 30, 2024 and December 31, 2023 for the Corporation and the Bank:

			Regulatory Ratios
			Adequately	Well
	June 30,	December 31,	Capitalized	Capitalized
(Dollars in thousands)	2024	2023	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	12.01%	11.82%	N/A	N/A
Farmers & Merchants Trust Company	12.27%	12.38%	4.50%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	12.01%	11.82%	N/A	N/A
Farmers & Merchants Trust Company	12.27%	12.38%	6.00%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	14.66%	14.45%	N/A	N/A
Farmers & Merchants Trust Company	13.52%	13.63%	8.00%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	8.38%	9.01%	N/A	N/A
Farmers & Merchants Trust Company	8.56%	9.44%	4.00%	5.00%

(1)Common equity Tier 1 capital / total risk-weighted assets

(2)Tier 1 capital / total risk-weighted assets

(3)Total risk-based capital / total risk-weighted assets

(4)Tier 1 capital / average quarterly assets

Note 15. Revenue Recognition

All of the Corporation’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income as presented in its consolidated statements of income. Revenue generating activities that fall within the scope of ASC 606 are described as follows:

Wealth Management Fees – these represent fees from wealth management (assets under management), fees from the management and settlement of estates and commissions from the sale of investment and insurance products. Asset management fees are generally assessed based on a tiered fee schedule, based on the value of assets under management, and are recognized monthly when the service obligation is completed. Fees for estate management services are based on the estimated fair value of the estate. These fees are generally recognized monthly over an 18-month period that Management has determined to represent the average time to fulfill the performance obligations of the contract. Management has the discretion to adjust this time period as needed based upon the nature and complexity of an individual estate. Commissions from the sale of investment and insurance products are recognized upon the completion of the transaction.

The following table presents Wealth Management Fees for the three and six months ended June 30, 2024 and 2023:

	For the Three Months Ended				For the Six Months Ended
(Dollars in thousands)	June 30,				June 30,
Wealth Management Fees	2024		2023		2024		2023
Asset Management Fees	$	2,051	$	1,844	$	3,884	$	3,481
Estate Management Fees		128		61		215		152
Commissions		63		54		170		160
Total	$	2,242	$	1,959	$	4,269	$	3,793

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Loan Service Charges – these represent fees on loans for services or charges that occur after the loan has been booked, for example, late payment fees. These also include fees for mortgages settled for third-party mortgage companies. All of these fees are transactional in nature and are recognized upon completion of the transaction which represents the performance obligation.

Deposit Service Charges and Fees – these represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to, stop payment fees and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fees are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly.

Debit Card Income – this represents interchange fees from cardholder transactions conducted through the card payment network. Cardholders use the debit card to conduct point-of-sale transactions that produce interchange fees. The fees are transaction based and the fee is recognized with the processing of the transaction. These fees are reported net of cardholder rewards.

Other Service Charges and Fees – these are comprised primarily of merchant card fees, credit card fees, ATM surcharges and interchange fees and wire transfer fees. Merchant card fees represent fees the Bank earns from a third party for enrolling a customer in the processor’s program. Credit card fees represent a fee earned by the Bank for a successful referral to a card-issuing company. ATM surcharges and interchange fees are the result of Bank customers conducting ATM transactions that generate fee income and are processed through multiple card networks. All of these fees are transaction based and are recognized at the time of the transaction.

Gains/Losses on the Sale of Other Real Estate – these are recognized when control of the property transfers to the buyer.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into longer-term revenue contracts with customers, and therefore, does not experience significant contract balances.

Contract Acquisition Costs

The Corporation expenses all contract acquisition costs as costs are incurred.

1Note 16. Commitments and Contingencies

In the normal course of business, the Bank is a party to financial instruments that are not reflected in the accompanying financial statements and are commonly referred to as off-balance-sheet instruments. These financial instruments are entered into primarily to meet the financing needs of the Bank’s customers and include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the consolidated balance sheet.

The Corporation’s exposure to credit loss in the event of nonperformance by other parties to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments.

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The Bank had the following outstanding commitments for the periods presented:

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit	$	320,735	$	325,982
Consumer commitments to extend credit (secured)		126,387		112,157
Consumer commitments to extend credit (unsecured)		6,366		5,964
	$	453,488	$	444,103
Standby letters of credit	$	21,538	$	19,851
ACL - Unfunded Commitments (1)	$	1,970	$	2,022
(1) Reported in Other Liabilities on the Consolidated Balance Sheets

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses with the exception of home equity lines and personal lines of credit and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, is based on Management’s credit evaluation of the counterparty. Collateral for most commercial commitments varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. Collateral for secured consumer commitments consists of liens on residential real estate.

Standby letters of credit are instruments issued by the Bank, which guarantee the beneficiary payment by the Bank in the event of default by the Bank’s customer in the nonperformance of an obligation or service. Most standby letters of credit are extended for one-year periods. Generally, the credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral supporting those commitments for which collateral is deemed necessary primarily in the form of certificates of deposit and liens on real estate. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.

Most of the Bank’s business activity is with customers located within its primary market and does not involve any significant concentrations of credit to any one entity or industry.

Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation.

The Corporation establishes accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable, and the amount of the loss can be reasonably estimated. When the Corporation is able to do so, it also determines estimates of possible losses, whether in excess of any accrued liability or where there is no accrued liability.

These assessments are based on the analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties. As new information is obtained, the Corporation may change its assessments and, as a result, take or adjust the amounts of its accruals and change its estimates of possible losses or ranges of possible losses. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts that may be accrued or included in estimates of possible losses or ranges of possible losses may not represent the actual loss to the Corporation from any legal proceeding. Its exposure and ultimate losses may be higher, possibly significantly higher, than amounts it may accrue or amounts it may estimate.

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26

In management’s opinion, the Corporation does not anticipate, at the present time, that the ultimate aggregate liability, if any, arising out of all litigation to which the Corporation is a party at this time will have a material adverse effect on its financial position. The Corporation cannot now determine, however, whether or not any claim asserted against it will have a material adverse effect on its results of operations in any future reporting period, which will depend on, among other things, the amount of loss resulting from the claim and the amount of income otherwise reported for the reporting period. Thus, at June 30, 2024, the Corporation is unable to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss with respect to such other matters and, accordingly, have not yet established any specific accrual for such other matters.

Note 17. Reclassification

Certain prior period amounts may have been reclassified to conform to the current year presentation. Such reclassifications did not affect prior year net income or shareholders’ equity.

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

Management’s Discussion and Analysis of Results of Operations and Financial Condition

For the Three and Six Months Ended June 30, 2024 and 2023

Forward Looking Statements

Certain statements appearing herein which are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements refer to a future period or periods, reflecting management’s current views as to likely future developments, and use words such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” or similar terms. Because forward-looking statements involve certain risks, uncertainties and other factors over which the Corporation has no direct control, actual results could differ materially from those contemplated in such statements. These factors include (but are not limited to) the following: general economic conditions, changes in the rates of inflation and the effects of inflation, changes in interest rates, ongoing disruption in the financial services industry caused by bank failures and uncertainties involving various banks, changes in the Corporation’s cost of funds, changes in government monetary policy, changes in government regulation and taxation of financial institutions, changes in technology, the intensification of competition within the Corporation’s market area, and other similar factors.

We caution readers not to place undue reliance on these forward-looking statements. They only reflect management’s analysis as of this date. The Corporation does not revise or update these forward-looking statements to reflect events or changed circumstances.

Critical Accounting Policies

Management has identified critical accounting policies for the Corporation. These policies are particularly sensitive, requiring significant judgements, estimates and assumptions to be made by Management.

There were no changes to the critical accounting policies disclosed in the 2023 Annual Report on Form 10-K in regards to application or related judgments and estimates used as of June 30, 2024. Please refer to Item 7 of the Corporation’s 2023 Annual Report on Form 10-K for a more detailed disclosure of the critical accounting policies.

Results of Operations

Summary

A summary of operating results for Franklin Financial Services Corporation for the three and six months ended June 30, 2024 are as follows:

Net income for the second quarter of 2024 was $3.0 million ($0.66 per diluted share) compared to $3.4 million ($0.77 per diluted share) for the first quarter of 2024 (a decrease of 9.8%) and $3.0 million ($0.68 per diluted share) for the second quarter of 2023.

Net income year-to-date for 2024 was $6.4 million ($1.43 per diluted share) compared to $6.3 million ($1.42 per diluted share) for the same period in 2023

For the second quarter of 2024, the provision for credit losses was $546 thousand compared to $452 thousand for the first quarter of 2024 and $532 thousand for the second quarter of 2023. Year-to-date provision expense was $998 thousand compared to $1.1 million for the same period in 2023.

Total assets were $2.039 billion as of June 30, 2024.

Total net loans increased $61.3 million (4.9%) to $1.301 billion at June 30, 2024 from $1.241 billion at December 31, 2023. 

Total deposits increased $48.5 million (3.2%) to $1.586 billion at June 30, 2024 from $1.538 billion at December 31, 2023.

At June 30, 2024, borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB) were $240.0 million and $40.0 million from the Federal Reserve Bank. 

Shareholders’ equity increased by $4.7 million, year-to-date, to $136.8 million, and the book value of the Corporation’s common stock increased to $31.01 per share.

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28

For the year-to-date period, Return on Assets (ROA) was 0.63%, Return on Equity (ROE) was 9.71% and the Net Interest Margin (NIM) was 2.94%, compared to an ROA of 0.75%, ROE of 10.56% and NIM of 3.35% for the same period in 2023.

On July 11, 2024, the Board of Directors declared a $0.32 per share regular quarterly cash dividend for the third quarter of 2024 to be paid on August 28, 2024 to shareholders of record at the close of business on August 2, 2024. 

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Key performance ratios as of, or for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023 are listed below:

	June 30,		June 30,		December 31,
(Dollars in thousands, except per share) (Unaudited)	2024		2023		2023
Balance Sheet Highlights
Total assets	$	2,039,126	$	1,736,165	$	1,836,039
Debt securities available for sale		454,465		439,851		472,503
Loans, net		1,301,302		1,130,547		1,240,933
Deposits		1,586,458		1,513,135		1,537,978
Other borrowings		280,000		70,000		280,000
Shareholders' equity		136,809		119,770		132,136
Summary of Operations
Interest income	$	48,541	$	35,094	$	76,762
Interest expense		20,776		9,062		23,125
Net interest income		27,765		26,032		53,637
Provision for credit losses - loans		1,050		991		2,589
(Reversal of) provision for credit losses - unfunded commitments		(52)		70		135
Total provision for credit losses		998		1,061		2,724
Net interest income after provision for credit losses		26,767		24,971		50,913
Noninterest income		8,538		6,754		14,851
Noninterest expense		27,642		24,667		50,011
Income before income taxes		7,663		7,058		15,753
Federal income tax expense		1,269		790		2,155
Net income	$	6,394	$	6,268	$	13,598
Performance Measurements
Return on average assets*		0.63%		0.75%		0.78%
Return on average equity*		9.71%		10.56%		11.39%
Return on average tangible equity (1)*		10.40%		11.26%		12.32%
Efficiency ratio (1)		74.91%		71.48%		70.75%
Net interest margin*		2.94%		3.35%		3.31%
Shareholders' Value (per common share)
Diluted earnings per share	$	1.43	$	1.42	$	3.10
Basic earnings per share		1.43		1.43		3.11
Regular cash dividends declared		0.64		0.64		1.28
Book value		31.01		27.53		30.23
Tangible book value (1)		28.96		25.46		28.17
Market value		28.28		27.74		31.55
Market value/book value ratio		91.20%		100.76%		104.37%
Market value/tangible book value ratio		97.64%		108.95%		112.01%
Price/earnings multiple*		9.89		9.77		10.18
Current quarter dividend yield		4.53%		4.61%		4.06%
Dividend payout ratio year-to-date		43.88%		44.77%		41.15%
Safety and Soundness
Average equity/average assets		6.54%		7.10%		6.82%
Risk-based capital ratio (Total)		14.66%		16.84%		14.45%
Leverage ratio (Tier 1)		8.38%		9.39%		9.01%
Common equity ratio (Tier 1)		12.01%		13.88%		11.82%
Nonperforming loans / gross loans		0.07%		0.02%		0.01%
Nonperforming assets/total assets		0.04%		0.01%		0.01%
Allowance for credit losses as a % of loans		1.29%		1.28%		1.28%
Net loans (charged-off) recovered / average loans*		-0.01%		0.00%		-0.02%
Assets under Management
Trust assets under management (fair value)	$	1,128,087	$	977,461	$	1,094,747
Held at third-party brokers (fair value)		143,736		127,801		135,423

*Year-to-date annualized

(1)   See the section titled “GAAP versus Non-GAAP Presentation” that follows.

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GAAP versus non-GAAP Presentations – The Corporation supplements its traditional GAAP measurements with certain non-GAAP measurements to evaluate its performance and to eliminate the effect of intangible assets.  By eliminating intangible assets (Goodwill), the Corporation believes it presents a measurement that is comparable to companies that have no intangible assets or to companies that have eliminated intangible assets in similar calculations. However, not all companies may use the same calculation method for each measurement. The non-GAAP measurements are not intended to be used as a substitute for the related GAAP measurements. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. In the event of such a disclosure or release, the Securities and Exchange Commission’s Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. The following table shows the calculation of the non-GAAP measurements as of, or for the six months ended June 30, 2024 and 2023 and the year ended December 31, 2023.

(Dollars in thousands, except per share)
	June 30, 2024		June 30, 2023		December 31, 2023
Return on Tangible Equity (non-GAAP)
Net income	$	6,394	$	6,268	$	13,598
Average shareholders' equity		132,017		120,374		119,408
Less average intangible assets		(9,016)		(9,016)		(9,016)
Average tangible equity (non-GAAP)		123,001		111,358		110,392
Return on average tangible equity (non-GAAP)*		10.40%		11.26%		12.32%
Tangible Book Value (per share) (non-GAAP)
Shareholders' equity	$	136,809	$	119,770	$	132,136
Less intangible assets		(9,016)		(9,016)		(9,016)
Tangible book value (non-GAAP)		127,793		110,754		123,120
Shares outstanding (in thousands)		4,412		4,350		4,371
Tangible book value per share (non-GAAP)	$	28.96	$	25.46	$	28.17
Efficiency Ratio
Noninterest expense	$	27,642	$	24,667	$	50,011
Net interest income		27,765		26,032		53,637
Plus tax equivalent adjustment to net interest income		522		573		1,094
Plus noninterest income, net of securities transactions		8,613		7,905		15,954
Total revenue		36,900		34,510		70,685
Efficiency ratio (Noninterest expense/total revenue)		74.91%		71.48%		70.75%
* Year-to-date annualized

Net Interest Income

The largest source of the Corporation’s earnings is net interest income, which is defined as the difference between income on interest-earning assets and the expense of interest-bearing liabilities supporting those assets. Principal categories of interest-earning assets are loans and securities, while deposits, short-term borrowings and long-term debt are the principal categories of interest-bearing liabilities. Demand deposits enhance net interest income because they are noninterest-bearing deposits. For the purpose of this discussion, balance sheet items refer to the average balance for the year and net interest income is adjusted to a fully taxable-equivalent basis. This tax-equivalent adjustment facilitates performance comparisons between taxable and tax-free assets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the Corporation’s 21% Federal statutory rate.

Comparison of the three months ended June 30, 2024 to the three months ended June 30, 2023:

Tax equivalent net interest income increased $1.0 million to $14.5 million in the second quarter of 2024 compared to $13.5 million for the same period in 2023. Tax-equivalent net interest income increased $433 thousand from balance sheet volume changes and $567 thousand from interest rate changes.

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The following table presents average balances, tax-equivalent (T/E) interest income, and yields earned or rates paid on the assets or liabilities. Loans are classified by type of collateral and residential loans include commercial purpose loans and nonaccrual loans are included in the average loan balance used to calculate the yield. All nontaxable interest income has been adjusted to a tax-equivalent basis using a tax rate of 21%.

	For the Three Months Ended June 30,
	2024					2023
	Average		Income or		Average	Average		Income or		Average
(Dollars in thousands)	balance		expense		yield/rate	balance		expense		yield/rate
Interest-earning assets:
Interest-earning deposits in other banks	$	169,186	$	2,293	5.44%	$	64,851	$	791	4.89%
Investment securities:
Taxable		416,355		4,106	3.96%		398,289		3,338	3.36%
Tax exempt		50,341		339	2.70%		56,136		387	2.77%
Investments		466,696		4,445	3.82%		454,425		3,725	3.29%
Loans:
Residential real estate 1-4 family:
First liens		214,883		2,721	5.08%		165,322		1,809	4.39%
Junior liens and lines of credit		74,087		1,118	6.05%		72,923		1,006	5.53%
Residential real estate - construction		28,236		481	6.83%		18,537		285	6.16%
Commercial real estate		734,571		10,494	5.73%		608,963		7,962	5.24%
Commercial		244,249		3,287	5.40%		244,333		3,081	5.06%
Consumer		6,857		154	9.01%		6,219		129	8.31%
Loans		1,302,883		18,255	5.62%		1,116,297		14,272	5.13%
Total interest-earning assets		1,938,765	$	24,993	5.17%		1,635,573	$	18,788	4.61%
Other assets		92,554					95,670
Total assets	$	2,031,319				$	1,731,243
Interest-bearing liabilities:
Deposits:
Interest-bearing checking	$	414,217	$	602	0.58%	$	446,491	$	431	0.39%
Money Management		604,989		4,518	3.00%		563,760		3,316	2.36%
Savings		102,800		39	0.15%		120,193		45	0.15%
Time		180,525		1,859	4.13%		84,093		586	2.80%
Total interest-bearing deposits		1,302,531		7,018	2.16%		1,214,537		4,378	1.45%
Subordinated notes		19,675		261	5.31%		19,638		261	5.31%
Federal Reserve Bank borrowings		40,000		480	4.81%		61,209		677	4.44%
FHLB advances		240,000		2,762	4.62%		—		—	-
Total interest-bearing liabilities		1,602,206		10,521	2.63%		1,295,384		5,316	1.65%
Noninterest-bearing deposits		281,267					298,330
Other liabilities		15,892					14,595
Shareholders' equity		131,954					122,934
Total liabilities and shareholders' equity	$	2,031,319				$	1,731,243
T/E net interest income/Net interest margin				14,472	2.99%				13,472	3.30%
Tax equivalent adjustment				(261)					(277)
Net interest income			$	14,211				$	13,195
Net Interest Spread					2.54%					2.96%
Cost of Funds					2.24%					1.34%
Cost of Deposits					1.78%					1.16%

Provision for Credit Losses

For the second quarter of 2024, the provision for credit losses on loans was $560 thousand and the provision for unfunded commitments was a reversal of $14 thousand, resulting in a total provision for credit loss expense of $546

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thousand. The loan provision expense was due primarily to growth in the loan portfolio as the historical credit loss rate and the qualitative loss factor have not materially changed.

For the second quarter of 2023, the provision for credit losses on loans was $524 thousand and the provision for unfunded commitments was $8 thousand, resulting in a total provision for credit loss expense of $532 thousand.

The ACL ratio for loans was 1.29% at June 30, 2024 compared to 1.28% at December 31, 2023. The ACL for unfunded commitments was $2.0 million at June 30, 2024 and December 31, 2023. For more information refer to the Loan Quality and Allowance for Credit Losses discussion in the Financial Condition section.

Noninterest Income

For the second quarter of 2024, noninterest income increased $821 thousand from the same period in 2023. Wealth Management fees increased, primarily because of growth in assets under management. Loan service charges, gains on sale of loans, other service charges and debit card income increased but were partially offset by a decrease in deposit fees. The decrease in other income was due, in part, to a nonrecurring IRS refund payment to the bank in 2023. There were no debt securities sales in 2024 compared to a loss of $517 thousand from sales in 2023.

The following table presents a comparison of noninterest income for the three months ended June 30, 2024 and 2023:

	For the Three Months Ended
	June 30,				Change
(Dollars in thousands)	2024		2023		Amount		%
Noninterest Income
Wealth management fees	$	2,242	$	1,959	$	283	14.4
Loan service charges		181		120		61	50.8
Gain on sale of loans		116		45		71	157.8
Deposit service charges and fees		572		616		(44)	(7.1)
Other service charges and fees		523		430		93	21.6
Debit card income		571		547		24	4.4
Increase in cash surrender value of life insurance		112		111		1	0.9
Net losses on sales of debt securities		—		(517)		517	NA
Change in fair value of equity securities		(34)		(8)		(26)	325.0
Other		67		226		(159)	(70.4)
Total noninterest income	$	4,350	$	3,529	$	821	23.3

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Noninterest Expense

Noninterest expense for the second quarter of 2024 increased $1.7 million compared to the same period in 2023. Salaries and benefits increased $1.1 million primarily in salaries due to a highly competitive labor market and wage increases, and an increase in health insurance costs. Data processing costs increased due to software expenses. FDIC insurance increased due to growth in the balance sheet. The increase in other expense is due, in part, to the amortization of solar tax credit investments and taxes paid to states other than Pennsylvania.

The following table presents a comparison of noninterest expense for the three months ended June 30, 2024 and 2023:

	For the Three Months Ended
(Dollars in thousands)	June 30,				Change
Noninterest Expense	2024		2023		Amount		%
Salaries and benefits	$	8,405	$	7,283	$	1,122	15.4
Net occupancy		1,149		1,112		37	3.3
Marketing and advertising		617		550		67	12.2
Legal and professional		515		454		61	13.4
Data processing		1,459		1,118		341	30.5
Pennsylvania bank shares tax		119		174		(55)	(31.6)
FDIC insurance		408		198		210	106.1
ATM/debit card processing		339		307		32	10.4
Telecommunications		108		98		10	10.2
Nonservice pension		(7)		(29)		22	(75.9)
Lease termination		—		495		(495)	(100.0)
Other		1,224		888		336	37.8
Total noninterest expense	$	14,336	$	12,648	$	1,688	13.3

Provision for Income Taxes

For the second quarter of 2024, the Corporation recorded a Federal income tax expense of $646 thousand compared to $568 thousand for the same quarter in 2023. The effective tax rate for the second quarter of 2024 was 17.6% compared to 16.6% for the same period in 2023. The federal statutory tax rate is 21% for 2024 and 2023.

Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023:

Tax equivalent net interest income increased $1.7 million to $28.3 million in the first half of 2024 compared to $26.6 million for the same period in 2023. Tax-equivalent net interest income increased $801 thousand from balance sheet volume changes and $881 thousand from interest rate changes.

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	For the Six Months Ended June 30,
	2024					2023
	Average		Income or		Average	Average		Income or		Average
(Dollars in thousands)	balance		expense		yield/rate	balance		expense		yield/rate
Interest-earning assets:
Interest-earning deposits in other banks	$	172,722	$	4,647	5.40%	$	54,326	$	1,214	4.50%
Investment securities:
Taxable		420,915		8,064	3.84%		402,784		6,796	3.40%
Tax exempt		50,869		679	2.67%		59,701		843	2.85%
Investments		471,784		8,743	3.72%		462,485		7,639	3.33%
Loans:
Residential real estate 1-4 family:
First liens		210,823		5,249	4.99%		157,841		3,423	4.37%
Junior liens and lines of credit		73,269		2,184	5.98%		72,926		1,931	5.34%
Residential real estate - construction		27,716		956	6.92%		21,456		591	5.56%
Commercial real estate		723,713		20,510	5.68%		586,218		14,894	5.12%
Commercial		242,388		6,476	5.36%		238,820		5,723	4.83%
Consumer		6,873		298	8.70%		6,165		252	8.23%
Loans		1,284,782		35,673	5.57%		1,083,426		26,814	4.99%
Total interest-earning assets		1,929,288	$	49,063	5.10%		1,600,237	$	35,667	4.49%
Other assets		90,762					96,154
Total assets	$	2,020,050				$	1,696,391
Interest-bearing liabilities:
Deposits:
Interest-bearing checking	$	417,760	$	1,199	0.58%	$	458,211	$	841	0.37%
Money Management		594,511		8,729	2.94%		560,672		6,054	2.18%
Savings		103,569		79	0.15%		123,527		94	0.15%
Time		169,508		3,515	4.16%		73,213		819	2.26%
Total interest-bearing deposits		1,285,348		13,522	2.11%		1,215,623		7,808	1.30%
Subordinated notes		19,670		525	5.34%		19,632		526	5.36%
Overnight borrowings		1,083		31	5.74%		—		—	-
Federal Reserve Bank borrowings		62,253		1,440	4.64%		33,094		728	4.44%
FHLB advances		227,912		5,258	4.63%		—		—	-
Total interest-bearing liabilities		1,596,266		20,776	2.61%		1,268,349		9,062	1.44%
Noninterest-bearing deposits		275,287					293,196
Other liabilities		16,480					14,472
Shareholders' equity		132,017					120,374
Total liabilities and shareholders' equity	$	2,020,050				$	1,696,391
T/E net interest income/Net interest margin				28,287	2.94%				26,605	3.35%
Tax equivalent adjustment				(522)					(573)
Net interest income			$	27,765				$	26,032
Net Interest Spread					2.49%					3.05%
Cost of Funds					2.23%					1.17%
Cost of Deposits					1.74%					1.04%

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35

Provision for Credit Losses

For the first half of 2024, the provision for credit losses on loans was $1.1 million and the provision for unfunded commitments was a reversal of $52 thousand, resulting in a total provision for credit loss expense of $998 thousand. The loan provision expense was due primarily to growth in the loan portfolio as the historical credit loss rate and the qualitative loss factor have not materially changed.

For the first half of 2023, the provision for credit losses on loans was $991 thousand and the provision for unfunded commitments was $70 thousand, resulting in a total provision for credit loss expense of $1.1 million.

The ACL ratio for loans was 1.29% at June 30, 2024 compared to 1.28% at December 31, 2023. The ACL for unfunded commitments was $2.0 million at June 30, 2024 and December 31, 2023. For more information refer to the Loan Quality and Allowance for Credit Losses discussion in the Financial Condition section.

Noninterest Income

For the first half of 2024, noninterest income increased $1.8 million from the same period in 2023. Wealth Management fees increased, primarily due to growth in assets under management. Gains on sales of loans, other service charges (increases in ATM fees) and debit card income increased but were partially offset by a decrease in loan fees from commercial service charges. There were no debt securities sales in 2024 compared to a loss of $1.1 million from sales in 2023.

The following table presents a comparison of noninterest expense for the six months ended June 30, 2024 and 2023:

	For the Six Months Ended
	June 30,				Change
(Dollars in thousands)	2024		2023		Amount		%
Noninterest Income
Wealth management fees	$	4,269	$	3,793	$	476	12.5
Loan service charges		387		422		(35)	(8.3)
Gain on sale of loans		174		118		56	47.5
Deposit service charges and fees		1,185		1,199		(14)	(1.2)
Other service charges and fees		1,010		862		148	17.2
Debit card income		1,106		1,050		56	5.3
Increase in cash surrender value of life insurance		224		220		4	1.8
Net losses on sales of debt securities		—		(1,119)		1,119	(100.0)
Change in fair value of equity securities		(75)		(32)		(43)	134.4
Other		258		241		17	7.1
Total noninterest income	$	8,538	$	6,754	$	1,784	26.4

Noninterest Expense

Noninterest expense for the first half of 2024 increased $3.0 million compared to the same period in 2023. Salaries and benefits increased $1.9 million primarily in salaries due to a highly competitive labor market and health insurance costs. Data processing costs increased due to software expenses. FDIC insurance increased due to growth in the balance sheet. Other expenses increased partially from the amortization of investments in solar tax credits and entertainment tax credits, partially offset with a decrease in Pennsylvania bank shares tax expense.

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36

The following table presents a comparison of noninterest expense for the six months ended June 30, 2024 and 2023:

	For the Six Months Ended
(Dollars in thousands)	June 30,				Change
Noninterest Expense	2024		2023		Amount		%
Salaries and employee benefits	$	16,132	$	14,220	$	1,912	13.4
Net occupancy		2,331		2,222		109	4.9
Marketing and advertising		1,137		1,069		68	6.4
Legal and professional		1,030		1,005		25	2.5
Data processing		2,882		2,178		704	32.3
Pennsylvania bank shares tax		244		397		(153)	(38.5)
FDIC insurance		730		380		350	92.1
ATM/debit card processing		662		601		61	10.1
Telecommunications		220		197		23	11.7
Nonservice pension		(36)		(59)		23	(39.0)
Lease termination		—		495		(495)	(100.0)
Other		2,310		1,962		348	17.7
Total noninterest expense	$	27,642	$	24,667	$	2,975	12.1

Provision for Income Taxes

For the first half of 2024, the Corporation recorded a Federal income tax expense of $1.3 million compared to $790 thousand for the same quarter in 2023. The effective tax rate for the first half of 2024 was 16.6% compared to 11.2% for the same period in 2023. The 2023 rate reflects the benefit of $280 thousand in tax credits recorded in the first quarter of 2023. Without the tax credits, the 2023 rate would have been 15.2%. The federal statutory tax rate is 21% for 2024 and 2023.

Financial Condition

Cash and Cash Equivalents:

Cash and cash equivalents totaled $179.7 million at June 30, 2024, an increase of $156.6 million from the prior year-end balance of $23.1 million, as a result of the $200.0 million FHLB advance that has not yet been fully invested. Short-term interest-earning deposits are held primarily at the Federal Reserve ($158.7 million).

Investment Securities:

AFS Securities: At June 30, 2024, the AFS securities portfolio had an amortized cost of $503.8 million, a decrease of $18.1 million from the prior year-end, and had a fair value of $454.5 million, a decrease of $18.0 million from the prior year-end. During the first half of 2024, the portfolio returned $24.5 million of principal while $8.0 million was reinvested into the portfolio. The Bank did not sell any of its holdings during 2024. The AFS portfolio had a net unrealized loss of $49.3 million at June 30, 2024 compared to a net unrealized loss of $49.4 million at the prior year-end. The AFS portfolio averaged $466.7 million with a tax-equivalized yield of 3.82% for the three months ended June 30, 2024. This compares to an average of $454.4 million and a tax-equivalized yield of 3.29% for the same period in 2023.

The AFS portfolio holdings are classified by type of security issuer. U.S. Treasury and Agency mortgage & asset-backed securities are direct obligations of the U.S. Treasury or are issued by a U.S. Government Agency or a government sponsored entity and securitized by pools of residential mortgages and other loan assets. Municipal securities are issued by state and local government entities and consist of taxable and tax-exempt securities. Many municipal securities have credit enhancements in the form of private bond insurance or other credit support. Corporate securities are mostly subordinated notes issued by community banks with the remainder consisting of five trust preferred securities. Non-Agency mortgage & asset-backed securities are issued by private entities and securitized by residential and commercial mortgages as well as other loan assets. Many of these securities benefit from credit enhancements in the form of subordinated tranches and overcollateralization.

At December 31, 2023, the Bank held four Build America Bonds within the municipal portfolio with an amortized cost of $4.6 million.  These bonds were purchased at a premium and included a call provision under an extraordinary redemption clause.  This call provision was exercised on two bonds during the first half of 2024 resulting in accelerated amortization of $261 thousand.  The Bank expects the remaining bonds to be called under this extraordinary redemption clause and if this occurs the remaining premium to amortize as of June 30, 2024 is $319 thousand.

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Restricted Stock at Cost: The Bank held $10.4 million of restricted stock at June 30, 2024. Except for $30 thousand, this investment represents stock in FHLB Pittsburgh. The Bank is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations. There is not a public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low-cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.

See Note 4 of the accompanying financial statements for additional information on Investment Securities.

Loans:

Residential real estate: This category is comprised of consumer purpose loans secured by residential real estate and to a lesser extent, commercial purpose loans secured by residential real estate. The consumer purpose category represents traditional residential mortgage loans and home equity products (primarily junior liens and lines of credit). Commercial purpose loans in this category represent loans made for various business needs but are secured with residential real estate. In addition to the real estate collateral, it is possible that additional security is provided by personal guarantees or UCC filings. These loans are underwritten as commercial loans and are not originated to be sold.

Total residential real estate loans increased by $18.5 million over year-end 2023, primarily in consumer first lien loans. For the first six months of 2024, the Bank originated $51.6 million in mortgages compared to $35.0 million for the same period in 2023, including $13.3 million for sale through the secondary market. The Bank does not originate or hold any loans that would be considered sub-prime or Alt-A and does not generally originate mortgages outside of its primary market area.

Residential real estate construction: This category contains loans for the vertical construction of 1-4 family residential properties. The largest component of this category represents loans to residential real estate developers ($15.8 million), while loans for individuals to construct personal residences totaled $11.5 million at June 30, 2024. The Bank’s exposure to residential construction loans is concentrated primarily in south central Pennsylvania. Real estate construction loans, including residential real estate and land development loans, occasionally provide an interest reserve in order to assist the developer during the development stage when minimal cash flow is generated. All real estate construction loans are underwritten in the same manner, regardless of the use of an interest reserve.

Commercial real estate (CRE): This category includes commercial, industrial, farm and agricultural loans and land development loans, where real estate serves as the primary collateral for the loans. Total commercial real estate loans increased to $743.6 million from $703.8 million at the end of 2023. Included in commercial real estate are approximately $563 million of nonowner occupied loans located primarily in the Bank’s market area of south-central Pennsylvania.

The following table presents the largest sectors by collateral in the commercial real estate category:

(Dollars in thousands)
Commercial Real Estate (CRE) Sectors	June 30, 2024		% of CRE
Apartment buildings	$	134,840	18%
Hotels & motels		92,219	12%
Office buildings		90,341	12%
Shopping centers		76,832	10%
Development land		65,508	9%

Also included in CRE are real estate construction loans totaling $154.7 million. At June 30, 2024, the Bank had $55.3 million in real estate construction loans funded with an interest reserve and capitalized $1.4 million of interest in the first six months of 2024 from these reserves on active projects for commercial construction. Real estate construction loans are monitored on a regular basis by either an independent third-party inspector or the assigned loan officer depending on loan amount or complexity of the project. This monitoring process includes at a minimum, the submission of invoices and American Institute of Architects (AIA) documents (depending on the complexity of the project) detailing costs incurred by the borrower, on-site inspections, and a signature by the assigned loan officer for disbursement of funds.

Commercial: This category includes commercial, industrial, farm, agricultural, and municipal loans. Commercial loans increased $974 thousand to $243.6 million at June 30, 2024, compared to $242.7 million at the end of 2023. At June 30, 2024, the Bank had approximately $111.3 million in tax-free loans.

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The following table presents the largest sectors by industry in the commercial category:

(Dollars in thousands)
Commercial	June 30, 2024		% of Commercial
Public administration	$	45,518	19%
Utilities		41,156	17%
Real estate, rental & leasing		24,592	10%
Retail trade		19,452	8%
Manufacturing		17,209	7%

Participations: The Bank may supplement its own commercial loan production by purchasing loan participations. These participations are primarily located in south-central Pennsylvania. At June 30, 2024, the outstanding commercial participations were $104.7 million, or 9.8%, of commercial purpose loans and 7.9% of total gross loans compared to $97.8 million at December 31, 2023, or 9.5%, of commercial purpose loans and 7.8% of total gross loans. The Bank’s total exposure (including outstanding balances and unfunded commitments) to purchased participations is $133.9 million, compared to $135.4 million at December 31, 2023. The commercial loan participations are comprised of $30.2 million of Commercial loans and $74.5 million of CRE loans, reported in the respective loan class.

Consumer loans: This category had a balance of $7.4 million at June 30, 2024, compared to $6.8 million at prior year-end and is comprised primarily of installment loans and personal lines of credit.

The following table presents a summary of loans outstanding, by class as of:

	June 30,		December 31,			Change
(Dollars in thousands)	2024		2023			Amount	%
Residential Real Estate 1-4 Family
Consumer first liens	$	159,806	$	142,017	$	17,789	12.5
Commercial first lien		61,032		63,271		(2,239)	(3.5)
Total first liens		220,838		205,288		15,550	7.6
Consumer junior liens and lines of credit		70,256		68,752		1,504	2.2
Commercial junior liens and lines of credit		5,296		3,809		1,487	39.0
Total junior liens and lines of credit		75,552		72,561		2,991	4.1
Total residential real estate 1-4 family		296,390		277,849		18,541	6.7
Residential real estate - construction
Consumer		15,804		13,837		1,967	14.2
Commercial		11,466		12,063		(597)	(4.9)
Total residential real estate construction		27,270		25,900		1,370	5.3
Commercial real estate		743,642		703,767		39,875	5.7
Commercial		243,628		242,654		974	0.4
Total commercial		987,270		946,421		40,849	4.3
Consumer		7,390		6,815		575	8.4
		1,318,320		1,256,985		61,335	4.9
Less: Allowance for credit losses		(17,018)		(16,052)		(966)	6.0
Net Loans	$	1,301,302	$	1,240,933	$	60,369	4.9

Loan Quality:

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the Allowance for Credit Loss for loans (ACL). The Bank begins enhanced monitoring of all loans rated 6–OAEM or worse and obtains a new appraisal or asset valuation for any loans placed on nonaccrual and rated 7 - Substandard or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation

39

in order to determine the net realizable value to the Bank. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Board Enterprise Risk Management Committee of the Board of Directors. Management believes the ACL at June 30, 2024 is adequate.

Watch list loans exhibit financial weaknesses that increase the potential risk of default or loss to the Bank. However, inclusion on the watch list, does not by itself, mean a loss is certain. The watch list totaled $27.9 million at June 30, 2024 compared to $17.2 million at December 31, 2023. The watch list includes both performing and nonperforming loans. Included in the watchlist total are $723 thousand of nonaccrual loans as of June 30, 2024 and $147 thousand as of December 31, 2023. The credit composition of the watch list (loans rated 6, 7, or 8), by primary collateral is shown in Note 6 of the accompanying financial statements.

Delinquent loans are a result of borrowers’ cash flow and/or alternative sources of cash being insufficient to repay loans. The Bank’s likelihood of collateral liquidation to repay the loans becomes more probable the further behind a borrower falls, particularly when loans reach 90 days or more past due. Management monitors the performance status of loans by the use of an aging report. The aging report can provide an early indicator of loans that may become severely delinquent and possibly result in a loss to the Bank. See Note 6 in the accompanying financial statements for a table that presents the aging of payments in the loan portfolio.

Nonaccruing loans generally represent Management’s determination that the borrower will be unable to repay the loan in accordance with its contractual terms and that collateral liquidation may or may not fully repay both interest and principal. It is the Bank’s policy to evaluate the probable collectability of principal and interest due under terms of loan contracts for all loans 90-days or more past due, nonaccrual loans, or individually evaluated loans. Further, it is the Bank’s policy to discontinue accruing interest on loans that are not adequately secured and in the process of collection. Upon determination of nonaccrual status, the Bank subtracts any current year accrued and unpaid interest from its income, and any prior year accrued and unpaid interest from the allowance for credit losses. Management continually monitors the status of nonperforming loans, the value of any collateral and potential of risk of loss. Nonaccrual loans are rated no better than 7-Substandard.

The Bank’s Loan Management Committee reviews these loans and risk ratings on a quarterly basis in order to proactively identify and manage problem loans. In addition, a committee meets monthly to discuss possible workout strategies for all credits rated 7-Substandard or worse. Management also tracks other commercial loan risk measurements including high loan to value loans, concentrations, participations and policy exceptions and reports these to the Board Enterprise Risk Management Committee of the Board of Directors. The Bank also uses an external loan review consultant to assist with internal loan review with a goal of reviewing up to 80% of commercial loans each year. The FDIC defines certain supervisory loan-to-value lending limits. The Bank’s internal loan–to-value limits are all equal to or have a lower loan-to-value limit than the supervisory limits. However, in certain instances, the Bank may make a loan that exceeds the supervisory loan-to-value limit. At June 30, 2024, the Bank had loans of $9.3 million (0.7% of gross loans) that exceeded the supervisory limit, compared to 1.1% at year-end 2023.

Loan quality, as measured by nonaccrual loans, totaled $723 thousand at June 30, 2024 compared to $147 thousand at December 31, 2023 and the nonperforming loan to gross loans ratio was 0.04% at June 30, 2024 compared to 0.01% at December 31, 2023. Loans past due 90-days or more, but still accruing, totaled $165 thousand at June 30, 2024.

In addition to monitoring nonaccrual loans, the Bank also closely monitors loans to borrowers experiencing financial difficulty when, based on current information and events, it is probable that the Bank will be unable to collect all interest and principal payments due according to the originally contracted terms of the loan agreement.

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

As of June 30, 2024 and December 31, 2023 there were no modifications made to borrowers experiencing financial difficulty.

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40

Allowance for Credit Losses:

Allowance for Credit Losses – Loans

The ACL for loans is established through provisions for credit losses charged against income. Loans deemed to be uncollectible are charged against the ACL, and subsequent recoveries, if any, are credited to the ACL.

The ACL for loans is an estimate of the losses expected to be realized over the life of the loan portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated individually for expected credit losses (specific reserve), and 2) loans evaluated collectively for expected credit losses (pooled reserve). Management’s periodic evaluation of the adequacy of the ACL for loans is based on the Bank’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic forecasts and conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, borrowers’ actual or perceived financial and managerial strengths, and other relevant factors. This evaluation is inherently subjective, as it requires material assumptions and estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on loans evaluated individually.

Loans evaluated individually for credit losses are primarily commercial purpose loans that do not share similar characteristics with those loans evaluated in the pool. These loans may exhibit performance characteristics where it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. All commercial purpose loans greater than $250 thousand and rated Substandard (7), Doubtful (8) or on nonaccrual status may be considered for individual evaluation. Impairment is measured on a loan-by-loan basis by one of the following methods: the fair value of the collateral if the loan is collateral dependent, the present value of expected future cash flows discounted at the loan’s effective interest rate or the loan’s obtainable market price. Commercial purpose loans with a balance less than $250 thousand, and consumer purpose loans are not evaluated individually for a specific reserve but are included in the pooled reserve calculation. Loans that are evaluated for a specific reserve, but not needing a specific reserve are not included in the pooled reserve calculation.

The Corporation has elected to exclude accrued interest receivable from the measurement of the ACL. When a loan is placed on nonaccrual status, any outstanding current accrued interest is reversed against income and prior year accrued interest is deducted from the ACL.

The pooled reserve represents the ACL for pools of homogenous loans, not evaluated individually. The pooled reserve is calculated using a quantitative and qualitative component for the loan pools.

The following inputs are used to calculate the quantitative component for the loan pool:

Segregating loans into homogeneous pools by the FRB Call Code which is primarily a collateral-based and secondarily a purpose-based segmentation.

The average remaining life of each pool is calculated using the weighted average remaining maturity method (WARM). The WARM method produces an estimated remaining balance by pool, by year, until maturity.

A historical credit loss rate is calculated for each pool, using the average historical loss, by FRB Call Code, for a peer group of Pennsylvania community banks over the last eight quarters. The loss rate is calculated over a historical period the Bank believes best represents a period that will be the most similar and relevant to the next four quarters.

The historical credit loss rate is applied to each WARM bucket through the next four quarter period.

At the end of the four quarter period, the credit loss rate applied to each WARM bucket reverts to the peer group historical loss rate for the respective pool.

Collectively these estimated losses represent the quantitative component of the pooled reserve.

The qualitative component for the pool utilizes a risk matrix comprised of eight risk factors and assigns a risk level to each factor. The risk factors give consideration to changes in: lending policy, procedures and practice; economic conditions; nature and volume of loans; experience of lending team; volume of past due loans; quality of the loan review system; concentrations of credit; and other external factors. The risk factors are weighted to reflect Management’s estimate of how the factor affects potential losses. The risk levels within each factor are measured in basis points and range from minimal risk to very high risk and are determined independently for commercial loans, residential mortgage loans and consumer loans.

The ACL for pooled loans is the sum of the quantitative and qualitative loss estimates. At June 30, 2024, approximately 68% of the ACL for Loans was from the qualitative component, unchanged from year-end 2023.

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41

Allowance for Credit Losses – Unfunded Commitments

The ACL for unfunded commitments is recorded in other liabilities on the consolidated balance sheet. The ACL represents management’s estimate of expected losses from unfunded commitments and is determined by estimating future usage of the commitments, based on historical usage. The estimated loss is calculated in a manner similar to that used for the ACL for loans, previously described. The ACL is increased or decreased through the provision for credit losses.

The following table shows the allocation of the allowance for credit losses and other loan performance ratios, by class, as of June 30, 2024 and December 31, 2023:

(Dollars in thousands)	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
2024
Loans at June 30, 2024	$	220,838	$	75,552	$	27,270	$	743,642	$	243,628	$	7,390	$	1,318,320
Average Loans through June 30, 2024		210,823		73,269		27,716		723,713		242,388		6,873		1,284,782
Nonaccrual Loans at June 30, 2024		—		—		—		407		316		—		723
Allowance for Credit Loss at June 30, 2024		1,384		429		318		11,423		3,364		100		17,018
YTD Net (Charge-offs)/Recoveries at June 30, 2024		—		—		7		(2)		(69)		(20)		(84)
Loans/Total Gross Loans at June 30, 2024		17%		6%		2%		56%		18%		1%		100%
Nonaccrual Loans/Total Gross Loans at June 30, 2024		0.00%		0.00%		0.00%		0.05%		0.13%		0.00%		0.05%
Allowance for Credit Loss/Gross Loans at June 30, 2024		0.63%		0.57%		1.17%		1.54%		1.38%		1.35%		1.29%
Net (Charge-offs) Recoveries/Average Loans at June 30, 2024*		0.00%		0.00%		0.03%		0.00%		-0.03%		-0.29%		-0.01%
Allowance for Credit Loss/Nonaccrual Loans at June 30, 2024														2353.80%

2023
Loans at December 31, 2023	$	205,288	$	72,561	$	25,900	$	703,767	$	242,654	$	6,815	$	1,256,985
Average Loans for 2023		173,986		72,623		21,124		626,817		243,045		6,285		1,143,880
Nonaccrual Loans at December 31, 2023		—		—		—		—		147		—		147
Allowance for Credit Losses at December 31, 2023		1,296		419		296		10,657		3,290		94		16,052
Net Recoveries/(Charge-offs) for 2023		2		—		49		1		(193)		(35)		(176)
Loans/Total Gross Loans at December 31, 2023		16%		6%		2%		56%		19%		1%		100%
Nonaccrual Loans/Total Gross Loans at December 31, 2023		0.00%		0.00%		0.00%		0.00%		0.06%		0.00%		0.01%
Allowance for Credit Loss/Gross Loans at December 31, 2023		0.63%		0.58%		1.14%		1.51%		1.36%		1.38%		1.28%
Net Recoveries(Charge-offs)/Average Loans for 2023		0.00%		0.00%		0.23%		0.00%		-0.08%		-0.56%		-0.02%
Allowance for Credit Loss/Nonaccrual Loans at December 31, 2023														10919.73%
*Annualized

Deposits:

Total deposits increased $48.5 million during the first half of 2024 to $1.586 billion. Interest-bearing checking decreased by $53.3 million primarily in municipal deposits and savings decreased by $4.2 million, while the Bank’s Money Management increased $44.9 million. Time deposits increased $51.2 million as customers shifted to higher rate products. The Bank has $22.0 million of brokered CDs at June 30, 2024.

As of June 30, 2024, the Bank had deposits of $222.8 million placed in the IntraFi Network deposit program ($101.1 million in interest-bearing checking and $129.6 million in money management) and $19.4 million in reciprocal time deposits in the CDARS program included in time deposits. These programs allow the Bank to offer full FDIC coverage to large depositors, but with the convenience to the customer of only having to deal with one bank. The Bank solicits these deposits from within its market and it believes they present no greater risk than any other local deposit. Only reciprocal deposits that exceed 20% of liabilities are considered brokered deposits. At June 30, 2024, the Bank’s reciprocal deposits were 13.3% of total liabilities compared to 14.3% at year-end 2023.

The Bank estimates that approximately 90% of its deposits are FDIC insured or collateralized as of June 30, 2024.

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42

The following table presents a summary of deposits for the periods ended:

	June 30,		December 31,			Change
(Dollars in thousands)	2024		2023			Amount	%
Noninterest-bearing checking	$	282,964	$	273,050	$	9,914	3.6
Interest-bearing checking		401,174		454,517		(53,343)	(11.7)
Money management		616,928		572,058		44,870	7.8
Savings		101,712		105,907		(4,195)	(4.0)
Total interest-bearing checking and savings		1,119,814		1,132,482		(12,668)	(1.1)
Time deposits		183,680		132,446		51,234	38.7
Total deposits	$	1,586,458	$	1,537,978	$	48,480	3.2
Overdrawn deposit accounts reclassified as loans	$	660	$	160

Borrowings:

At June 30, 2024, the Bank had $40.0 million borrowed from the Federal Reserve’s Bank Term Funding Program (BTFP) with a rate of 4.81% due January 10, 2025. At June 30, 2024, the fair value of debt securities pledged for the BTFP was $44.1 million.

At June 30, 2024, the Bank had $240.0 million in total borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB). The borrowings are comprised of $40.0 million in short-term borrowings with a blended rate of 5.80%, due during the third quarter of 2024, and $200.0 million in long-term borrowings with a rate of 4.32%, due January 12, 2027.

On August 4, 2020, the Corporation completed the sale of a subordinated debt note offering. The Corporation sold $15.0 million of subordinated debt notes with a maturity date of September 1, 2030. These notes are noncallable for 5 years and carry a fixed interest rate of 5.00% per year for 5 years and then convert to floating rate of SOFR plus 4.93% per year for the remainder of the term. The notes can be redeemed at par beginning 5 years prior to maturity. The Corporation also sold $5.0 million of subordinated debt notes with a maturity date of September 1, 2035. These notes are noncallable for 10 years and carry a fixed interest rate of 5.25% per year for 10 years and then convert to floating rate of SOFR plus 4.92% per year for the remainder of the term. The notes can be redeemed at par beginning 5 years prior to maturity. The notes are structured to qualify as Tier 2 capital for the Corporation and any funds it invests in the Bank qualify as Tier 1 capital at the Bank. The Corporation paid an issuance fee of 2% of the total issue that will be amortized to maturity date of each issue on a pro-rata basis. The proceeds are intended to be used for general corporate purposes.

Shareholders’ Equity:

Total shareholders’ equity increased $4.7 million to $136.8 million as of June 30, 2024 from December 31, 2023. Retained earnings increased $3.6 million in 2024 and accumulated other comprehensive income/(loss) (AOCI) remained essentially unchanged since year-end 2023. The increase in retained earnings was from net income of $6.4 million partially offset by cash dividends of $2.8 million. The Corporation’s Dividend Reinvestment Plan (DRIP) added $644 thousand in new capital from optional cash contributions and $511 thousand from the reinvestment of quarterly dividends. The Corporation’s dividend payout ratio was 43.88% for the first half of 2024 compared to 44.77% for the same period in 2023.

As part of its quarterly dividend decision, the Corporation considers, among other factors, current and future income projections, dividend yield, payout ratio, current and future capital ratios, reserves and allocations. For the second quarter of 2024, the Corporation paid a $0.32 per share dividend, compared to $0.32 paid in the second quarter of 2023. On July 11, 2024, the Board of Directors declared a $0.32 per share regular quarterly dividend for the third quarter of 2024, which will be paid on August 28, 2024.

In December 2023, the Board of Directors authorized a repurchase plan for the repurchase of up to 150,000 shares of the Corporation’s $1.00 par value common stock at market prices in open market or privately negotiated transactions over a one-year period. During the first six months of 2024, the Corporation repurchased 14,684 shares for $440 thousand.

‎

43

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered “well capitalized” are: (1) Common Equity Tier 1 (CET1) of 6.5%, (2) Tier 1 Leverage of 5%, (3) Tier 1 Risk-Based Capital of 8%, and (4) Total Risk-Based Capital of 10%. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank’s capital conservation buffer at June 30, 2024 was 5.52% compared to the regulatory buffer of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of June 30, 2024, the Bank was “well capitalized.”

In 2019, the Community Bank Leverage Ratio (CBLR) was approved by federal banking agencies as an optional capital measure available to Qualifying Community Banking Organizations (QCBO). If a bank qualifies as a QCBO and maintains a CBLR of 9% or greater, the bank would be considered “well-capitalized” for regulatory capital purposes and exempt from complying with the risk-based capital rule described above. The CBLR rule took effect January 1, 2020 and banks could opt-in through an election in the first quarter 2020 regulatory filing. The Bank met the criteria of a QCBO but did not opt-in to the CBLR.

The consolidated asset limit on small bank holding companies is $3.0 billion and a company with assets under that limit is not subject to the consolidated capital rules but may file reports that include capital amounts and ratios. The Corporation has elected to file those reports.

The following table summarizes the regulatory capital requirements and results as of June 30, 2024 and December 31, 2023 for the Corporation and the Bank:

			Regulatory Ratios
			Adequately	Well
	June 30,	December 31,	Capitalized	Capitalized
(Dollars in thousands)	2024	2023	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	12.01%	11.82%	N/A	N/A
Farmers & Merchants Trust Company	12.27%	12.38%	4.50%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	12.01%	11.82%	N/A	N/A
Farmers & Merchants Trust Company	12.27%	12.38%	6.00%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	14.66%	14.45%	N/A	N/A
Farmers & Merchants Trust Company	13.52%	13.63%	8.00%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	8.38%	9.01%	N/A	N/A
Farmers & Merchants Trust Company	8.56%	9.44%	4.00%	5.00%

(1)Common equity Tier 1 capital / total risk-weighted assets

(2)Tier 1 capital / total risk-weighted assets

(3)Total risk-based capital / total risk-weighted assets

(4)Tier 1 capital / average quarterly assets

‎

44

Economy

The Corporation’s primary market area includes Franklin, Fulton, Cumberland, Huntingdon, and Dauphin County, PA, and Washington County, MD. This area is diverse in demographic and economic composition. County populations range from a low of approximately 15,000 in Fulton County to over 280,000 in Dauphin County. The market area has a diverse economic base and local industries include warehousing, truck and rail shipping centers, light and heavy manufacturers, health care, higher education institutions, farming and agriculture, and a varied service sector. The market area provides easy access to the major metropolitan markets on the east coast via trucking and rail transportation. Because of this, warehousing and distribution companies continue to find the area attractive. The local economy is not overly dependent on any one industry or business and Management believes that the Bank’s primary market area continues to be well suited for growth.

Impact of Inflation

The impact of inflation upon financial institutions such as the Corporation differs from its effect upon other commercial enterprises. Unlike many companies, the assets and liabilities of the Corporation are financial in nature. As such, interest rates and changes in interest rates may have a more significant effect on the Corporation’s financial results than on other types of industries. Because of this, the Corporation watches the actions of the Federal Reserve Open Market Committee (FOMC) as it makes decisions about interest rate changes and how such changes affect market rates and the Corporation. Although inflation (and inflation expectations) may affect the interest rate environment, it is not possible to measure with any precision the effect of inflation on the Corporation.

Liquidity

The Corporation must meet the financial needs of the customers that it serves, while providing a satisfactory return on the shareholders’ investment. In order to accomplish this, the Corporation must maintain sufficient liquidity in order to respond quickly to the changing level of funds required for both loan and deposit activity. The goal of liquidity management is to meet the ongoing cash flow requirements of depositors who want to withdraw funds and of borrowers who request loan disbursements. The Bank regularly reviews its liquidity position by measuring its projected net cash flows (in and out) at a 30 and 90-day interval. The Bank stresses the measurements by assuming a level of deposit out-flows that have not historically been realized. In addition to this forecast, other funding sources are reviewed as a method to provide emergency funding if necessary. The objective of this measurement is to identify the amount of cash that could be raised quickly without the need to liquidate assets. The Bank also stresses its liquidity position utilizing different longer-term scenarios. The varying degrees of stress create pressure on deposit flows in its local market, reduce access to wholesale funding and limit access of funds available through brokered deposit channels. In addition to stressing cash flow, specific liquidity risk indicators are monitored to help identify risk areas. This analysis helps identify and quantify the potential cash surplus/deficit over a variety of time horizons to ensure the Bank has adequate funding resources. Assumptions used for liquidity stress testing are subjective. Should an evolving liquidity situation or business cycle present new data, potential assumption changes will be considered. The Bank believes it can meet all anticipated liquidity demands.

Historically, the Corporation has satisfied its liquidity needs from earnings, repayment of loans and amortizing investment securities, maturing investment securities, loan sales, deposit growth and its ability to access existing lines of credit. All investment securities are classified as available for sale; therefore, marketable securities that are unencumbered ($168.0 million fair value) are an additional source of readily available liquidity, either by selling the security or, more preferably, to provide collateral for additional borrowing. The Bank also has access to other wholesale funding via the brokered CD market.

The FHLB system has always been a major funding source for the Bank. There are no current indicators that lead the Bank to believe the FHLB would discontinue its lending function or restrict the Bank’s ability to borrow. If either of these events would occur, it would have a negative effect on the Bank, and it is unlikely that the Bank could replace the level of FHLB funding in a short time. The Bank has established credit at the Federal Reserve Discount Window and at correspondent banks.

45

The following table shows the Bank’s available liquidity at June 30, 2024.

(Dollars in thousands)
Liquidity Source		Capacity		Outstanding		Available
Federal Home Loan Bank	$	538,487	$	240,000	$	298,487
Federal Reserve Bank Discount Window		54,048		—		54,048
Correspondent Banks		76,000		—		76,000
Total	$	668,535	$	240,000	$	428,535

Off Balance Sheet Commitments

The Corporation’s financial statements do not reflect various commitments that are made in the normal course of business, which may involve some liquidity risk. These commitments consist mainly of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments. 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 to the Corporation.

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit	$	320,735	$	325,982
Consumer commitments to extend credit (secured)		126,387		112,157
Consumer commitments to extend credit (unsecured)		6,366		5,964
	$	453,488	$	444,103
Standby letters of credit	$	21,538	$	19,851
ACL - Unfunded Commitments (1)	$	1,970	$	2,022
(1) Reported in Other Liabilities on the Consolidated Balance Sheet

The Corporation has entered into various contractual obligations to make future payments. These obligations include time deposits, long-term debt, operating leases, deferred compensation and pension payments. These amounts have not changed materially, except as reported, from those reported in the Corporation’s 2023 Annual Report on Form 10-K.

Management believes that any amounts actually drawn upon can be funded in the normal course of operations. The Corporation has no investment in or financial relationship with any unconsolidated entities that are reasonably likely to have a material effect on liquidity.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in the Corporation’s exposure to market risk during the six months ended June 30, 2024. For more information on market risk refer to the Corporation’s 2023 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Controls and Procedures

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2024, the Corporation’s disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in the Corporation’s 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. There were no changes in the Corporation’s internal control over financial reporting during the quarterly period ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

46

The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. The Corporation’s internal control system is designed 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

‎

47

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation in the ordinary course of business.

In management’s opinion, there are no other legal proceedings pending to which the Corporation is a party or to which its property is subject which, if determined adversely to the Corporation, would be material to the Corporation’s financial condition or results of operations. No material proceedings are pending or are known to be threatened or contemplated against us by any governmental authorities.

Item 1A. Risk Factors

There were no material changes in the Corporation’s risk factors during the three and six months ended June 30, 2024. For more information, refer to the Corporation’s 2023 Annual Report on Form 10-K.

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

In December 2023, the Board of Directors approved an open market repurchase plan to repurchase 150,000 shares of the Corporation’s $1.00 par value common stock at market prices in open market or privately negotiated transactions over a one-year period.

Period	Number of Shares Purchased as Part of Publicly Announced Program		Weighted Average Price Paid per Share		Dollar Amount of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares Yet To Be Purchased Under Program
April 2024	—	$	—	$	—	150,000
May 2024	2,555	$	26.55		67,843	147,445
June 2024	12,129	$	27.41		332,486	135,316
	14,684			$	400,329

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended June 30, 2024.

‎

48

Item 6.   Exhibits

Exhibits

3.1	Amended and Restated Articles of Incorporation of the Corporation (Filed as Exhibit 3.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference).
3.2	Bylaws of the Corporation. (Filed on Form 8-K, as Exhibit 99 with the commission on September 2, 2022 and incorporated herein by reference).
31.1	Rule 13a – 14(a)/15d-14(a) Certifications – Principal Executive Officer
31.2	Rule 13a – 14(a)/15d-14(a) Certifications – Principal Financial Officer
32.1	Section 1350 Certifications – Principal Executive Officer
32.2	Section 1350 Certifications – Principal Financial Officer
101	Interactive Data File (XBRL)
104	Cover Page Interactive Data File (the cover page XBRL tags are imbedded in the XBRL document)

FRANKLIN FINANCIAL SERVICES CORPORATION

and SUBSIDIARIES

SIGNATURES

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

Franklin Financial Services Corporation

August 9, 2024	/s/ Timothy G. Henry
	Timothy G. Henry
	Chief Executive Officer and President
	(Principal Executive Officer)
August 9, 2024	/s/ Mark R. Hollar
	Mark R. Hollar
	Treasurer and Chief Financial Officer
	(Principal Financial and Accounting Officer)

49

50

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certifications

I, TimothyG.  Henry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Franklin Financial Services Corporation;

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

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

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

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

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

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

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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:

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:  August9, 2024

/s/ TimothyG.  Henry

TimothyG.  Henry

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certifications

I, Mark R. Hollar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Franklin Financial Services Corporation;

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

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

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

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

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

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

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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:

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:  August9, 2024

/s/ Mark R. Hollar

Mark R. Hollar

Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

In connection with the Quarterly Report of Franklin Financial Services Corporation (the “Corporation”) on Form 10-Q, for the period endingJune  30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, TimothyG.  Henry, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 that:

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

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ TimothyG.  Henry

TimothyG.  Henry

President and Chief Executive Officer

August9, 2024

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Sections 1350,

As Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

In connection with the Quarterly Report of Franklin Financial Services Corporation (the “Corporation”) on Form 10-Q for the period ending June  30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark R. Hollar, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 that:

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

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Mark R. Hollar

Mark R. Hollar

Chief Financial Officer

August9, 2024

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2024	Jul. 31, 2024
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2024
Current Fiscal Year End Date	--12-31
Document Transition Report	false
Entity File Number	001-38884
Entity Registrant Name	FRANKLIN FINANCIAL SERVICES CORPORATION
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	25-1440803
Entity Address, Address Line One	1500 Nitterhouse Drive
Entity Address, City or Town	Chambersburg
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	17201-0819
City Area Code	717
Local Phone Number	264-6116
Title of 12(b) Security	Common stock
Trading Symbol	FRAF
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,408,901
Entity Central Index Key	0000723646
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Assets
Cash and due from banks	$ 20,048	$ 19,505
Short-term interest-earning deposits in other banks	159,679	3,635
Total cash and cash equivalents	179,727	23,140
Long-term interest-earning deposits in other banks	1,994	6,229
Debt securities available for sale, at fair value	454,465	472,503
Equity securities	352	427
Restricted stock	10,375	2,375
Loans held for sale	932	213
Loans	1,318,320	1,256,985
Allowance for credit losses	(17,018)	(16,052)
Net Loans	1,301,302	1,240,933
Premises and equipment, net	28,974	28,543
Right of use asset	4,380	4,680
Bank owned life insurance	22,502	22,758
Goodwill	9,016	9,016
Deferred tax asset, net	11,789	11,801
Other assets	13,318	13,421
Total assets	2,039,126	1,836,039
Deposits
Noninterest-bearing checking	282,964	273,050
Money management, savings, and interest checking	1,119,814	1,132,482
Time	183,680	132,446
Total deposits	1,586,458	1,537,978
Lease liability	4,527	4,816
Other liabilities	11,652	11,448
Total liabilities	1,902,317	1,703,903
Commitments and contingent liabilities
Shareholders' equity
Common stock, $1 par value per share,15,000,000 shares authorized with 4,710,972 shares issued and 4,412,374 shares outstanding at June 30, 2024 and 4,710,972 shares issued and 4,371,231 shares outstanding at December 31, 2023	4,711	4,711
Capital stock no par value, 5,000,000 shares authorized with no shares issued and outstanding
Additional paid-in capital	43,547	43,646
Retained earnings	137,581	133,993
Accumulated other comprehensive loss	(40,881)	(40,940)
Treasury stock, 298,598 shares at June 30, 2024 and 339,741 shares at December 31, 2023, at cost	(8,149)	(9,274)
Total shareholders' equity	136,809	132,136
Total liabilities and shareholders' equity	2,039,126	1,836,039
Federal Reserve Bank Borrowings [Member]
Deposits
Debt	40,000	90,000
Federal Home Loan Bank (FHLB) Advances [Member]
Deposits
Debt	240,000	40,000
Subordinated Notes [Member]
Deposits
Debt	$ 19,680	$ 19,661

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2024	Dec. 31, 2023
Consolidated Balance Sheets [Abstract]
Common Stock, Par Value Per Share	$ 1	$ 1
Common Stock, Shares Authorized	15,000,000	15,000,000
Common Stock, Shares, Issued	4,710,972	4,710,972
Common Stock, Shares, Outstanding	4,412,374	4,371,231
Capital Stock, No Par Value
Capital Stock, Shares Authorized	5,000,000	5,000,000
Capital Stock, Shares, Issued	0	0
Capital Stock, Shares, Outstanding	0	0
Treasury Stock, Shares	298,598	339,741

XML

Consolidated Statements Of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Interest income
Loans, including fees	$ 18,059	$ 14,069	$ 35,281	$ 26,405
Interest and dividends on investments:
Taxable interest	3,901	3,327	7,814	6,777
Tax exempt interest	274	313	549	679
Dividend income	205	11	250	19
Interest-earning deposits in other banks	2,293	791	4,647	1,214
Total interest income	24,732	18,511	48,541	35,094
Interest expense
Deposits	7,018	4,378	13,522	7,808
Federal Reserve Bank borrowings	480	677	1,440	728
FHLB overnight borrowings and advances	2,762		5,289
Subordinate notes	261	261	525	526
Total interest expense	10,521	5,316	20,776	9,062
Net interest income	14,211	13,195	27,765	26,032
Provision for credit losses - loans	560	524	1,050	991
(Reversal of) provision for credit losses - unfunded commitments	(14)	8	(52)	70
Total provision for credit losses	546	532	998	1,061
Net interest income after credit loss expense	13,665	12,663	26,767	24,971
Noninterest income
Wealth management fees	2,242	1,959	4,269	3,793
Loan service charges	181	120	387	422
Gain on sale of loans	116	45	174	118
Deposit service charges and fees	572	616	1,185	1,199
Other service charges and fees	523	430	1,010	862
Debit card income	571	547	1,106	1,050
Increase in cash surrender value of life insurance	112	111	224	220
Net losses on sales of debt securities		(517)		(1,119)
Change in fair value of equity securities	(34)	(8)	(75)	(32)
Other	67	226	258	241
Total noninterest income	4,350	3,529	8,538	6,754
Noninterest Expense
Salaries and employee benefits	8,405	7,283	16,132	14,220
Net occupancy	1,149	1,112	2,331	2,222
Marketing and advertising	617	550	1,137	1,069
Legal and professional	515	454	1,030	1,005
Data processing	1,459	1,118	2,882	2,178
Pennsylvania bank shares tax	119	174	244	397
FDIC Insurance	408	198	730	380
ATM/debit card processing	339	307	662	601
Telecommunications	108	98	220	197
Nonservice pension	(7)	(29)	(36)	(59)
Lease termination		495		495
Other	1,224	888	2,310	1,962
Total noninterest expense	14,336	12,648	27,642	24,667
Income before federal income taxes	3,679	3,544	7,663	7,058
Federal income tax expense	646	568	1,269	790
Net income	$ 3,033	$ 2,976	$ 6,394	$ 6,268
Per share
Basic earnings per share	$ 0.67	$ 0.68	$ 1.43	$ 1.43
Diluted earnings per share	$ 0.66	$ 0.68	$ 1.43	$ 1.42

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Consolidated Statements of Comprehensive Income [Abstract]
Net Income		$ 3,033	$ 2,976	$ 6,394	$ 6,268
Debt Securities:
Unrealized gains (losses) arising during the period		447	(5,534)	74	3,092
Reclassification adjustment for losses included in net income	[1]		517		1,119
Net unrealized gains (losses)		447	(5,017)	74	4,211
Tax effect		(94)	1,052	(15)	(885)
Net of tax amount		353	(3,965)	59	3,326
Total other comprehensive gain (loss)		353	(3,965)	59	3,326
Total Comprehensive Income (Loss)		$ 3,386	$ (989)	$ 6,453	$ 9,594

[1] Reclassified to net losses on sales of debt securities

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Consolidated Statements Of Changes In Shareholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member] Impact of Adoption, Adjustment [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Impact of Adoption, Adjustment [Member]	Total
Balance at Dec. 31, 2022	$ 4,711	$ 43,535	$ 98	$ 125,892	$ (51,287)	$ (8,654)	$ 98	$ 114,197
Balance, shares at Dec. 31, 2022	4,390,397
Net income				6,268				6,268
Other comprehensive income loss					3,326			3,326
Cash dividends declared				(2,806)				(2,806)
Acquisition of treasury stock						$ (2,394)		(2,394)
Acquisition of treasury stock, shares						(84,414)
Treasury shares issued under dividend reinvestment plan		32				$ 779		811
Treasury shares issued under dividend reinvestment plan, shares	28,679
Stock Compensation Plans:
Treasury shares issued		(398)				415		17
Treasury shares issued, shares	15,326
Compensation expense		253						253
Balance at Jun. 30, 2023	$ 4,711	43,422		129,452	(47,961)	(9,854)		119,770
Balance, shares at Jun. 30, 2023	4,349,988
Balance at Mar. 31, 2023	$ 4,711	43,356		127,877	(43,996)	(8,365)		123,583
Balance, shares at Mar. 31, 2023	4,402,675
Net income				2,976				2,976
Other comprehensive income loss					(3,965)			(3,965)
Cash dividends declared				(1,401)				(1,401)
Acquisition of treasury stock						$ (2,078)		(2,078)
Acquisition of treasury stock, shares						(74,306)
Treasury shares issued under dividend reinvestment plan		(17)				$ 550		533
Treasury shares issued under dividend reinvestment plan, shares						20,195
Stock Compensation Plans:
Treasury shares issued		(35)				$ 39		4
Treasury shares issued, shares	1,424
Compensation expense		118						118
Balance at Jun. 30, 2023	$ 4,711	43,422		129,452	(47,961)	(9,854)		119,770
Balance, shares at Jun. 30, 2023	4,349,988
Balance at Dec. 31, 2023	$ 4,711	43,646		133,993	(40,940)	(9,274)		$ 132,136
Balance, shares at Dec. 31, 2023	4,371,231							4,371,231
Net income				6,394				$ 6,394
Other comprehensive income loss					59			59
Cash dividends declared				(2,806)				(2,806)
Acquisition of treasury stock						$ (440)		(440)
Acquisition of treasury stock, shares						(16,202)
Treasury shares issued under dividend reinvestment plan		(33)				$ 1,188		1,155
Treasury shares issued under dividend reinvestment plan, shares						43,543
Stock Compensation Plans:
Treasury shares issued		(362)				$ 377		15
Treasury shares issued, shares						13,802
Compensation expense		296						296
Balance at Jun. 30, 2024	$ 4,711	43,547		137,581	(40,881)	$ (8,149)		$ 136,809
Balance, shares at Jun. 30, 2024	4,412,374							4,412,374
Balance at Mar. 31, 2024	$ 4,711	43,459		135,955	(41,234)	(8,654)		$ 134,237
Balance, shares at Mar. 31, 2024	4,393,873
Net income				3,033				3,033
Other comprehensive income loss					353			353
Cash dividends declared				(1,407)				(1,407)
Acquisition of treasury stock						$ (400)
Acquisition of treasury stock, shares						(14,684)
Treasury shares issued under dividend reinvestment plan		(27)				$ 853		826
Treasury shares issued under dividend reinvestment plan, shares						31,255
Stock Compensation Plans:
Treasury shares issued		(52)				$ 52
Treasury shares issued, shares						1,930
Compensation expense		167						167
Balance at Jun. 30, 2024	$ 4,711	$ 43,547		$ 137,581	$ (40,881)	$ (8,149)		$ 136,809
Balance, shares at Jun. 30, 2024	4,412,374							4,412,374

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Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Consolidated Statements Of Changes In Shareholders' Equity [Abstract]
Dividend declared per share	$ 0.32	$ 0.32	$ 0.64	$ 0.64

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Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Cash flows from operating activities
Net income	$ 6,394	$ 6,268
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,040	988
Net amortization of loans and investment securities	1,775	1,720
Amortization of subordinate debt issuance costs	19	20
Provision for credit losses	998	1,061
Change in fair value of equity securities	75	32
Realized losses on sales of debt securities		1,119
Loans originated for sale	(13,227)	(8,341)
Proceeds from sale of loans	12,682	8,616
Gain on sale of loans held for sale	(174)	(118)
Increase in cash surrender value of life insurance	(224)	(220)
Gain from claims on life insurance policies	(78)
Change in fair value of derivative	(2)
Stock based compensation	296	253
Decrease in other assets	877	1,573
(Decrease) increase in other liabilities	(715)	414
Net cash provided by operating activities	9,736	13,385
Cash flows from investing activities
Net decrease in long-term interest-earning deposits in other banks	4,235	4,997
Proceeds from sales and calls of investment securities available for sale		40,117
Proceeds from maturities and pay-downs of securities available for sale	24,548	16,062
Purchase of investment securities available for sale	(8,025)	(7,248)
Increase in restricted stock	(8,000)	(50)
Net increase in loans	(61,419)	(94,417)
Proceeds from surrender of life insurance policies	559
Capital expenditures	(1,451)	(228)
Net cash used in investing activities	(49,553)	(40,767)
Cash flows from financing activities
Net decrease in demand deposits, interest-bearing checking, and savings accounts	(2,754)	(70,665)
Net increase in time deposits	51,234	32,352
Increase in long-term borrowings	200,000	70,000
Net decrease in short-term borrowings	(50,000)
Dividends paid	(2,806)	(2,806)
Purchase of Treasury shares	(440)	(2,394)
Cash received from option exercises	15	17
Treasury shares issued under dividend reinvestment plan	1,155	811
Net cash provided by financing activities	196,404	27,315
Increase (decrease) in cash and cash equivalents	156,587	(67)
Cash and cash equivalents at the beginning of the period	23,140	64,899
Cash and cash equivalents at the end of the period	179,727	64,832
Cash paid during the period for:
Interest on deposits and other borrowed funds	19,897	7,813
Income taxes	1,080	1,316
Noncash Activities
Noncash extinguishment of lease liability		537
Noncash decrease in right-of-use asset		$ 507

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Basis Of Presentation

6 Months Ended

Jun. 30, 2024

Basis Of Presentation [Abstract]

Basis Of Presentation

Note 1. Basis of Presentation

The consolidated financial statements include the accounts of Franklin Financial Services Corporation (the Corporation), and its wholly owned subsidiaries, Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc. Farmers and Merchants Trust Company of Chambersburg is a commercial bank that has one wholly owned subsidiary, Franklin Financial Properties Corp. Franklin Financial Properties Corp. holds real estate assets that are leased by the Bank. Franklin Future Fund Inc. is a non-bank investment company. The activities of the non-bank subsidiary are not significant to the consolidated totals. All significant intercompany transactions and account balances have been eliminated.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations, and cash flows as of June 30, 2024, and for all other periods presented have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2023 Annual Report on Form 10-K. The consolidated results of operations for the three and six month period ended June 30, 2024 are not necessarily indicative of the operating results for the full year. Management has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

The consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and cash items with original maturities less than 90 days.

Earnings per share are computed based on the weighted average number of shares outstanding during each period end. A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(Dollars and shares in thousands, except per share data)	2024		2023		2024		2023
Weighted average shares outstanding (basic)		4,555		4,380		4,465		4,388
Impact of common stock equivalents		7		8		8		13
Weighted average shares outstanding (diluted)		4,562		4,388		4,473		4,401
Anti-dilutive options excluded from calculation		—		74		—		25
Net income	$	3,033	$	2,976	$	6,394	$	6,268
Basic earnings per share	$	0.67	$	0.68	$	1.43	$	1.43
Diluted earnings per share	$	0.66	$	0.68	$	1.43	$	1.42

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2024

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 2. Recent Accounting Pronouncements 

Recently adopted accounting standards

ASU 2023-01, Leases (Topic 842): Common Control Arrangements
Description	This ASU requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is determined to be a lease, an entity must classify and account for the lease on the same basis as an arrangement with a related party (on the basis of legally enforceable terms and conditions).
Effective Date	January 1, 2024
Effect on the Consolidated Financial Statements	The Corporation adopted the ASU on January 1, 2024 and it did not have a material effect on the Corporation's financial statements.
ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
Description	This ASU permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.
Effective Date	January 1, 2024
Effect on the Consolidated Financial Statements	The Corporation adopted the ASU on January 1, 2024 and it did not have a material effect on the Corporation's financial statements.
Recently issued but not yet effective accounting standards
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
Description	This ASU is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation table and income taxes paid to be disaggregated by jurisdiction. It also includes certain amendments to improve the effectiveness of income tax disclosures.
Effective Date	January 1, 2025
Effect on the Consolidated Financial Statements	The ASU is not expected to have an impact on the Corporation's financial statements.
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
Description	This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.
Effective Date	Fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
Effect on the Consolidated Financial Statements	The Corporation is currently evaluating the impact the ASU will have on its consolidated financial statements.
ASU 2023-01, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative
Description	This ASU incorporates certain U.S. Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirement, and align the requirements in the Codification with the SEC's regulations.
Effective Date	The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.
Effect on the Consolidated Financial Statements	The ASU is not expected to have an impact on the Corporation's financial statements.

     

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2024

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Income (Loss)

‎

Note 3. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive income (loss), net of income tax effects, included in shareholders' equity are as follows:

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Net unrealized losses on debt securities	$	(49,342)	$	(49,416)
Tax effect		10,362		10,377
Net of tax amount	$	(38,980)	$	(39,039)
Accumulated pension adjustment	$	(2,406)	$	(2,406)
Tax effect		505		505
Net of tax amount	$	(1,901)	$	(1,901)
Total accumulated other comprehensive (loss)	$	(40,881)	$	(40,940)

 

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Investments

6 Months Ended

Jun. 30, 2024

Investments [Abstract]

Investments

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of June 30, 2024 and December 31, 2023 are as follows:

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
June 30, 2024	cost		gains		losses		Value
U.S. Treasury	$	83,139	$	—	$	(10,119)	$	73,020
Municipal		158,445		—		(23,744)		134,701
Corporate		26,346		—		(2,658)		23,688
Agency mortgage & asset-backed		133,119		187		(9,523)		123,783
Non-Agency mortgage & asset-backed		102,758		34		(3,519)		99,273
Total	$	503,807	$	221	$	(49,563)	$	454,465

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2023	cost		gains		losses		value
U.S. Treasury	$	83,494	$	—	$	(9,403)	$	74,091
Municipal		161,339		—		(22,721)		138,618
Corporate		26,336		—		(3,138)		23,198
Agency mortgage & asset-backed		142,565		90		(10,064)		132,591
Non-Agency mortgage & asset-backed		108,185		48		(4,228)		104,005
Total	$	521,919	$	138	$	(49,554)	$	472,503

At June 30, 2024 and December 31, 2023, the fair value of debt securities pledged to secure public funds, trust deposits and FHLB loan commitments totaled $231.0 million and $207.4 million, respectively. The Bank has no investment in a single issuer that exceeds 10% of shareholders’ equity, except for securities issued by the U.S. Treasury and U.S. government sponsored entities.

The amortized cost and estimated fair value of debt securities at June 30, 2024, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities. Securities not due at a single maturity date are presented separately.

(Dollars in thousands)	Amortized ‎cost		Fair ‎value
Due in one year or less	$	—	$	—
Due after one year through five years		85,160		75,619
Due after five years through ten years		80,052		69,302
Due after ten years		102,718		86,488
		267,930		231,409
Mortgage & asset-backed		235,877		223,056
	$	503,807	$	454,465

The composition of the net realized gains (losses) on debt securities for the three and six months ended are as follows:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2024		2023		2024		2023
Proceeds	$	—	$	7,262	$	—	$	40,117
Gross gains realized	$	—	$	—	$	—	$	12
Gross losses realized		—		(517)		—		(1,131)
Net (losses) gains realized	$	—	$	(517)	$	—	$	(1,119)
Tax benefit (provision) on net (losses) gains realized	$	—	$	109	$	—	$	235

Credit Impairment:

The debt securities portfolio contained 551 securities, with a fair value of $437.0 million, and $49.6 million in gross unrealized losses at June 30, 2024, essentially unchanged from the prior year-end.

AFS securities in an unrealized loss position are evaluated for credit impairment at least quarterly. For these securities, the Bank considers: (1) the extent to which the fair value is less than amortized cost; (2) adverse conditions specifically related to the security, industry or geographic area; (3) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; (4) failure of the issuer of the security to make scheduled interest or principal payments; and (5) any changes to the rating of the security by a rating agency. In addition, the Bank considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. The Bank does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. The unrealized losses identified on debt securities and subject to evaluation at June 30, 2024, was determined not to be attributable to credit related factors; therefore, the Bank does not have an allowance for credit loss for these investments.

‎

The following table summarizes debt securities in the AFS portfolio in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category, length of time that individual securities have been in continuous unrealized loss position and the number of securities in each category as of June 30, 2024 and December 31, 2023:

	June 30, 2024
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Treasury	$	—	$	—	—	$	73,020	$	(10,119)	226	$	73,020	$	(10,119)	226
Municipal		—		—	—		134,701		(23,744)	50		134,701		(23,744)	50
Corporate		978		(5)	1		22,710		(2,653)	166		23,688		(2,658)	167
Agency mortgage & asset-backed		745		(10)	4		108,925		(9,513)	57		109,670		(9,523)	61
Non-Agency mortgage & asset-backed		38,658		(194)	19		57,302		(3,325)	28		95,960		(3,519)	47
Total temporarily impaired	$	40,381	$	(209)	24	$	396,658	$	(49,354)	527	$	437,039	$	(49,563)	551

	December 31, 2023
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Treasury	$	—	$	—	—	$	74,091	$	(9,403)	28	$	74,091	$	(9,403)	28
Municipal		—		—	—		138,618		(22,721)	168		138,618		(22,721)	168
Corporate		1,483		(167)	5		21,715		(2,971)	46		23,198		(3,138)	51
Agency mortgage & asset-backed		6,227		(186)	19		118,053		(9,878)	223		124,280		(10,064)	242
Non-Agency mortgage & asset-backed		47,928		(560)	19		50,071		(3,668)	56		97,999		(4,228)	75
Total temporarily impaired	$	55,638	$	(913)	43	$	402,548	$	(48,641)	521	$	458,186	$	(49,554)	564

Equity Securities at Fair Value

The Corporation owns one equity investment with a readily determinable fair value. At June 30, 2024 and December 31, 2023, this investment was reported at fair value of $352 thousand and $427 thousand, respectively, with changes in value reported through income.

 

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Loans

6 Months Ended

Jun. 30, 2024

Loans [Abstract]

Loans

Note 5. Loans

The Bank reports its loan portfolio based on the primary collateral of the loan. It further classifies these loans by the primary purpose, either consumer or commercial. The Bank’s mortgage loans include long-term loans to individuals and businesses secured by mortgages on the borrower’s real property. Construction loans are made to finance the purchase of land and the construction of residential and commercial buildings thereon and are secured by mortgages on real estate. Commercial loans are made to businesses of various sizes for a variety of purposes including construction, property, plant and equipment, and working capital. Commercial loans also include loans to government municipalities. Commercial lending is concentrated in the Bank’s primary market, but also includes purchased loan participations. Consumer loans are comprised of installment, home equity and unsecured personal lines of credit.

Each class of loans involves a different kind of risk. However, risk factors such as changes in interest rates, general economic conditions and changes in collateral values are common across all classes. The risk of each loan class is presented below.

Residential Real Estate 1-4 family

The largest risk in residential real estate loans to retail customers is the borrower’s inability to repay the loan due to the loss of the primary source of income. The Bank attempts to mitigate this risk through prudent underwriting standards including employment history, current financial condition and credit history. These loans are generally owner occupied and serve as the borrower’s primary residence. The Bank usually holds a first lien position on these properties but may hold a second lien position in some home equity loans or lines of credit. Commercial purpose loans, secured by residential real estate, are usually dependent upon repayment from the rental income or other business purposes. These loans are generally non-owner occupied. In addition to the real estate collateral, these loans may have personal guarantees or UCC filings on other business assets. If a payment default occurs on a 1-4 family residential real estate loan, the collateral serves as a source of repayment, but may be subject to a change in value due to economic conditions.

Residential Real Estate Construction

This class includes loans to individuals for construction of a primary residence and to contractors and developers to improve real estate and construct residential properties. Construction loans to individuals generally bear the same risk as 1-4 family residential loans. Additional risks may include cost overruns, delays in construction or contractor problems.

Loans to contractors and developers are primarily dependent on the sale of improved lots or finished homes for repayment. Risks associated with these loans include the borrower’s character and capacity to complete a development, the effect of economic conditions on the valuation of lots or homes, cost overruns, delays in construction or contractor problems. In addition to real estate collateral, these loans may have personal guarantees or UCC filings on other business assets, depending on the financial strength and experience of the developer. Real estate construction loans are monitored on a regular basis by either an independent third party or the responsible loan officer, depending on the size and complexity of the project. This monitoring process includes, at a minimum, the submission of invoices or AIA documents detailing the cost incurred by the borrower, on-site inspections, and an authorizing signature for disbursement of funds.

Commercial Real Estate

Commercial real estate loans may be secured by various types of commercial property including retail space, office buildings, warehouses, hotels and motels, manufacturing facilities and, agricultural land.

Commercial real estate loans present a higher level of risk than residential real estate loans. Repayment of these loans is normally dependent on cash flow generated by the operation of a business that utilizes the real estate. The successful operation of the business, and therefore repayment ability, may be affected by general economic conditions outside of the control of the operator. On most commercial real estate loans ongoing monitoring of cash flow and other financial performance indictors is completed annually through financial statement analysis. In addition, the value of the collateral may be negatively affected by economic conditions and may be insufficient to repay the loan in the event of default. In the event of foreclosure, commercial real estate may be more difficult to liquidate than residential real estate.

Commercial

Commercial loans are made for various business purposes to finance equipment, inventory, accounts receivables, and operating liquidity. These loans are generally secured by business assets or equipment, non-real estate collateral and/or personal guarantees.

Commercial loans present a higher level of credit risk than other loans because repayment ability is usually dependent on cash-flow from a business operation that can be affected by general economic conditions. On most commercial loans ongoing monitoring of cash flow and other financial performance indicators occur at least annually through financial statement analysis. In the event of a default, collateral for these loans may be more difficult to liquidate, and the valuation of the collateral may decline more quickly than loans secured by other types of collateral.

Loans to governmental municipalities are also included in the Commercial class. These loans generally have less risk than Commercial & Industrial (C&I) loans due to the taxing authority of the municipality and its ability to assess fees on services.

This class also includes loans made as part of the Paycheck Protection Program (PPP). The PPP is a small business loan program, administered by the Small Business Administration (SBA). The PPP loans are 100 percent guaranteed by the SBA and have a maturity of two years or five years with a fixed interest rate of 1.00% for the life of the loan. Because the PPP loans are 100% guaranteed by the SBA, they present no credit risk to the Bank once the SBA guarantee is fulfilled. However, if the SBA does not grant loan forgiveness, the PPP loan would present the same risk factors as any other commercial loan.

Consumer

These loans are made for a variety of reasons to consumers and include term loans and personal lines-of credit. The loans may be secured or unsecured. Repayment is primarily dependent on the income of the borrower and to a lesser extent the sale of collateral. The underwriting of these loans is based on the consumer’s ability and willingness to repay and is determined by the borrower’s employment history, current financial condition and credit history. Collateral for these loans, if any, usually depreciates quickly and therefore, may not be adequate to repay the loan if it is repossessed. Therefore, the overall health of the economy, including unemployment rates and wages, will have an effect on the credit quality in this loan class.

A summary of loans outstanding, by class, at the end of the reporting periods is as follows:

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Residential Real Estate 1-4 Family
Consumer first liens	$	159,806	$	142,017
Commercial first lien		61,032		63,271
Total first liens		220,838		205,288
Consumer junior liens and lines of credit		70,256		68,752
Commercial junior liens and lines of credit		5,296		3,809
Total junior liens and lines of credit		75,552		72,561
Total residential real estate 1-4 family		296,390		277,849
Residential real estate - construction
Consumer		15,804		13,837
Commercial		11,466		12,063
Total residential real estate construction		27,270		25,900
Commercial real estate		743,642		703,767
Commercial		243,628		242,654
Total commercial		987,270		946,421
Consumer		7,390		6,815
		1,318,320		1,256,985
Less: Allowance for credit losses		(17,018)		(16,052)
Net Loans	$	1,301,302	$	1,240,933
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	1,829	$	1,615
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	737,601	$	699,527
Federal Reserve Bank		77,268		83,482
	$	814,869	$	783,009
Paycheck Protection Program (included in commercial loans)	$	25	$	57

 

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Loan Quality And Allowance For Credit Losses

6 Months Ended

Jun. 30, 2024

Loan Quality And Allowance For Credit Losses [Abstract]

Loan Quality And Allowance For Credit Losses

Note 6. Loan Quality and Allowance for Credit Losses

The Bank 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, and current economic trends, among other factors. Management utilizes a risk rating scale ranging from 1-Prime to 9-Loss to evaluate loan quality. This risk rating scale is used primarily for commercial purpose loans. Consumer purpose loans are identified as either performing or nonperforming based on the payment status of the loans. Nonperforming consumer loans are loans that are nonaccrual or 90 days or more past due and still accruing. The Bank uses the following definitions for risk ratings:

Pass (1-5): are considered pass credits with lower or average risk and are not otherwise classified.

Other Assets Especially Mentioned (OAEM) (6): Loans classified as OAEM 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 borrower’s credit position at some future date.

‎

Substandard (7): Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower 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 Bank will sustain some loss if the deficiencies are not corrected.

Doubtful (8): 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, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the pool evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the sale of the collateral, the expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for any discounts and selling costs as appropriate.

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the Allowance for Credit Loss for loans (ACL). The Bank begins enhanced monitoring of all loans rated 6–OAEM or worse and obtains a new appraisal or asset valuation for any loans placed on nonaccrual and rated 7 - Substandard or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Bank. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Enterprise Risk Management Committee of the Board of Directors. Management believes the ACL at June 30, 2024 is adequate.

‎

The following table presents loans by year of origination and internally assigned risk ratings:

(Dollars in thousands)													Revolving		Revolving
	Term Loans												Loans		Loans
	Amortized Cost Basis by Origination Year												Amortized		Converted
As of June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Residential real estate 1-4 family:
Commercial:
Risk rating:
Pass (1-5)	$	2,903	$	9,737	$	8,484	$	10,766	$	9,189	$	21,759	$	3,490	$	—	$	66,328
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		2,903		9,737		8,484		10,766		9,189		21,759		3,490		—		66,328
Consumer:
Performing		18,756		56,876		32,537		14,674		9,621		29,538		47,035		19,816		228,853
Nonperforming		—		—		106		280		—		436		387		—		1,209
Total Consumer		18,756		56,876		32,643		14,954		9,621		29,974		47,422		19,816		230,062
Total	$	21,659	$	66,613	$	41,127	$	25,720	$	18,810	$	51,733	$	50,912	$	19,816	$	296,390
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate construction:
Commercial:
Risk rating:
Pass (1-5)	$	1,980	$	6,128	$	1,059	$	1,071	$	184	$	1,044	$	—	$	—	$	11,466
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		1,980		6,128		1,059		1,071		184		1,044		—		—		11,466
Consumer:
Performing		4,811		10,993		—		—		—		—		—		—		15,804
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		4,811		10,993		—		—		—		—		—		—		15,804
Total	$	6,791	$	17,121	$	1,059	$	1,071	$	184	$	1,044	$	—	$	—	$	27,270
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Risk rating:
Pass (1-5)	$	31,739	$	205,456	$	105,602	$	96,075	$	34,467	$	236,387	$	9,962	$	—	$	719,688
OAEM (6)		—		2,927		1,794		1,722		6,732		1,646		594		—		15,415
Substandard (7)		—		6,004		—		—		—		2,535		—		—		8,539
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	31,739	$	214,387	$	107,396	$	97,797	$	41,199	$	240,568	$	10,556	$	—	$	743,642
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	(2)	$	—	$	—	$	(2)
Commercial:
Risk rating:
Pass (1-5)	$	8,962	$	30,446	$	30,653	$	41,822	$	20,944	$	65,039	$	43,050	$	—	$	240,916
OAEM (6)		—		12		448		1,586		14		—		240		—		2,300
Substandard (7)		—		—		215		—		1		—		196		—		412
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	8,962	$	30,458	$	31,316	$	43,408	$	20,959	$	65,039	$	43,486	$	—	$	243,628
Current period gross charge-offs	$	(7)	$	—	$	(80)	$	—	$	—	$	—	$	(62)	$	—	$	(149)
Consumer:
Performing		1,491		1,401		509		1,836		82		48		1,977		—		7,344
Nonperforming		—		23		—		—		2		—		21		—		46
Total	$	1,491	$	1,424	$	509	$	1,836	$	84	$	48	$	1,998	$	—	$	7,390
Current period gross charge-offs	$	(21)	$	—	$	(2)	$	(2)	$	(6)	$	(1)	$	(14)	$	—	$	(46)

‎

(Dollars in thousands)													Revolving		Revolving
	Term Loans												Loans		Loans
	Amortized Cost Basis by Origination Year												Amortized		Converted
As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate 1-4 family:
Commercial:
Risk rating:
Pass (1-5)	$	9,867	$	9,088	$	11,038	$	9,691	$	2,433	$	22,906	$	2,057	$	—	$	67,080
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		9,867		9,088		11,038		9,691		2,433		22,906		2,057		—		67,080
Consumer:
Performing		53,128		34,136		15,625		10,245		5,222		28,423		43,968		20,022		210,769
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		53,128		34,136		15,625		10,245		5,222		28,423		43,968		20,022		210,769
Total	$	62,995	$	43,224	$	26,663	$	19,936	$	7,655	$	51,329	$	46,025	$	20,022	$	277,849
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate construction:
Commercial:
Risk rating:
Pass (1-5)	$	6,845	$	2,209	$	1,289	$	214	$	—	$	1,506	$	—	$	—	$	12,063
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		6,845		2,209		1,289		214		—		1,506		—		—		12,063
Consumer:
Performing		13,837		—		—		—		—		—		—		—		13,837
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		13,837		—		—		—		—		—		—		—		13,837
Total	$	20,682	$	2,209	$	1,289	$	214	$	—	$	1,506	$	—	$	—	$	25,900
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Risk rating:
Pass (1-5)	$	180,052	$	110,886	$	98,540	$	34,307	$	38,603	$	214,179	$	10,567	$	—	$	687,134
OAEM (6)		2,955		1,350		1,000		6,823		—		2,182		139		—		14,449
Substandard (7)		—		—		—		—		—		2,134		50		—		2,184
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	183,007	$	112,236	$	99,540	$	41,130	$	38,603	$	218,495	$	10,756	$	—	$	703,767
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial:
Risk rating:
Pass (1-5)	$	34,851	$	33,983	$	45,754	$	22,847	$	3,579	$	64,542	$	36,508	$	—	$	242,064
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		317		—		—		—		—		273		—		590
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	34,851	$	34,300	$	45,754	$	22,847	$	3,579	$	64,542	$	36,781	$	—	$	242,654
Current period gross charge-offs	$	(125)	$	—	$	(130)	$	—	$	—	$	—	$	(50)	$	—	$	(305)
Consumer:
Performing		1,863		669		1,985		148		80		5		2,060		—		6,810
Nonperforming		—		—		—		—		—		—		5		—		5
Total	$	1,863	$	669	$	1,985	$	148	$	80	$	5	$	2,065	$	—	$	6,815
Current period gross charge-offs	$	(63)	$	—	$	(10)	$	(2)	$	(6)	$	—	$	(36)	$	—	$	(117)

‎

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days and still accruing as of June 30, 2024:

	June 30, 2024						December 31, 2023
(Dollars in thousands)	Nonaccrual and Loans Past Due Over 90 Days+						Nonaccrual and Loans Past Due Over 90 Days+
					Loans Past Due						Loans Past Due
	Nonaccrual		Nonaccrual		Over 90 Days		Nonaccrual		Nonaccrual		Over 90 Days
	Without ACL		With ACL		Still Accruing		Without ACL		With ACL		Still Accruing
June 30, 2024
Residential Real Estate 1-4 Family
First liens	$	—	$	—	$	41	$	—	$	—	$	—
Junior liens and lines of credit		—		—		30		—		—		—
Total		—		—		71		—		—		—
Residential real estate - construction		—		—		—		—		—		—
Commercial real estate		407		—		—		—		—		—
Commercial		316		—		88		147		—		—
Consumer		—		—		6		—		—		5
Total	$	723	$	—	$	165	$	147	$	—	$	5

At June 30, 2024 the company had $407 thousand of commercial real estate loans and $316 thousand of commercial loans that were considered to be collateral dependent. A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty, and the repayment is expected to be provided substantially through the operation or sale of collateral. These loans were secured by farmland and business assets, respectively. No loans were considered collateral dependent at December 31, 2023.

At June 30, 2024 and December 31, 2023, the Bank had $0 of residential properties in the process of foreclosure.

The following table presents the aging of payments of the loan portfolio:

(Dollars in thousands)	Loans Past Due						Total				Total
	30-59 Days		60-89 Days		90 Days+		Past Due		Current		Loans
June 30, 2024
Residential Real Estate 1-4 Family
First liens	$	—	$	799	$	41	$	840	$	219,998	$	220,838
Junior liens and lines of credit		339		—		30		369		75,183		75,552
Total		339		799		71		1,209		295,181		296,390
Residential real estate - construction		—		—		—		—		27,270		27,270
Commercial real estate		356		854		407		1,617		742,025		743,642
Commercial		193		—		404		597		243,031		243,628
Consumer		37		3		6		46		7,344		7,390
Total	$	925	$	1,656	$	888	$	3,469	$	1,314,851	$	1,318,320

	Loans Past Due						Total				Total
	30-59 Days		60-89 Days		90 Days+		Past Due		Current		Loans
December 31, 2023
Residential Real Estate 1-4 Family
First liens	$	62	$	394	$	—	$	456	$	204,832	$	205,288
Junior liens and lines of credit		239		228		—		467		72,094		72,561
Total		301		622		—		923		276,926		277,849
Residential real estate - construction		—		—		—		—		25,900		25,900
Commercial real estate		3,232		—		—		3,232		700,535		703,767
Commercial		542		112		147		801		241,853		242,654
Consumer		21		12		5		38		6,777		6,815
Total	$	4,096	$	746	$	152	$	4,994	$	1,251,991	$	1,256,985

The following table presents, by class, the activity in the Allowance for Credit Losses (ACL) for the periods shown:

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
ACL at March 31, 2024	$	1,308	$	415	$	337	$	11,057	$	3,324	$	92	$	—	$	16,533
Charge-offs		—		—		—		—		(83)		(18)		—		(101)
Recoveries		—		—		3		—		20		3		—		26
Provision		76		14		(22)		366		103		23		—		560
ACL at June 30, 2024	$	1,384	$	429	$	318	$	11,423	$	3,364	$	100	$	—	$	17,018
ACL at December 31, 2023	$	1,296	$	419	$	296	$	10,657	$	3,290	$	94	$	—	$	16,052
Charge-offs		—		—		—		(2)		(149)		(46)		—		(197)
Recoveries		—		—		7		—		80		26		—		113
Provision		88		10		15		768		143		26		—		1,050
ACL at June 30, 2024	$	1,384	$	429	$	318	$	11,423	$	3,364	$	100	$	—	$	17,018
ACL at March 31, 2023	$	1,624	$	690	$	190	$	8,236	$	3,275	$	94	$	—	$	14,109
Charge-offs		—		—		—		—		(1)		(42)		—		(43)
Recoveries		—		—		3		—		12		10		—		25
Provision		96		(7)		(16)		847		(432)		36		—		524
ACL at June 30, 2023	$	1,720	$	683	$	177	$	9,083	$	2,854	$	98	$	—	$	14,615
ACL at December 31, 2022	$	459	$	234	$	343	$	7,493	$	4,846	$	133	$	667	$	14,175
Impact of adopting ASU 2016-13		1,096		493		(95)		584		(1,907)		(40)		(667)		(536)
Charge-offs		—		—		—		—		(87)		(76)		—		(163)
Recoveries		2		—		42		—		79		25		—		148
Provision		163		(44)		(113)		1,006		(77)		56		—		991
ACL at June 30, 2023	$	1,720	$	683	$	177	$	9,083	$	2,854	$	98	$	—	$	14,615

On January 1, 2023, The Bank adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

As of June 30, 2024 and December 31, 2023 there were no modifications made to borrowers experiencing financial difficulty.

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Leases

6 Months Ended

Jun. 30, 2024

Leases [Abstract]

Leases

Note 7. Leases

The Corporation leases various assets in the course of its operations that are subject to recognition on the balance sheet. The Corporation considers all of its leases to be operating leases and it has no finance leases. The leased assets may include equipment, and buildings and land (collectively real estate). The equipment leases are shorter-term than the real estate leases, and generally have a fixed payment over a defined term without renewal options. Certain equipment leases have purchase options and it was determined the option was not reasonably certain to be exercised. The real estate leases are longer-term and may contain renewal options after the initial term, but none of the real estate leases contain a purchase option. The renewal options on real estate leases were reviewed and if it was determined the option was reasonably certain to be renewed, the option term was considered in the determination of the lease liability. There is only one real estate lease with a variable payment based on an index included in the lease liability. None of the leases contain any restrictive covenants and there are no significant leases that have not yet commenced. The discount rate used to determine the lease liability is based on the Bank’s fully secured borrowing rate from the Federal Home Loan Bank for a term similar to the lease term. Operating lease expense is included in net occupancy expense in the consolidated statements of income.

Lease costs:

The components of total lease cost were as follows:

	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
(Dollars in thousands)	2024		2023		2024		2023
Operating lease cost	$	195	$	212	$	389	$	429
Short-term lease cost		1		4		2		8
Variable lease cost		37		37		87		74
Total lease cost	$	233	$	253	$	478	$	511

Supplemental Lease Information:

	Six Months Ended ‎June 30,
(Dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	379	$	413
Weighted-average remaining lease term (years)		11.7		11.9
Weighted-average discount rate		3.43%		3.37%

Lease Obligations:

Future undiscounted lease payments for operating leases with initial terms of one year or more as of June 30, 2024, are as follows:

(Dollars in thousands)
2024	$	354
2025		666
2026		564
2027		421
2028		393
2029 and beyond		3,205
Undiscounted cash flow		5,603
Imputed Interest		(1,076)
Total lease liability	$	4,527

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Other Real Estate Owned

6 Months Ended

Jun. 30, 2024

Other Real Estate Owned [Abstract]

Other Real Estate Owned

Note 8. Other Real Estate Owned

The Bank had no other real estate owned at June 30, 2024 and December 31, 2023.

 

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Derivatives

6 Months Ended

Jun. 30, 2024

Derivatives [Abstract]

Derivatives

Note 9. Derivatives

The Corporation is exposed to certain risks arising from both its business operations and economic conditions.  The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. 

The Corporation’s existing credit derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements.  Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders which participate in loans.

The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the Balance Sheet.

		Fair Value of Derivative Instruments
		Derivative Liabilities
(Dollars in thousands)		June 30, 2024					December 31, 2023
		Notional amount	Balance Sheet Location		Fair Value		Notional amount	Balance Sheet Location		Fair Value
Derivatives not designated as hedging instruments
Other Contracts	$	6,167	Other Liabilities	$	—	$	6,268	Other Liabilities	$	2
Total derivatives not designated as hedging instruments				$	—				$	2

The table below presents the effect of the Corporation’s derivative financial instruments that are not designated as hedging instruments on the Income Statement.

Effect of Derivatives as Hedging Instruments on the Income Statement
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivatives
(Dollars in thousands)		Three Months Ended				Six Months Ended
		June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Other Contracts	Other income	$	-	$	2	$	1	$	-

As of June 30, 2024, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $0.

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Pension

6 Months Ended

Jun. 30, 2024

Pension [Abstract]

Pension

Note 10. Pension

The components of pension expense for the periods presented are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2024		2023		2024		2023
Components of net periodic cost:
Service cost	$	56	$	53	$	103	$	108
Interest cost		193		202		381		403
Expected return on plan assets		(215)		(231)		(432)		(462)
Recognized net actuarial loss		15		—		15		—
Total pension expense	$	49	$	24	$	67	$	49

The service cost component of pension expense is recorded in the salaries and employee benefits line and all other cost components are recorded in the nonservice pension line of the Consolidated Statements of Income. 

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Fair Value Measurements And Fair Values Of Financial Instruments

6 Months Ended

Jun. 30, 2024

Fair Value Measurements And Fair Values Of Financial Instruments [Abstract]

Fair Value Measurements And Fair Values Of Financial Instruments

Note 11. Fair Value Measurements and Fair Values of Financial Instruments

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

FASB ASC Topic 820, “Financial Instruments”, requires disclosure of the fair value of financial assets and liabilities, including those financial assets and liabilities that are not measured and reported at fair value on a recurring and nonrecurring basis. The Corporation does not report any nonfinancial assets at fair value. FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority

to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1: Valuation is based on unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. There may be substantial differences in the assumptions used for securities within the same level. For example, prices for U.S. Agency securities have fewer assumptions and are closer to level 1 valuations than the private label mortgage-backed securities that require more assumptions and are closer to level 3 valuations.

Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Corporation’s assumptions regarding what market participants would assume when pricing a financial instrument.

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

The following information regarding the fair value of the Corporation’s financial instruments should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’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 Corporation’s disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Corporation’s financial instruments measured at fair value on a recurring and nonrecurring basis.

Equity Securities: Equity securities are valued using quoted market prices from nationally recognized markets (Level 1). Equity securities are measured at fair value on a recurring basis.

Investment securities: Fair values of investment securities available-for-sale were primarily measured using information from a third-party pricing service. This service provides pricing information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data from market research publications. Level 2 investment securities are primarily comprised of debt securities issued by states and municipalities, corporations, mortgage-backed securities issued by government agencies, and government-sponsored enterprises. Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models. Investment securities are measured at fair value on a recurring basis.

Collateral Dependent Loans: The fair value of collateral dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals conducted by an independent, licensed appraiser, less cost to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach (Level 2). If the appraiser makes an adjustment to account for differences between the comparable sales and income data available for similar loans, or if management adjusts the appraised value, then the fair value is considered Level 3. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral dependent loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy. No partial charge-offs on these loans were taken in the first quarter of 2024. Collateral dependent loans are measured at fair value on a nonrecurring basis.

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Recurring Fair Value Measurements

For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2024 and December 31, 2023 are as follows:

(Dollars in thousands)	Fair Value at June 30, 2024
Asset Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	352	$	—	$	—	$	352
Available for sale:
U.S. Treasury		73,020		—		—		73,020
Municipal		—		134,701		—		134,701
Corporate		—		23,688		—		23,688
Agency mortgage & asset-backed		—		123,783		—		123,783
Non-Agency mortgage & asset-backed		—		99,273		—		99,273
Total assets	$	73,372	$	381,445	$	—	$	454,817

(Dollars in thousands)	Fair Value at December 31, 2023
Asset Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	427	$	—	$	—	$	427
Available for sale:
U.S. Treasury		74,091		—		—		74,091
Municipal		—		138,618		—		138,618
Corporate		—		23,198		—		23,198
Agency mortgage and asset-backed		—		132,591		—		132,591
Non-Agency mortgage and asset-backed		—		104,005		—		104,005
Total assets	$	74,518	$	398,412	$	—	$	472,930

The fair value of derivative liabilities measured at fair value was $0 at June 30, 2024, $2 thousand at December 31, 2023 and was considered immaterial.

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Nonrecurring Fair Value Measurements

The Corporation did not record any assets or liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis at June 30, 2024. For financial assets and liabilities measured at fair value on a recurring basis, there were no transfers of financial assets or liabilities between Level 1 and Level 2 during the period ending June 30, 2024.

The carrying amounts and estimated fair value of financial instruments not carried at fair value are as follows:

	June 30, 2024
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	179,727	$	179,727	$	179,727	$	—	$	—
Long-term interest-earning deposits in other banks		1,994		1,994		1,994		—		—
Loans held for sale		932		947		—		947		—
Net loans		1,301,302		1,259,496		—		—		1,259,496
Accrued interest receivable		7,515		7,515		—		—		7,515
Financial liabilities:
Deposits	$	1,586,458	$	1,585,810	$	—	$	1,585,810	$	—
Federal Reserve Bank borrowings		40,000		39,891				39,891
FHLB advances		240,000		239,310		—		239,310		—
Subordinate notes		19,680		17,474		—		17,474		—
Accrued interest payable		4,735		4,735		—		4,735		—
	December 31, 2023
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	23,140	$	23,140	$	23,140	$	—	$	—
Long-term interest-earning deposits in other banks		6,229		6,229		6,229		—		—
Loans held for sale		213		213		—		213		—
Net loans		1,240,933		1,207,403		—		—		1,207,403
Accrued interest receivable		7,506		7,506		—		—		7,506
Financial liabilities:
Deposits	$	1,537,978	$	1,537,480	$	—	$	1,537,480	$	—
Federal Reserve Bank Borrowings		90,000		89,783				89,783
FHLB Advances		40,000		40,110				40,110
Subordinate notes		19,661		18,303		—		18,303		—
Accrued interest payable		3,856		3,856		—		3,856		—

 

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Deposits

6 Months Ended

Jun. 30, 2024

Deposits [Abstract]

Deposits

Note 12. Deposits

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Noninterest-bearing checking	$	282,964	$	273,050
Interest-bearing checking		401,174		454,517
Money management		616,928		572,058
Savings		101,712		105,907
Total interest-bearing checking and savings		1,119,814		1,132,482
Time deposits		183,680		132,446
Total deposits	$	1,586,458	$	1,537,978
Overdrawn deposit accounts reclassified as loans	$	660	$	160

Time deposits greater than $250,000 at June 30, 2024 and December 31, 2023 were $48.5 million and $44.4 million, respectively.

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Borrowings

6 Months Ended

Jun. 30, 2024

Borrowings [Abstract]

Borrowings

Note 13. Borrowings

At June 30, 2024, the Bank had $40.0 million borrowed from the Federal Reserve’s Bank Term Funding Program (BTFP) with a rate of 4.81% due January 10, 2025, compared to $90.0 million at December 31, 2023. At June 30, 2024, the fair value of debt securities pledged for the BTFP was $44.1 million.

At June 30, 2024, the Bank had $240.0 million in total borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB), compared to $40.0 million at December 31, 2023. The borrowings are comprised of $40.0 million in short-term borrowings with a blended rate of 5.80%, due during the third quarter of 2024, and $200.0 million in long-term borrowings with a rate of 4.32%, due January 12, 2027.

At June 30, 2024, the Corporation had $20.0 million of unsecured subordinated debt notes payable, $15.0 million which mature on September 1, 2030 and $5.0 million which mature on September 1, 2035. The notes are recorded on the consolidated balance sheet net of remaining debt issuance costs totaling $320 thousand at June 30, 2024, which is being amortized on a pro-rata basis, based on the maturity date of the notes, on an effective interest method. The subordinated notes totaling $15.0 million have a fixed interest rate of 5.00% through September 1, 2025, then convert to a variable rate of 90-day Secured Overnight Financing Rate (SOFR) plus 4.93% for the applicable interest periods through maturity. The subordinated notes totaling $5.0 million have a fixed interest rate of 5.25% through September 1, 2030, then convert to a variable rate of 90-day SOFR plus 4.92% for the applicable interest periods through maturity. The Corporation may, at its option, redeem the notes, in whole or in part, at any time 5-years prior to the maturity. The notes are structured to qualify as Tier 2 Capital for the Corporation and there are no debt covenants on the notes.

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Capital Ratios

6 Months Ended

Jun. 30, 2024

Capital Ratios [Abstract]

Capital Ratios

Note 14. Capital Ratios

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered “well capitalized” are: (1) Common Equity Tier 1 (CET1) of 6.5%, (2) Tier 1 Leverage of 5%, (3) Tier 1 Risk-Based Capital of 8%, and (4) Total Risk-Based Capital of 10%. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank’s capital conservation buffer at June 30, 2024 was 5.52% compared to the regulatory buffer of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of June 30, 2024, the Bank was “well capitalized.”

In 2019, the Community Bank Leverage Ratio (CBLR) was approved by federal banking agencies as an optional capital measure available to Qualifying Community Banking Organizations (QCBO). If a bank qualifies as a QCBO and maintains a CBLR of 9% or greater, the bank would be considered “well-capitalized” for regulatory capital purposes and exempt from complying with the risk-based capital rule described above. The CBLR rule took effect January 1, 2020 and banks could opt-in through an election in the first quarter 2020 regulatory filing. The Bank met the criteria of a QCBO but did not opt-in to the CBLR.

The consolidated asset limit on small bank holding companies is $3.0 billion and a company with assets under that limit is not subject to the consolidated capital rules but may file reports that include capital amounts and ratios. The Corporation has elected to file those reports.

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The following table summarizes the regulatory capital requirements and results as of June 30, 2024 and December 31, 2023 for the Corporation and the Bank:

			Regulatory Ratios
			Adequately	Well
	June 30,	December 31,	Capitalized	Capitalized
(Dollars in thousands)	2024	2023	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	12.01%	11.82%	N/A	N/A
Farmers & Merchants Trust Company	12.27%	12.38%	4.50%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	12.01%	11.82%	N/A	N/A
Farmers & Merchants Trust Company	12.27%	12.38%	6.00%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	14.66%	14.45%	N/A	N/A
Farmers & Merchants Trust Company	13.52%	13.63%	8.00%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	8.38%	9.01%	N/A	N/A
Farmers & Merchants Trust Company	8.56%	9.44%	4.00%	5.00%

(1)Common equity Tier 1 capital / total risk-weighted assets

(2)Tier 1 capital / total risk-weighted assets

(3)Total risk-based capital / total risk-weighted assets

(4)Tier 1 capital / average quarterly assets

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Revenue Recognition

6 Months Ended

Jun. 30, 2024

Revenue Recognition [Abstract]

Revenue Recognition

Note 15. Revenue Recognition

All of the Corporation’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income as presented in its consolidated statements of income. Revenue generating activities that fall within the scope of ASC 606 are described as follows:

Wealth Management Fees – these represent fees from wealth management (assets under management), fees from the management and settlement of estates and commissions from the sale of investment and insurance products. Asset management fees are generally assessed based on a tiered fee schedule, based on the value of assets under management, and are recognized monthly when the service obligation is completed. Fees for estate management services are based on the estimated fair value of the estate. These fees are generally recognized monthly over an 18-month period that Management has determined to represent the average time to fulfill the performance obligations of the contract. Management has the discretion to adjust this time period as needed based upon the nature and complexity of an individual estate. Commissions from the sale of investment and insurance products are recognized upon the completion of the transaction.

The following table presents Wealth Management Fees for the three and six months ended June 30, 2024 and 2023:

	For the Three Months Ended				For the Six Months Ended
(Dollars in thousands)	June 30,				June 30,
Wealth Management Fees	2024		2023		2024		2023
Asset Management Fees	$	2,051	$	1,844	$	3,884	$	3,481
Estate Management Fees		128		61		215		152
Commissions		63		54		170		160
Total	$	2,242	$	1,959	$	4,269	$	3,793

Loan Service Charges – these represent fees on loans for services or charges that occur after the loan has been booked, for example, late payment fees. These also include fees for mortgages settled for third-party mortgage companies. All of these fees are transactional in nature and are recognized upon completion of the transaction which represents the performance obligation.

Deposit Service Charges and Fees – these represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to, stop payment fees and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fees are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly.

Debit Card Income – this represents interchange fees from cardholder transactions conducted through the card payment network. Cardholders use the debit card to conduct point-of-sale transactions that produce interchange fees. The fees are transaction based and the fee is recognized with the processing of the transaction. These fees are reported net of cardholder rewards.

Other Service Charges and Fees – these are comprised primarily of merchant card fees, credit card fees, ATM surcharges and interchange fees and wire transfer fees. Merchant card fees represent fees the Bank earns from a third party for enrolling a customer in the processor’s program. Credit card fees represent a fee earned by the Bank for a successful referral to a card-issuing company. ATM surcharges and interchange fees are the result of Bank customers conducting ATM transactions that generate fee income and are processed through multiple card networks. All of these fees are transaction based and are recognized at the time of the transaction.

Gains/Losses on the Sale of Other Real Estate – these are recognized when control of the property transfers to the buyer.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into longer-term revenue contracts with customers, and therefore, does not experience significant contract balances.

Contract Acquisition Costs

The Corporation expenses all contract acquisition costs as costs are incurred.

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Commitments And Contingencies

6 Months Ended

Jun. 30, 2024

Commitments And Contingencies [Abstract]

Commitments And Contingencies

1Note 16. Commitments and Contingencies

In the normal course of business, the Bank is a party to financial instruments that are not reflected in the accompanying financial statements and are commonly referred to as off-balance-sheet instruments. These financial instruments are entered into primarily to meet the financing needs of the Bank’s customers and include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the consolidated balance sheet.

The Corporation’s exposure to credit loss in the event of nonperformance by other parties to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments.

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The Bank had the following outstanding commitments for the periods presented:

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit	$	320,735	$	325,982
Consumer commitments to extend credit (secured)		126,387		112,157
Consumer commitments to extend credit (unsecured)		6,366		5,964
	$	453,488	$	444,103
Standby letters of credit	$	21,538	$	19,851
ACL - Unfunded Commitments (1)	$	1,970	$	2,022
(1) Reported in Other Liabilities on the Consolidated Balance Sheets

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses with the exception of home equity lines and personal lines of credit and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, is based on Management’s credit evaluation of the counterparty. Collateral for most commercial commitments varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. Collateral for secured consumer commitments consists of liens on residential real estate.

Standby letters of credit are instruments issued by the Bank, which guarantee the beneficiary payment by the Bank in the event of default by the Bank’s customer in the nonperformance of an obligation or service. Most standby letters of credit are extended for one-year periods. Generally, the credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral supporting those commitments for which collateral is deemed necessary primarily in the form of certificates of deposit and liens on real estate. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.

Most of the Bank’s business activity is with customers located within its primary market and does not involve any significant concentrations of credit to any one entity or industry.

Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation.

The Corporation establishes accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable, and the amount of the loss can be reasonably estimated. When the Corporation is able to do so, it also determines estimates of possible losses, whether in excess of any accrued liability or where there is no accrued liability.

These assessments are based on the analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties. As new information is obtained, the Corporation may change its assessments and, as a result, take or adjust the amounts of its accruals and change its estimates of possible losses or ranges of possible losses. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts that may be accrued or included in estimates of possible losses or ranges of possible losses may not represent the actual loss to the Corporation from any legal proceeding. Its exposure and ultimate losses may be higher, possibly significantly higher, than amounts it may accrue or amounts it may estimate.

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In management’s opinion, the Corporation does not anticipate, at the present time, that the ultimate aggregate liability, if any, arising out of all litigation to which the Corporation is a party at this time will have a material adverse effect on its financial position. The Corporation cannot now determine, however, whether or not any claim asserted against it will have a material adverse effect on its results of operations in any future reporting period, which will depend on, among other things, the amount of loss resulting from the claim and the amount of income otherwise reported for the reporting period. Thus, at June 30, 2024, the Corporation is unable to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss with respect to such other matters and, accordingly, have not yet established any specific accrual for such other matters.

 

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Reclassification

6 Months Ended

Jun. 30, 2024

Reclassification [Abstract]

Reclassification

Note 17. Reclassification

Certain prior period amounts may have been reclassified to conform to the current year presentation. Such reclassifications did not affect prior year net income or shareholders’ equity.

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Basis Of Presentation (Policy)

6 Months Ended

Jun. 30, 2024

Basis Of Presentation [Abstract]

Consolidation

The consolidated financial statements include the accounts of Franklin Financial Services Corporation (the Corporation), and its wholly owned subsidiaries, Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc. Farmers and Merchants Trust Company of Chambersburg is a commercial bank that has one wholly owned subsidiary, Franklin Financial Properties Corp. Franklin Financial Properties Corp. holds real estate assets that are leased by the Bank. Franklin Future Fund Inc. is a non-bank investment company. The activities of the non-bank subsidiary are not significant to the consolidated totals. All significant intercompany transactions and account balances have been eliminated.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations, and cash flows as of June 30, 2024, and for all other periods presented have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2023 Annual Report on Form 10-K. The consolidated results of operations for the three and six month period ended June 30, 2024 are not necessarily indicative of the operating results for the full year. Management has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

The consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and cash items with original maturities less than 90 days.

Earnings Per Share

Earnings per share are computed based on the weighted average number of shares outstanding during each period end. A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(Dollars and shares in thousands, except per share data)	2024		2023		2024		2023
Weighted average shares outstanding (basic)		4,555		4,380		4,465		4,388
Impact of common stock equivalents		7		8		8		13
Weighted average shares outstanding (diluted)		4,562		4,388		4,473		4,401
Anti-dilutive options excluded from calculation		—		74		—		25
Net income	$	3,033	$	2,976	$	6,394	$	6,268
Basic earnings per share	$	0.67	$	0.68	$	1.43	$	1.43
Diluted earnings per share	$	0.66	$	0.68	$	1.43	$	1.42

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Recent Accounting Pronouncements (Policy)

6 Months Ended

Jun. 30, 2024

Recent Accounting Pronouncements [Abstract]

Recently Adopted Accounting Standards

 

Recently adopted accounting standards

ASU 2023-01, Leases (Topic 842): Common Control Arrangements
Description	This ASU requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is determined to be a lease, an entity must classify and account for the lease on the same basis as an arrangement with a related party (on the basis of legally enforceable terms and conditions).
Effective Date	January 1, 2024
Effect on the Consolidated Financial Statements	The Corporation adopted the ASU on January 1, 2024 and it did not have a material effect on the Corporation's financial statements.
ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
Description	This ASU permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.
Effective Date	January 1, 2024
Effect on the Consolidated Financial Statements	The Corporation adopted the ASU on January 1, 2024 and it did not have a material effect on the Corporation's financial statements.
Recently issued but not yet effective accounting standards
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
Description	This ASU is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation table and income taxes paid to be disaggregated by jurisdiction. It also includes certain amendments to improve the effectiveness of income tax disclosures.
Effective Date	January 1, 2025
Effect on the Consolidated Financial Statements	The ASU is not expected to have an impact on the Corporation's financial statements.
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
Description	This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.
Effective Date	Fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
Effect on the Consolidated Financial Statements	The Corporation is currently evaluating the impact the ASU will have on its consolidated financial statements.
ASU 2023-01, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative
Description	This ASU incorporates certain U.S. Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirement, and align the requirements in the Codification with the SEC's regulations.
Effective Date	The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.
Effect on the Consolidated Financial Statements	The ASU is not expected to have an impact on the Corporation's financial statements.

   

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Basis Of Presentation (Tables)

6 Months Ended

Jun. 30, 2024

Basis Of Presentation [Abstract]

Schedule Of Earnings Per Share, Basic And Diluted

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(Dollars and shares in thousands, except per share data)	2024		2023		2024		2023
Weighted average shares outstanding (basic)		4,555		4,380		4,465		4,388
Impact of common stock equivalents		7		8		8		13
Weighted average shares outstanding (diluted)		4,562		4,388		4,473		4,401
Anti-dilutive options excluded from calculation		—		74		—		25
Net income	$	3,033	$	2,976	$	6,394	$	6,268
Basic earnings per share	$	0.67	$	0.68	$	1.43	$	1.43
Diluted earnings per share	$	0.66	$	0.68	$	1.43	$	1.42

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2024

Accumulated Other Comprehensive Loss [Abstract]

Schedule Of Accumulated Other Comprehensive Income (Loss)

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Net unrealized losses on debt securities	$	(49,342)	$	(49,416)
Tax effect		10,362		10,377
Net of tax amount	$	(38,980)	$	(39,039)
Accumulated pension adjustment	$	(2,406)	$	(2,406)
Tax effect		505		505
Net of tax amount	$	(1,901)	$	(1,901)
Total accumulated other comprehensive (loss)	$	(40,881)	$	(40,940)

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Investments (Tables)

6 Months Ended

Jun. 30, 2024

Investments [Abstract]

Unrealized Gain (Loss) On Investments

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
June 30, 2024	cost		gains		losses		Value
U.S. Treasury	$	83,139	$	—	$	(10,119)	$	73,020
Municipal		158,445		—		(23,744)		134,701
Corporate		26,346		—		(2,658)		23,688
Agency mortgage & asset-backed		133,119		187		(9,523)		123,783
Non-Agency mortgage & asset-backed		102,758		34		(3,519)		99,273
Total	$	503,807	$	221	$	(49,563)	$	454,465

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2023	cost		gains		losses		value
U.S. Treasury	$	83,494	$	—	$	(9,403)	$	74,091
Municipal		161,339		—		(22,721)		138,618
Corporate		26,336		—		(3,138)		23,198
Agency mortgage & asset-backed		142,565		90		(10,064)		132,591
Non-Agency mortgage & asset-backed		108,185		48		(4,228)		104,005
Total	$	521,919	$	138	$	(49,554)	$	472,503

Amortized Cost And Fair Value Of Debt Securities, By Contractual Maturity

(Dollars in thousands)	Amortized ‎cost		Fair ‎value
Due in one year or less	$	—	$	—
Due after one year through five years		85,160		75,619
Due after five years through ten years		80,052		69,302
Due after ten years		102,718		86,488
		267,930		231,409
Mortgage & asset-backed		235,877		223,056
	$	503,807	$	454,465

Composition Of Net Realized Securities Gains (Losses)

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2024		2023		2024		2023
Proceeds	$	—	$	7,262	$	—	$	40,117
Gross gains realized	$	—	$	—	$	—	$	12
Gross losses realized		—		(517)		—		(1,131)
Net (losses) gains realized	$	—	$	(517)	$	—	$	(1,119)
Tax benefit (provision) on net (losses) gains realized	$	—	$	109	$	—	$	235

Schedule Of Unrealized Loss On Investments

	June 30, 2024
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Treasury	$	—	$	—	—	$	73,020	$	(10,119)	226	$	73,020	$	(10,119)	226
Municipal		—		—	—		134,701		(23,744)	50		134,701		(23,744)	50
Corporate		978		(5)	1		22,710		(2,653)	166		23,688		(2,658)	167
Agency mortgage & asset-backed		745		(10)	4		108,925		(9,513)	57		109,670		(9,523)	61
Non-Agency mortgage & asset-backed		38,658		(194)	19		57,302		(3,325)	28		95,960		(3,519)	47
Total temporarily impaired	$	40,381	$	(209)	24	$	396,658	$	(49,354)	527	$	437,039	$	(49,563)	551

	December 31, 2023
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Treasury	$	—	$	—	—	$	74,091	$	(9,403)	28	$	74,091	$	(9,403)	28
Municipal		—		—	—		138,618		(22,721)	168		138,618		(22,721)	168
Corporate		1,483		(167)	5		21,715		(2,971)	46		23,198		(3,138)	51
Agency mortgage & asset-backed		6,227		(186)	19		118,053		(9,878)	223		124,280		(10,064)	242
Non-Agency mortgage & asset-backed		47,928		(560)	19		50,071		(3,668)	56		97,999		(4,228)	75
Total temporarily impaired	$	55,638	$	(913)	43	$	402,548	$	(48,641)	521	$	458,186	$	(49,554)	564

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Loans (Tables)

6 Months Ended

Jun. 30, 2024

Loans [Abstract]

Schedule Of Loans Outstanding

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Residential Real Estate 1-4 Family
Consumer first liens	$	159,806	$	142,017
Commercial first lien		61,032		63,271
Total first liens		220,838		205,288
Consumer junior liens and lines of credit		70,256		68,752
Commercial junior liens and lines of credit		5,296		3,809
Total junior liens and lines of credit		75,552		72,561
Total residential real estate 1-4 family		296,390		277,849
Residential real estate - construction
Consumer		15,804		13,837
Commercial		11,466		12,063
Total residential real estate construction		27,270		25,900
Commercial real estate		743,642		703,767
Commercial		243,628		242,654
Total commercial		987,270		946,421
Consumer		7,390		6,815
		1,318,320		1,256,985
Less: Allowance for credit losses		(17,018)		(16,052)
Net Loans	$	1,301,302	$	1,240,933
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	1,829	$	1,615
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	737,601	$	699,527
Federal Reserve Bank		77,268		83,482
	$	814,869	$	783,009
Paycheck Protection Program (included in commercial loans)	$	25	$	57

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Loan Quality And Allowance For Credit Losses (Tables)

6 Months Ended

Jun. 30, 2024

Loan Quality And Allowance For Credit Losses [Abstract]

Schedule of loans by Year of origination and Internally Assigned Risk Ratings

(Dollars in thousands)													Revolving		Revolving
	Term Loans												Loans		Loans
	Amortized Cost Basis by Origination Year												Amortized		Converted
As of June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Residential real estate 1-4 family:
Commercial:
Risk rating:
Pass (1-5)	$	2,903	$	9,737	$	8,484	$	10,766	$	9,189	$	21,759	$	3,490	$	—	$	66,328
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		2,903		9,737		8,484		10,766		9,189		21,759		3,490		—		66,328
Consumer:
Performing		18,756		56,876		32,537		14,674		9,621		29,538		47,035		19,816		228,853
Nonperforming		—		—		106		280		—		436		387		—		1,209
Total Consumer		18,756		56,876		32,643		14,954		9,621		29,974		47,422		19,816		230,062
Total	$	21,659	$	66,613	$	41,127	$	25,720	$	18,810	$	51,733	$	50,912	$	19,816	$	296,390
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate construction:
Commercial:
Risk rating:
Pass (1-5)	$	1,980	$	6,128	$	1,059	$	1,071	$	184	$	1,044	$	—	$	—	$	11,466
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		1,980		6,128		1,059		1,071		184		1,044		—		—		11,466
Consumer:
Performing		4,811		10,993		—		—		—		—		—		—		15,804
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		4,811		10,993		—		—		—		—		—		—		15,804
Total	$	6,791	$	17,121	$	1,059	$	1,071	$	184	$	1,044	$	—	$	—	$	27,270
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Risk rating:
Pass (1-5)	$	31,739	$	205,456	$	105,602	$	96,075	$	34,467	$	236,387	$	9,962	$	—	$	719,688
OAEM (6)		—		2,927		1,794		1,722		6,732		1,646		594		—		15,415
Substandard (7)		—		6,004		—		—		—		2,535		—		—		8,539
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	31,739	$	214,387	$	107,396	$	97,797	$	41,199	$	240,568	$	10,556	$	—	$	743,642
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	(2)	$	—	$	—	$	(2)
Commercial:
Risk rating:
Pass (1-5)	$	8,962	$	30,446	$	30,653	$	41,822	$	20,944	$	65,039	$	43,050	$	—	$	240,916
OAEM (6)		—		12		448		1,586		14		—		240		—		2,300
Substandard (7)		—		—		215		—		1		—		196		—		412
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	8,962	$	30,458	$	31,316	$	43,408	$	20,959	$	65,039	$	43,486	$	—	$	243,628
Current period gross charge-offs	$	(7)	$	—	$	(80)	$	—	$	—	$	—	$	(62)	$	—	$	(149)
Consumer:
Performing		1,491		1,401		509		1,836		82		48		1,977		—		7,344
Nonperforming		—		23		—		—		2		—		21		—		46
Total	$	1,491	$	1,424	$	509	$	1,836	$	84	$	48	$	1,998	$	—	$	7,390
Current period gross charge-offs	$	(21)	$	—	$	(2)	$	(2)	$	(6)	$	(1)	$	(14)	$	—	$	(46)

‎

(Dollars in thousands)													Revolving		Revolving
	Term Loans												Loans		Loans
	Amortized Cost Basis by Origination Year												Amortized		Converted
As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate 1-4 family:
Commercial:
Risk rating:
Pass (1-5)	$	9,867	$	9,088	$	11,038	$	9,691	$	2,433	$	22,906	$	2,057	$	—	$	67,080
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		9,867		9,088		11,038		9,691		2,433		22,906		2,057		—		67,080
Consumer:
Performing		53,128		34,136		15,625		10,245		5,222		28,423		43,968		20,022		210,769
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		53,128		34,136		15,625		10,245		5,222		28,423		43,968		20,022		210,769
Total	$	62,995	$	43,224	$	26,663	$	19,936	$	7,655	$	51,329	$	46,025	$	20,022	$	277,849
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential real estate construction:
Commercial:
Risk rating:
Pass (1-5)	$	6,845	$	2,209	$	1,289	$	214	$	—	$	1,506	$	—	$	—	$	12,063
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		—		—		—		—		—		—		—		—
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total Commercial		6,845		2,209		1,289		214		—		1,506		—		—		12,063
Consumer:
Performing		13,837		—		—		—		—		—		—		—		13,837
Nonperforming		—		—		—		—		—		—		—		—		—
Total Consumer		13,837		—		—		—		—		—		—		—		13,837
Total	$	20,682	$	2,209	$	1,289	$	214	$	—	$	1,506	$	—	$	—	$	25,900
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Risk rating:
Pass (1-5)	$	180,052	$	110,886	$	98,540	$	34,307	$	38,603	$	214,179	$	10,567	$	—	$	687,134
OAEM (6)		2,955		1,350		1,000		6,823		—		2,182		139		—		14,449
Substandard (7)		—		—		—		—		—		2,134		50		—		2,184
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	183,007	$	112,236	$	99,540	$	41,130	$	38,603	$	218,495	$	10,756	$	—	$	703,767
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial:
Risk rating:
Pass (1-5)	$	34,851	$	33,983	$	45,754	$	22,847	$	3,579	$	64,542	$	36,508	$	—	$	242,064
OAEM (6)		—		—		—		—		—		—		—		—		—
Substandard (7)		—		317		—		—		—		—		273		—		590
Doubtful (8)		—		—		—		—		—		—		—		—		—
Total	$	34,851	$	34,300	$	45,754	$	22,847	$	3,579	$	64,542	$	36,781	$	—	$	242,654
Current period gross charge-offs	$	(125)	$	—	$	(130)	$	—	$	—	$	—	$	(50)	$	—	$	(305)
Consumer:
Performing		1,863		669		1,985		148		80		5		2,060		—		6,810
Nonperforming		—		—		—		—		—		—		5		—		5
Total	$	1,863	$	669	$	1,985	$	148	$	80	$	5	$	2,065	$	—	$	6,815
Current period gross charge-offs	$	(63)	$	—	$	(10)	$	(2)	$	(6)	$	—	$	(36)	$	—	$	(117)

Schedule of nonaccrual loans and loans past due over 90 days and still on accrual by class of loans

	June 30, 2024						December 31, 2023
(Dollars in thousands)	Nonaccrual and Loans Past Due Over 90 Days+						Nonaccrual and Loans Past Due Over 90 Days+
					Loans Past Due						Loans Past Due
	Nonaccrual		Nonaccrual		Over 90 Days		Nonaccrual		Nonaccrual		Over 90 Days
	Without ACL		With ACL		Still Accruing		Without ACL		With ACL		Still Accruing
June 30, 2024
Residential Real Estate 1-4 Family
First liens	$	—	$	—	$	41	$	—	$	—	$	—
Junior liens and lines of credit		—		—		30		—		—		—
Total		—		—		71		—		—		—
Residential real estate - construction		—		—		—		—		—		—
Commercial real estate		407		—		—		—		—		—
Commercial		316		—		88		147		—		—
Consumer		—		—		6		—		—		5
Total	$	723	$	—	$	165	$	147	$	—	$	5

Aging Of Payments Of The Loan Portfolio

(Dollars in thousands)	Loans Past Due						Total				Total
	30-59 Days		60-89 Days		90 Days+		Past Due		Current		Loans
June 30, 2024
Residential Real Estate 1-4 Family
First liens	$	—	$	799	$	41	$	840	$	219,998	$	220,838
Junior liens and lines of credit		339		—		30		369		75,183		75,552
Total		339		799		71		1,209		295,181		296,390
Residential real estate - construction		—		—		—		—		27,270		27,270
Commercial real estate		356		854		407		1,617		742,025		743,642
Commercial		193		—		404		597		243,031		243,628
Consumer		37		3		6		46		7,344		7,390
Total	$	925	$	1,656	$	888	$	3,469	$	1,314,851	$	1,318,320

	Loans Past Due						Total				Total
	30-59 Days		60-89 Days		90 Days+		Past Due		Current		Loans
December 31, 2023
Residential Real Estate 1-4 Family
First liens	$	62	$	394	$	—	$	456	$	204,832	$	205,288
Junior liens and lines of credit		239		228		—		467		72,094		72,561
Total		301		622		—		923		276,926		277,849
Residential real estate - construction		—		—		—		—		25,900		25,900
Commercial real estate		3,232		—		—		3,232		700,535		703,767
Commercial		542		112		147		801		241,853		242,654
Consumer		21		12		5		38		6,777		6,815
Total	$	4,096	$	746	$	152	$	4,994	$	1,251,991	$	1,256,985

Allowance for Credit Losses (ACL), By Loan Segment

	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total
ACL at March 31, 2024	$	1,308	$	415	$	337	$	11,057	$	3,324	$	92	$	—	$	16,533
Charge-offs		—		—		—		—		(83)		(18)		—		(101)
Recoveries		—		—		3		—		20		3		—		26
Provision		76		14		(22)		366		103		23		—		560
ACL at June 30, 2024	$	1,384	$	429	$	318	$	11,423	$	3,364	$	100	$	—	$	17,018
ACL at December 31, 2023	$	1,296	$	419	$	296	$	10,657	$	3,290	$	94	$	—	$	16,052
Charge-offs		—		—		—		(2)		(149)		(46)		—		(197)
Recoveries		—		—		7		—		80		26		—		113
Provision		88		10		15		768		143		26		—		1,050
ACL at June 30, 2024	$	1,384	$	429	$	318	$	11,423	$	3,364	$	100	$	—	$	17,018
ACL at March 31, 2023	$	1,624	$	690	$	190	$	8,236	$	3,275	$	94	$	—	$	14,109
Charge-offs		—		—		—		—		(1)		(42)		—		(43)
Recoveries		—		—		3		—		12		10		—		25
Provision		96		(7)		(16)		847		(432)		36		—		524
ACL at June 30, 2023	$	1,720	$	683	$	177	$	9,083	$	2,854	$	98	$	—	$	14,615
ACL at December 31, 2022	$	459	$	234	$	343	$	7,493	$	4,846	$	133	$	667	$	14,175
Impact of adopting ASU 2016-13		1,096		493		(95)		584		(1,907)		(40)		(667)		(536)
Charge-offs		—		—		—		—		(87)		(76)		—		(163)
Recoveries		2		—		42		—		79		25		—		148
Provision		163		(44)		(113)		1,006		(77)		56		—		991
ACL at June 30, 2023	$	1,720	$	683	$	177	$	9,083	$	2,854	$	98	$	—	$	14,615

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Leases (Tables)

6 Months Ended

Jun. 30, 2024

Leases [Abstract]

Schedule Of Lease Costs

	Three Months Ended ‎June 30,				Six Months Ended ‎June 30,
(Dollars in thousands)	2024		2023		2024		2023
Operating lease cost	$	195	$	212	$	389	$	429
Short-term lease cost		1		4		2		8
Variable lease cost		37		37		87		74
Total lease cost	$	233	$	253	$	478	$	511

Schedule Of Measurement Of Lease Liabilities

	Six Months Ended ‎June 30,
(Dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	379	$	413
Weighted-average remaining lease term (years)		11.7		11.9
Weighted-average discount rate		3.43%		3.37%

Schedule Of Future Minimum Payments Operating Leases

(Dollars in thousands)
2024	$	354
2025		666
2026		564
2027		421
2028		393
2029 and beyond		3,205
Undiscounted cash flow		5,603
Imputed Interest		(1,076)
Total lease liability	$	4,527

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Derivatives (Tables)

6 Months Ended

Jun. 30, 2024

Derivatives [Abstract]

Schedule Of Fair Value Of Derivative Instruments

		Fair Value of Derivative Instruments
		Derivative Liabilities
(Dollars in thousands)		June 30, 2024					December 31, 2023
		Notional amount	Balance Sheet Location		Fair Value		Notional amount	Balance Sheet Location		Fair Value
Derivatives not designated as hedging instruments
Other Contracts	$	6,167	Other Liabilities	$	—	$	6,268	Other Liabilities	$	2
Total derivatives not designated as hedging instruments				$	—				$	2

Schedule Of Effect Of Derivative Instruments On The Statement Of Income

Effect of Derivatives as Hedging Instruments on the Income Statement
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivatives
(Dollars in thousands)		Three Months Ended				Six Months Ended
		June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Other Contracts	Other income	$	-	$	2	$	1	$	-

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Pension (Tables)

6 Months Ended

Jun. 30, 2024

Pension [Abstract]

Schedule Of Net Periodic Pension Costs

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2024		2023		2024		2023
Components of net periodic cost:
Service cost	$	56	$	53	$	103	$	108
Interest cost		193		202		381		403
Expected return on plan assets		(215)		(231)		(432)		(462)
Recognized net actuarial loss		15		—		15		—
Total pension expense	$	49	$	24	$	67	$	49

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Fair Value Measurements And Fair Values Of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2024

Fair Value Measurements And Fair Values Of Financial Instruments [Abstract]

Schedule Of Fair Value, Assets And Liabilities Measured On Recurring Basis

(Dollars in thousands)	Fair Value at June 30, 2024
Asset Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	352	$	—	$	—	$	352
Available for sale:
U.S. Treasury		73,020		—		—		73,020
Municipal		—		134,701		—		134,701
Corporate		—		23,688		—		23,688
Agency mortgage & asset-backed		—		123,783		—		123,783
Non-Agency mortgage & asset-backed		—		99,273		—		99,273
Total assets	$	73,372	$	381,445	$	—	$	454,817

(Dollars in thousands)	Fair Value at December 31, 2023
Asset Description	Level 1		Level 2		Level 3		Total
Equity securities, at fair value	$	427	$	—	$	—	$	427
Available for sale:
U.S. Treasury		74,091		—		—		74,091
Municipal		—		138,618		—		138,618
Corporate		—		23,198		—		23,198
Agency mortgage and asset-backed		—		132,591		—		132,591
Non-Agency mortgage and asset-backed		—		104,005		—		104,005
Total assets	$	74,518	$	398,412	$	—	$	472,930

Fair Value, By Balance Sheet Grouping

	June 30, 2024
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	179,727	$	179,727	$	179,727	$	—	$	—
Long-term interest-earning deposits in other banks		1,994		1,994		1,994		—		—
Loans held for sale		932		947		—		947		—
Net loans		1,301,302		1,259,496		—		—		1,259,496
Accrued interest receivable		7,515		7,515		—		—		7,515
Financial liabilities:
Deposits	$	1,586,458	$	1,585,810	$	—	$	1,585,810	$	—
Federal Reserve Bank borrowings		40,000		39,891				39,891
FHLB advances		240,000		239,310		—		239,310		—
Subordinate notes		19,680		17,474		—		17,474		—
Accrued interest payable		4,735		4,735		—		4,735		—
	December 31, 2023
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets, carried at cost:
Cash and cash equivalents	$	23,140	$	23,140	$	23,140	$	—	$	—
Long-term interest-earning deposits in other banks		6,229		6,229		6,229		—		—
Loans held for sale		213		213		—		213		—
Net loans		1,240,933		1,207,403		—		—		1,207,403
Accrued interest receivable		7,506		7,506		—		—		7,506
Financial liabilities:
Deposits	$	1,537,978	$	1,537,480	$	—	$	1,537,480	$	—
Federal Reserve Bank Borrowings		90,000		89,783				89,783
FHLB Advances		40,000		40,110				40,110
Subordinate notes		19,661		18,303		—		18,303		—
Accrued interest payable		3,856		3,856		—		3,856		—

 

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Deposits (Tables)

6 Months Ended

Jun. 30, 2024

Deposits [Abstract]

Schedule Of Deposits

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Noninterest-bearing checking	$	282,964	$	273,050
Interest-bearing checking		401,174		454,517
Money management		616,928		572,058
Savings		101,712		105,907
Total interest-bearing checking and savings		1,119,814		1,132,482
Time deposits		183,680		132,446
Total deposits	$	1,586,458	$	1,537,978
Overdrawn deposit accounts reclassified as loans	$	660	$	160

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Capital Ratios (Tables)

6 Months Ended

Jun. 30, 2024

Capital Ratios [Abstract]

Schedule Of The Total Risk-based, Tier 1 Risk-based And Tier 1 Leverage Requirements

			Regulatory Ratios
			Adequately	Well
	June 30,	December 31,	Capitalized	Capitalized
(Dollars in thousands)	2024	2023	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	12.01%	11.82%	N/A	N/A
Farmers & Merchants Trust Company	12.27%	12.38%	4.50%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	12.01%	11.82%	N/A	N/A
Farmers & Merchants Trust Company	12.27%	12.38%	6.00%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	14.66%	14.45%	N/A	N/A
Farmers & Merchants Trust Company	13.52%	13.63%	8.00%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	8.38%	9.01%	N/A	N/A
Farmers & Merchants Trust Company	8.56%	9.44%	4.00%	5.00%

(1)Common equity Tier 1 capital / total risk-weighted assets

(2)Tier 1 capital / total risk-weighted assets

(3)Total risk-based capital / total risk-weighted assets

(4)Tier 1 capital / average quarterly assets

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2024

Revenue Recognition [Abstract]

Schedule of Wealth Management Fees

	For the Three Months Ended				For the Six Months Ended
(Dollars in thousands)	June 30,				June 30,
Wealth Management Fees	2024		2023		2024		2023
Asset Management Fees	$	2,051	$	1,844	$	3,884	$	3,481
Estate Management Fees		128		61		215		152
Commissions		63		54		170		160
Total	$	2,242	$	1,959	$	4,269	$	3,793

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Commitments And Contingencies (Tables)

6 Months Ended

Jun. 30, 2024

Commitments And Contingencies [Abstract]

Outstanding Commitments

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Financial instruments whose contract amounts represent credit risk
Commercial commitments to extend credit	$	320,735	$	325,982
Consumer commitments to extend credit (secured)		126,387		112,157
Consumer commitments to extend credit (unsecured)		6,366		5,964
	$	453,488	$	444,103
Standby letters of credit	$	21,538	$	19,851
ACL - Unfunded Commitments (1)	$	1,970	$	2,022
(1) Reported in Other Liabilities on the Consolidated Balance Sheets

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Basis Of Presentation (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Basis Of Presentation [Abstract]
Weighted average shares outstanding (basic)	4,555	4,380	4,465	4,388
Impact of common stock equivalents	7	8	8	13
Weighted average shares outstanding (diluted)	4,562	4,388	4,473	4,401
Anti-dilutive options excluded from calculation		74		25
Net income	$ 3,033	$ 2,976	$ 6,394	$ 6,268
Basic earnings per share	$ 0.67	$ 0.68	$ 1.43	$ 1.43
Diluted earnings per share	$ 0.66	$ 0.68	$ 1.43	$ 1.42

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Accumulated Other Comprehensive Loss (Schedule Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total accumulated other comprehensive (loss)	$ (40,881)	$ (40,940)
Accumulated Other Comprehensive Loss, Debt Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Accumulated other comprehensive loss, Before tax	(49,342)	(49,416)
Accumulated other comprehensive loss, Tax effect	10,362	10,377
Total accumulated other comprehensive (loss)	(38,980)	(39,039)
Accumulated Other Comprehensive Loss, Pension [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Accumulated other comprehensive loss, Before tax	(2,406)	(2,406)
Accumulated other comprehensive loss, Tax effect	505	505
Total accumulated other comprehensive (loss)	$ (1,901)	$ (1,901)

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Investments (Narrative) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2024 USD ($) security item	Dec. 31, 2023 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Fair value	$ 454,465	$ 472,503
Number of investments in a single issuer exceeds 10% of shareholders' equity | item	0
Percent of shareholders equity benchmark for investments in a single issuer	10.00%
Number of debt securities | security	551	564
Fair value of temporarily impaired securities	$ 437,039	$ 458,186
Unrealized Losses	49,563	49,554
Equity securities	352	427
Corporate [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	$ 23,688	$ 23,198
Number of debt securities | security	167	51
Fair value of temporarily impaired securities	$ 23,688	$ 23,198
Unrealized Losses	2,658	3,138
Public Funds And Trust Deposits [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	$ 231,000	$ 207,400
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of equity investments | item	1

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Investments (Unrealized Gain (Loss) On Investments) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 503,807	$ 521,919
Gross unrealized gains	221	138
Gross unrealized losses	(49,563)	(49,554)
Fair value	454,465	472,503
U.S Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	83,139	83,494
Gross unrealized losses	(10,119)	(9,403)
Fair value	73,020	74,091
Municipal [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	158,445	161,339
Gross unrealized losses	(23,744)	(22,721)
Fair value	134,701	138,618
Corporate [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	26,346	26,336
Gross unrealized losses	(2,658)	(3,138)
Fair value	23,688	23,198
Agency Mortgage & Asset-Backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	133,119	142,565
Gross unrealized gains	187	90
Gross unrealized losses	(9,523)	(10,064)
Fair value	123,783	132,591
Non-Agency Mortgage & Asset-Backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	102,758	108,185
Gross unrealized gains	34	48
Gross unrealized losses	(3,519)	(4,228)
Fair value	$ 99,273	$ 104,005

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Investments (Amortized Cost And Fair Value Of Debt Securities, By Contractual Maturity) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 503,807	$ 521,919
Fair Value	454,465	$ 472,503
Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Due after one year through five years, Amortized cost	85,160
Due after five years through ten years, Amortized cost	80,052
Due after ten years, Amortized cost	102,718
Amortized cost	267,930
Due after one year through five years, Fair value	75,619
Due after five years through ten years, Fair value	69,302
Due after ten years, Fair value	86,488
Fair Value	231,409
Mortgage And Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Mortgage-backed securities, Amortized cost	235,877
Mortgage-backed securities, Fair value	$ 223,056

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Investments (Composition Of Net Realized Securities Gains (Losses)) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023
Investments [Abstract]
Proceeds	$ 7,262	$ 40,117
Gross gains realized		12
Gross losses realized	(517)	(1,131)
Net (losses) gains realized	(517)	(1,119)
Tax benefit (provision) on net (losses) gains realized	$ 109	$ 235

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Investments (Schedule Of Unrealized Loss On Investments) (Details) $ in Thousands	Jun. 30, 2024 USD ($) security	Dec. 31, 2023 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 40,381	$ 55,638
Less than 12 months: Unrealized Losses	$ (209)	$ (913)
Less than 12 months: Count | security	24	43
12 months or more: Fair Value	$ 396,658	$ 402,548
12 months or more: Unrealized Losses	$ (49,354)	$ (48,641)
12 months or more: Count | security	527	521
Fair Value	$ 437,039	$ 458,186
Unrealized Losses	$ (49,563)	$ (49,554)
Count | security	551	564
U.S Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
12 months or more: Fair Value	$ 73,020	$ 74,091
12 months or more: Unrealized Losses	$ (10,119)	$ (9,403)
12 months or more: Count | security	226	28
Fair Value	$ 73,020	$ 74,091
Unrealized Losses	$ (10,119)	$ (9,403)
Count | security	226	28
Municipal [Member]
Schedule of Available-for-sale Securities [Line Items]
12 months or more: Fair Value	$ 134,701	$ 138,618
12 months or more: Unrealized Losses	$ (23,744)	$ (22,721)
12 months or more: Count | security	50	168
Fair Value	$ 134,701	$ 138,618
Unrealized Losses	$ (23,744)	$ (22,721)
Count | security	50	168
Corporate [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 978	$ 1,483
Less than 12 months: Unrealized Losses	$ (5)	$ (167)
Less than 12 months: Count | security	1	5
12 months or more: Fair Value	$ 22,710	$ 21,715
12 months or more: Unrealized Losses	$ (2,653)	$ (2,971)
12 months or more: Count | security	166	46
Fair Value	$ 23,688	$ 23,198
Unrealized Losses	$ (2,658)	$ (3,138)
Count | security	167	51
Agency Mortgage & Asset-Backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 745	$ 6,227
Less than 12 months: Unrealized Losses	$ (10)	$ (186)
Less than 12 months: Count | security	4	19
12 months or more: Fair Value	$ 108,925	$ 118,053
12 months or more: Unrealized Losses	$ (9,513)	$ (9,878)
12 months or more: Count | security	57	223
Fair Value	$ 109,670	$ 124,280
Unrealized Losses	$ (9,523)	$ (10,064)
Count | security	61	242
Non-Agency Mortgage & Asset-Backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 38,658	$ 47,928
Less than 12 months: Unrealized Losses	$ (194)	$ (560)
Less than 12 months: Count | security	19	19
12 months or more: Fair Value	$ 57,302	$ 50,071
12 months or more: Unrealized Losses	$ (3,325)	$ (3,668)
12 months or more: Count | security	28	56
Fair Value	$ 95,960	$ 97,999
Unrealized Losses	$ (3,519)	$ (4,228)
Count | security	47	75

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Loans (Narrative) (Details)	6 Months Ended
	Jun. 30, 2024
Financing Receivable, Allowance for Credit Losses [Line Items]
PPP Program, guarantee percentage	100.00%
PPP program, interest rate	1.00%
Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
PPP Program, maturity period	2 years
Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
PPP Program, maturity period	5 years

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Loans (Schedule Of Loans Outstanding) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Mar. 31, 2024	Dec. 31, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 1,318,320		$ 1,256,985
Less: Allowance for credit losses	(17,018)	$ (16,533)	(16,052)	$ (14,615)	$ (14,109)	$ (14,175)
Net Loans	1,301,302		1,240,933
Net unamortized deferred loan costs	1,829		1,615
Net loans	814,869		783,009
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	296,390		277,849
Residential Real Estate - Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	27,270		25,900
Less: Allowance for credit losses	(318)	(337)	(296)	(177)	(190)	(343)
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	743,642		703,767
Less: Allowance for credit losses	(11,423)	(11,057)	(10,657)	(9,083)	(8,236)	(7,493)
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	243,628		242,654
Less: Allowance for credit losses	(3,364)	(3,324)	(3,290)	(2,854)	(3,275)	(4,846)
Total Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	987,270		946,421
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	7,390		6,815
Less: Allowance for credit losses	(100)	(92)	(94)	(98)	(94)	(133)
Consumer First Liens [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	159,806		142,017
Consumer Junior Liens And Lines Of Credit [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	70,256		68,752
Consumer [Member] | Residential Real Estate - Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	15,804		13,837
Commercial First Lien [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	61,032		63,271
Commercial Junior Liens And Lines Of Credit [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	5,296		3,809
Commercial [Member] | Residential Real Estate - Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	11,466		12,063
First Liens [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	220,838		205,288
Less: Allowance for credit losses	(1,384)	$ (1,308)	(1,296)	$ (1,720)	$ (1,624)	$ (459)
Junior Lines And Lines Of Credit [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	75,552		72,561
PPP [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	25		57
FHLB [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net loans	737,601		699,527
Federal Reserve Bank Borrowings [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net loans	$ 77,268		$ 83,482

XML

Loan Quality And Allowance for Credit Losses (Narrative) (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2024	Dec. 31, 2023
Financing Receivable, Allowance for Credit Losses [Line Items]
Loan deferrals or modifications	$ 0	$ 0
Loans modified	0	0
Collateral Dependent [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans		$ 0
Collateral Dependent [Member] | Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	407,000
Collateral Dependent [Member] | Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans	$ 316,000

XML

Loan Quality And Allowance for Credit Losses (Schedule Of Loans By Year Of Origination And Internally Assigned Risk Ratings) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Loans	$ 1,318,320		$ 1,318,320		$ 1,256,985
Current period gross charge-offs, Total	(101)	$ (43)	(197)	$ (163)
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	21,659		21,659		62,995
Loans, One Year Before Current Fiscal Year	66,613		66,613		43,224
Loans, Two Years Before Current Fiscal Year	41,127		41,127		26,663
Loans, Three Years Before Current Fiscal Year	25,720		25,720		19,936
Loans, Four Years Before Current Fiscal Year	18,810		18,810		7,655
Prior	51,733		51,733		51,329
Revolving Loans Amortized Cost Basis	50,912		50,912		46,025
Revolving Loans Converted to Term	19,816		19,816		20,022
Total Loans	296,390		296,390		277,849
Residential Real Estate [Member] | First Liens [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Loans	220,838		220,838		205,288
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Loans	75,552		75,552		72,561
Residential Real Estate [Member] | Residential Real Estate Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	2,903		2,903		9,867
Loans, One Year Before Current Fiscal Year	9,737		9,737		9,088
Loans, Two Years Before Current Fiscal Year	8,484		8,484		11,038
Loans, Three Years Before Current Fiscal Year	10,766		10,766		9,691
Loans, Four Years Before Current Fiscal Year	9,189		9,189		2,433
Prior	21,759		21,759		22,906
Revolving Loans Amortized Cost Basis	3,490		3,490		2,057
Total Loans	66,328		66,328		67,080
Residential Real Estate [Member] | Residential Real Estate Commercial [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	2,903		2,903		9,867
Loans, One Year Before Current Fiscal Year	9,737		9,737		9,088
Loans, Two Years Before Current Fiscal Year	8,484		8,484		11,038
Loans, Three Years Before Current Fiscal Year	10,766		10,766		9,691
Loans, Four Years Before Current Fiscal Year	9,189		9,189		2,433
Prior	21,759		21,759		22,906
Revolving Loans Amortized Cost Basis	3,490		3,490		2,057
Total Loans	66,328		66,328		67,080
Residential Real Estate [Member] | Residential Real Estate Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	18,756		18,756		53,128
Loans, One Year Before Current Fiscal Year	56,876		56,876		34,136
Loans, Two Years Before Current Fiscal Year	32,643		32,643		15,625
Loans, Three Years Before Current Fiscal Year	14,954		14,954		10,245
Loans, Four Years Before Current Fiscal Year	9,621		9,621		5,222
Prior	29,974		29,974		28,423
Revolving Loans Amortized Cost Basis	47,422		47,422		43,968
Revolving Loans Converted to Term	19,816		19,816		20,022
Total Loans	230,062		230,062		210,769
Residential Real Estate [Member] | Residential Real Estate Consumer [Member] | Performing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	18,756		18,756		53,128
Loans, One Year Before Current Fiscal Year	56,876		56,876		34,136
Loans, Two Years Before Current Fiscal Year	32,537		32,537		15,625
Loans, Three Years Before Current Fiscal Year	14,674		14,674		10,245
Loans, Four Years Before Current Fiscal Year	9,621		9,621		5,222
Prior	29,538		29,538		28,423
Revolving Loans Amortized Cost Basis	47,035		47,035		43,968
Revolving Loans Converted to Term	19,816		19,816		20,022
Total Loans	228,853		228,853		210,769
Residential Real Estate [Member] | Residential Real Estate Consumer [Member] | Nonperforming [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Two Years Before Current Fiscal Year	106		106
Loans, Three Years Before Current Fiscal Year	280		280
Prior	436		436
Revolving Loans Amortized Cost Basis	387		387
Total Loans	1,209		1,209
Residential Real Estate - Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	6,791		6,791		20,682
Loans, One Year Before Current Fiscal Year	17,121		17,121		2,209
Loans, Two Years Before Current Fiscal Year	1,059		1,059		1,289
Loans, Three Years Before Current Fiscal Year	1,071		1,071		214
Loans, Four Years Before Current Fiscal Year	184		184
Prior	1,044		1,044		1,506
Total Loans	27,270		27,270		25,900
Residential Real Estate - Construction [Member] | Residential Real Estate Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	1,980		1,980		6,845
Loans, One Year Before Current Fiscal Year	6,128		6,128		2,209
Loans, Two Years Before Current Fiscal Year	1,059		1,059		1,289
Loans, Three Years Before Current Fiscal Year	1,071		1,071		214
Loans, Four Years Before Current Fiscal Year	184		184
Prior	1,044		1,044		1,506
Total Loans	11,466		11,466		12,063
Residential Real Estate - Construction [Member] | Residential Real Estate Commercial [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	1,980		1,980		6,845
Loans, One Year Before Current Fiscal Year	6,128		6,128		2,209
Loans, Two Years Before Current Fiscal Year	1,059		1,059		1,289
Loans, Three Years Before Current Fiscal Year	1,071		1,071		214
Loans, Four Years Before Current Fiscal Year	184		184
Prior	1,044		1,044		1,506
Total Loans	11,466		11,466		12,063
Residential Real Estate - Construction [Member] | Residential Real Estate Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	4,811		4,811		13,837
Loans, One Year Before Current Fiscal Year	10,993		10,993
Total Loans	15,804		15,804		13,837
Residential Real Estate - Construction [Member] | Residential Real Estate Consumer [Member] | Performing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	4,811		4,811		13,837
Loans, One Year Before Current Fiscal Year	10,993		10,993
Total Loans	15,804		15,804		13,837
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	31,739		31,739		183,007
Loans, One Year Before Current Fiscal Year	214,387		214,387		112,236
Loans, Two Years Before Current Fiscal Year	107,396		107,396		99,540
Loans, Three Years Before Current Fiscal Year	97,797		97,797		41,130
Loans, Four Years Before Current Fiscal Year	41,199		41,199		38,603
Prior	240,568		240,568		218,495
Revolving Loans Amortized Cost Basis	10,556		10,556		10,756
Total Loans	743,642		743,642		703,767
Loans Amortized Prior			(2)
Current period gross charge-offs, Total			(2)
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	31,739		31,739		180,052
Loans, One Year Before Current Fiscal Year	205,456		205,456		110,886
Loans, Two Years Before Current Fiscal Year	105,602		105,602		98,540
Loans, Three Years Before Current Fiscal Year	96,075		96,075		34,307
Loans, Four Years Before Current Fiscal Year	34,467		34,467		38,603
Prior	236,387		236,387		214,179
Revolving Loans Amortized Cost Basis	9,962		9,962		10,567
Total Loans	719,688		719,688		687,134
Commercial Real Estate [Member] | OAEM [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year					2,955
Loans, One Year Before Current Fiscal Year	2,927		2,927		1,350
Loans, Two Years Before Current Fiscal Year	1,794		1,794		1,000
Loans, Three Years Before Current Fiscal Year	1,722		1,722		6,823
Loans, Four Years Before Current Fiscal Year	6,732		6,732
Prior	1,646		1,646		2,182
Revolving Loans Amortized Cost Basis	594		594		139
Total Loans	15,415		15,415		14,449
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, One Year Before Current Fiscal Year	6,004		6,004
Prior	2,535		2,535		2,134
Revolving Loans Amortized Cost Basis					50
Total Loans	8,539		8,539		2,184
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	8,962		8,962		34,851
Loans, One Year Before Current Fiscal Year	30,458		30,458		34,300
Loans, Two Years Before Current Fiscal Year	31,316		31,316		45,754
Loans, Three Years Before Current Fiscal Year	43,408		43,408		22,847
Loans, Four Years Before Current Fiscal Year	20,959		20,959		3,579
Prior	65,039		65,039		64,542
Revolving Loans Amortized Cost Basis	43,486		43,486		36,781
Total Loans	243,628		243,628		242,654
Current period gross charge-offs, 2024			(7)
Current period gross charge-offs, 2023					(125)
Current period gross charge-offs, 2022			(80)
Current period gross charge-offs, 2021					(130)
Current period gross charge-offs, Revolving loans amortized cost basis			(62)		(50)
Current period gross charge-offs, Total	(83)	(1)	(149)	(87)	(305)
Commercial [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	8,962		8,962		34,851
Loans, One Year Before Current Fiscal Year	30,446		30,446		33,983
Loans, Two Years Before Current Fiscal Year	30,653		30,653		45,754
Loans, Three Years Before Current Fiscal Year	41,822		41,822		22,847
Loans, Four Years Before Current Fiscal Year	20,944		20,944		3,579
Prior	65,039		65,039		64,542
Revolving Loans Amortized Cost Basis	43,050		43,050		36,508
Total Loans	240,916		240,916		242,064
Commercial [Member] | OAEM [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, One Year Before Current Fiscal Year	12		12
Loans, Two Years Before Current Fiscal Year	448		448
Loans, Three Years Before Current Fiscal Year	1,586		1,586
Loans, Four Years Before Current Fiscal Year	14		14
Revolving Loans Amortized Cost Basis	240		240
Total Loans	2,300		2,300
Commercial [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, One Year Before Current Fiscal Year					317
Loans, Two Years Before Current Fiscal Year	215		215
Loans, Four Years Before Current Fiscal Year	1		1
Revolving Loans Amortized Cost Basis	196		196		273
Total Loans	412		412		590
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	1,491		1,491		1,863
Loans, One Year Before Current Fiscal Year	1,424		1,424		669
Loans, Two Years Before Current Fiscal Year	509		509		1,985
Loans, Three Years Before Current Fiscal Year	1,836		1,836		148
Loans, Four Years Before Current Fiscal Year	84		84		80
Prior	48		48		5
Revolving Loans Amortized Cost Basis	1,998		1,998		2,065
Total Loans	7,390		7,390		6,815
Current period gross charge-offs, 2024			(21)
Current period gross charge-offs, 2023					(63)
Current period gross charge-offs, 2022			(2)
Current period gross charge-offs, 2021			(2)		(10)
Current period gross charge-offs, 2020			(6)		(2)
Current period gross charge-offs, 2019					(6)
Loans Amortized Prior			(1)
Current period gross charge-offs, Revolving loans amortized cost basis			(14)		(36)
Current period gross charge-offs, Total	(18)	$ (42)	(46)	$ (76)	(117)
Consumer [Member] | Performing [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, Current Year	1,491		1,491		1,863
Loans, One Year Before Current Fiscal Year	1,401		1,401		669
Loans, Two Years Before Current Fiscal Year	509		509		1,985
Loans, Three Years Before Current Fiscal Year	1,836		1,836		148
Loans, Four Years Before Current Fiscal Year	82		82		80
Prior	48		48		5
Revolving Loans Amortized Cost Basis	1,977		1,977		2,060
Total Loans	7,344		7,344		6,810
Consumer [Member] | Nonperforming [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans, One Year Before Current Fiscal Year	23		23
Loans, Four Years Before Current Fiscal Year	2		2
Revolving Loans Amortized Cost Basis	21		21		5
Total Loans	$ 46		$ 46		$ 5

XML

Loan Quality And Allowance For Credit Losses (Schedule Of Nonaccrual Loans And Loans Past Due Over 90 Days And Still On Accrual By Class Of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Financing Receivable, Impaired [Line Items]
Nonaccrual, without ACL	$ 723	$ 147
Loans past due 90 days or more and still accruing	165	5
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Loans past due 90 days or more and still accruing	71
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Nonaccrual, without ACL	407	147
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Nonaccrual, without ACL	316
Loans past due 90 days or more and still accruing	88
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Loans past due 90 days or more and still accruing	6	$ 5
First Liens [Member] | Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Loans past due 90 days or more and still accruing	41
Junior Liens & Lines Of Credit [Member] | Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Loans past due 90 days or more and still accruing	$ 30

XML

Loan Quality And Allowance For Credit Losses (Aging Of Payments Of The Loan Portfolio) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	$ 1,318,320	$ 1,256,985
Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	1,314,851	1,251,991
30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	925	4,096
60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	1,656	746
90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	888	152
Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	3,469	4,994
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	296,390	277,849
Residential Real Estate [Member] | Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	295,181	276,926
Residential Real Estate [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	339	301
Residential Real Estate [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	799	622
Residential Real Estate [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	71
Residential Real Estate [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	1,209	923
Residential Real Estate [Member] | First Liens [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	220,838	205,288
Residential Real Estate [Member] | First Liens [Member] | Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	219,998	204,832
Residential Real Estate [Member] | First Liens [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans		62
Residential Real Estate [Member] | First Liens [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	799	394
Residential Real Estate [Member] | First Liens [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	41
Residential Real Estate [Member] | First Liens [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	840	456
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	75,552	72,561
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	75,183	72,094
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	339	239
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans		228
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	30
Residential Real Estate [Member] | Junior Liens & Lines Of Credit [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	369	467
Residential Real Estate - Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	27,270	25,900
Residential Real Estate - Construction [Member] | Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	27,270	25,900
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	743,642	703,767
Commercial Real Estate [Member] | Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	742,025	700,535
Commercial Real Estate [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	356	3,232
Commercial Real Estate [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	854
Commercial Real Estate [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	407
Commercial Real Estate [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	1,617	3,232
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	243,628	242,654
Commercial [Member] | Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	243,031	241,853
Commercial [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	193	542
Commercial [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans		112
Commercial [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	404	147
Commercial [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	597	801
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	7,390	6,815
Consumer [Member] | Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	7,344	6,777
Consumer [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	37	21
Consumer [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	3	12
Consumer [Member] | 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	6	5
Consumer [Member] | Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	$ 46	$ 38

XML

Loan Quality And Allowance For Credit Losses (Allowance For Credit Losses (ACL), By Loan Segment) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	$ 16,533	$ 14,109	$ 16,052	$ 14,175	$ 14,175
Charge-offs	(101)	(43)	(197)	(163)
Recoveries	26	25	113	148
Provision	560	524	1,050	991
Allowance, Ending Balance	17,018	14,615	17,018	14,615	16,052
Total Loans	1,318,320		1,318,320		1,256,985
Total Allowance	17,018	14,615	17,018	14,615	16,052
Impact of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				(536)	(536)
Total Allowance
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Loans	296,390		296,390		277,849
Residential Real Estate - Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	337	190	296	343	343
Recoveries	3	3	7	42
Provision	(22)	(16)	15	(113)
Allowance, Ending Balance	318	177	318	177	296
Total Loans	27,270		27,270		25,900
Total Allowance	318	177	318	177	296
Residential Real Estate - Construction [Member] | Impact of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				(95)	(95)
Total Allowance
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	11,057	8,236	10,657	7,493	7,493
Charge-offs			(2)
Provision	366	847	768	1,006
Allowance, Ending Balance	11,423	9,083	11,423	9,083	10,657
Total Loans	743,642		743,642		703,767
Total Allowance	11,423	9,083	11,423	9,083	10,657
Commercial Real Estate [Member] | Impact of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				584	584
Total Allowance
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	3,324	3,275	3,290	4,846	4,846
Charge-offs	(83)	(1)	(149)	(87)	(305)
Recoveries	20	12	80	79
Provision	103	(432)	143	(77)
Allowance, Ending Balance	3,364	2,854	3,364	2,854	3,290
Total Loans	243,628		243,628		242,654
Total Allowance	3,364	2,854	3,364	2,854	3,290
Commercial [Member] | Impact of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				(1,907)	(1,907)
Total Allowance
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	92	94	94	133	133
Charge-offs	(18)	(42)	(46)	(76)	(117)
Recoveries	3	10	26	25
Provision	23	36	26	56
Allowance, Ending Balance	100	98	100	98	94
Total Loans	7,390		7,390		6,815
Total Allowance	100	98	100	98	94
Consumer [Member] | Impact of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				(40)	(40)
Total Allowance
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				667	667
Total Allowance
Unallocated [Member] | Impact of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				(667)	(667)
Total Allowance
First Liens [Member] | Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	1,308	1,624	1,296	459	459
Recoveries				2
Provision	76	96	88	163
Allowance, Ending Balance	1,384	1,720	1,384	1,720	1,296
Total Loans	220,838		220,838		205,288
Total Allowance	1,384	1,720	1,384	1,720	1,296
First Liens [Member] | Residential Real Estate [Member] | Impact of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				1,096	1,096
Total Allowance
Junior Liens & Lines Of Credit [Member] | Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	415	690	419	234	234
Provision	14	(7)	10	(44)
Allowance, Ending Balance	429	683	429	683	419
Total Loans	75,552		75,552		72,561
Total Allowance	$ 429	$ 683	$ 429	683	419
Junior Liens & Lines Of Credit [Member] | Residential Real Estate [Member] | Impact of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance				$ 493	$ 493
Total Allowance

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Leases (Narrative) (Details)	6 Months Ended
	Jun. 30, 2024 item
Leases [Abstract]
Number of leases with a variable payment based on an index	1
Lessee, Operating Lease, Option to Extend	may contain renewal options after the initial term
Lessee, Operating Lease, Restriction or Covenant	None of the leases contain any restrictive covenants

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Leases (Schedule Of Lease Costs) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Leases [Abstract]
Operating lease cost	$ 195	$ 212	$ 389	$ 429
Short-term lease cost	1	4	2	8
Variable lease cost	37	37	87	74
Total lease cost	$ 233	$ 253	$ 478	$ 511

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Leases (Schedule Of Measurement Of Lease Liabilities) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Leases [Abstract]
Operating cash flows from operating leases	$ 379	$ 413
Weighted-average remaining lease term (years)	11 years 8 months 12 days	11 years 10 months 24 days
Weighted-average discount rate	3.43%	3.37%

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Leases (Schedule Of Future Minimum Payments Operating Leases) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Leases [Abstract]
2024	$ 354
2025	666
2026	564
2027	421
2028	393
2029 and beyond	3,205
Undiscounted cash flow	5,603
Imputed Interest	(1,076)
Total lease liability	$ 4,527	$ 4,816

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Other Real Estate Owned (Narrative) (Details) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Other Real Estate Owned [Abstract]
Other real estate owned	$ 0	$ 0

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Derivatives (Narrative) (Details) $ in Thousands	Jun. 30, 2024 USD ($)
Derivatives [Abstract]
Derivative, net	$ 0

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Derivatives (Schedule Of Fair Value Of Derivative Instruments) (Details) - Not Designated as Hedging Instrument [Member] - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Derivatives, Fair Value [Line Items]
Fair Value		$ 2
Other Contracts [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	$ 6,167	6,268
Fair Value		$ 2

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Derivatives (Schedule Of Effect Of Derivative Instruments On The Statement Of Income) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2024
Other Contracts [Member] | Other Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives	$ 2	$ 1

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Pension (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Pension [Abstract]
Service cost	$ 56	$ 53	$ 103	$ 108
Interest cost	193	202	381	403
Expected return on plan assets	(215)	(231)	(432)	(462)
Recognized net actuarial loss	15		15
Net periodic pension cost	$ 49	$ 24	$ 67	$ 49

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Fair Value Measurements And Fair Values Of Financial Instruments (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Jun. 30, 2024	Dec. 31, 2023
Fair Value Measurements And Fair Values Of Financial Instruments [Abstract]
Derivative liabilities		$ 0	$ 2,000
Assets, Fair Value Disclosure		0
Total liabilities		$ 0
Partial charge-offs on impaired loans	$ 0
Derivative Liability, Statement of Financial Position [Extensible Enumeration]		Other Liabilities	Other Liabilities

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Fair Value Measurements And Fair Values Of Financial Instruments (Schedule Of Fair Value, Assets And Liabilities Measured On Recurring Basis) (Details) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, at fair value	$ 352,000	$ 427,000
Available for sale	454,465,000	472,503,000
Total assets	0
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	454,817,000	472,930,000
Level 1 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	73,372,000	74,518,000
Level 2 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	381,445,000	398,412,000
Equity Securities [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, at fair value	352,000	427,000
Equity Securities [Member] | Level 1 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, at fair value	352,000	427,000
U.S Treasury [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	73,020,000	74,091,000
U.S Treasury [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	73,020,000	74,091,000
U.S Treasury [Member] | Level 1 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	73,020,000	74,091,000
Municipal [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	134,701,000	138,618,000
Municipal [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	134,701,000	138,618,000
Municipal [Member] | Level 2 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	134,701,000	138,618,000
Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	23,688,000	23,198,000
Corporate [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	23,688,000	23,198,000
Corporate [Member] | Level 2 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	23,688,000	23,198,000
Agency Mortgage & Asset-Backed [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	123,783,000	132,591,000
Agency Mortgage & Asset-Backed [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	123,783,000	132,591,000
Agency Mortgage & Asset-Backed [Member] | Level 2 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	123,783,000	132,591,000
Non-Agency Mortgage & Asset-Backed [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	99,273,000	104,005,000
Non-Agency Mortgage & Asset-Backed [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	99,273,000	104,005,000
Non-Agency Mortgage & Asset-Backed [Member] | Level 2 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	$ 99,273,000	$ 104,005,000

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Fair Value Measurements And Fair Values Of Financial Instruments (Fair Value, By Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Net loans	$ 814,869	$ 783,009
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	179,727	23,140
Long-term interest-earning deposits in other banks	1,994	6,229
Loans held for sale	932	213
Net loans	1,301,302	1,240,933
Accrued interest receivable	7,515	7,506
Deposits	1,586,458	1,537,978
Federal Reserve Bank borrowings	40,000	90,000
FHLB advances	240,000	40,000
Subordinate notes	19,680	19,661
Accrued interest payable	4,735	3,856
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	179,727	23,140
Long-term interest-earning deposits in other banks	1,994	6,229
Loans held for sale	947	213
Net loans	1,259,496	1,207,403
Accrued interest receivable	7,515	7,506
Deposits	1,585,810	1,537,480
Federal Reserve Bank borrowings	39,891	89,783
FHLB advances	239,310	40,110
Subordinate notes	17,474	18,303
Accrued interest payable	4,735	3,856
Level 1 [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	179,727	23,140
Long-term interest-earning deposits in other banks	1,994	6,229
Level 2 [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for sale	947	213
Deposits	1,585,810	1,537,480
Federal Reserve Bank borrowings	39,891	89,783
FHLB advances	239,310	40,110
Subordinate notes	17,474	18,303
Accrued interest payable	4,735	3,856
Level 3 [Member] | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Net loans	1,259,496	1,207,403
Accrued interest receivable	$ 7,515	$ 7,506

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Deposits (Narrative) (Details) - USD ($) $ in Millions	Jun. 30, 2024	Dec. 31, 2023
Deposits [Abstract]
Time deposits greater than $250,000	$ 48.5	$ 44.4

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Deposits (Schedule Of Deposits) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Deposits [Abstract]
Noninterest-bearing checking	$ 282,964	$ 273,050
Interest-bearing checking	401,174	454,517
Money Management	616,928	572,058
Savings	101,712	105,907
Total interest-bearing checking and savings	1,119,814	1,132,482
Time deposits	183,680	132,446
Total deposits	1,586,458	1,537,978
Overdrawn deposit accounts reclassified as loans	$ 660	$ 160

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Borrowings (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Dec. 31, 2023
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Debt issuance costs	$ 320,000
Redemption period	5 years
Maturing September 1, 2030 [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Subordinate notes	$ 15,000
Maturing September 1, 2035 [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Subordinate notes	5,000
Through September 1, 2025 [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Subordinate notes	$ 15,000
Interest rate	5.00%
After September 1, 2025 [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Basis spread on variable rate	4.93%
Through September 1, 2030 [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Subordinate notes	$ 5,000
Interest rate	5.25%
After September 1, 2030 [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Basis spread on variable rate	4.92%
Subordinated Notes [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Debt	$ 19,680	$ 19,661
Subordinate notes	20,000
Federal Reserve Bank Borrowings [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Debt	40,000	90,000
Fair value of debt securities pledged	$ 44,100
Interest rate	4.81%
Federal Home Loan Bank (FHLB) Advances[Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Debt	$ 240,000	$ 40,000
Federal Home Loan Bank (FHLB) Advances, Short-Term [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Short-term borrowings	$ 40,000
Interest rate	5.80%
Federal Home Loan Bank (FHLB) Advances, Long-Term [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Long-term borrowings	$ 200,000
Interest rate	4.32%

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Capital Ratios (Narrative) (Details) - USD ($) $ in Billions	6 Months Ended	12 Months Ended
	Jun. 30, 2024	Dec. 31, 2021
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Capital Ratios, Basel III, Capital Conservation Buffer, Year Three	2.50%
Community Bank Leverage Ratio, Minimum		9.00%
Consolidated asset limit on small bank holding companies	$ 3
Through September 1, 2025 [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	5.00%
Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	0.065
Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	0.08
Tier 1 Leverage Ratio: Well Capitalized Minimum: Ratio	0.05
Total Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	0.10
Capital ratios, capital conservation buffer	5.52%

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Capital Ratios (Schedule Of The Total Risk-based, Tier 1 Risk-based And Tier 1 Leverage Requirements) (Details)	Jun. 30, 2024	Dec. 31, 2023
Franklin Financial Services Corporation [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital Ratio: Ratio	0.1201	0.1182
Tier 1 Risk-based Capital Ratio: Ratio	0.1201	0.1182
Total Risk-based Capital Ratio: Ratio	0.1466	0.1445
Tier 1 Leverage Ratio: Ratio	0.0838	0.0901
Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital Ratio: Ratio	0.1227	0.1238
Common Equity Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	0.0450
Common Equity Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	0.065
Tier 1 Risk-based Capital Ratio: Ratio	0.1227	0.1238
Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	0.0600
Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	0.08
Total Risk-based Capital Ratio: Ratio	0.1352	0.1363
Total Risk-based Capital Ratio: Adequately Capitalized Minimum: Ratio	0.0800
Total Risk-based Capital Ratio: Well Capitalized Minimum: Ratio	0.10
Tier 1 Leverage Ratio: Ratio	0.0856	0.0944
Tier 1 Leverage Ratio: Adequately Capitalized Minimum: Ratio	0.0400
Tier 1 Leverage Ratio: Well Capitalized Minimum: Ratio	0.05

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Revenue Recognition (Schedule of Wealth Management Fees) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Disaggregation of Revenue [Line Items]
Investment and trust services fees	$ 2,242	$ 1,959	$ 4,269	$ 3,793
Estate management services Fees recognition period			18 months
Asset Management Fees [Member]
Disaggregation of Revenue [Line Items]
Investment and trust services fees	2,051	1,844	$ 3,884	3,481
Estate Management Fees [Member]
Disaggregation of Revenue [Line Items]
Investment and trust services fees	128	61	215	152
Commissions [Member]
Disaggregation of Revenue [Line Items]
Investment and trust services fees	$ 63	$ 54	$ 170	$ 160

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Commitments And Contingencies (Narrative) (Details)	6 Months Ended
	Jun. 30, 2024
Commitments And Contingencies [Abstract]
Standby letters of credit extension period, in years	1 year

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Commitments And Contingencies (Outstanding Commitments) (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Mar. 31, 2024	Dec. 31, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022
Loss Contingencies [Line Items]
ALL, Ending Balance	$ 17,018	$ 16,533	$ 16,052	$ 14,615	$ 14,109	$ 14,175
Commercial Commitments To Extend Credit [Member]
Loss Contingencies [Line Items]
Commitments outstanding	320,735		325,982
Consumer Commitments To Extend Credit (Secured) [Member]
Loss Contingencies [Line Items]
Commitments outstanding	126,387		112,157
Consumer Commitments To Extend Credit (Unsecured) [Member]
Loss Contingencies [Line Items]
Commitments outstanding	6,366		5,964
Commitments To Extend Credit [Member]
Loss Contingencies [Line Items]
Commitments outstanding	453,488		444,103
Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Commitments outstanding	21,538		19,851
Unfunded Commitments [Member]
Loss Contingencies [Line Items]
ALL, Ending Balance	$ 1,970		$ 2,022

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Insider Trading Arrangements	3 Months Ended
	Jun. 30, 2024
Insider Trading Arrangements [Line Items]
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false