10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

Or

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

EXCHANGE ACT OF 1934

For the transition period from_____________________ to ___________________

Commission file number 0-13222

CITIZENS FINANCIAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

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

15 South Main Street

Mansfield, Pennsylvania 16933

(Address of principal executive offices)(Zip Code)

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

N/A

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

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

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

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

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

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

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

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

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

The number of outstanding shares of the Registrant’s Common Stock, as of August 1, 2023, was 4,704,363.

Citizens Financial Services, Inc.

Form 10-Q

INDEX

		PAGE
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Consolidated Balance Sheet as of June 30, 2023 and December 31, 2022	1
	Consolidated Statement of Income for the Three and Six Months Ended June 30, 2023 and 2022	2
	Consolidated Statement of Comprehensive Income (Loss) for the Three and Six Months ended June 30, 2023 and 2022	3
	Consolidated Statement of Changes in Stockholders’ Equity for  the Three and Six Months ended June 30, 2023 and 2022	4
	Consolidated Statement of Cash Flows for the Six Months ended June 30, 2023 and 2022	5
	Notes to Consolidated Financial Statements	6-38
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39-63
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	64
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	66
	Signatures	68

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(in thousands except share data)	June 30, 2023			December 31, 2022
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	28,740		$	24,814
Interest-bearing		15,969			1,397
Total cash and cash equivalents		44,709			26,211
Interest bearing time deposits with other banks		4,814			6,055
Equity securities		1,849			2,208
Available-for-sale securities		434,315			439,506
Loans held for sale		14,940			725
Loans (net of allowance for credit losses - loans: 2023 $21,652 and 2022, $18,552)		2,141,190			1,706,447
Premises and equipment		21,382			17,619
Accrued interest receivable		9,283			7,332
Goodwill		84,758			31,376
Bank owned life insurance		50,194			39,355
Other intangibles		4,071			1,272
Fair value of derivative instruments		16,395			16,599
Deferred tax asset		20,108			12,886
Other assets		43,800			25,802
TOTAL ASSETS	$	2,891,808		$	2,333,393
LIABILITIES:
Deposits:
Noninterest-bearing	$	553,097		$	396,260
Interest-bearing		1,713,003			1,447,948
Total deposits		2,266,100			1,844,208
Borrowed funds		318,200			257,278
Accrued interest payable		2,256			1,232
Fair value of derivative instruments - liability		9,303			9,726
Other liabilities		32,721			20,802
TOTAL LIABILITIES		2,628,580			2,133,246
STOCKHOLDERS’ EQUITY:
Preferred Stock
$1.00 par value; authorized 3,000,000 shares at June 30, 2023 and December 31, 2022; none issued in 2023 or 2022		-			-
Common Stock
$1.00 par value; authorized 25,000,000 shares at June 30, 2023 and December 31, 2022; issued 5,160,754 at June 30, 2023 and 4,427,687 at December 31, 2022		5,161			4,428
Additional paid-in capital		143,351			80,911
Retained earnings		162,499			164,922
Accumulated other comprehensive loss		(30,980	)		(33,141	)
Treasury stock, at cost: 453,986 shares at June 30, 2023 and 456,478 shares at December 31, 2022		(16,803	)		(16,973	)
TOTAL STOCKHOLDERS’ EQUITY		263,228			200,147
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,891,808		$	2,333,393

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

1

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except share and per share data)	2023			2022			2023			2022
INTEREST INCOME:
Interest and fees on loans	$	24,117		$	17,120		$	46,666		$	33,040
Interest-bearing deposits with banks		127			156			198			272
Investment securities:
Taxable		1,683			1,424			3,239			2,536
Nontaxable		572			617			1,189			1,200
Dividends		311			90			625			174
TOTAL INTEREST INCOME		26,810			19,407			51,917			37,222
INTEREST EXPENSE:
Deposits		5,480			1,356			9,419			2,631
Borrowed funds		3,409			322			6,497			600
TOTAL INTEREST EXPENSE		8,889			1,678			15,916			3,231
NET INTEREST INCOME		17,921			17,729			36,001			33,991
Provision for credit losses		262			450			262			700
Provision for credit losses - acquisition day 1 non-PCD		4,591			-			4,591			-
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		13,068			17,279			31,148			33,291
NON-INTEREST INCOME:
Service charges		1,293			1,324			2,504			2,572
Trust		181			184			411			433
Brokerage and insurance		442			501			956			982
Gains on loans sold		169			41			214			146
Equity security losses, net		(74	)		(134	)		(292	)		(179	)
Available for sale security losses, net		(51	)		-			(51	)		-
Earnings on bank owned life insurance		234			212			452			419
Other		86			176			260			362
TOTAL NON-INTEREST INCOME		2,280			2,304			4,454			4,735
NON-INTEREST EXPENSES:
Salaries and employee benefits		7,916			7,117			15,593			14,030
Occupancy		814			754			1,649			1,548
Furniture and equipment		162			166			313			295
Professional fees		387			394			768			733
FDIC insurance		325			145			625			280
Pennsylvania shares tax		298			339			596			678
Amortization of intangibles		31			40			62			80
Merger and acquisition		8,402			-			8,646			-
Software expenses		372			358			723			699
ORE (recovery) expenses		(11	)		120			15			(247	)
Other		1,984			1,767			3,468			3,335
TOTAL NON-INTEREST EXPENSES		20,680			11,200			32,458			21,431
Income (loss) before provision for income taxes		(5,332	)		8,383			3,144			16,595
Provision for income taxes (benefit)		(1,188	)		1,482			421			2,954
NET INCOME (LOSS)	$	(4,144	)	$	6,901		$	2,723		$	13,641
PER COMMON SHARE DATA:
Net (Loss) Income - Basic	$	(1.01	)	$	1.72		$	0.67		$	3.40
Net (Loss) Income - Diluted	$	(1.01	)	$	1.72		$	0.67		$	3.40
Cash Dividends Paid	$	0.480		$	0.466		$	0.961		$	0.930
Number of shares used in computation - basic		4,113,377			4,012,611			4,059,416			4,008,830
Number of shares used in computation - diluted		4,113,377			4,012,626			4,059,416			4,008,934

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

2

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended, June 30,
(in thousands)	2023			2022			2023			2022
Net income (loss)	$	(4,144	)	$	6,901		$	2,723		$	13,641
Other comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities		(5,995	)		(16,016	)		2,982			(37,003	)
Income tax effect		1,259			3,364			(626	)		7,771
Change in unrecognized pension cost		7			12			14			48
Income tax effect		(2	)		(2	)		(3	)		(10	)
Change in unrealized loss on interest rate swaps		600			1,075			(310	)		3,533
Income tax effect		(126	)		(227	)		65			(743	)
Less:  Reclassification adjustment for investment security gains included in net income		51			-			51			-
Income tax effect		(12	)		-			(12	)		-
Other comprehensive income (loss), net of tax		(4,218	)		(11,794	)		2,161			(26,404	)
Comprehensive income (loss)	$	(8,362	)	$	(4,893	)	$	4,884		$	(12,763	)

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

3

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock				Additional Paid-in				Retained				Accumulated Other Comprehensive				Treasury
(in thousands, except share data)	Shares		Amount			Capital				Earnings				(Loss) Income				Stock			Total
Balance, March 31, 2023		4,427,687		4,428			80,926				171,629				(26,762	)			(16,983	)		213,238
Comprehensive loss:
Net loss											(4,144	)										(4,144	)
Net other comprehensive loss															(4,218	)						(4,218	)
Stock dividend		39,209		39			2,982				(3,021	)										-
Issuance of Common stock		693,858		694			59,443															60,137
Restricted stock, executive and Board of Director awards (2,652 shares)							(145	)											180			35
Restricted stock vesting							145															145
Cash dividends, $0.480 per share											(1,965	)										(1,965	)
Balance, June 30, 2023		5,160,754	$	5,161		$	143,351			$	162,499			$	(30,980	)		$	(16,803	)	$	263,228
Balance, December 31, 2022		4,427,687	$	4,428		$	80,911			$	164,922			$	(33,141	)		$	(16,973	)	$	200,147
Comprehensive income:
Net income											2,723											2,723
Net other comprehensive income															2,161							2,161
Stock dividend		39,209		39			2,982				(3,021	)										-
Issuance of Common stock		693,858		694			59,443															60,137
Restricted stock, executive and Board of Director awards (2,652 shares)							(145	)											180			35
Restricted stock vesting							150															150
Forfeited restricted stock							10												(10	)		-
Change in Accounting policy for allowance for credit losses											1,766				-							1,766
Cash dividends, $0.961 per share											(3,891	)										(3,891	)
Balance, June 30, 2023		5,160,754	$	5,161		$	143,351			$	162,499			$	(30,980	)		$	(16,803	)	$	263,228
Balance, March 31, 2022		4,388,901		4,389			78,396				150,876				(14,765	)			(16,151	)		202,745
Comprehensive income:
Net income											6,901											6,901
Net other comprehensive income (loss)															(11,794	)						(11,794	)
Stock dividend		38,786		39			2,521				(2,560	)										-
Purchase of treasury stock (18,584 shares)																			(1,272	)		(1,272	)
Restricted stock, executive and Board of Director awards (4,544 shares)							(164	)											308			144
Restricted stock vesting							138															138
Sale of treasury stock							1												71			72
Cash dividends, $0.466 per share											(1,902	)										(1,902	)
Balance, June 30, 2022		4,427,687	$	4,428		$	80,892			$	153,315			$	(26,559	)		$	(17,044	)	$	195,032
Balance, December 31, 2021		4,388,901	$	4,389		$	78,395			$	146,010			$	(155	)		$	(16,147	)	$	212,492
Comprehensive income:
Net income											13,641											13,641
Net other comprehensive income (loss)															(26,404	)						(26,404	)
Stock dividend		38,786		39			2,521				(2,560	)										-
Purchase of treasury stock (18,697 shares)																			(1,279	)		(1,279	)
Restricted stock, executive and Board of Director awards (79 shares)							(169	)											313			144
Restricted stock vesting							142															142
Sale of treasury stock to employees (1,060 shares)							1												71			72
Forfeited restricted stock (39 shares)							2												(2	)		-
Cash dividends, $0.93 per share											(3,776	)										(3,776	)
Balance, June 30, 2022		4,427,687	$	4,428		$	80,892			$	153,315			$	(26,559	)		$	(17,044	)	$	195,032

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

4

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
(in thousands)	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,723		$	13,641
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		4,853			700
Depreciation and amortization		530			519
Amortization and accretion of loans and other assets		(825	)		(1,068	)
Amortization and accretion of investment securities		826			1,025
Deferred income taxes		125			294
Investment securities losses, net		343			179
Earnings on bank owned life insurance		(452	)		(419	)
Vesting of restricted stock		150			141
Originations of loans held for sale		(12,730	)		(4,624	)
Proceeds from sales of loans held for sale		9,444			8,056
Realized gains on loans sold		(214	)		(146	)
Decrease (increase) in accrued interest receivable		275			(640	)
Gain on sale of foreclosed assets held for sale		(67	)		(491	)
Increase (decrease) in accrued interest payable		139			(145	)
Other, net		(2,219	)		(1,950	)
Net cash provided by operating activities		2,901			15,072
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Proceeds from sales		86,504			-
Proceeds from maturity and principal repayments		10,336			21,294
Purchase of securities		(10,246	)		(110,022	)
Proceeds from sale of equity securities		67			-
Purchase of interest bearing time deposits with other banks		-			(2,480	)
Proceeds from matured interest bearing time deposits with other banks		1,241			5,458
Proceeds from redemption of regulatory stock		10,839			1,912
Purchase of regulatory stock		(12,789	)		(3,493	)
Net decrease (increase) in loans		40,119			(152,949	)
Purchase of premises and equipment		(1,926	)		(898	)
Investments in low income housing partnerships		(591	)		(949	)
Proceeds from sale of foreclosed assets held for sale		233			760
Acquisition, net of cash paid		4,905			-
Net cash provided by (used in) investing activities		128,692			(241,367	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits		(111,473	)		42,560
Proceeds from long-term borrowings		20,000			-
Repayments of long-term borrowings		-			(4,725	)
Net (decrease) increase in short-term borrowed funds		(17,731	)		41,282
Purchase of treasury and restricted stock		-			(1,279	)
Sale of treasury stock to employees		-			72
Dividends paid		(3,891	)		(3,776	)
Net cash (used in) provided by financing activities		(113,095	)		74,134
Net  increase (decrease) in cash and cash equivalents		18,498			(152,161	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		26,211			172,833
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	44,709		$	20,672
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	14,892		$	3,376
Income taxes paid	$	3,600		$	3,600
Loans transferred to foreclosed property	$	49		$	61
Right of use asset and liability	$	5		$	1,518
Stock Dividend	$	3,021		$	2,560
CECL adjustment	$	3,300		$	-

Acquisition of	HV Bancorp, Inc.
Non-cash assets acquired
Available-for-sale securities	$	79,248
Interest bearing time deposits with other banks		-
Loans held for sale		10,750
Loans		475,338
Premises and equipment		2,310
Accrued interest receivable		2,226
Bank owned life insurance		10,387
Intangibles		2,972
Deferred tax asset		8,392
Other assets		18,213
Goodwill		53,382
		663,218
Liabilities assumed
Noninterest-bearing deposits		197,549
Interest-bearing deposits		335,816
Accrued interest payable		885
Borrowed funds		58,647
Other liabilities		11,674
		604,571
Net non-cash assets acquired		58,647
Cash and cash equivalents acquired	$	18,017

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

5

CITIZENS FINANCIAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

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

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

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

Accounting Pronouncements Adopted in 2023

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

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

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

6

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

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

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

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

Loans

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

7

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

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

Allowance for Credit losses – Loans

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

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

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

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

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

Probability of Default (PD)

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

Loss Given Default (LGD)

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

Prepayment and Curtailment rates

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

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

Reasonable and Supportable Forecasts

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

Forecast Reversion Period

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

Expected Recoveries on Charged-off Loans

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

Discount Rate

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

Individual Evaluation

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

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

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $6.3 million at June 30, 2023 and is included within Accrued interest receivable. This amount is excluded from the estimate of expected credit losses.

Reserve for Unfunded Commitments

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

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Note 2 – Acquisition of HV Bancorp, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

• Loans - The estimated fair value of loans were based on a discounted cash flow methodology applied on a pooled basis for nonpurchased credit-deteriorated (“non-PCD”) loans and on an individual basis for purchased credit-deteriorated (“PCD”) loans. The valuation considered underlying characteristics including loan type, term, rate, payment schedule and credit rating. Other factors included assumptions related to prepayments, probability of default and loss given default. The discount rates applied were based on a build-up approach considering the funding mix, servicing costs, liquidity premium and factors related to performance risk.

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

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

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

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

Accounting for Acquired Loans

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

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

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

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

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

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

Amounts recognized separately from the acquisition include primarily legal fees, investment banking fees, system conversion costs, severance costs and contract termination costs. These costs were included in merger and acquisition expenses within non-interest expenses on the Consolidated Statement of Income and amounted to approximately $8,646,000 for the quarter ended June 30, 2023.

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

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

	Actual from Acquisition Date Through June 30, 2023		Unaudited Pro Forma for
			Three Months Ended					Six Months Ended
			June 30,					June 30,
(In Thousands, Except Per Share Data)			2023			2022		2023		2022
Net interest income	$	917	$	18,901		$	23,572	$	38,004	$	44,960
Non-interest income		34		2,280			4,488		4,454		10,241
Net (loss) income		590		(3,461	)		8,587		4,124		13,557
Pro forma (loss) earnings per share:
Basic			$	(0.72	)	$	1.84		0.87	$	2.91
Diluted			$	(0.72	)	$	1.84	$	0.87	$	2.91

Note 3 – Revenue Recognition

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

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

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

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

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

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Revenue stream	2023		2022		2023		2022
Service charges on deposit accounts
Overdraft fees	$	371		312	$	730	$	619
Statement fees		54		51		106		107
Interchange revenue		764		819		1,461		1,542
ATM income		34		66		72		155
Other service charges		70		76		135		149
Total Service Charges		1,293		1,324		2,504		2,572
Trust		181		184		411		433
Brokerage and insurance		442		501		956		982
Other		118		123		233		262
Total	$	2,034	$	2,132	$	4,104	$	4,249

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Note 4 – Earnings per Share

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

	Three months ended June 30,					Six months ended June 30,
	2023			2022		2023		2022
Net (loss) income applicable to common stock	$	(4,144,000	)	$	6,901,000	$	2,723,000	$	13,641,000
Basic earnings per share computation
Weighted average common shares outstanding		4,113,377			4,012,611		4,059,416		4,008,830
Earnings (loss) per share – basic	$	(1.01	)	$	1.72	$	0.67	$	3.40
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,113,377			4,012,611		4,059,416		4,008,830
Add: Dilutive effects of restricted stock		-			15		-		104
Weighted average common shares outstanding for dilutive earnings per share		4,113,377			4,012,626		4,059,416		4,008,934
Earnings (loss) per share – diluted	$	(1.01	)	$	1.72	$	0.67	$	3.40

For the three months ended June 30, 2023 and 2022, there were 6,078 and 3,121 shares, respectively, related to the restricted stock plan that were excluded from the diluted earnings per share calculations since they were anti-dilutive. These anti-dilutive shares had per share prices ranging from $44.93-$83.38 for the three month period ended June 30, 2023 and per share prices ranging from $57.36-$67.85 for the three month period ended June 30, 2022. For the six months ended June 30, 2023 and 2022, 6,078 and 6,264 shares, respectively, related to the restricted stock plan were excluded from the diluted earnings per share calculations since they were anti-dilutive. These anti-dilutive shares had prices ranging from $44.93-$83.38 for the six month period ended June 30, 2023 and prices ranging from $51.14-$67.85 for the six month period ended June 30, 2022.

Note 5 – Investments

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

June 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses			Fair Value
Available-for-sale securities:
U.S. agency securities	$	74,064	$	-	$	(7,197	)	$	66,867
U.S. treasury securities		162,365		-		(12,574	)		149,791
Obligations of state and political subdivisions		109,365		7		(8,929	)		100,443
Corporate obligations		13,363		260		(1,416	)		12,207
Mortgage-backed securities in government sponsored entities		119,612		10		(14,615	)		105,007
Total available-for-sale securities	$	478,769	$	277	$	(44,731	)	$	434,315

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

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The following table shows the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time, which individual securities have been in a continuous unrealized loss position, at June 30, 2023 and December 31, 2022 (in thousands). As of June 30, 2023, the Company owned 348 securities whose fair value was less than their cost basis.

June 30, 2023	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. agency securities	$	4,631	$	(120	)	$	62,236	$	(7,077	)	$	66,867	$	(7,197	)
U.S. treasury securities		-		-			149,791		(12,574	)		149,791		(12,574	)
Obligations of state and  political subdivisions		6,423		(108	)		89,377		(8,821	)		95,800		(8,929	)
Corporate obligations		800		(200	)		8,097		(1,216	)		8,897		(1,416	)
Mortgage-backed securities in government sponsored entities		18,718		(377	)		83,665		(14,238	)		102,383		(14,615	)
Total securities	$	30,572	$	(805	)	$	393,166	$	(43,926	)	$	423,738	$	(44,731	)

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

Allowance for Credit Losses – Available for Sale Securities

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

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

Accrued interest receivable on available-for-sale debt securities totaled $2,303,000 at June 30, 2023 and is included within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

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

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

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

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

Proceeds from sales of securities available-for-sale for the three and six months ended June 30, 2023 were $86,504,000. There were no sales of available for sale securities during the three and six months ended June 30, 2022.

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

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
Equity securities	2023			2022			2023			2022
Net losses recognized in equity securities during the period	$	(74	)	$	(134	)	$	(292	)	$	(179	)
Less: Net gains realized on the sale of equity securities during the period		-			-			5			-
Net unrealized losses	$	(74	)	$	(134	)	$	(297	)	$	(179	)

17

Investment securities with an approximate carrying value of $349.9 million and $311.8 million at June 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds, certain other deposits and borrowing lines.

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

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	36,851	$	36,117
Due after one year through five years		180,628		165,964
Due after five years through ten years		100,654		90,278
Due after ten years		160,636		141,956
Total	$	478,769	$	434,315

Note 6 – Loans

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

	June 30, 2023		December 31, 2022
Real estate loans:
Residential	$	358,025	$	210,213
Commercial		1,080,513		876,569
Agricultural		312,302		313,614
Construction		156,927		80,691
Consumer		42,701		86,650
Other commercial loans		120,288		63,222
Other agricultural loans		30,615		34,832
State and political subdivision loans		61,471		59,208
Total		2,162,842		1,724,999
Allowance for credit losses - loans		21,652		18,552
Net loans	$	2,141,190	$	1,706,447

Allowance for Credit Losses, effective January 1, 2023

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

18

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

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

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

	June 30, 2023
Allowance for Credit Losses - Loans	$	21,652
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,391
Total allowance for credit losses	$	23,043

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

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure		Total
Balance at March 31, 2023	$	15,250		$	1,229	$	16,479
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(4	)		-		(4	)
Recoveries of loans previously charged-off		26			-		26
Net loans charged-off		22			-		22
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		100			162		262
Balance at June 30, 2023	$	21,652		$	1,391	$	23,043

	Allowance for Credit Losses -Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure		Total
Balance at December 31, 2022	$	18,552		$	165	$	18,717
Impact of adopting CECL		(3,300	)		1,064		(2,236	)
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(11	)		-		(11	)
Recoveries of loans previously charged-off		31			-		31
Net loans charged-off		20			-		20
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		100			162		262
Balance at June 30, 2023	$	21,652		$	1,391	$	23,043

19

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

	For the three months ended June 30, 2023
	Balance at March 31, 2023		Allowance for credit loss on PCD acquired loans		Charge-offs			Recoveries		Provision			Balance at June 30, 2023
Real estate loans:
Residential	$	1,195	$	108	$	(1	)	$	-	$	1,373		$	2,675
Commercial		6,747		39		-			-		2,488			9,274
Agricultural		3,409		37		-			-		133			3,579
Construction		851				-			-		816			1,667
Consumer		1,220		677		(3	)		23		(658	)		1,259
Other commercial loans		712		828		-			3		934			2,477
Other agricultural loans		250		-		-			-		18			268
State and political subdivision loans		42		-		-			-		10			52
Unallocated		824		-		-			-		(423	)		401
Total	$	15,250	$	1,689	$	(4	)	$	26	$	4,691		$	21,652

	For the six months ended June 30, 2023
	Balance at December 31, 2022		Impact of adopting CECL			Allowance for credit loss on PCD acquired loans		Charge-offs			Recoveries		Provision			Balance at June 30, 2023
Real estate loans:
Residential	$	1,056	$	79		$	108	$	(1	)	$	-	$	1,433		$	2,675
Commercial		10,120		(3,070	)		39		-			-		2,185			9,274
Agricultural		4,589		(1,145	)		37		-			-		98			3,579
Construction		801		(103	)				-			-		969			1,667
Consumer		135		1,040			677		(10	)		27		(610	)		1,259
Other commercial loans		1,040		(328	)		828		-			4		933			2,477
Other agricultural loans		489		(219	)		-		-			-		(2	)		268
State and political subdivision loans		322		(280	)		-		-			-		10			52
Unallocated		-		726			-		-			-		(325	)		401
Total	$	18,552	$	(3,300	)	$	1,689	$	(11	)	$	31	$	4,691		$	21,652

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

	Allowance for Credit Losses - Loans						Loans
June 30, 2023	Collectively evaluated for impairment		Individually evaluated for impairment		Total Allowance for Credit Losses - Loans		Collectively evaluated for impairment		Individually evaluated for impairment		Total Loans
Real estate loans:
Residential	$	2,552	$	123	$	2,675	$	356,592	$	1,433	$	358,025
Commercial		9,110		164		9,274		1,075,534		4,979		1,080,513
Agricultural		3,493		86		3,579		308,010		4,292		312,302
Construction		1,410		257		1,667		154,570		2,357		156,927
Consumer		446		813		1,259		41,625		1,076		42,701
Other commercial loans		1,713		764		2,477		118,024		2,264		120,288
Other agricultural loans		268		-		268		30,320		295		30,615
State and political subdivision loans		52		-		52		61,471		-		61,471
Unallocated		401		-		401		-		-		-
Total	$	19,445	$	2,207	$	21,652	$	2,146,146	$	16,696	$	2,162,842

20

Allowance for Credit Losses, prior to January 1, 2023

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to net loans. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in unfunded commitments and letters of credit, and is recorded in other liabilities on the consolidated balance sheet. The allowance for credit losses is increased by charges to expense, through the provision for credit losses and decreased by charge-offs, net of recoveries. The following table presents the components of the allowance for credit losses as of December 31, 2022 (in thousands):

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

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

	Allowance for Credit Losses - Loans			Reserve for unfunded commitments		Total
Balance at March 31, 2022	$	17,556		$	165	$	17,721
Loans charge-off		(446	)		-		(446	)
Recoveries of loans previously charged-off		10			-		10
Net loans charged-off		(436	)		-		(436	)
Provision for credit losses		450			-		450
Balance at June 30, 2022	$	17,570		$	165	$	17,735
Balance at December 31, 2021	$	17,304		$	165	$	17,469
Loans charge-off		(451	)		-		(451	)
Recoveries of loans previously charged-off		17			-		17
Net loans charged-off		(434	)		-		(434	)
Provision for credit losses		700			-		700
Balance at June 30, 2022	$	17,570		$	165	$	17,735

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

	For the three months ended June 30, 2022
	Balance at March 31, 2022		Charge-offs			Recoveries		Provision			Balance at June 30, 2022
Real estate loans:
Residential	$	1,070	$	-		$	-	$	(55	)	$	1,015
Commercial		8,394		-			-		822			9,216
Agricultural		4,516		-			-		(32	)		4,484
Construction		497		-			-		66			563
Consumer		210		(12	)		5		261			464
Other commercial loans		1,380		(434	)		5		222			1,173
Other agricultural loans		551		-			-		(105	)		446
State and political subdivision loans		285		-			-		38			323
Unallocated		653		-			-		(767	)		(114	)
Total	$	17,556	$	(446	)	$	10	$	450		$	17,570

21

	For the six months ended June 30, 2022
	Balance at December 31, 2021		Charge-offs			Recoveries		Provision			Balance at June 30, 2022
Real estate loans:
Residential	$	1,147	$	-		$	-	$	(132	)	$	1,015
Commercial		8,099		-			-		1,117			9,216
Agricultural		4,729		-			-		(245	)		4,484
Construction		434		-			-		129			563
Consumer		262		(17	)		10		209			464
Other commercial loans		1,023		(434	)		7		577			1,173
Other agricultural loans		558		-			-		(112	)		446
State and political subdivision loans		281		-			-		42			323
Unallocated		771		-			-		(885	)		(114	)
Total	$	17,304	$	(451	)	$	17	$	700		$	17,570

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

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

Non-performing Loans

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

22

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

	June 30, 2023								December 31, 2022
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	472	$	1,701	$	-	$	2,173	$	562	$	-	$	562
Home Equity		-		53		-		53		29		-		29
Commercial		353		1,510		129		1,992		2,778		-		2,778
Agricultural		182		2,810		-		2,992		3,222		-		3,222
Construction		2,357		-		-		2,357		-		-		-
Consumer		1,072		-		10		1,082		-		7		7
Other commercial loans		789		1,475		-		2,264		62		-		62
Other agricultural loans		-		299		-		299		285		-		285
State and political subdivision		-		-		-		-		-		-		-
	$	5,225	$	7,848	$	139	$	13,212	$	6,938	$	7	$	6,945

As of June 30, 2023, there were $7.8 million of non-accrual loans that did not have a related allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charge down to the realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

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

June 30, 2023	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	2,173	$	-	$	-	$	2,173
Home Equity		53		-		-		53
Commercial		1,863		-		-		1,863
Agricultural		2,992		-		-		2,992
Construction		2,357		-		-		2,357
Consumer		-		-		1,072		1,072
Other commercial loans		-		2,264		-		2,264
Other agricultural loans		-		299		-		299
State and political subdivision		-		-		-		-
	$	9,438	$	2,563	$	1,072	$	13,073

December 31, 2022	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	562	$	-	$	-	$	562
Home Equity		29		-		-		29
Commercial		2,778		-		-		2,778
Agricultural		3,222		-		-		3,222
Construction		-		-		-		-
Consumer		-		-		-		-
Other commercial loans		-		62		-		62
Other agricultural loans		-		285		-		285
State and political subdivision		-		-		-		-
	$	6,591	$	347	$	-	$	6,938

Credit Quality Information

For commercial real estate, agricultural real estate, construction, other commercial, other agricultural and state and political subdivision loans, management uses a nine grade internal risk rating system to monitor and assess credit quality. The first five categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The definitions of each rating are defined below:

23

• Pass (Grades 1-5) – These loans are to customers with credit quality ranging from an acceptable to very high quality and are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

• Special Mention (Grade 6) – This loan grade is in accordance with regulatory guidance and includes loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

• Substandard (Grade 7) – This loan grade is in accordance with regulatory guidance and includes loans that have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

• Doubtful (Grade 8) – This loan grade is in accordance with regulatory guidance and includes loans that have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

• Loss (Grade 9) – This loan grade is in accordance with regulatory guidance and includes loans that are considered uncollectible, or of such value that continuance as an asset is not warranted.

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

24

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

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	54,881	$	329,894	$	217,856	$	126,372	$	83,562	$	203,314	$	32,598	$	1,187	$	1,049,664
Special Mention		-		8,847		-		1,378		7,627		9,447		125		-		27,424
Substandard		-		251		6		195		254		1,980		731		8		3,425
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	54,881	$	338,992	$	217,862	$	127,945	$	91,443	$	214,741	$	33,454	$	1,195	$	1,080,513
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	10,468	$	54,241	$	30,666	$	33,222	$	27,167	$	126,373	$	11,466	$	1,344	$	294,947
Special Mention		-		3,028		1,261		-		-		6,819		85		-		11,193
Substandard		-		-		-		-		103		5,737		75		247		6,162
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	10,468	$	57,269	$	31,927	$	33,222	$	27,270	$	138,929	$	11,626	$	1,591	$	312,302
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	20,388	$	81,202	$	45,691	$	501	$	-	$	-	$	-	$	-	$	147,782
Special Mention		1,406		980		4,402		-		-		-		-		-		6,788
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	21,794	$	82,182	$	52,450	$	501	$	-	$	-	$	-	$	-	$	156,927
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	3,115	$	12,671	$	9,536	$	5,793	$	5,970	$	5,041	$	70,515	$	109	$	112,750
Special Mention		-		87		1,585		216		338		24		2,678		39		4,967
Substandard		-		-		-		763		198		1,298		286		-		2,545
Doubtful		-		-		-		-		-		-		-		26		26
Total	$	3,115	$	12,758	$	11,121	$	6,772	$	6,506	$	6,363	$	73,479	$	174	$	120,288
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other agricultural loans										-
Risk Rating
Pass	$	2,998	$	1,766	$	7,530	$	1,249	$	1,281	$	487	$	13,417	$	-	$	28,728
Special Mention		-		522		268		48		7		55		543		-		1,443
Substandard		-		-		-		-		8		377		25		34		444
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,998	$	2,288	$	7,798	$	1,297	$	1,296	$	919	$	13,985	$	-	$	30,615
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	94	$	18,733	$	12,124	$	4,438	$	5	$	26,077	$	-	$	-	$	61,471
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	94	$	18,733	$	12,124	$	4,438	$	5	$	26,077	$	-	$	-	$	61,471
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	91,944	$	498,507	$	323,403	$	171,575	$	117,985	$	361,292	$	127,996	$	2,640	$	1,695,342
Special Mention		1,406		13,464		7,516		1,642		7,972		16,345		3,431		39		51,815
Substandard		-		251		2,363		958		563		9,392		1,117		289		14,933
Doubtful		-		-		-		-		-		-		-		26		26
Total	$	93,350	$	512,222	$	333,282	$	174,175	$	126,520	$	387,029	$	132,544	$	2,994	$	1,762,116

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

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

25

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

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	12,084	$	88,543	$	49,595	$	30,895	$	19,334	$	106,346	$	-	$	-	$	306,797
Nonperforming		-		-		788		115		-		1,270		-		-		2,173
Total	$	12,084	$	88,543	$	50,383	$	31,010	$	19,334	$	107,616	$	-	$	-	$	308,970
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity										-
Payment Performance
Performing	$	2,130	$	3,217	$	2,046	$	2,439	$	2,685	$	8,914	$	27,127	$	444	$	49,002
Nonperforming		-		-		-		-		-		53		-		-		53
Total	$	2,130	$	3,217	$	2,046	$	2,439	$	2,685	$	8,967	$	27,127	$	444	$	49,055
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	3,708	$	1,267	$	650	$	551	$	597	$	3,332	$	31,505	$	9	$	41,619
Nonperforming		-		20		-		-		-		1,062		-		-		1,082
Total	$	3,708	$	1,287	$	650	$	551	$	597	$	4,394	$	31,505	$	9	$	42,701
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	-	$	9	$	-	$	10
Total										-
Payment Performance
Performing	$	17,922	$	93,027	$	52,291	$	33,885	$	22,616	$	118,592	$	58,632	$	453	$	397,418
Nonperforming		-		20		788		115		-		2,385		-		-		3,308
Total	$	17,922	$	93,047	$	53,079	$	34,000	$	22,616	$	120,977	$	58,632	$	453	$	400,726

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

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

26

Aging Analysis of Past Due Loan Receivables

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

June 30, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	-	$	1,225	$	1,708	$	2,933	$	306,037	$	308,970	$	-
Home Equity		110		7		30		147		48,908		49,055		-
Commercial		2,072		231		1,216		3,519		1,076,994		1,080,513		129
Agricultural		23		-		1,367		1,390		310,912		312,302		-
Construction		477		-		-		477		156,450		156,927		-
Consumer		389		8		1,082		1,479		41,222		42,701		10
Other commercial loans		154		829		1,475		2,458		117,830		120,288		-
Other agricultural loans		234		-		-		234		30,381		30,615		-
State and political subdivision loans		-		-		-		-		61,471		61,471		-
Total	$	3,459	$	2,300	$	6,878	$	12,637	$	2,150,205	$	2,162,842	$	139
Loans considered non-accrual	$	37	$	894	$	6,739	$	7,670	$	5,403	$	13,073
Loans still accruing		3,422		1,406		139		4,967		2,144,802		2,149,769
Total	$	3,459	$	2,300	$	6,878	$	12,637	$	2,150,205	$	2,162,842

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

Modifications to Borrowers Experiencing Financial Difficulty

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

27

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

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

	Three months ended June 30, 2023
	Number of loans		Amortized Cost Basis			% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		3		$	243		0.02	%
Agricultural		4			765		0.24	%
Total		7		$	1,008

	Six months ended June 30, 2023
	Number of loans		Amortized Cost Basis		% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	$	131		0.04	%
Commercial		7		1,992		0.18	%
Agricultural		4		765		0.24	%
Consumer		1		3		0.01	%
Total		13	$	2,891
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	$	91		0.01	%
Total		1	$	91

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

Three months ended June 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		3	Extended the weighted average loan maturity 5 months
Agricultural		4	Extended the weighted average loan maturity 2 months
Total		7

28

Six months ended June 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	Extended the loan maturity 4 months
Commercial		7	Extended the weighted average loan maturity 22 months
Agricultural		4	Extended the weighted average loan maturity 2 months
Consumer		1	Extended the loan maturity 24 months
Total		13
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the loan maturity 6 months
Total		1

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

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

	June 30, 2023
			30-89 Days		90 Days
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty	Current		Past Due		Or Greater		Total
Real estate loans:
Mortgages	$	131	$	-	$	-	$	131
Commercial		1,992		-		-		1,992
Agricultural		765		-		-		765
Consumer		3		-		-		3
Total	$	2,891	$	-	$	-	$	2,891
Non-Accruing Modified Loans to Borrowers experiencing Financial Difficulty
Real estate loans:
Commercial	$	91	$	-	$	-	$	91
Total	$	91	$	-	$	-	$	91

Foreclosed Assets Held For Sale

Foreclosed assets acquired in settlement of loans are carried at fair value, less estimated costs to sell, and are included in other assets on the Consolidated Balance Sheet. As of June 30, 2023 and December 31, 2022, included within other assets are $426,000 and $543,000, respectively, of foreclosed assets. As of June 30, 2023, included within the foreclosed assets are $226,000 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end. As of June 30, 2023, the Company had initiated formal foreclosure proceedings on $241,000 of residential mortgages loans, the collateral properties which have not yet been transferred into foreclosed assets.

Note 7 – Goodwill and Other Intangible Assets

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

	June 30, 2023							December 31, 2022
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,575	$	(1,510	)	$	1,065	$	2,336	$	(1,362	)	$	974
Core deposit intangibles		4,713		(1,707	)		3,006		1,943		(1,645	)		298
Total amortized intangible assets	$	7,288	$	(3,217	)	$	4,071	$	4,279	$	(3,007	)	$	1,272
Unamortized intangible assets:
Goodwill	$	84,758						$	31,376

(1) Excludes fully amortized intangible assets

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

	MSRs		Core deposit intangibles		Total
Three months ended June 30, 2023 (actual)	$	75	$	31	$	106
Six months ended June 30, 2023 (actual)		148		62		210
Three months ended June 30, 2022 (actual)		78		40		118
Six months ended June 30, 2022 (actual)		160		80		240
Estimate for year ending December 31,
Remaining 2023		155		310		465
2024		271		564		835
2025		220		478		698
2026		170		395		565
2027		113		339		452
Thereafter		136		920		1,056
Total	$	1,065	$	3,006	$	4,071

Note 8 – Employee Benefit Plans

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

Noncontributory Defined Benefit Pension Plan

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

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

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

29

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022			Affected line item on the Consolidated Statement of Income
Service cost	$	77		$	100		$	155		$	178		Salary and Employee Benefits
Interest cost		110			79			220			138		Other Expenses
Expected return on plan assets		(197	)		(264	)		(394	)		(467	)	Other Expenses
Net amortization and deferral		7			12			14			48		Other Expenses
Net periodic benefit cost	$	(3	)	$	(73	)	$	(5	)	$	(103	)

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

Restricted Stock Plan

The Company maintains a Restricted Stock Plan (the “Plan”) whereby employees and non-employee corporate directors are eligible to receive awards of restricted stock based upon performance related requirements.  Awards granted under the Plan are in the form of the Company’s common stock and are subject to certain vesting requirements including continuous employment or service with the Company.  In April of 2016, the Company’s stockholders authorized a total of 150,000 shares of the Company’s common stock to be made available under the Plan. As of June 30, 2023, 113,816 shares remain available to be issued under the Plan.  The Plan assists the Company in attracting, retaining and motivating employees to make substantial contributions to the success of the Company and to increase the emphasis on the use of equity as a key component of compensation.

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

	Three months						Six months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,372		$	63.71			6,622		$	63.63
Granted		2,242			83.38			2,242			83.38
Forfeited		-			-			(161	)		(63.13	)
Vested		(2,360	)		(61.47	)		(2,449	)		(61.38	)
Outstanding, end of period		6,254		$	71.61			6,254		$	71.61

Compensation expense related to restricted stock is recognized, based on the market price of the stock at the grant date, over the vesting period. Compensation expense related to restricted stock was $116,000 and $142,000 for the six months ended June 30, 2023 and 2022, respectively. For the three months ended June 30, 2023 and 2022, compensation expense totaled $51,000 and $65,000, respectively. At June 30, 2023, the total compensation cost related to nonvested awards that had not yet been recognized was $448,000, which is expected to be recognized over the next three years.

30

Note 9 – Accumulated Comprehensive Loss

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

	Three months ended June 30, 2023
	Unrealized gain (loss) on available for sale  securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)			Total
Balance as of March 31, 2023	$	(30,422	)	$	(1,050	)	$	4,710		$	(26,762	)
Other comprehensive income (loss) before reclassifications (net of tax)		(4,736	)		-			888			(3,848	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			5			(414	)		(370	)
Net current period other comprehensive income (loss)		(4,697	)		5			474			(4,218	)
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)

	Six months ended June 30, 2023
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)			Total
Balance as of December 31, 2022	$	(37,514	)	$	(1,056	)	$	5,429		$	(33,141	)
Other comprehensive income before reclassifications (net of tax)		2,356			-			529			2,885
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			11			(774	)		(724	)
Net current period other comprehensive income (loss)		2,395			11			(245	)		2,161
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)

	Three months ended June 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)		Total
Balance as of March 31, 2022	$	(16,276	)	$	(1,940	)	$	3,451	$	(14,765	)
Other comprehensive income (loss) before reclassifications (net of tax)		(12,652	)		-			831		(11,821	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			10			17		27
Net current period other comprehensive income (loss)		(12,652	)		10			848		(11,794	)
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299	$	(26,559	)

	Six months ended June 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)		Total
Balance as of December 31, 2021	$	304		$	(1,968	)	$	1,509	$	(155	)
Other comprehensive income (loss) before reclassifications (net of tax)		(29,232	)		-			2,741		(26,491	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			38			49		87
Net current period other comprehensive income (loss)		(29,232	)		38			2,790		(26,404	)
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299	$	(26,559	)

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

31

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

Details about accumulated other comprehensive income (loss)	Amount reclassified from accumulated comprehensive income (loss) (a)						Affected line item in the Consolidated Statement of Income
	Three Months Ended June 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	-		Available for sale securities gains, net
		12			-		Provision for income taxes
	$	(39	)	$	-		Net of tax
Defined benefit pension items
	$	(7	)	$	(12	)	Other expenses
		2			2		Provision for income taxes
	$	(5	)	$	(10	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	524		$	(21	)	Interest expense
		(110	)		4		Provision for income taxes
	$	414		$	(17	)	Net of tax
Total reclassifications	$	370		$	(27	)

Six Months Ended June 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	-		Available for sale securities gains, net
		12			-		Provision for income taxes
	$	(39	)	$	-		Net of tax
Defined benefit pension items
	$	(14	)	$	(48	)	Other expenses
		3			10		Provision for income taxes
	$	(11	)	$	(38	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	980		$	(62	)	Interest expense
		(206	)		13		Provision for income taxes
	$	774		$	(49	)	Net of tax
Total reclassifications	$	724		$	(87	)

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

32

Note 10 – Fair Value Measurements

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

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

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

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

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

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

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

June 30, 2023	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,849	$	-		$	-	$	1,849
Available for sale securities:
U.S. Agency securities		-		66,867			-		66,867
U.S. Treasury securities		149,791		-			-		149,791
Obligations of state and political subdivisions		-		100,443			-		100,443
Corporate obligations		-		12,207			-		12,207
Mortgage-backed securities in government sponsored entities		-		105,007			-		105,007
Loans held for sale		-		14,940			-		14,940
Derivative instruments		-		15,866			529		16,395
Liabilities
Derivative instruments		-		(9,303	)		-		(9,303	)

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

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

	IRLC- Asset
Balance acquired as part of the HVBC acquisition	$	657
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(128	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2023	$	529
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of June 30, 2023	$	(128	)
Change in unrealized loss for the period included other comprehensive loss for assets held as of June 16, 2023		-

At June 30, 2023, the Company had classified $529,000 of net derivative assets and liabilities related to IRLC as Level 3. The fair value of IRLCs is based on prices obtained for loans with similar characteristics from third parties, adjusted by the pull-through rate, which represents the Company’s best estimate of the probability that a committed loan will fund. The weighted average pull-through rates applied ranged from 78.26% to 95.76% at June 30, 2023.

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

	Quantitative Information about Level 3 Fair Value Measurements at June 30, 2023
	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	529	Discounted cash flows	Pull-through rates		78.26%-95.76	%		84.53	%

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

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

June 30, 2023	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	4,026	$	4,026
Other real estate owned		-		-		49		49
December 31, 2022	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	496	$	496
Other real estate owned		-		-		297		297

• Individually analyzed loans held for investment - The Company has measured impairment on impaired loans generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed.   Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value.  If the fair value of the collateral dependent loan is less than the carrying amount of the loan a specific reserve for the loan is made in the allowance for credit losses - loans or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the table above as a Level III measurement.  If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the table above as it is not currently being carried at its fair value. The fair values above excluded estimated selling costs of $359,000 and $50,000 at June 30, 2023 and December 31, 2022, respectively.

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

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

Quantitative Information about Level III Fair Value Measurements

June 30, 2023	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Individually analyzed loans held for investment	$	4,026	Appraised Collateral Values	Discount for time since appraisal		0-100	%		32.60	%
				Selling costs		8%-10	%		8.92	%
				Holding period	0 - 12 months			10.41 months
Other real estate owned		49	Appraised Collateral Values	Discount for time since appraisal		20	%		20.00	%

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

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

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

June 30, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,814	$	4,814	$	-	$	-	$	4,814
Net loans		2,141,190		2,080,817		-		-		2,080,817
Financial liabilities:
Deposits		2,266,100		2,254,845		1,935,269		-		319,576
Borrowed funds		318,200		308,507		-		-		308,507
December 31, 2022
Financial assets:
Interest bearing time deposits with other banks	$	6,055	$	6,055	$	-	$	-	$	6,055
Loans held for sale		725		725		-		-		725
Net loans		1,706,447		1,662,514		-		-		1,662,514
Financial liabilities:
Deposits		1,844,208		1,832,037		1,566,517		-		265,520
Borrowed funds		257,278		246,288		-		-		246,288

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

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Note 11 – Recent Accounting Pronouncements

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

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which added to ASU 2020-04 optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a onetime election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company has identified our loan receivables that have an interest rate indexed to LIBOR and is currently assessing the appropriate transition path. As such, the Company does not have an estimate of the financial impact of this update but does not expect the impact to be material to the financial statements of the Company.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (ASC 815): Fair Value Hedging - Portfolio Layer Method. ASC 815 currently permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in this Update allow non-prepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby allowing consistent accounting for similar hedges. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

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

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

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

Forward-Looking Statements

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Critical Accounting Policies

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

Introduction

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

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

Risk Management

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

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

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

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

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

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

Competition

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

Trust and Investment Services; Oil and Gas Lease Services

Our Investment and Trust Services Division offers professional trust administration, investment management services, estate planning and administration, and custody of securities.  In addition to traditional trust and investment services offered, we assist our customers through various oil and gas specific leasing matters from lease negotiations to establishing a successful approach to personal wealth management. Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the Consolidated Balance Sheets since such items are not assets of the Company.  Revenues and fees of the Trust Department are reflected in trust income in the Consolidated Statement of Income. As of June 30, 2023 and December 31, 2022, the Trust Department had $170.0 million and $150.0 million of assets under management, respectively.

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Our Investment Representatives offer full service brokerage services and financial planning throughout the Bank’s market area. Products such as mutual funds, annuities, health and life insurance are made available through our insurance subsidiary, First Citizens Insurance Agency, Inc.  The assets associated with these products are not included in the Consolidated Balance Sheets since such items are not assets of the Company. Assets owned and invested by customers of the Bank through the Bank’s Investment Representatives increased from $283.5 million at December 31, 2022 to $307.3 million at June 30, 2023. Fee income from the sale of these products is reflected in brokerage and insurance income in the Consolidated Statement of Income. Management believes that there are opportunities to increase non-interest income through these products and services, especially in our central south central and south eastern Pennsylvania markets.

Results of Operations

Overview of the Income Statement

The Company had net income of $2,723,000 for the first six months of 2023 compared to $13,641,000 for last year’s comparable period, a decrease of $10,918,000, or 80.0%, primarily due to the one-time costs associated with the HVBC acquisition. Basic earnings per share for the first six months of 2023 were $0.67, compared to $3.40 for last year’s comparable period, representing a 80.3% decrease.  Annualized return on assets and return on equity for the six months of 2023 were 0.23% and 2.22%, respectively, compared with 1.25% and 12.48% for last year’s comparable period.

Net loss for the three months ended June 30, 2023 was $4,144,000 compared to net income of $6,901,000 in the comparable 2022 period, a decrease of $11,045,000. Basic earnings (loss) per share for the three months ended June 30, 2023 were ($1.01), compared to $1.72 for last year’s comparable period, representing a 158.7% decrease due to the one-time costs associated with the acquisition and the provision for credit losses. Annualized return on assets and return on equity for the quarter ended June 30, 2023 was (0.68%) and (6.62%), respectively, compared with 1.25% and 12.49% for the same 2022 period.

Net Interest Income

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

Net interest income for the first six months of 2023 was $36,001,000, an increase of $2,010,000, or 5.9%, compared to the same period in 2022.  For the first six months of 2023 the provision for credit losses was $4,853,000, including $4,591,000 for non-PCD loans acquired as part of the acquisition. Excluding the $4,591,000 related to the acquisition, the provision for credit losses decreased $438,000. Consequently, net interest income after the provision for credit losses was $31,148,000 in the first six months of 2023 compared to $33,291,000 during the first six months of 2022.

For the three months ended June 30, 2023, net interest income was $17,921,000 compared to $17,729,000, an increase of $192,000, or 1.0%, over the comparable period in 2022. The provision for loan losses in the second quarter was $4,853,000 including $4,591,000 for non-PCD loans acquired as part of the acquisition. Excluding the $4,591,000 related to the acquisition, the provision for credit losses decreased $188,000. Consequently, net interest income after the provision for credit losses was $13,068,000 for the quarter ended June 30, 2023 compared to $17,279,000 in 2022.

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

	Analysis of Average Balances and Interest Rates
	Six Months Ended
	June 30, 2023							June 30, 2022
	Average Balance (1)		Interest		Average Rate			Average Balance (1)		Interest		Average Rate
(dollars in thousands)	$			$		%		$			$		%
ASSETS
Short-term investments:
Interest-bearing deposits at banks		16,395		108		1.33			91,687		137		0.30
Total short-term investments		16,395		108		1.33			91,687		137		0.30
Interest bearing time deposits at banks		6,028		90		3.00			10,389		135		2.62
Investment securities:
Taxable		384,453		3,864		2.01			359,189		2,710		1.51
Tax-exempt (3)		117,025		1,505		2.57			118,613		1,519		2.56
Total investment securities		501,478		5,369		2.14			477,802		4,229		1.77
Loans (2)(3)(4):
Residential mortgage loans		224,059		5,872		5.28			202,095		4,712		4.70
Construction		88,048		2,492		5.71			65,626		1,327		4.08
Commercial Loans		959,221		26,097		5.49			793,313		18,076		4.59
Agricultural Loans		344,882		8,474		4.95			348,479		7,455		4.31
Loans to state & political subdivisions		59,860		1,125		3.79			52,489		824		3.17
Other loans		79,199		2,828		7.20			30,568		796		5.25
Loans, net of discount		1,755,269		46,888		5.39			1,492,570		33,190		4.48
Total interest-earning assets		2,279,170		52,455		4.64			2,072,448		37,691		3.67
Cash and due from banks		7,716							6,600
Bank premises and equipment		18,292							17,078
Other assets		96,542							81,077
Total non-interest earning assets		122,550							104,755
Total assets		2,401,720							2,177,203
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts		527,960		3,584		1.37			516,129		717		0.28
Savings accounts		317,063		471		0.30			321,436		154		0.10
Money market accounts		325,841		3,121		1.93			347,403		523		0.30
Certificates of deposit		281,482		2,243		1.61			314,494		1,237		0.79
Total interest-bearing deposits		1,452,346		9,419		1.31			1,499,462		2,631		0.35
Other borrowed funds		303,344		6,497		4.32			73,651		600		1.64
Total interest-bearing liabilities		1,755,690		15,916		1.83			1,573,113		3,231		0.41
Demand deposits		386,104							366,046
Other liabilities		15,157							19,360
Total non-interest-bearing liabilities		401,261							385,406
Stockholders' equity		244,769							218,684
Total liabilities & stockholders' equity		2,401,720							2,177,203
Net interest income				36,539							34,460
Net interest spread (5)						2.81	%						3.26	%
Net interest income as a percentage of average interest-earning assets						3.23	%						3.35	%
Ratio of interest-earning assets to interest-bearing liabilities						130	%						132	%

(1) Averages are based on daily averages.

(2) Includes loan origination and commitment fees.

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

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

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

43

	Analysis of Average Balances and Interest Rates
	Three Months Ended
	June 30, 2023							June 30, 2022
	Average Balance (1)		Interest		Average Rate			Average Balance (1)		Interest		Average Rate
(dollars in thousands)		$	$			%			$	$			%
ASSETS
Short-term investments:
Interest-bearing deposits at banks		18,193		82		1.79			59,943		91		0.61
Total short-term investments		18,193		82		1.79			59,943		91		0.61
Interest bearing time deposits at banks		6,000		45		2.99			9,827		65		2.65
Investment securities:
Taxable		388,327		1,994		2.05			379,060		1,514		1.60
Tax-exempt (3)		113,674		725		2.55			122,167		782		2.56
Total investment securities		502,001		2,719		2.17			501,227		2,296		1.83
Loans (2)(3)(4):
Residential mortgage loans		236,167		3,168		5.38			203,338		2,381		4.70
Construction		90,635		1,353		5.99			69,689		721		4.15
Commercial Loans		983,666		13,772		5.62			818,517		9,494		4.65
Agricultural Loans		345,467		4,221		4.90			346,199		3,706		4.29
Loans to state & political subdivisions		60,395		582		3.87			57,933		457		3.16
Other loans		60,770		1,136		7.50			33,907		446		5.28
Loans, net of discount		1,777,100		24,232		5.47			1,529,583		17,205		4.51
Total interest-earning assets		2,303,294		27,078		4.72			2,100,580		19,657		3.75
Cash and due from banks		8,386							6,805
Bank premises and equipment		18,960							17,179
Other assets		102,155							83,164
Total non-interest earning assets		129,501							107,148
Total assets		2,432,795							2,207,728
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts		545,527		2,067		1.52			530,596		398		0.30
Savings accounts		314,745		265		0.34			325,649		80		0.10
Money market accounts		330,453		1,847		2.24			348,718		300		0.35
Certificates of deposit		283,694		1,301		1.84			306,213		578		0.76
Total interest-bearing deposits		1,474,419		5,480		1.49			1,511,176		1,356		0.36
Other borrowed funds		307,523		3,409		4.45			78,948		322		1.64
Total interest-bearing liabilities		1,781,942		8,889		2.00			1,590,124		1,678		0.42
Demand deposits		397,084							375,542
Other liabilities		3,379							21,134
Total non-interest-bearing liabilities		400,463							396,676
Stockholders' equity		250,390							220,928
Total liabilities & stockholders' equity		2,432,795							2,207,728
Net interest income				18,189							17,979
Net interest spread (5)						2.71	%						3.33	%
Net interest income as a percentage of average interest-earning assets						3.17	%						3.43	%
Ratio of interest-earning assets to interest-bearing liabilities						129	%						132	%

(1) Averages are based on daily averages.

(2) Includes loan origination and commitment fees.

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

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

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

44

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

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Interest and dividend income from investment securities and interest bearing deposits at banks (non-tax adjusted)	$	2,693	$	2,287	$	5,251	$	4,182
Tax equivalent adjustment		152		165		316		319
Interest and dividend income from investment securities and interest bearing deposits at banks (tax equivalent basis)	$	2,845	$	2,452	$	5,567	$	4,501
Interest and fees on loans (non-tax adjusted)	$	24,117	$	17,120	$	46,666	$	33,040
Tax equivalent adjustment		116		85		222		150
Interest and fees on loans (tax equivalent basis)	$	24,233	$	17,205	$	46,888	$	33,190
Total interest income	$	26,810	$	19,407	$	51,917	$	37,222
Total interest expense		8,889		1,678		15,916		3,231
Net interest income		17,921		17,729		36,001		33,991
Total tax equivalent adjustment		268		250		538		469
Net interest income (tax equivalent basis)	$	18,189	$	17,979	$	36,539	$	34,460

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

	Three months ended June 30, 2023 vs 2022 (1)						Six months ended June 30, 2023 vs 2022 (1)
	Change in Volume		Change in Rate		Total Change		Change in Volume		Change in Rate		Total Change
Interest Income:
Short-term investments:
Interest-bearing deposits at banks	$	6	$	(15)	$	(9)	$	9	$	(38)	$	(29)
Interest bearing time deposits at banks		(30)		10		(20)		(68)		23		(45)
Investment securities:
Taxable		38		442		480		203		951		1,154
Tax-exempt		(54)		(3)		(57)		(21)		7		(14)
Total investments		(16)		439		423		182		958		1,140
Loans:
Residential mortgage loans		414		373		787		542		618		1,160
Construction		255		377		632		537		628		1,165
Commercial Loans		2,111		2,167		4,278		4,161		3,860		8,021
Agricultural Loans		(8)		523		515		(76)		1,095		1,019
Loans to state & political subdivisions		20		105		125		125		176		301
Other loans		451		239		690		1,648		384		2,032
Total loans, net of discount		3,243		3,784		7,027		6,937		6,761		13,698
Total Interest Income		3,203		4,218		7,421		7,060		7,704		14,764
Interest Expense:
Interest-bearing deposits:
NOW accounts		12		1,657		1,669		16		2,851		2,867
Savings accounts		(3)		188		185		(2)		319		317
Money Market accounts		(15)		1,562		1,547		(31)		2,629		2,598
Certificates of deposit		(38)		761		723		(113)		1,119		1,006
Total interest-bearing deposits		(44)		4,168		4,124		(130)		6,918		6,788
Other borrowed funds		1,937		1,150		3,087		3,874		2,023		5,897
Total interest expense		1,893		5,318		7,211		3,744		8,941		12,685
Net interest income	$	1,310	$	(1,100)	$	210	$	3,316	$	(1,237)	$	2,079

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

45

Tax equivalent net interest income increased from $34,460,000 for the six month period ended June 30, 2022 to $36,539,000 for the six month period ended June 30, 2023, an increase of $2,079,000. The acquisition of HVBC had a minimal impact as the merger closed on June 16, 2023. The tax equivalent net interest margin decreased from 3.35% for the first six months of 2022 to 3.23% for the comparable period in 2023. The decrease is primarily caused by the increase in the cost of interest-bearing liabilities due to higher market interest rates in 2023 compared to 2022.

Total tax equivalent interest income for the 2023 six month period increased $14,764,000 as compared to the 2022 six month period. This increase was a result of an increase of $7,060,000 due to a change in volume as average interest-bearing assets increased $206.7 million. As a result of the higher market interest rate environment, the yield on average interest earning assets increased 97 basis point from 3.67% to 4.64% resulting in an increase interest income of $7,704,000.

Tax equivalent investment income for the six months ended June 30, 2023 increased $1,140,000 over the same period last year. The primary cause of the increase was due to the increase in yield on investment securities of 37 basis points to 2.14%

• The average balance of taxable securities increased $25.3 million, which resulted in an increase in investment income of $203,000. The yield on taxable securities increased 50 basis points from 1.51% to 2.01% as a result of lower yielding securities maturing in the second half of 2022 and first half of 2023. This resulted in an increase in investment income of $951,000. For a discussion of the Company’s current investment strategy, see the “Financial Condition – Investments”.

Total loan interest income increased $13,698,000 for the six months ended June 30, 2023 compared to the same period last year, as a result of higher volume and yields.

• Interest income on residential mortgage loans increased $1,160,000. The change due to rate was an increase of $618,000 as the average yield on residential mortgages increased from 4.70% to 5.28% as a result of the higher rate environment during the second half of 2022 and all of 2023. The average balance of residential mortgage loans increased $22.0 million as a result of organic growth and the HVBC acquisition. This resulted in an increase of $542,000 on total interest income due to volume.

• The average balance of construction loans increased $22.4 million as a result of projects in our Delaware market and the HVBC acquisition. This resulted in an increase of $537,000 on total interest income due to volume. The change due to rate was an increase of $628,000 as the average yield on construction loans increased from 4.08% to 5.71% as a result of the higher rate. environment during the second half of 2022 and all of 2023.

• The average balance of commercial loans increased $165.9 million from a year ago. The growth was primarily attributable to growth in the Delaware market and the HVCB acquisition. This had a positive impact of $4,161,000 on total interest income due to volume. The yield increased 90 basis points to 5.49% as a result of the higher rate environment during the second half of 2022 and all of 2023, which increased loan interest income $3,860,000.

46

• Interest income on agricultural loans increased $1,019,000 from 2022 to 2023. The yield increased 64 basis points to 4.95% as a result of the higher rate environment during the second half of 2022 and all of 2023, which increased loan interest income $1,095,000. The decrease in the average balance of agricultural loans of $3.6 million resulted in a decrease in interest income due to volume of $76,000.

• The average yield of state and political subdivision loans increased 62 basis points to 3.79% due to the higher rate environment resulting in an increase in income of $176,000. The average balance of state and political subdivision loans increased $7.4 million resulting in an increase in loan interest income of $125,000.

• The average balance of other loans increased $48.6 million as a result of outstanding student loans. This resulted in an increase of $1,648,000 on total interest income due to volume. The average yield of other loans increased 195 basis points to 7.20% due to the higher rate environment resulting in an increase in income of $384,000.

Total interest expense increased $12,685,000 for the six months ended June 30, 2023 compared with the comparative period last year as a result of an increase in the volume of other borrowed funds and an increase in rate on interest-bearing liabilities. Interest expense increased $3,744,000 due to volume as a result of an increase in the average balance of other borrowed funds of $229.7 million. The average rate paid on interest-bearing liabilities increased from 0.41% to 1.83%. The increase was driven by the Federal Reserve interest rate increases in 2022 and 2023, which caused interest expenses to increase $8,941,000.

• The average balance of interest bearing deposits decreased $47.1 million from June 30, 2022 to June 30, 2023. The reduction in average deposits resulted from customer funds transferred to higher-yielding investment alternatives as well as a reduction in municipal deposits to fund projects in various municipalities. The effect of these volume changes was a decrease in interest expense of $130,000. The average rate paid on interest bearing deposits was 1.31% for the first six months of 2023 and 0.35% for the comparable period in 2022. This resulted in an increase in interest expense of $6,918,000. The increase was due to the Federal Reserve increasing interest rates during 2022 and 2023.

• The average balance of other borrowed funds increased $229.7 million to fund loan growth experienced in 2022 and 2023. This resulted in an increase in interest expense of $3,874,000. There was an increase in the average rate paid on other borrowed funds from 1.64% to 4.32% due to the interest rate increases by the Federal Reserve that increased borrowings costs resulting in an increase in interest expense of $2,023,000.

Tax equivalent net interest income for the three months ended June 30, 2023 was $18,189,000 which compares to $17,979,000 for the same period last year.  This represents an increase of $210,000 and was primarily caused by an increase in the volume of interest earning assets.

Total tax equivalent interest income was $27,078,000 for the three month period ended June 30, 2023, compared to $19,657,000 for the comparable period last year, an increase of $7,421,000. This increase was a result of an increase of $3,203,000 due to a change in volume as average interest-bearing assets increased $202.7 million due to growth in the Delaware market and the HVBC acquisition. As a result of the higher market interest rate environment, the yield on average interest earning assets increased 97 basis point from 3.75% to 4.72% resulting in an increase interest income of $4,218,000.

Tax equivalent investment income for the three months ended June 30, 2023 increased $423,000 over the same period last year. The yield on taxable securities increased 45 basis points from 1.60% to 2.05% as a result of the purchases made during 2022 in a higher rate environment. This resulted in an increase in investment income of $442,000.

47

Total loan interest income increased $7,027,000 for the three months ended June 30, 2023 compared to the same period last year, as a result of a loan growth experienced in 2022 and the HVBC acquisition.

• Interest income on residential mortgage loans increased $787,000. The change due to rate was an increase of $373,000 as the average yield on residential mortgages increased from 4.70% to 5.38% as a result of the higher rate environment during the second half of 2022 and all of 2023.  The average balance of residential mortgage loans increased $32.8 million as a result organic loan growth and the HVBC acquisition. This resulted in an increase of $414,000 on total interest income due to volume.

• The average balance of construction loans increased $20.9 million as a result of projects in our Delaware market and the HVBC acquisition. This resulted in an increase of $255,000 on total interest income due to volume. The change due to rate was an increase of $377,000 as the average yield on construction loans increased from 4.15% to 5.99% as a result of the higher rate.

• The average balance of commercial loans increased $165.1 million from a year ago. The growth was primarily attributable to growth in the Delaware market and the HVBC acquisition. This had a positive impact of $2,111,000 on total interest income due to volume. The yield increased 97 basis points to 5.62% due to the higher rate environment experienced during the second half of 2022 and all of 2023, which increased loan interest income $2,167,000.

• The average yield of agricultural loans increased 61 basis points to 4.90% due to the higher rate environment resulting in an increase in income of $523,000.

• The average yield of state and political subdivision loans increased 71 basis points to 3.87% due to the higher rate environment resulting in an increase in income of $105,000.

• The average balance of other loans increased $26.9 million as a result of outstanding student loans. This resulted in an increase of $451,000 on total interest income due to volume. The average yield on other loans increased 222 basis points to 7.50% due to the rate earned on the student loans, resulting in an increase in interest income of $239,000.

Total interest expense increased $7,211,000 for the three months ended June 30, 2023 compared with the comparative period last year as a result of an increase in the volume of other borrowed funds and an increase in rate on interest-bearing liabilities. Interest expense increased $1,893,000 due to volume as a result of an increase in the average balance of other borrowed funds of $228.6 million. The average rate paid on interest-bearing liabilities increased from 0.42% to 2.00%. The increase was driven by the Federal Reserve interest rate increases in 2022 and 2023, which caused interest expenses to increased $5,318,000.

• The average balance of interest bearing deposits decreased $36.8 million from June 30, 2022 to June 30, 2023. The reduction in average deposits resulted from customer funds transferred to higher-yielding investment alternatives as well as a reduction in municipal deposits to fund projects in various municipalities. The effect of these volume changes was a decrease in interest expense of $44,000. The average rate paid on interest bearing deposits was 1.49% for the three months ended June 30, 2023 and 0.36% for the comparable period in 2022. This resulted in an increase in interest expense of $4,168,000. The increase was due to the Federal Reserve increasing interest rates during 2022 and 2023.

• The average balance of other borrowed funds increased $228.6 million to fund loan growth experienced in 2022 and borrowings acquired as part of the acquisition. This resulted in an increase in interest expense of $1,937,000. There was an increase in the average rate paid on other borrowed funds from 1.64% to 4.45% due to the interest rate increases by the Federal Reserve that increased borrowings costs resulting in an increase in interest expense of $1,150,000.

48

Provision for Credit Losses

For the six month period ended June 30, 2023, we recorded a provision for credit losses of $4,853,000, which represents an increase of $4,153,000 from the $700,000 provision recorded in the corresponding six months of last year. The provision for 2023 includes $4,591,000 associated with the HVBC acquisition and $162,000 as a provision for off-balance sheet items, which is also primarily attributable to the HVBC acquisition. Excluding these items, the provision for 2023 is $600,000 less than the comparable period in 2022 and is due to limited organic loan activity in  2023. (see “Financial Condition – Allowance for Credit Losses and Credit Quality Risk”).

For the three months ended June 30, 2023, we recorded a provision for credit losses of $4,853,000, which represents an increase of $4,403,000 from the $700,000 provision recorded in the corresponding six months of last year. The provision for 2023 includes $4,591,000 associated with the HVBC acquisition and $162,000 as a provision for off-balance sheet items, which is also primarily attributable to the HVBC acquisition. Excluding these items, the provision for 2023 is $350,000 less than the comparable period in 2022 and is due to limited organic loan activity in 2023.

Non-interest Income

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

	Six months ended June 30,				Change
	2023		2022		Amount		%
Service charges	$	2,504	$	2,572	$	(68)		(2.6)
Trust		411		433		(22)		(5.1)
Brokerage and insurance		956		982		(26)		(2.6)
Gains on loans sold		214		146		68		46.6
Equity security losses, net		(292)		(179)		(113)		63.1
Available for sale security losses, net		(51)		-		(51)	NA
Earnings on bank owned life insurance		452		419		33		7.9
Other		260		362		(102)		(28.2)
Total	$	4,454	$	4,735	$	(281)		(5.9)

	Three months ended June 30,				Change
	2023		2022		Amount		%
Service charges	$	1,293	$	1,324	$	(31)		(2.3)
Trust		181		184		(3)		(1.6)
Brokerage and insurance		442		501		(59)		(11.8)
Gains on loans sold		169		41		128		312.2
Equity security losses, net		(74)		(134)		60		(44.8)
Available for sale security losses, net		(51)		-		(51)	NA
Earnings on bank owned life insurance		234		212		22		10.4
Other		86		176		(90)		(51.1)
Total	$	2,280	$	2,304	$	(24)		(1.0)

Non-interest income for the six months ended June 30, 2023 totaled $4,454,000, a decrease of $281,000 when compared to the same period in 2022. For the three months ended June 30, 2023, non-interest income decreased $24,000 to $2,280,000.  During the first six   months of 2023, net equity security losses amounted to $292,000 as a result of market losses associated with general stock market losses compared with a $179,000 loss in the comparable 2022 period associated with market conditions for that period. During the three and six months ended June 30, 2023, there were $51,000 of losses from the sale of $10.0 million available for sale municipal securities. Additionally, $76.5 million of securities obtained as part of the acquisition were sold for no gain or loss during the second quarter of 2023. There were no sales of available during the three and six months ended June 30, 2022.

49

The increase in gains on loans sold and the decrease in other income for the three and six month periods ended June 30 2023 compared to 2022 is attributable the HVBC acquisition and their residential lending model, which focused on originating and selling residential mortgage loans, which includes the use of interest rate locks and other derivative activities, which is included in other income. The decrease in Trust revenues for the six month period is due to lower estate settlement fees in 2023 compared to 2022.

Non-interest Expense

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

	Six months ended June 30,				Change
	2023		2022		Amount		%
Salaries and employee benefits	$	15,593	$	14,030	$	1,563		11.1
Occupancy		1,649		1,548		101		6.5
Furniture and equipment		313		295		18		6.1
Professional fees		768		733		35		4.8
FDIC insurance		625		280		345		123.2
Pennsylvania shares tax		596		678		(82)		(12.1)
Amortization of intangibles		62		80		(18)		(22.5)
Merger and acquisition		8,646		-		8,646	NA
Software expenses		723		699		24		3.4
ORE expenses (recovery)		15		(247)		262		(106.1)
Other		3,468		3,335		133		4.0
Total	$	32,458	$	21,431	$	11,027		51.5

	Three months ended June 30,				Change
	2023		2022		Amount		%
Salaries and employee benefits	$	7,916	$	7,117	$	799		11.2
Occupancy		814		754		60		8.0
Furniture and equipment		162		166		(4)		(2.4)
Professional fees		387		394		(7)		(1.8)
FDIC insurance		325		145		180		124.1
Pennsylvania shares tax		298		339		(41)		(12.1)
Amortization of intangibles		31		40		(9)		(22.5)
Merger and acquisition		8,402		-		8,402		NA
Software expenses		372		358		14		3.9
ORE expenses (recovery)		(11)		120		(131)		(109.2)
Other		1,984		1,767		217		12.3
Total	$	20,680	$	11,200	$	9,480		84.6

Non-interest expenses increased $11,027,000 for the six months ended June 30, 2023 compared to the same period in 2022. Salaries and employee benefits increased $1,563,000 or 11.1%. The increase was due to merit increases effective at the beginning of 2023, additional full time equivalent employees (FTE) of 8.9, which is an increase of 2.90%, and an increase in health care expenses due to higher claims on the Company’s partially self-funded plan.

50

The increase in merger and acquisition expenses was due to fees associated with the acquisition of HVB that closed in June 2023 and includes severance costs, change in control payments, contract termination payments and various professional and consulting fees. The increase in ORE expenses was due to the sales of OREO properties in 2022 for a gain of $481,000.

For the three months ended, June 30, 2023, non-interest expenses increased $9,480,000 when compared to the same period in 2022. The changes in salaries and employee benefits and merger and acquisition expenses correspond to the changes for the six month period. The decrease in ORE expenses is due to having few ORE properties in 2023 than 2022. The increase in other expenses for the three month period is due to operational charge-offs for fraudulent account activity in customer accounts, franchise fees for Delaware and other periodic pension expenses.

Provision for Income Taxes

The provision for income taxes was $421,000 for the six month period ended June 30, 2023 compared to $2,954,000 for the same period in 2022. The decrease is primarily attributable to the decrease in income before the provision for income taxes of $13,715,000 for the comparable periods due to the one-time costs associated with the HVBC acquisition.  Through management of our municipal loan and bond portfolios, management is focused on minimizing our effective tax rate.  Our effective tax rate was 13.4% and 17.8% for the first six months of 2023 and 2022, respectively, compared to the statutory rate of 21%.

For the three months ended June 30, 2023, the benefit for income taxes was $1,188,000 compared to a provision of $1,482,000 for the same period in 2022. The decrease is attributable to the decrease in income before the provision for income taxes of $13,715,000 for the comparable periods due to the one-time acquisition costs. Our effective tax rate was (22.3)% and 17.7% for the three months ended June 30, 2023 and 2022, respectively.

We are invested in seven limited partnerships that have established low-income housing projects in our market areas with our most recent investments made in the second half of 2022. Three project are currently in construction phase with the expectation credits will be available in the second half of 2023. The remaining four partnership credits are fully utilized as of December 31, 2023. We anticipate recognizing an aggregate of $6.6 million of tax credits over the next 13 years.

Financial Condition

Total assets were $2.89 billion at June 30, 2023, an increase of $558.4 million from $2.33 billion at December 31, 2022, due primarily to the HVBC acquisition that closed on June 16, 2023. Cash and cash equivalents increased to $18.5 million to $44.7 million with the increase attributable to the acquisition and collateral held for derivative instruments. Available for sale securities decreased $5.2 million and net loans increased $434.7 million to $2.14 billion at June 30, 2023 due to the acquisition. Total deposits increased $421.6 million to $2.27 billion since year-end 2022 as a result of the acquisition, while borrowed funds increased $60.9 million to $318.2 million.

Cash and Cash Equivalents

Cash and cash equivalents totaled $44.7 million at June 30, 2023 compared to $26.2 million at December 31, 2022. The increase is due to the acquisition and cash held as collateral for certain derivative positions the Bank is exposed to with third parties.  Management actively measures and evaluates the Company’s liquidity position through our Asset–Liability Committee and believes the Company’s liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional funding sources including the Bank’s core deposits, Federal Home Loan Bank financing, federal funds lines with correspondent banks, brokered certificates of deposit and the portion of the investment and loan portfolios that mature within one year.  Management expects that these sources of funds will permit us to meet cash obligations and off-balance sheet commitments as they come due.

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Investments

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

	June 30, 2023				December 31, 2022
	Amount		%		Amount		%
Debt securities:
U. S. Agency securities	$	66,867		15.3	$	70,677		16.0
U. S. Treasury notes		149,791		34.4		148,570		33.6
Obligations of state & political subdivisions		100,443		23.0		110,300		25.0
Corporate obligations		12,207		2.8		9,383		2.1
Mortgage-backed securities in government sponsored entities		105,007		24.1		100,576		22.8
Equity securities		1,849		0.4		2,208		0.5
Total	$	436,164		100.0	$	441,714		100.0

	June 30, 2023/ December 31, 2022 Change
	Amount		%
Debt securities:
U. S. Agency securities	$	(3,810)		(5.4)
U. S. Treasury notes		1,221		0.8
Obligations of state & political subdivisions		(9,857)		(8.9)
Corporate obligations		2,824		30.1
Mortgage-backed securities in government sponsored entities		4,431		4.4
Equity securities		(359)		(16.3)
Total	$	(5,550)		(1.3)

Our investment portfolio decreased by $5.6 million, or 1.3%, from December 31, 2022 to June 30, 2023. As part of the HVBC acquisition, $79.2 million of available for sale securities were acquired. Excluding the acquisition, $10.3 million of mortgage backed securities were purchased. We experienced $5.8 million of principal repayments and $4.5 million of calls and maturities. We sold $86.6 million of securities to deleverage balance sheet during 2023 that included a loss of $51,000. The majority of the securities sold were acquired as part of the HVBC acquisition.  As a result of decreases in market interest rates, the unrealized loss on available for sale investment portfolio decreased $3.0 million. Excluding our short-term investments consisting of monies held primarily at the Federal Reserve for liquidity purposes, our investment portfolio for the six month period ended June 30, 2023 yielded 2.14%, compared to 1.77% in the comparable period in 2022, on a tax equivalent basis.

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

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

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Loans Held for Sale

Loans held for sale increased $14.2 million to $14.9 million as of June 30, 2023 from December 31, 2022 due to the HVBC acquisition and their focus on residential mortgage lending and related loan sales into the secondary market.

Loans

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

	June 30, 2023				December 31, 2022
	Amount		%		Amount		%
Real estate:
Residential	$	358,025		16.6	$	210,213		12.2
Commercial		1,080,513		50.0		876,569		50.8
Agricultural		312,302		14.4		313,614		18.2
Construction		156,927		7.3		80,691		4.7
Consumer		42,701		2.0		86,650		5.0
Other commercial loans		120,288		5.6		63,222		3.7
Other agricultural loans		30,615		1.4		34,832		2.0
State & political subdivision loans		61,471		2.7		59,208		3.4
Total loans		2,162,842		100.0		1,724,999		100.0
Less allowance for loan losses		15,250				18,552
Net loans	$	2,147,592			$	1,706,447

	June 30, 2023/ December 31, 2022 Change
	Amount		%
Real estate:
Residential	$	147,812		70.3
Commercial		203,944		23.3
Agricultural		(1,312)		(0.4)
Construction		76,236		94.5
Consumer		(43,949)		(50.7)
Other commercial loans		57,066		90.3
Other agricultural loans		(4,217)		(12.1)
State & political subdivision loans		2,263		3.8
Total loans	$	437,843		25.4

The Bank’s lending efforts have historically been focused in north central Pennsylvania and southern New York. With the acquisition of FNB and the opening of offices in Lancaster County, this focus has grown to include Lebanon, Schuylkill, Berks and Lancaster County markets of south central, Pennsylvania. We have a limited branch office in Union County that is staffed by a lending team to primarily support agricultural opportunities in central Pennsylvania. In December 2017, we completed a branch acquisition in State College, which provides us with opportunities in Centre County, Pennsylvania and other areas of central Pennsylvania. In April 2020, we completed the MidCoast acquisition, which expanded our markets into the State of Delaware with activity centered around the cities of Wilmington and Dover, Delaware. Since the MidCoast acquisition, we have opened two additional branches in the Delaware market to better serve customers in the Wilmington market, as well as the surrounding area of Chester County, Pennsylvania. In June 2023, we completed the HVBC acquisition, which expanded our markets into south east Pennsylvania, including the counties of Montgomery, Bucks and Philadelphia. It also includes a Mortgage production in Mount Laurel, New Jersey. We have received approval to open an office in Williamsport, Pennsylvania, which is expected in the fourth quarter of 2023. We originate loans primarily through direct loans to our existing customer base, with new customers generated through the strong relationships our lending teams have with their customers and our lenders expertise in certain areas, as well as by referrals from real estate brokers, building contractors, attorneys, accountants, corporate and advisory board members, existing customers and the Bank’s website.  The Bank offers a variety of loans although historically most of our lending has focused on real estate loans including residential, commercial, agricultural, and construction loans.  All lending is governed by a lending policy that is developed and administered by management and approved by the Board of Directors.

53

As part of the acquisition, we acquired $477.0 million of loans for the portfolio. Excluding this, organic loan growth has been limited, and the Bank actually experienced a decrease in loans of $40.1 million, which was expected due to a paydown in student loans. The rise in market interest rates has had an impact and slowed activity, especially in the first half of 2023.

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

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

Allowance for Credit Losses - Loans

The allowance for credit losses - loans is maintained at a level which, in management’s judgment, is adequate to absorb losses in the loan portfolio. The provision for credit losses - loans is charged against current income.  Loans deemed not collectable are charged-off against the allowance while subsequent recoveries increase the allowance.  The allowance for credit losses - loans was $21,652,000 or 1.00% of total loans as of June 30, 2023 as compared to $18,552,000 or 1.08% of loans as of December 31, 2022. During the first quarter of 2023, the Company adopted CECL, which resulted in a decrease in the allowance for credit losses – loans of $3.3 million. As a result of the acquisition, the Bank recorded a provision for credit losses for non-PCD loans of $4,591,000 and an allowance of $1,689,000 for PCD loans. An additional $100,000 of provision for credit losses-loans was recorded in 2023. Net recoveries for the first half of 2023 totaled $20,000. The following table shows the distribution of the allowance for credit losses - loans and the percentage of loans compared to total loans by loan category as of June 30, 2023 and December 31, 2022 (dollars in thousands):

	June 30, 2023				December 31
					2022
	Amount		%		Amount		%
Real estate loans:
Residential	$	2,675		16.6	$	1,056		12.2
Commercial		9,274		50.0		10,120		50.8
Agricultural		3,579		14.4		4,589		18.2
Construction		1,667		7.3		801		4.7
Consumer		1,259		2.0		135		5.0
Other commercial loans		2,477		5.6		1,040		3.7
Other agricultural loans		268		1.4		489		2.0
State & political subdivision loans		52		2.7		322		3.4
Unallocated		401		N/A		-		N/A
Total allowance for loan losses	$	21,652		100.0	$	18,552		100.0

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

June 30, 2023	Credit Loss Expense (Benefit)		Net (charge- offs) Recoveries		Average Loans		Ratio of net (charge-offs) recoveries to Average loans		Allowance to total loans		Non- accrual loans as a percent of loans		Allowance to total non- accrual loans
Real estate:
Residential	$	1,433	$	(1)	$	224,059		0.00%		0.75%		0.62%		120.17%
Commercial		2,185		-		890,065		0.00%		0.86%		0.17%		497.80%
Agricultural		98		-		312,317		0.00%		1.15%		0.96%		119.62%
Construction		969		-		88,048		0.00%		1.06%		1.50%		70.73%
Consumer		(610)		17		79,199		0.02%		2.95%		2.51%		117.44%
Other commercial loans		933		4		69,156		0.01%		2.06%		1.88%		109.41%
Other agricultural loans		(2)		-		32,565		0.00%		0.88%		0.98%		89.63%
State & political subdivision loans		10		-		59,860		0.00%		0.08%		0.00%	NA
Unallocated		(325)		-		-	NA		NA		NA		NA
Total	$	4,691	$	20	$	1,755,269		0.00%		1.00%		0.60%		116.65%
December 31, 2022
Real estate:
Residential	$	(91)	$	-	$	204,063		0.00%		0.50%		0.28%		178.68%
Commercial		2,018		3		782,016		0.00%		1.15%		0.32%		364.29%
Agricultural		(140)		-		312,999		0.00%		1.46%		1.03%		142.43%
Construction		367		-		73,214		0.00%		0.99%		0.00%	NA
Consumer		(111)		(16)		58,715		(0.03%)		0.16%		0.00%	NA
Other commercial loans		439		(422)		72,444		(0.58%)		1.64%		0.10%		1677.42%
Other agricultural loans		(69)		-		34,421		0.00%		1.40%		0.82%		171.58%
State & political subdivision loans		41		-		56,004		0.00%		0.54%		0.00%	NA
Unallocated		(771)		-		-	NA		NA		NA		NA
Total	$	1,683	$	(435)	$	1,593,876		(0.03%)		1.08%		0.40%		267.40%

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

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

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

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

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

(dollars in thousands)	June 30, 2023		December 31, 2022
Non-performing loans:
Non-accruing loans	$	13,073	$	6,938
Accrual loans - 90 days or more past due		139		7
Total non-performing loans		13,212		6,945
Foreclosed assets held for sale		426		543
Total non-performing assets	$	13,638	$	7,488

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

(in thousands)	June 30, 2023								December 31, 2022
	30 - 89 Days Past Due Accruing		Non-Performing Loans								Non-Performing Loans
			90 Days Past Due Accruing		Non- accrual		Total Non- Performing		30 - 89 Days Past Due Accruing		90 Days Past Due Accruing		Non- accrual		Total Non- Performing
Real estate:
Residential	$	1,212	$	-	$	2,226	$	2,226	$	469	$	-	$	591	$	591
Commercial		2,265		129		1,863		1,992		1,018		-		2,778		2,778
Agricultural		23		-		2,992		2,992		-		-		3,222		3,222
Construction		477		-		2,357		2,357		-		-		-		-
Consumer		397		10		1,072		1,082		147		7		-		7
Other commercial loans		220		-		2,264		2,264		1,695		-		62		62
Other agricultural loans		234		-		299		299		-		-		285		285
Total nonperforming loans	$	4,828	$	139	$	13,073	$	13,212	$	3,329	$	7	$	6,938	$	6,945

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(in thousands)	Change in Non-Performing Loans June 30, 2023 /December 31, 2022
	Amount		%
Real estate:
Residential	$	1,635		276.6
Commercial		(786)		(28.3)
Agricultural		(230)		(7.1)
Construction		2,357	NA
Consumer		1,075		15,357.1
Other commercial loans		2,202		3,551.6
Other agricultural loans		14		4.9
Total nonperforming loans	$	6,267		90.2

Nonperforming loans increased $6.3 million during 2023. As part of the acquisition, we acquired $1.8 million of non-performing residential loans, $1.1 million of non-performing consumer loans and $763,000 of non-performing other commercial loans. During the first quarter of 2023, the Bank place two large relationships totaling $3.8 million on non-accrual status, one of which was secured by real estate and the other was secured by airplanes and camera equipment. At June 30, 2023, approximately 61.2% of the Bank’s non-performing loans are associated with the following six customer relationships:

• A commercial loan relationship with $661,000 outstanding, and additional letters of credit of $1.2 million available, secured by undeveloped land, stone quarries and equipment, was on non-accrual status as of June 30, 2023. The Company services the natural gas industry, as well as local municipalities. As a result, the reduced exploration for natural gas in north central Pennsylvania has significantly impacted the cash flows of the customer, who provides excavation services and stone for pad construction related to these activities. During 2020, the Company had the underlying equipment collateral appraised and in the first quarter of 2022, the Company had the quarry appraised. The appraisals indicated a decrease in collateral values compared to the appraisal ordered for the loan origination, however, the loan was still considered well secured on a loan to value basis at June 30, 2023. In 2022 and 2023, the customer  liquidated some excess equipment and the funds have been utilized to pay down a portion of the loans. Management determined that no specific reserve was required as of June 30, 2023.

• An agricultural loan customer with a total loan relationship of $1.7 million, secured by real estate, equipment and cattle, was on non-accrual status as of June 30, 2023. The customer declared bankruptcy during the fourth quarter of 2018 and developed a workout plan that was approved by the bankruptcy court in the fourth quarter of 2019 and resulted in monthly payments resuming in late 2019 that continues into 2023. Included within these loans to this customer are loans which are subject to Farm Service Agency guarantees in excess of $700,000. Depressed milk prices and the pandemic have created cash flow difficulties for this customer.  Absent a sizable and sustained increase in milk prices, which is not assured, we will need to rely upon the collateral for repayment of interest and principal. During 2020, the Company had the underlying collateral appraised. Management determined that no specific reserve was required as of June 30, 2023.

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

• A commercial loan customer with a total loan relationship of $1.5 million, secured by airplanes and camera equipment was on non-accrual status as of June 30, 2023. The customer is in the process of selling its business, which has taken longer than expected causing cashflow difficulties. Management reviewed the collateral and determined that no specific reserve was required as of June 30, 2023.

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• A construction loan customer with a total loan relationship of $2.4 million, secured by partially  developed real estate, was on non-accrual status as of June 30, 2023. The customer has experienced delays in developing the real estate for resale resulting in financing difficulties. Management reviewed the collateral and determined that a specific reserve of $257,000 was required as of June 30, 2023.

• A commercial loan customer acquired as part of the HVBC acquisition with a total loan relationship of $15.3 million that is subject to a 95% participation agreement with the Federal Reserve Bank of Boston through their Main Street Lending Program. The net balance owned by the Bank is $763,000, is unsecured and is subject to a variable rate tied to three month SOFR. The rise in market interest rates has significantly impacted the cashflows of the customer and the customer has indicated that they do not have funds to make any payments on this loan. As the loan is unsecured a specific reserve of $763,000 was required as of June 30, 2023.

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

• Six loan relationships comprise 61.2% of the non-performing loan balance, which required a specific reserve of $1,020,000 as of June 30, 2023.

• The Company has a history of low charge-offs, which were 0.00% of average loans on an annualized basis for 2023 and 0.3% for 2022.

Bank Owned Life Insurance

The Company owns bank owned life insurance policies to offset future employee benefit costs. These policies provide the Bank with an asset that generates earnings to partially offset the current costs of benefits, and eventually (at the death of the insureds) provide partial recovery of cash outflows associated with the benefits.  As of June 30, 2023, and December 31, 2022, the cash surrender value of the life insurance was $50.2 million and $39.4 million, respectively. As part of the HVBC acquisition, the Bank acquired $10.4 million of bank owned life insurance.  The change in cash surrender value, net of purchases and amounts acquired through acquisitions, is recognized in the results of operations. The amounts recorded as non-interest income totaled $234,000 and $212,000 for the three month periods ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023 and 2022, $452,000 and $419,000, respectively, was recorded in non-interest income. The Company evaluates annually the risks associated with the life insurance policies, including limits on the amount of coverage and an evaluation of the various carriers’ credit ratings.

The Company policies that were purchased directly from insurance companies and acquired as part of the HVBC acquisition are structured so that any death benefits received from a policy while the insured person is an active employee of the Bank will be split with the beneficiary of the policy.  Under these agreements, the employee’s beneficiary will be entitled to receive 50% of the net amount at risk from the proceeds.  The net amount at risk is the total death benefit payable less the cash surrender value of the policy as of the date of death. The policies acquired as part of the acquisition of FNB provide a fixed split-dollar benefit for the beneficiary’s estate, which is dependent on several factors including whether the covered individual was a former Director of First National Bank of Fredericksburg (“FNB”) or a former employee of FNB and their salary level. As of June 30, 2023, and December 31, 2022, included in other liabilities on the Consolidated Balance Sheet was a liability of $630,000 and $660,000, respectively, for the obligation under the split-dollar benefit agreements.

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Premises and Equipment

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

Other assets

Other assets increased $18.0 million to $43.8 million. The primary driver of the increase was the HVBC acquisition, which increased other assets $14.8 million, which was due to leases, restricted stocks and prepaid expenses.

Deposits

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

	June 30, 2023				December 31, 2022
	Amount		%		Amount		%
Non-interest-bearing deposits	$	553,097		24.4	$	396,260		21.5
NOW accounts		633,325		27.9		512,502		27.8
Savings deposits		335,497		14.8		321,917		17.5
Money market deposit accounts		413,350		18.2		335,838		18.2
Certificates of deposit		330,831		14.7		277,691		15.0
Total	$	2,266,100		100.0	$	1,844,208		100.0

	June 30, 2023/ December 31, 2022 Change
	Amount		%
Non-interest-bearing deposits	$	156,837		39.6
NOW accounts		120,823		23.6
Savings deposits		13,580		4.2
Money market deposit accounts		77,512		23.1
Certificates of deposit		53,140		19.1
Total	$	421,892		22.9

Deposits increased $421.9 million since December 31, 2022. As part of the acquisition, we acquired $533.4 million of deposits. Excluding the acquisition, deposits would have decreased $111.5 million.  The reduction in deposits resulted from customer funds transferred to higher-yielding investment alternatives; and seasonal reductions in municipal deposits as well as funds used for various projects within municipalities. Brokered deposits totaled $42.2 million and $16.0 million as of June 30, 2023 and December 31, 2022, respectively. As part of the acquisition, we acquired $36.2 million, which are subject to mature prior to December 31, 2023. At June 30, 2023, the Bank estimates that balances held by customers in excess of the FDIC insurance limit ($250,000 per insured account) totaled $986.4 million, or 43.5% of the Bank’s total deposits. Included in this balance are balances held through Intrafi, which provides customers with  additional FDIC insurance, as well as deposits collateralized by securities (almost exclusively municipal deposits). The total of these items was $577.6 million, or 25.5% of the Bank’s total deposits, as of June 30, 2023.

Borrowed Funds

Borrowed funds were $318.2 million and $257.3 million as of June 30, 2023 and December 31, 2022, respectively. As part of the acquisition, the Company acquired $58.6 of borrowings, which accounts for the majority of the increase. The acquired borrowings include $49.8 million of FHLB advances and $8.9 million of subordinated debt.

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In April 2020, the Bank entered into two interest rate swap agreements to convert floating-rate debt to fixed rate debt on notional amounts of $15.0 million and $10.0 million. The interest rate swap instruments involve an agreement to receive a floating rate and pay a fixed rate, at specified intervals, calculated on the agreed-upon notional amounts. The differentials paid or received on interest rate swap agreements are recognized as adjustments to interest expense in the period. The interest rate swap agreements were entered into on April 1, 2020 and expire on April 1, 2025 and April 1, 2027. In April 2020, the Company entered into an interest rate swap agreement to convert floating-rate debt to fixed rate debt on a notional amounts of $7.5 million. The interest rate swap instrument involves an agreement to receive a floating rate and pay a fixed rate, at specified intervals, calculated on the agreed-upon notional amount. The differentials paid or received on interest rate swap agreements are recognized as adjustments to interest expense in the period. The interest rate swap agreements were entered into on April 13, 2020 and expire on June 17, 2027. In May of 2020, the Bank entered into three two year forward interest rate swaps that will convert floating rate debt to fixed rate debt on notional amounts of $6.0 million each.  The interest rate swap instruments involves an agreement to receive a floating rate and pay a fixed rate, at specified intervals, calculated on the agreed-upon notional amount. The differentials paid or received on interest rate swap agreements are recognized as adjustments to interest expense in the period. The interest rate swap agreements were entered into on May 14, 2020 and expire on May 14, 2027, 2029 and 2032. The fair value of the interest rate swaps at June 30, 2023 was $6,562,000 and is included within fair value of derivative instruments on the consolidated balance sheets.

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

Stockholders’ Equity

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

Total stockholders’ equity was $263.2 million at June 30, 2023 compared to $200.1 million at December 31, 2022, an increase of $63,081,000, or 31.5%.  As part of the acquisition, the Company issued 693,858 shares that had a fair value at the time of issuance of $60.1 million. Excluding accumulated other comprehensive loss, stockholders’ equity increased $60.9 million, or 26.1%. The accumulated comprehensive loss decreased $2.2 million, which was primarily the result of the increase in fair value of the Company’s available for sale investment portfolio caused by the decrease in longer term market interest rates. For the six months of 2023, the Company had net income of $2.7 million and declared cash dividends of $3.9 million, or $0.961 per share, representing a cash dividend payout ratio of 142.9%, due to the impact the one-time costs of the acquisition had on net income. As a result of implementing CECL, retained earnings increased $1,766,000.

All of the Company’s debt investment securities are classified as available-for-sale, making this portion of the Company’s balance sheet more sensitive to the changing market value of investments. As a result of decreases in longer term market interest rates, the defined benefit plan obligations and the interest rate swaps entered into during 2020, accumulated other comprehensive loss increased approximately $2.2 million from December 31, 2022.

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

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Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), common equity Tier 1 capital (as defined) to total risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As permitted by applicable federal regulation, the Bank has opted to use the community bank leverage ratio (the “CBLR”) framework for determining its capital adequacy.  Under the CBLR framework a qualifying community bank is considered well-capitalized if its leverage ratio (Tier 1 capital divided by average total consolidated assets) exceeds 9%. Following the passage of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in response to the COVID-19 pandemic, the federal banking regulators revised the CBLR framework as follows: (i) beginning in the second quarter of 2020, a qualifying community bank need only have a leverage ratio of at least 8%, subject to the other qualifying requirements, and (ii) if a qualifying community bank’s leverage ratio falls below 8%, then it will have two calendar quarters to maintain a leverage ratio of 7% or greater.  These revisions under the CARES Act are effective April 23, 2020 and terminated on December 31, 2020.  Following such termination there is a grace period for returning to the 9% CBLR threshold.  The CBLR was set at 8.5% for 2021, and 9% thereafter.  The grace period is also adjusted to account for the graduating increase. As a result, in 2021, a qualifying community bank utilizing the grace period must maintain a CBLR of at least 7.5%. Thereafter, a qualifying community bank utilizing the grace period must maintain a CBLR of at least 8%. If a qualifying community bank fails to maintain the applicable minimum CBLR during the grace period, or if it is unable to restore compliance with the CBLR within the grace period, then it will revert to the Basel III capital framework and the normal Prompt Corrective Action capital categories will apply. At June 30, 2023, the Bank leverage ratio under the CBLR framework was 9.70%, which meets the 9.0% requirement to be considered “well-capitalized”  under the CBLR. The Bank leverage ratio as of December 31, 2022 was 8.77%, which did not meet the ratio to be considered “well-capitalized”  under the CBLR as of December 31, 2022. As such, the following table provides the Bank’s computed risk‑based capital ratios as of December 31, 2022, which reflects the Bank being well capitalized at that date (dollars in thousands):

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
December 31, 2022	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets):
Company	$	238,966		12.87%	$	148,567		8.00%	$	185,709		10.00%
Bank	$	222,714		12.01%	$	148,348		8.00%	$	185,435		10.00%
Tier 1 Capital (to Risk Weighted Assets):
Company	$	210,250		11.32%	$	111,425		6.00%	$	148,567		8.00%
Bank	$	203,998		11.00%	$	111,261		6.00%	$	148,348		8.00%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Company	$	202,750		10.92%	$	83,569		4.50%	$	120,711		6.50%
Bank	$	203,998		11.00%	$	83,446		4.50%	$	120,533		6.50%
Tier 1 Capital (to Average Assets):
Company	$	210,250		9.03%	$	93,161		4.00%	$	116,451		5.00%
Bank	$	203,998		8.77%	$	93,075		4.00%	$	116,344		5.00%

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Off-Balance Sheet Activities

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

	June 30, 2023		December 31, 2022
Commitments to extend credit	$	596,120	$	437,449
Standby letters of credit		17,760		15,972
	$	613,880	$	453,421
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	$	1,390	$	165

We also offer limited overdraft protection as a non-contractual courtesy which is available to demand deposit accounts in good standing. Overdraft charges as a result of ATM withdrawals and one-time point of sale (non-recurring) transactions require prior approval of the customer. The non-contractual amount of financial instruments with off-balance sheet risk at June 30, 2023 and December 31, 2022 was $13,595,000 and $12,232,000, respectively. The Company reserves the right to discontinue this service without prior notice.

Liquidity

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

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

The Company's use of funds is shown in the investing activity section of the Consolidated Statement of Cash Flows, where the net loan activity is presented.  Other uses of funds include purchasing stock from the Federal Home Loan Bank (FHLB) of Pittsburgh, as well as capital expenditures.  Capital expenditures (including software purchases), during the first six months of 2023 were $1,926,000 compared to $898,000 during the same time period in 2022.

Short-term debt from the FHLB supplements the Bank’s availability of funds.  The Bank achieves liquidity primarily from temporary or short‑term investments in the Federal Reserve and the FHLB.  The Bank had a maximum borrowing capacity at the FHLB of approximately $881.3 million, of which $345.6 million was outstanding, at June 30, 2023. The Bank also has two federal funds line with third party providers for $34.0 million as of June 30, 2023, which is unsecured and undrawn upon. We also have a borrower in custody line with the Federal Reserve Bank of approximately $1.0 million, which also is not drawn upon as of June 30, 2023. The Bank also has available through the Bank Term Funding program initiated by the Federal Reserve during the second quarter of 2023, a line of $54.5 million, which is undrawn upon as of June 30, 2023. The Company has a $20.0 million line of credit with a Pennsylvania community bank, of which $7.5 million is utilized as of June 30, 2023. The Company continues to evaluate its liquidity needs and as necessary finds additional sources.

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Citizens Financial Services, Inc. is a separate legal entity from the Bank and must provide for its own liquidity.  In addition to its operating expenses, Citizens Financial Services, Inc. is responsible for paying any dividends declared to its shareholders.  Citizens Financial also has repurchased shares of its common stock.  Citizens Financial Services, Inc.’s primary source of income is dividends received from the Bank.  Both federal and state laws impose restrictions on the ability of the Bank to pay dividends. In particular, the Bank may not, as a state-chartered bank which is a member of the Federal Reserve System, declare a dividend without approval of the Federal Reserve, unless the dividend to be declared by the Bank’s Board of Directors does not exceed the total of:  (i) the Bank’s net profits for the current year to date, plus (ii) its retained net profits for the preceding two current years, less any required transfers to surplus.  The Federal Reserve Board and the FDIC have formal and informal policies which provide that insured banks and bank holding companies should generally pay dividends only out of current operating earnings, with some exceptions.  The Prompt Corrective Action Rules, described above, further limit the ability of banks to pay dividends, because banks which are not classified as well capitalized or adequately capitalized may not pay dividends and no dividend may be paid which would make the Bank undercapitalized after the dividend.  At June 30, 2023, Citizens Financial Services, Inc. (on an unconsolidated basis) had liquid assets of approximately $9.2 million.

Interest Rate and Market Risk Management

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

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

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

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

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

			Change In			% Change In
	Prospective One-Year		Prospective			Prospective
Changes in Rates	Net Interest Income		Net Interest Income			Net Interest Income
-400 Shock	$	94,994	$	4,895			5.43
-300 Shock		93,624		3,525			3.91
-200 Shock		92,193		2,094			2.32
-100 Shock		91,568		1,469			1.63
Base		90,099		-			-
+100 Shock		87,716		(2,383	)		(2.64	)
+200 Shock		85,028		(5,071	)		(5.63	)
+300 Shock		82,707		(7,392	)		(8.20	)
+400 Shock		80,374		(9,725	)		(10.79	)

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The model makes estimates, at each level of interest rate change, regarding cash flows from principal repayments on loans and mortgage backed securities, call activity of other investment securities, and deposit selection, re-pricing and maturity structure.  Because of these assumptions, actual results could differ significantly from these estimates which would result in significant differences in the calculated projected change on net interest income. Additionally, the changes above do not necessarily represent the level of change under which management would undertake specific measures to realign its portfolio in order to reduce the projected level of change. It should be noted that the changes in net interest income noted above are in line with Company policy for interest rate risk.

Item 3-Quantitative and Qualitative Disclosure about Market Risk

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

Item 4-Control and Procedures

(a) Disclosure Controls and Procedures

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

(b) Changes to Internal Control over Financial Reporting

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

PART II ‑ OTHER INFORMATION

Item 1 ‑ Legal Proceedings

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

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Item 1A – Risk Factors

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

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

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

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

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

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

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

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

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares (or units Purchased)		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans of Programs		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
4/1/23 to 4/30/23		-	$	0.00		-		116,389
5/1/23 to 5/31/23		-	$	0.00		-		116,389
6/1/23 to 6/30/23		-	$	0.00		-		116,389
Total		-	$	0.00		-		116,389

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

Item 3 ‑ Defaults Upon Senior Securities

Not applicable.

Item 4 – Mine Safety Disclosure

Not applicable.

Item 5 ‑ Other Information

None

Item 6 ‑ Exhibits

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

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

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

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

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

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

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

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Signatures

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

Citizens Financial Services, Inc.

(Registrant)

August 9, 2023		/s/ Randall E. Black
	By:	Randall E. Black
	President and Chief Executive Officer
	(Principal Executive Officer)

August 9, 2023		/s/ Stephen J. Guillaume
	By:	Stephen J. Guillaume
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

I, Randall E. Black, certify that:

1.    I have reviewed this Form 10-Q of Citizens Financial Services, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: August 9, 2023		By:	/s/ Randall E. Black
	By:	Randall E. Black
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Stephen J. Guillaume, certify that:

1.    I have reviewed this Form 10-Q of Citizens Financial Services, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: August 9, 2023 By:  /s/ Stephen  J. Guillaume

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

EX-32.1

EXHIBIT 32.1

Section 1350 Certification

of Chief Executive Officer and Chief Financial Officer

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

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

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

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

Date:  August 9, 2023
By:	/s/ Stephen J. Guillaume
By:	Stephen J. Guillaume
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date:  August 9, 2023

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2023	Aug. 01, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Document Transition Report	false
Entity File Number	0-13222
Entity Registrant Name	CITIZENS FINANCIAL SERVICES, INC.
Entity Central Index Key	0000739421
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	23-2265045
Entity Address, Address Line One	15 South Main Street
Entity Address, City or Town	Mansfield
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	16933
City Area Code	570
Local Phone Number	662‑2121
Title of 12(b) Security	Common Stock, Par value $1.0 per share
Trading Symbol	CZFS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,704,363

XML

CONSOLIDATED BALANCE SHEET - USD ($) $ in Thousands		Jun. 30, 2023	Dec. 31, 2022
Cash and due from banks:
Noninterest-bearing		$ 28,740	$ 24,814
Interest-bearing		15,969	1,397
Total cash and cash equivalents		44,709	26,211
Interest bearing time deposits with other banks		4,814	6,055
Equity securities		1,849	2,208
Available-for-sale securities		434,315	439,506
Loans held for sale		14,940	725
Loans (net of allowance for credit losses - loans: 2023 $21,652 and 2022, $18,552)		2,141,190	1,706,447
Premises and equipment		21,382	17,619
Accrued interest receivable		9,283	7,332
Goodwill	[1]	84,758	31,376
Bank owned life insurance		50,194	39,355
Other intangibles		4,071	1,272
Fair value of derivative instruments		16,395	16,599
Deferred tax asset		20,108	12,886
Other assets		43,800	25,802
TOTAL ASSETS		2,891,808	2,333,393
Deposits:
Noninterest-bearing		553,097	396,260
Interest-bearing		1,713,003	1,447,948
Total deposits		2,266,100	1,844,208
Borrowed funds		318,200	257,278
Accrued interest payable		2,256	1,232
Fair value of derivative instruments - liability		9,303	9,726
Other liabilities		32,721	20,802
TOTAL LIABILITIES		2,628,580	2,133,246
STOCKHOLDERS' EQUITY:
Preferred Stock $1.00 par value; authorized 3,000,000 shares at June 30, 2023 and December 31, 2022; none issued in 2023 or 2022		0	0
Common stock $1.00 par value; authorized 25,000,000 shares at June 30, 2023 and December 31, 2022; issued 5,160,754 at June 30, 2023 and 4,427,687 at December 31, 2022		5,161	4,428
Additional paid-in capital		143,351	80,911
Retained earnings		162,499	164,922
Accumulated other comprehensive loss		(30,980)	(33,141)
Treasury stock, at cost: 453,986 shares at June 30, 2023 and 456,478 shares at December 31, 2022		(16,803)	(16,973)
TOTAL STOCKHOLDERS' EQUITY		263,228	200,147
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$ 2,891,808	$ 2,333,393

[1] Excludes fully amortized intangible assets

XML

CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
ASSETS:
Loans, allowance for credit losses - loans	$ 21,652	$ 18,552
STOCKHOLDERS' EQUITY:
Preferred Stock, par value (in dollars per share)	$ 1	$ 1
Preferred Stock, authorized (in shares)	3,000,000	3,000,000
Preferred Stock, issued (in shares)	0	0
Common Stock, par value (in dollars per share)	$ 1	$ 1
Common Stock, authorized (in shares)	25,000,000	25,000,000
Common Stock, issued (in shares)	5,160,754	4,427,687
Treasury stock, shares (in shares)	453,986	456,478

XML

CONSOLIDATED STATEMENT OF INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
INTEREST INCOME:
Interest and fees on loans	$ 24,117	$ 17,120	$ 46,666	$ 33,040
Interest-bearing deposits with banks	127	156	198	272
Investment securities:
Taxable	1,683	1,424	3,239	2,536
Nontaxable	572	617	1,189	1,200
Dividends	311	90	625	174
TOTAL INTEREST INCOME	26,810	19,407	51,917	37,222
INTEREST EXPENSE:
Deposits	5,480	1,356	9,419	2,631
Borrowed funds	3,409	322	6,497	600
TOTAL INTEREST EXPENSE	8,889	1,678	15,916	3,231
NET INTEREST INCOME	17,921	17,729	36,001	33,991
Provision for credit losses	262	450	262	700
Provision for credit losses - acquisition day 1 non-PCD	4,591	0	4,591	0
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	13,068	17,279	31,148	33,291
NON-INTEREST INCOME:
Service charges	1,293	1,324	2,504	2,572
Trust	181	184	411	433
Brokerage and insurance	442	501	956	982
Gains on loans sold	169	41	214	146
Equity security losses, net	(74)	(134)	(292)	(179)
Available for sale security losses, net	(51)	0	(51)	0
Earnings on bank owned life insurance	234	212	452	419
Other	86	176	260	362
TOTAL NON-INTEREST INCOME	2,280	2,304	4,454	4,735
NON-INTEREST EXPENSES:
Salaries and employee benefits	7,916	7,117	15,593	14,030
Occupancy	814	754	1,649	1,548
Furniture and equipment	162	166	313	295
Professional fees	387	394	768	733
FDIC insurance	325	145	625	280
Pennsylvania shares tax	298	339	596	678
Amortization of intangibles	31	40	62	80
Merger and acquisition	8,402	0	8,646	0
Software expenses	372	358	723	699
ORE (recovery) expenses	(11)	120	15	(247)
Other	1,984	1,767	3,468	3,335
TOTAL NON-INTEREST EXPENSES	20,680	11,200	32,458	21,431
Income (loss) before provision for income taxes	(5,332)	8,383	3,144	16,595
Provision for income taxes (benefit)	(1,188)	1,482	421	2,954
NET INCOME (LOSS)	$ (4,144)	$ 6,901	$ 2,723	$ 13,641
PER COMMON SHARE DATA:
Net (Loss) Income - Basic (in dollars per share)	$ (1.01)	$ 1.72	$ 0.67	$ 3.4
Net (Loss) Income - Diluted (in dollars per share)	(1.01)	1.72	0.67	3.4
Cash Dividends Paid (in dollars per share)	$ 0.48	$ 0.466	$ 0.961	$ 0.93
Number of shares used in computation - basic (in shares)	4,113,377	4,012,611	4,059,416	4,008,830
Number of shares used in computation - diluted (in shares)	4,113,377	4,012,626	4,059,416	4,008,934

XML

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) [Abstract]
Net income (loss)	$ (4,144)	$ 6,901	$ 2,723	$ 13,641
Other Comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities	(5,995)	(16,016)	2,982	(37,003)
Income tax effect	1,259	3,364	(626)	7,771
Change in unrecognized pension cost	7	12	14	48
Income tax effect	(2)	(2)	(3)	(10)
Change in unrealized loss on interest rate swaps	600	1,075	(310)	3,533
Income tax effect	(126)	(227)	65	(743)
Reclassification adjustment for investment security gains included in net income	51	0	51	0
Income tax effect	(12)	0	(12)	0
Other comprehensive income (loss), net of tax	(4,218)	(11,794)	2,161	(26,404)
Comprehensive income (loss)	$ (8,362)	$ (4,893)	$ 4,884	$ (12,763)

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss) Income [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2021	$ 4,389	$ 78,395	$ 146,010	$ (155)	$ (16,147)	$ 212,492
Balance (in shares) at Dec. 31, 2021	4,388,901
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)			13,641			13,641
Net other comprehensive income (loss)				(26,404)		(26,404)
Stock dividend	$ 39	2,521				0
Stock dividend			(2,560)
Stock dividend (in shares)	38,786
Purchase of treasury stock					(1,279)	(1,279)
Restricted stock, executive and Board of Director awards		(169)			313	144
Restricted stock vesting		142				142
Forfeited restricted stock		2			(2)	0
Sale of treasury stock to employees		1			71	72
Cash dividends			(3,776)			(3,776)
Balance at Jun. 30, 2022	$ 4,428	80,892	153,315	(26,559)	(17,044)	195,032
Balance (in shares) at Jun. 30, 2022	4,427,687
Balance at Mar. 31, 2022	$ 4,389	78,396	150,876	(14,765)	(16,151)	202,745
Balance (in shares) at Mar. 31, 2022	4,388,901
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)			6,901			6,901
Net other comprehensive income (loss)				(11,794)		(11,794)
Stock dividend	$ 39	2,521				0
Stock dividend			(2,560)
Stock dividend (in shares)	38,786
Purchase of treasury stock					(1,272)	(1,272)
Restricted stock, executive and Board of Director awards		(164)			308	144
Restricted stock vesting		138				138
Sale of treasury stock to employees		1			71	72
Cash dividends			(1,902)			(1,902)
Balance at Jun. 30, 2022	$ 4,428	80,892	153,315	(26,559)	(17,044)	195,032
Balance (in shares) at Jun. 30, 2022	4,427,687
Balance at Dec. 31, 2022	$ 4,428	80,911	164,922	(33,141)	(16,973)	200,147
Balance (in shares) at Dec. 31, 2022	4,427,687
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)			2,723			2,723
Net other comprehensive income (loss)				2,161		2,161
Stock dividend	$ 39	2,982				0
Stock dividend			(3,021)
Stock dividend (in shares)	39,209
Issuance of Common stock	$ 694	59,443				60,137
Issuance of Common stock (in shares)	693,858
Restricted stock, executive and Board of Director awards		(145)			180	35
Restricted stock vesting		150				150
Forfeited restricted stock		10			(10)	0
Cash dividends			(3,891)			(3,891)
Balance at Jun. 30, 2023	$ 5,161	143,351	162,499	(30,980)	(16,803)	263,228
Balance (ASU 2016-13 [Member]) at Jun. 30, 2023			1,766	0		1,766
Balance (in shares) at Jun. 30, 2023	5,160,754
Balance at Mar. 31, 2023	$ 4,428	80,926	171,629	(26,762)	(16,983)	213,238
Balance (in shares) at Mar. 31, 2023	4,427,687
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)			(4,144)			(4,144)
Net other comprehensive income (loss)				(4,218)		(4,218)
Stock dividend	$ 39	2,982				0
Stock dividend			(3,021)
Stock dividend (in shares)	39,209
Issuance of Common stock	$ 694	59,443				60,137
Issuance of Common stock (in shares)	693,858
Restricted stock, executive and Board of Director awards		(145)			180	35
Restricted stock vesting		145				145
Cash dividends			(1,965)			(1,965)
Balance at Jun. 30, 2023	$ 5,161	$ 143,351	162,499	(30,980)	$ (16,803)	263,228
Balance (ASU 2016-13 [Member]) at Jun. 30, 2023			$ 1,766	$ 0		$ 1,766
Balance (in shares) at Jun. 30, 2023	5,160,754

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY [Abstract]
Purchase of treasury stock (in shares)		18,584		18,697
Restricted stock (in shares)	2,652	4,544	2,652	79
Forfeited restricted stock (in shares)				39
Sale of treasury stock to employee (in shares)				1,060
Cash dividends (in dollars per share)	$ 0.48	$ 0.466	$ 0.961	$ 0.93

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CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Thousands		1 Months Ended	3 Months Ended	6 Months Ended
		Jun. 30, 2023	Jun. 30, 2023	Jun. 30, 2023	Jun. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)			$ (4,144)	$ 2,723	$ 13,641
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses				4,853	700
Depreciation and amortization				530	519
Amortization and accretion of loans and other assets				(825)	(1,068)
Amortization and accretion of investment securities				826	1,025
Deferred income taxes				125	294
Investment securities losses, net				343	179
Earnings on bank owned life insurance			(234)	(452)	(419)
Vesting of restricted stock				150	141
Originations of loans held for sale				(12,730)	(4,624)
Proceeds from sales of loans held for sale				9,444	8,056
Realized gains on loans sold			(169)	(214)	(146)
Decrease (increase) in accrued interest receivable				275	(640)
Gain on sale of foreclosed assets held for sale				(67)	(491)
Increase (decrease) in accrued interest payable				139	(145)
Other, net				(2,219)	(1,950)
Net cash provided by operating activities				2,901	15,072
Available-for-sale securities:
Proceeds from sales			86,504	86,504	0
Proceeds from maturity and principal repayments				10,336	21,294
Purchase of securities				(10,246)	(110,022)
Proceeds from sale of equity securities				67	0
Purchase of interest bearing time deposits with other banks				0	(2,480)
Proceeds from matured interest bearing time deposits with other banks				1,241	5,458
Proceeds from redemption of regulatory stock				10,839	1,912
Purchase of regulatory stock				(12,789)	(3,493)
Net decrease (increase) in loans				40,119	(152,949)
Purchase of premises and equipment				(1,926)	(898)
Investments in low income housing partnerships				(591)	(949)
Proceeds from sale of foreclosed assets held for sale				233	760
Acquisition, net of cash paid				4,905	0
Net cash provided by (used in) investing activities				128,692	(241,367)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits				(111,473)	42,560
Proceeds from long-term borrowings				20,000	0
Repayments of long-term borrowings				0	(4,725)
Net (decrease) increase in short-term borrowed funds				(17,731)	41,282
Purchase of treasury and restricted stock				0	(1,279)
Sale of treasury stock to employees				0	72
Dividends paid				(3,891)	(3,776)
Net cash (used in) provided by financing activities				(113,095)	74,134
Net increase (decrease) in cash and cash equivalents				18,498	(152,161)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				26,211	172,833
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$ 44,709	44,709	44,709	20,672
Supplemental Disclosures of Cash Flow Information:
Interest paid				14,892	3,376
Income taxes paid				3,600	3,600
Loans transferred to foreclosed property				49	61
Right of use asset and liability				5	1,518
Stock Dividend				3,021	2,560
CECL adjustment				3,300	$ 0
Non-cash assets acquired
Goodwill	[1]	84,758	84,758	84,758
HV Bancorp, Inc. [Member]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		590
Non-cash assets acquired
Available-for-sale securities		79,248	79,248	79,248
Interest bearing time deposits with other banks		0	0	0
Loans held for sale		10,750	10,750	10,750
Loans		475,338	475,338	475,338
Premises and equipment		2,310	2,310	2,310
Accrued interest receivable		2,226	2,226	2,226
Bank owned life insurance		10,387	10,387	10,387
Intangibles		2,972	2,972	2,972
Deferred tax asset		8,392	8,392	8,392
Other assets		18,213	18,213	18,213
Goodwill		53,382	53,382	53,382
Total Non-cash assets acquired		663,218	663,218	663,218
Liabilities assumed
Noninterest-bearing deposits		197,549	197,549	197,549
Interest-bearing deposits		335,816	335,816	335,816
Accrued interest payable		885	885	885
Borrowed funds		58,647	58,647	58,647
Other liabilities		11,674	11,674	11,674
Total liabilities assumed		604,571	604,571	604,571
Net non-cash liabilities acquired		58,647	58,647	58,647
Cash and cash equivalents acquired		$ 18,017	$ 18,017	$ 18,017

[1] Excludes fully amortized intangible assets

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2023

Basis of Presentation [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

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

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

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

Accounting Pronouncements Adopted in 2023

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

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

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

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

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

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

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

Loans

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

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

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

Allowance for Credit losses – Loans

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

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

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

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

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

Probability of Default (PD)

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

Loss Given Default (LGD)

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

Prepayment and Curtailment rates

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

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

Reasonable and Supportable Forecasts

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

Forecast Reversion Period

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

Expected Recoveries on Charged-off Loans

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

Discount Rate

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

Individual Evaluation

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

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

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $6.3 million at June 30, 2023 and is included within Accrued interest receivable. This amount is excluded from the estimate of expected credit losses.

Reserve for Unfunded Commitments

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

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Acquisition of HV Bancorp, Inc.

6 Months Ended

Jun. 30, 2023

Acquisition of HV Bancorp, Inc. [Abstract]

Acquisition of HV Bancorp, Inc.

Note 2 – Acquisition of HV Bancorp, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

• Loans - The estimated fair value of loans were based on a discounted cash flow methodology applied on a pooled basis for nonpurchased credit-deteriorated (“non-PCD”) loans and on an individual basis for purchased credit-deteriorated (“PCD”) loans. The valuation considered underlying characteristics including loan type, term, rate, payment schedule and credit rating. Other factors included assumptions related to prepayments, probability of default and loss given default. The discount rates applied were based on a build-up approach considering the funding mix, servicing costs, liquidity premium and factors related to performance risk.

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

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

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

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

Accounting for Acquired Loans

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

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

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

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

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

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

Amounts recognized separately from the acquisition include primarily legal fees, investment banking fees, system conversion costs, severance costs and contract termination costs. These costs were included in merger and acquisition expenses within non-interest expenses on the Consolidated Statement of Income and amounted to approximately $8,646,000 for the quarter ended June 30, 2023.

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

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

	Actual from Acquisition Date Through June 30, 2023		Unaudited Pro Forma for
			Three Months Ended					Six Months Ended
			June 30,					June 30,
(In Thousands, Except Per Share Data)			2023			2022		2023		2022
Net interest income	$	917	$	18,901		$	23,572	$	38,004	$	44,960
Non-interest income		34		2,280			4,488		4,454		10,241
Net (loss) income		590		(3,461	)		8,587		4,124		13,557
Pro forma (loss) earnings per share:
Basic			$	(0.72	)	$	1.84		0.87	$	2.91
Diluted			$	(0.72	)	$	1.84	$	0.87	$	2.91

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Revenue Recognition

6 Months Ended

Jun. 30, 2023

Revenue Recognition [Abstract]

Revenue Recognition

Note 3 – Revenue Recognition

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

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

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

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

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

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Revenue stream	2023		2022		2023		2022
Service charges on deposit accounts
Overdraft fees	$	371		312	$	730	$	619
Statement fees		54		51		106		107
Interchange revenue		764		819		1,461		1,542
ATM income		34		66		72		155
Other service charges		70		76		135		149
Total Service Charges		1,293		1,324		2,504		2,572
Trust		181		184		411		433
Brokerage and insurance		442		501		956		982
Other		118		123		233		262
Total	$	2,034	$	2,132	$	4,104	$	4,249

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Earnings per Share

6 Months Ended

Jun. 30, 2023

Earnings per Share [Abstract]

Earnings per Share

Note 4 – Earnings per Share

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

	Three months ended June 30,					Six months ended June 30,
	2023			2022		2023		2022
Net (loss) income applicable to common stock	$	(4,144,000	)	$	6,901,000	$	2,723,000	$	13,641,000
Basic earnings per share computation
Weighted average common shares outstanding		4,113,377			4,012,611		4,059,416		4,008,830
Earnings (loss) per share – basic	$	(1.01	)	$	1.72	$	0.67	$	3.40
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,113,377			4,012,611		4,059,416		4,008,830
Add: Dilutive effects of restricted stock		-			15		-		104
Weighted average common shares outstanding for dilutive earnings per share		4,113,377			4,012,626		4,059,416		4,008,934
Earnings (loss) per share – diluted	$	(1.01	)	$	1.72	$	0.67	$	3.40

For the three months ended June 30, 2023 and 2022, there were 6,078 and 3,121 shares, respectively, related to the restricted stock plan that were excluded from the diluted earnings per share calculations since they were anti-dilutive. These anti-dilutive shares had per share prices ranging from $44.93-$83.38 for the three month period ended June 30, 2023 and per share prices ranging from $57.36-$67.85 for the three month period ended June 30, 2022. For the six months ended June 30, 2023 and 2022, 6,078 and 6,264 shares, respectively, related to the restricted stock plan were excluded from the diluted earnings per share calculations since they were anti-dilutive. These anti-dilutive shares had prices ranging from $44.93-$83.38 for the six month period ended June 30, 2023 and prices ranging from $51.14-$67.85 for the six month period ended June 30, 2022.

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Investments

6 Months Ended

Jun. 30, 2023

Investments [Abstract]

Investments

Note 5 – Investments

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

June 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses			Fair Value
Available-for-sale securities:
U.S. agency securities	$	74,064	$	-	$	(7,197	)	$	66,867
U.S. treasury securities		162,365		-		(12,574	)		149,791
Obligations of state and political subdivisions		109,365		7		(8,929	)		100,443
Corporate obligations		13,363		260		(1,416	)		12,207
Mortgage-backed securities in government sponsored entities		119,612		10		(14,615	)		105,007
Total available-for-sale securities	$	478,769	$	277	$	(44,731	)	$	434,315

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

The following table shows the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time, which individual securities have been in a continuous unrealized loss position, at June 30, 2023 and December 31, 2022 (in thousands). As of June 30, 2023, the Company owned 348 securities whose fair value was less than their cost basis.

June 30, 2023	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. agency securities	$	4,631	$	(120	)	$	62,236	$	(7,077	)	$	66,867	$	(7,197	)
U.S. treasury securities		-		-			149,791		(12,574	)		149,791		(12,574	)
Obligations of state and  political subdivisions		6,423		(108	)		89,377		(8,821	)		95,800		(8,929	)
Corporate obligations		800		(200	)		8,097		(1,216	)		8,897		(1,416	)
Mortgage-backed securities in government sponsored entities		18,718		(377	)		83,665		(14,238	)		102,383		(14,615	)
Total securities	$	30,572	$	(805	)	$	393,166	$	(43,926	)	$	423,738	$	(44,731	)

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

Allowance for Credit Losses – Available for Sale Securities

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

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

Accrued interest receivable on available-for-sale debt securities totaled $2,303,000 at June 30, 2023 and is included within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

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

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

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

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

Proceeds from sales of securities available-for-sale for the three and six months ended June 30, 2023 were $86,504,000. There were no sales of available for sale securities during the three and six months ended June 30, 2022.

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

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
Equity securities	2023			2022			2023			2022
Net losses recognized in equity securities during the period	$	(74	)	$	(134	)	$	(292	)	$	(179	)
Less: Net gains realized on the sale of equity securities during the period		-			-			5			-
Net unrealized losses	$	(74	)	$	(134	)	$	(297	)	$	(179	)

Investment securities with an approximate carrying value of $349.9 million and $311.8 million at June 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds, certain other deposits and borrowing lines.

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

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	36,851	$	36,117
Due after one year through five years		180,628		165,964
Due after five years through ten years		100,654		90,278
Due after ten years		160,636		141,956
Total	$	478,769	$	434,315

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Loans

6 Months Ended

Jun. 30, 2023

Loans [Abstract]

Loans

Note 6 – Loans

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

	June 30, 2023		December 31, 2022
Real estate loans:
Residential	$	358,025	$	210,213
Commercial		1,080,513		876,569
Agricultural		312,302		313,614
Construction		156,927		80,691
Consumer		42,701		86,650
Other commercial loans		120,288		63,222
Other agricultural loans		30,615		34,832
State and political subdivision loans		61,471		59,208
Total		2,162,842		1,724,999
Allowance for credit losses - loans		21,652		18,552
Net loans	$	2,141,190	$	1,706,447

Allowance for Credit Losses, effective January 1, 2023

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

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

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

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

	June 30, 2023
Allowance for Credit Losses - Loans	$	21,652
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,391
Total allowance for credit losses	$	23,043

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

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure		Total
Balance at March 31, 2023	$	15,250		$	1,229	$	16,479
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(4	)		-		(4	)
Recoveries of loans previously charged-off		26			-		26
Net loans charged-off		22			-		22
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		100			162		262
Balance at June 30, 2023	$	21,652		$	1,391	$	23,043

	Allowance for Credit Losses -Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure		Total
Balance at December 31, 2022	$	18,552		$	165	$	18,717
Impact of adopting CECL		(3,300	)		1,064		(2,236	)
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(11	)		-		(11	)
Recoveries of loans previously charged-off		31			-		31
Net loans charged-off		20			-		20
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		100			162		262
Balance at June 30, 2023	$	21,652		$	1,391	$	23,043

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

	For the three months ended June 30, 2023
	Balance at March 31, 2023		Allowance for credit loss on PCD acquired loans		Charge-offs			Recoveries		Provision			Balance at June 30, 2023
Real estate loans:
Residential	$	1,195	$	108	$	(1	)	$	-	$	1,373		$	2,675
Commercial		6,747		39		-			-		2,488			9,274
Agricultural		3,409		37		-			-		133			3,579
Construction		851				-			-		816			1,667
Consumer		1,220		677		(3	)		23		(658	)		1,259
Other commercial loans		712		828		-			3		934			2,477
Other agricultural loans		250		-		-			-		18			268
State and political subdivision loans		42		-		-			-		10			52
Unallocated		824		-		-			-		(423	)		401
Total	$	15,250	$	1,689	$	(4	)	$	26	$	4,691		$	21,652

	For the six months ended June 30, 2023
	Balance at December 31, 2022		Impact of adopting CECL			Allowance for credit loss on PCD acquired loans		Charge-offs			Recoveries		Provision			Balance at June 30, 2023
Real estate loans:
Residential	$	1,056	$	79		$	108	$	(1	)	$	-	$	1,433		$	2,675
Commercial		10,120		(3,070	)		39		-			-		2,185			9,274
Agricultural		4,589		(1,145	)		37		-			-		98			3,579
Construction		801		(103	)				-			-		969			1,667
Consumer		135		1,040			677		(10	)		27		(610	)		1,259
Other commercial loans		1,040		(328	)		828		-			4		933			2,477
Other agricultural loans		489		(219	)		-		-			-		(2	)		268
State and political subdivision loans		322		(280	)		-		-			-		10			52
Unallocated		-		726			-		-			-		(325	)		401
Total	$	18,552	$	(3,300	)	$	1,689	$	(11	)	$	31	$	4,691		$	21,652

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

	Allowance for Credit Losses - Loans						Loans
June 30, 2023	Collectively evaluated for impairment		Individually evaluated for impairment		Total Allowance for Credit Losses - Loans		Collectively evaluated for impairment		Individually evaluated for impairment		Total Loans
Real estate loans:
Residential	$	2,552	$	123	$	2,675	$	356,592	$	1,433	$	358,025
Commercial		9,110		164		9,274		1,075,534		4,979		1,080,513
Agricultural		3,493		86		3,579		308,010		4,292		312,302
Construction		1,410		257		1,667		154,570		2,357		156,927
Consumer		446		813		1,259		41,625		1,076		42,701
Other commercial loans		1,713		764		2,477		118,024		2,264		120,288
Other agricultural loans		268		-		268		30,320		295		30,615
State and political subdivision loans		52		-		52		61,471		-		61,471
Unallocated		401		-		401		-		-		-
Total	$	19,445	$	2,207	$	21,652	$	2,146,146	$	16,696	$	2,162,842

Allowance for Credit Losses, prior to January 1, 2023

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to net loans. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in unfunded commitments and letters of credit, and is recorded in other liabilities on the consolidated balance sheet. The allowance for credit losses is increased by charges to expense, through the provision for credit losses and decreased by charge-offs, net of recoveries. The following table presents the components of the allowance for credit losses as of December 31, 2022 (in thousands):

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

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

	Allowance for Credit Losses - Loans			Reserve for unfunded commitments		Total
Balance at March 31, 2022	$	17,556		$	165	$	17,721
Loans charge-off		(446	)		-		(446	)
Recoveries of loans previously charged-off		10			-		10
Net loans charged-off		(436	)		-		(436	)
Provision for credit losses		450			-		450
Balance at June 30, 2022	$	17,570		$	165	$	17,735
Balance at December 31, 2021	$	17,304		$	165	$	17,469
Loans charge-off		(451	)		-		(451	)
Recoveries of loans previously charged-off		17			-		17
Net loans charged-off		(434	)		-		(434	)
Provision for credit losses		700			-		700
Balance at June 30, 2022	$	17,570		$	165	$	17,735

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

	For the three months ended June 30, 2022
	Balance at March 31, 2022		Charge-offs			Recoveries		Provision			Balance at June 30, 2022
Real estate loans:
Residential	$	1,070	$	-		$	-	$	(55	)	$	1,015
Commercial		8,394		-			-		822			9,216
Agricultural		4,516		-			-		(32	)		4,484
Construction		497		-			-		66			563
Consumer		210		(12	)		5		261			464
Other commercial loans		1,380		(434	)		5		222			1,173
Other agricultural loans		551		-			-		(105	)		446
State and political subdivision loans		285		-			-		38			323
Unallocated		653		-			-		(767	)		(114	)
Total	$	17,556	$	(446	)	$	10	$	450		$	17,570

	For the six months ended June 30, 2022
	Balance at December 31, 2021		Charge-offs			Recoveries		Provision			Balance at June 30, 2022
Real estate loans:
Residential	$	1,147	$	-		$	-	$	(132	)	$	1,015
Commercial		8,099		-			-		1,117			9,216
Agricultural		4,729		-			-		(245	)		4,484
Construction		434		-			-		129			563
Consumer		262		(17	)		10		209			464
Other commercial loans		1,023		(434	)		7		577			1,173
Other agricultural loans		558		-			-		(112	)		446
State and political subdivision loans		281		-			-		42			323
Unallocated		771		-			-		(885	)		(114	)
Total	$	17,304	$	(451	)	$	17	$	700		$	17,570

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

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

Non-performing Loans

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

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

	June 30, 2023								December 31, 2022
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	472	$	1,701	$	-	$	2,173	$	562	$	-	$	562
Home Equity		-		53		-		53		29		-		29
Commercial		353		1,510		129		1,992		2,778		-		2,778
Agricultural		182		2,810		-		2,992		3,222		-		3,222
Construction		2,357		-		-		2,357		-		-		-
Consumer		1,072		-		10		1,082		-		7		7
Other commercial loans		789		1,475		-		2,264		62		-		62
Other agricultural loans		-		299		-		299		285		-		285
State and political subdivision		-		-		-		-		-		-		-
	$	5,225	$	7,848	$	139	$	13,212	$	6,938	$	7	$	6,945

As of June 30, 2023, there were $7.8 million of non-accrual loans that did not have a related allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charge down to the realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

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

June 30, 2023	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	2,173	$	-	$	-	$	2,173
Home Equity		53		-		-		53
Commercial		1,863		-		-		1,863
Agricultural		2,992		-		-		2,992
Construction		2,357		-		-		2,357
Consumer		-		-		1,072		1,072
Other commercial loans		-		2,264		-		2,264
Other agricultural loans		-		299		-		299
State and political subdivision		-		-		-		-
	$	9,438	$	2,563	$	1,072	$	13,073

December 31, 2022	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	562	$	-	$	-	$	562
Home Equity		29		-		-		29
Commercial		2,778		-		-		2,778
Agricultural		3,222		-		-		3,222
Construction		-		-		-		-
Consumer		-		-		-		-
Other commercial loans		-		62		-		62
Other agricultural loans		-		285		-		285
State and political subdivision		-		-		-		-
	$	6,591	$	347	$	-	$	6,938

Credit Quality Information

For commercial real estate, agricultural real estate, construction, other commercial, other agricultural and state and political subdivision loans, management uses a nine grade internal risk rating system to monitor and assess credit quality. The first five categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The definitions of each rating are defined below:

• Pass (Grades 1-5) – These loans are to customers with credit quality ranging from an acceptable to very high quality and are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

• Special Mention (Grade 6) – This loan grade is in accordance with regulatory guidance and includes loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

• Substandard (Grade 7) – This loan grade is in accordance with regulatory guidance and includes loans that have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

• Doubtful (Grade 8) – This loan grade is in accordance with regulatory guidance and includes loans that have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

• Loss (Grade 9) – This loan grade is in accordance with regulatory guidance and includes loans that are considered uncollectible, or of such value that continuance as an asset is not warranted.

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

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

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	54,881	$	329,894	$	217,856	$	126,372	$	83,562	$	203,314	$	32,598	$	1,187	$	1,049,664
Special Mention		-		8,847		-		1,378		7,627		9,447		125		-		27,424
Substandard		-		251		6		195		254		1,980		731		8		3,425
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	54,881	$	338,992	$	217,862	$	127,945	$	91,443	$	214,741	$	33,454	$	1,195	$	1,080,513
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	10,468	$	54,241	$	30,666	$	33,222	$	27,167	$	126,373	$	11,466	$	1,344	$	294,947
Special Mention		-		3,028		1,261		-		-		6,819		85		-		11,193
Substandard		-		-		-		-		103		5,737		75		247		6,162
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	10,468	$	57,269	$	31,927	$	33,222	$	27,270	$	138,929	$	11,626	$	1,591	$	312,302
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	20,388	$	81,202	$	45,691	$	501	$	-	$	-	$	-	$	-	$	147,782
Special Mention		1,406		980		4,402		-		-		-		-		-		6,788
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	21,794	$	82,182	$	52,450	$	501	$	-	$	-	$	-	$	-	$	156,927
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	3,115	$	12,671	$	9,536	$	5,793	$	5,970	$	5,041	$	70,515	$	109	$	112,750
Special Mention		-		87		1,585		216		338		24		2,678		39		4,967
Substandard		-		-		-		763		198		1,298		286		-		2,545
Doubtful		-		-		-		-		-		-		-		26		26
Total	$	3,115	$	12,758	$	11,121	$	6,772	$	6,506	$	6,363	$	73,479	$	174	$	120,288
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other agricultural loans										-
Risk Rating
Pass	$	2,998	$	1,766	$	7,530	$	1,249	$	1,281	$	487	$	13,417	$	-	$	28,728
Special Mention		-		522		268		48		7		55		543		-		1,443
Substandard		-		-		-		-		8		377		25		34		444
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,998	$	2,288	$	7,798	$	1,297	$	1,296	$	919	$	13,985	$	-	$	30,615
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	94	$	18,733	$	12,124	$	4,438	$	5	$	26,077	$	-	$	-	$	61,471
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	94	$	18,733	$	12,124	$	4,438	$	5	$	26,077	$	-	$	-	$	61,471
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	91,944	$	498,507	$	323,403	$	171,575	$	117,985	$	361,292	$	127,996	$	2,640	$	1,695,342
Special Mention		1,406		13,464		7,516		1,642		7,972		16,345		3,431		39		51,815
Substandard		-		251		2,363		958		563		9,392		1,117		289		14,933
Doubtful		-		-		-		-		-		-		-		26		26
Total	$	93,350	$	512,222	$	333,282	$	174,175	$	126,520	$	387,029	$	132,544	$	2,994	$	1,762,116

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

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

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

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	12,084	$	88,543	$	49,595	$	30,895	$	19,334	$	106,346	$	-	$	-	$	306,797
Nonperforming		-		-		788		115		-		1,270		-		-		2,173
Total	$	12,084	$	88,543	$	50,383	$	31,010	$	19,334	$	107,616	$	-	$	-	$	308,970
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity										-
Payment Performance
Performing	$	2,130	$	3,217	$	2,046	$	2,439	$	2,685	$	8,914	$	27,127	$	444	$	49,002
Nonperforming		-		-		-		-		-		53		-		-		53
Total	$	2,130	$	3,217	$	2,046	$	2,439	$	2,685	$	8,967	$	27,127	$	444	$	49,055
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	3,708	$	1,267	$	650	$	551	$	597	$	3,332	$	31,505	$	9	$	41,619
Nonperforming		-		20		-		-		-		1,062		-		-		1,082
Total	$	3,708	$	1,287	$	650	$	551	$	597	$	4,394	$	31,505	$	9	$	42,701
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	-	$	9	$	-	$	10
Total										-
Payment Performance
Performing	$	17,922	$	93,027	$	52,291	$	33,885	$	22,616	$	118,592	$	58,632	$	453	$	397,418
Nonperforming		-		20		788		115		-		2,385		-		-		3,308
Total	$	17,922	$	93,047	$	53,079	$	34,000	$	22,616	$	120,977	$	58,632	$	453	$	400,726

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

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

Aging Analysis of Past Due Loan Receivables

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

June 30, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	-	$	1,225	$	1,708	$	2,933	$	306,037	$	308,970	$	-
Home Equity		110		7		30		147		48,908		49,055		-
Commercial		2,072		231		1,216		3,519		1,076,994		1,080,513		129
Agricultural		23		-		1,367		1,390		310,912		312,302		-
Construction		477		-		-		477		156,450		156,927		-
Consumer		389		8		1,082		1,479		41,222		42,701		10
Other commercial loans		154		829		1,475		2,458		117,830		120,288		-
Other agricultural loans		234		-		-		234		30,381		30,615		-
State and political subdivision loans		-		-		-		-		61,471		61,471		-
Total	$	3,459	$	2,300	$	6,878	$	12,637	$	2,150,205	$	2,162,842	$	139
Loans considered non-accrual	$	37	$	894	$	6,739	$	7,670	$	5,403	$	13,073
Loans still accruing		3,422		1,406		139		4,967		2,144,802		2,149,769
Total	$	3,459	$	2,300	$	6,878	$	12,637	$	2,150,205	$	2,162,842

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

Modifications to Borrowers Experiencing Financial Difficulty

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

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

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

	Three months ended June 30, 2023
	Number of loans		Amortized Cost Basis			% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		3		$	243		0.02	%
Agricultural		4			765		0.24	%
Total		7		$	1,008

	Six months ended June 30, 2023
	Number of loans		Amortized Cost Basis		% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	$	131		0.04	%
Commercial		7		1,992		0.18	%
Agricultural		4		765		0.24	%
Consumer		1		3		0.01	%
Total		13	$	2,891
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	$	91		0.01	%
Total		1	$	91

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

Three months ended June 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		3	Extended the weighted average loan maturity 5 months
Agricultural		4	Extended the weighted average loan maturity 2 months
Total		7

Six months ended June 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	Extended the loan maturity 4 months
Commercial		7	Extended the weighted average loan maturity 22 months
Agricultural		4	Extended the weighted average loan maturity 2 months
Consumer		1	Extended the loan maturity 24 months
Total		13
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the loan maturity 6 months
Total		1

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

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

	June 30, 2023
			30-89 Days		90 Days
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty	Current		Past Due		Or Greater		Total
Real estate loans:
Mortgages	$	131	$	-	$	-	$	131
Commercial		1,992		-		-		1,992
Agricultural		765		-		-		765
Consumer		3		-		-		3
Total	$	2,891	$	-	$	-	$	2,891
Non-Accruing Modified Loans to Borrowers experiencing Financial Difficulty
Real estate loans:
Commercial	$	91	$	-	$	-	$	91
Total	$	91	$	-	$	-	$	91

Foreclosed Assets Held For Sale

Foreclosed assets acquired in settlement of loans are carried at fair value, less estimated costs to sell, and are included in other assets on the Consolidated Balance Sheet. As of June 30, 2023 and December 31, 2022, included within other assets are $426,000 and $543,000, respectively, of foreclosed assets. As of June 30, 2023, included within the foreclosed assets are $226,000 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end. As of June 30, 2023, the Company had initiated formal foreclosure proceedings on $241,000 of residential mortgages loans, the collateral properties which have not yet been transferred into foreclosed assets.

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2023

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

Note 7 – Goodwill and Other Intangible Assets

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

	June 30, 2023							December 31, 2022
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,575	$	(1,510	)	$	1,065	$	2,336	$	(1,362	)	$	974
Core deposit intangibles		4,713		(1,707	)		3,006		1,943		(1,645	)		298
Total amortized intangible assets	$	7,288	$	(3,217	)	$	4,071	$	4,279	$	(3,007	)	$	1,272
Unamortized intangible assets:
Goodwill	$	84,758						$	31,376

(1) Excludes fully amortized intangible assets

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

	MSRs		Core deposit intangibles		Total
Three months ended June 30, 2023 (actual)	$	75	$	31	$	106
Six months ended June 30, 2023 (actual)		148		62		210
Three months ended June 30, 2022 (actual)		78		40		118
Six months ended June 30, 2022 (actual)		160		80		240
Estimate for year ending December 31,
Remaining 2023		155		310		465
2024		271		564		835
2025		220		478		698
2026		170		395		565
2027		113		339		452
Thereafter		136		920		1,056
Total	$	1,065	$	3,006	$	4,071

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Employee Benefit Plans

6 Months Ended

Jun. 30, 2023

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note 8 – Employee Benefit Plans

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

Noncontributory Defined Benefit Pension Plan

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

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

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022			Affected line item on the Consolidated Statement of Income
Service cost	$	77		$	100		$	155		$	178		Salary and Employee Benefits
Interest cost		110			79			220			138		Other Expenses
Expected return on plan assets		(197	)		(264	)		(394	)		(467	)	Other Expenses
Net amortization and deferral		7			12			14			48		Other Expenses
Net periodic benefit cost	$	(3	)	$	(73	)	$	(5	)	$	(103	)

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

Restricted Stock Plan

The Company maintains a Restricted Stock Plan (the “Plan”) whereby employees and non-employee corporate directors are eligible to receive awards of restricted stock based upon performance related requirements.  Awards granted under the Plan are in the form of the Company’s common stock and are subject to certain vesting requirements including continuous employment or service with the Company.  In April of 2016, the Company’s stockholders authorized a total of 150,000 shares of the Company’s common stock to be made available under the Plan. As of June 30, 2023, 113,816 shares remain available to be issued under the Plan.  The Plan assists the Company in attracting, retaining and motivating employees to make substantial contributions to the success of the Company and to increase the emphasis on the use of equity as a key component of compensation.

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

	Three months						Six months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,372		$	63.71			6,622		$	63.63
Granted		2,242			83.38			2,242			83.38
Forfeited		-			-			(161	)		(63.13	)
Vested		(2,360	)		(61.47	)		(2,449	)		(61.38	)
Outstanding, end of period		6,254		$	71.61			6,254		$	71.61

Compensation expense related to restricted stock is recognized, based on the market price of the stock at the grant date, over the vesting period. Compensation expense related to restricted stock was $116,000 and $142,000 for the six months ended June 30, 2023 and 2022, respectively. For the three months ended June 30, 2023 and 2022, compensation expense totaled $51,000 and $65,000, respectively. At June 30, 2023, the total compensation cost related to nonvested awards that had not yet been recognized was $448,000, which is expected to be recognized over the next three years.

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Accumulated Comprehensive Loss

6 Months Ended

Jun. 30, 2023

Accumulated Comprehensive Loss [Abstract]

Accumulated Comprehensive Loss

Note 9 – Accumulated Comprehensive Loss

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

	Three months ended June 30, 2023
	Unrealized gain (loss) on available for sale  securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)			Total
Balance as of March 31, 2023	$	(30,422	)	$	(1,050	)	$	4,710		$	(26,762	)
Other comprehensive income (loss) before reclassifications (net of tax)		(4,736	)		-			888			(3,848	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			5			(414	)		(370	)
Net current period other comprehensive income (loss)		(4,697	)		5			474			(4,218	)
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)

	Six months ended June 30, 2023
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)			Total
Balance as of December 31, 2022	$	(37,514	)	$	(1,056	)	$	5,429		$	(33,141	)
Other comprehensive income before reclassifications (net of tax)		2,356			-			529			2,885
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			11			(774	)		(724	)
Net current period other comprehensive income (loss)		2,395			11			(245	)		2,161
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)

	Three months ended June 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)		Total
Balance as of March 31, 2022	$	(16,276	)	$	(1,940	)	$	3,451	$	(14,765	)
Other comprehensive income (loss) before reclassifications (net of tax)		(12,652	)		-			831		(11,821	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			10			17		27
Net current period other comprehensive income (loss)		(12,652	)		10			848		(11,794	)
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299	$	(26,559	)

	Six months ended June 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)		Total
Balance as of December 31, 2021	$	304		$	(1,968	)	$	1,509	$	(155	)
Other comprehensive income (loss) before reclassifications (net of tax)		(29,232	)		-			2,741		(26,491	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			38			49		87
Net current period other comprehensive income (loss)		(29,232	)		38			2,790		(26,404	)
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299	$	(26,559	)

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

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

Details about accumulated other comprehensive income (loss)	Amount reclassified from accumulated comprehensive income (loss) (a)						Affected line item in the Consolidated Statement of Income
	Three Months Ended June 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	-		Available for sale securities gains, net
		12			-		Provision for income taxes
	$	(39	)	$	-		Net of tax
Defined benefit pension items
	$	(7	)	$	(12	)	Other expenses
		2			2		Provision for income taxes
	$	(5	)	$	(10	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	524		$	(21	)	Interest expense
		(110	)		4		Provision for income taxes
	$	414		$	(17	)	Net of tax
Total reclassifications	$	370		$	(27	)

Six Months Ended June 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	-		Available for sale securities gains, net
		12			-		Provision for income taxes
	$	(39	)	$	-		Net of tax
Defined benefit pension items
	$	(14	)	$	(48	)	Other expenses
		3			10		Provision for income taxes
	$	(11	)	$	(38	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	980		$	(62	)	Interest expense
		(206	)		13		Provision for income taxes
	$	774		$	(49	)	Net of tax
Total reclassifications	$	724		$	(87	)

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

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Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 10 – Fair Value Measurements

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

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

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

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

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

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

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

June 30, 2023	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,849	$	-		$	-	$	1,849
Available for sale securities:
U.S. Agency securities		-		66,867			-		66,867
U.S. Treasury securities		149,791		-			-		149,791
Obligations of state and political subdivisions		-		100,443			-		100,443
Corporate obligations		-		12,207			-		12,207
Mortgage-backed securities in government sponsored entities		-		105,007			-		105,007
Loans held for sale		-		14,940			-		14,940
Derivative instruments		-		15,866			529		16,395
Liabilities
Derivative instruments		-		(9,303	)		-		(9,303	)

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

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

	IRLC- Asset
Balance acquired as part of the HVBC acquisition	$	657
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(128	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2023	$	529
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of June 30, 2023	$	(128	)
Change in unrealized loss for the period included other comprehensive loss for assets held as of June 16, 2023		-

At June 30, 2023, the Company had classified $529,000 of net derivative assets and liabilities related to IRLC as Level 3. The fair value of IRLCs is based on prices obtained for loans with similar characteristics from third parties, adjusted by the pull-through rate, which represents the Company’s best estimate of the probability that a committed loan will fund. The weighted average pull-through rates applied ranged from 78.26% to 95.76% at June 30, 2023.

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

	Quantitative Information about Level 3 Fair Value Measurements at June 30, 2023
	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	529	Discounted cash flows	Pull-through rates		78.26%-95.76	%		84.53	%

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

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

June 30, 2023	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	4,026	$	4,026
Other real estate owned		-		-		49		49
December 31, 2022	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	496	$	496
Other real estate owned		-		-		297		297

• Individually analyzed loans held for investment - The Company has measured impairment on impaired loans generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed.   Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value.  If the fair value of the collateral dependent loan is less than the carrying amount of the loan a specific reserve for the loan is made in the allowance for credit losses - loans or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the table above as a Level III measurement.  If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the table above as it is not currently being carried at its fair value. The fair values above excluded estimated selling costs of $359,000 and $50,000 at June 30, 2023 and December 31, 2022, respectively.

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

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

Quantitative Information about Level III Fair Value Measurements

June 30, 2023	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Individually analyzed loans held for investment	$	4,026	Appraised Collateral Values	Discount for time since appraisal		0-100	%		32.60	%
				Selling costs		8%-10	%		8.92	%
				Holding period	0 - 12 months			10.41 months
Other real estate owned		49	Appraised Collateral Values	Discount for time since appraisal		20	%		20.00	%

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

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

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

June 30, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,814	$	4,814	$	-	$	-	$	4,814
Net loans		2,141,190		2,080,817		-		-		2,080,817
Financial liabilities:
Deposits		2,266,100		2,254,845		1,935,269		-		319,576
Borrowed funds		318,200		308,507		-		-		308,507
December 31, 2022
Financial assets:
Interest bearing time deposits with other banks	$	6,055	$	6,055	$	-	$	-	$	6,055
Loans held for sale		725		725		-		-		725
Net loans		1,706,447		1,662,514		-		-		1,662,514
Financial liabilities:
Deposits		1,844,208		1,832,037		1,566,517		-		265,520
Borrowed funds		257,278		246,288		-		-		246,288

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

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2023

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 11 – Recent Accounting Pronouncements

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

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which added to ASU 2020-04 optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a onetime election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company has identified our loan receivables that have an interest rate indexed to LIBOR and is currently assessing the appropriate transition path. As such, the Company does not have an estimate of the financial impact of this update but does not expect the impact to be material to the financial statements of the Company.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (ASC 815): Fair Value Hedging - Portfolio Layer Method. ASC 815 currently permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in this Update allow non-prepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby allowing consistent accounting for similar hedges. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

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

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

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2023

Basis of Presentation [Abstract]

Basis of Presentation

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

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

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

Accounting Pronouncements Adopted

Accounting Pronouncements Adopted in 2023

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

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

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

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

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

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

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

Loans

Loans

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

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

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

Allowance for Credit losses - Loans

Allowance for Credit losses – Loans

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

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

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

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

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

Probability of Default (PD)

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

Loss Given Default (LGD)

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

Prepayment and Curtailment rates

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

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

Reasonable and Supportable Forecasts

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

Forecast Reversion Period

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

Expected Recoveries on Charged-off Loans

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

Discount Rate

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

Individual Evaluation

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

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

Accrued Interest Receivable on Loans and Leases

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $6.3 million at June 30, 2023 and is included within Accrued interest receivable. This amount is excluded from the estimate of expected credit losses.

Reserve for Unfunded Commitments

Reserve for Unfunded Commitments

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

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Revenue Recognition (Policies)

6 Months Ended

Jun. 30, 2023

Revenue Recognition [Abstract]

Revenue Recognition

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

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

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

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

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

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Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2023

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

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

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which added to ASU 2020-04 optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a onetime election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company has identified our loan receivables that have an interest rate indexed to LIBOR and is currently assessing the appropriate transition path. As such, the Company does not have an estimate of the financial impact of this update but does not expect the impact to be material to the financial statements of the Company.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (ASC 815): Fair Value Hedging - Portfolio Layer Method. ASC 815 currently permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in this Update allow non-prepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby allowing consistent accounting for similar hedges. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

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

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

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Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2023

Basis of Presentation [Abstract]

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

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

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

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Acquisition of HV Bancorp, Inc. (Tables)

6 Months Ended

Jun. 30, 2023

Acquisition of HV Bancorp, Inc. [Abstract]

Net Assets Acquired and Consideration Transferred

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

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

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

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

Fair Value of Acquired PCD Loans

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

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

Fair Value of Acquired Non-PCD Loans

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

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

Pro Forma Information

	Actual from Acquisition Date Through June 30, 2023		Unaudited Pro Forma for
			Three Months Ended					Six Months Ended
			June 30,					June 30,
(In Thousands, Except Per Share Data)			2023			2022		2023		2022
Net interest income	$	917	$	18,901		$	23,572	$	38,004	$	44,960
Non-interest income		34		2,280			4,488		4,454		10,241
Net (loss) income		590		(3,461	)		8,587		4,124		13,557
Pro forma (loss) earnings per share:
Basic			$	(0.72	)	$	1.84		0.87	$	2.91
Diluted			$	(0.72	)	$	1.84	$	0.87	$	2.91

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2023

Revenue Recognition [Abstract]

Disaggregation of Revenue Derived from Contracts with Customers

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Revenue stream	2023		2022		2023		2022
Service charges on deposit accounts
Overdraft fees	$	371		312	$	730	$	619
Statement fees		54		51		106		107
Interchange revenue		764		819		1,461		1,542
ATM income		34		66		72		155
Other service charges		70		76		135		149
Total Service Charges		1,293		1,324		2,504		2,572
Trust		181		184		411		433
Brokerage and insurance		442		501		956		982
Other		118		123		233		262
Total	$	2,034	$	2,132	$	4,104	$	4,249

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Earnings per Share (Tables)

6 Months Ended

Jun. 30, 2023

Earnings per Share [Abstract]

Computation of Earnings per Share

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

	Three months ended June 30,					Six months ended June 30,
	2023			2022		2023		2022
Net (loss) income applicable to common stock	$	(4,144,000	)	$	6,901,000	$	2,723,000	$	13,641,000
Basic earnings per share computation
Weighted average common shares outstanding		4,113,377			4,012,611		4,059,416		4,008,830
Earnings (loss) per share – basic	$	(1.01	)	$	1.72	$	0.67	$	3.40
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,113,377			4,012,611		4,059,416		4,008,830
Add: Dilutive effects of restricted stock		-			15		-		104
Weighted average common shares outstanding for dilutive earnings per share		4,113,377			4,012,626		4,059,416		4,008,934
Earnings (loss) per share – diluted	$	(1.01	)	$	1.72	$	0.67	$	3.40

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Investments (Tables)

6 Months Ended

Jun. 30, 2023

Investments [Abstract]

Amortized Cost and Fair Value of Investment Securities

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

June 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses			Fair Value
Available-for-sale securities:
U.S. agency securities	$	74,064	$	-	$	(7,197	)	$	66,867
U.S. treasury securities		162,365		-		(12,574	)		149,791
Obligations of state and political subdivisions		109,365		7		(8,929	)		100,443
Corporate obligations		13,363		260		(1,416	)		12,207
Mortgage-backed securities in government sponsored entities		119,612		10		(14,615	)		105,007
Total available-for-sale securities	$	478,769	$	277	$	(44,731	)	$	434,315

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

Unrealized Losses and Fair Value of Investments

The following table shows the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time, which individual securities have been in a continuous unrealized loss position, at June 30, 2023 and December 31, 2022 (in thousands). As of June 30, 2023, the Company owned 348 securities whose fair value was less than their cost basis.

June 30, 2023	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. agency securities	$	4,631	$	(120	)	$	62,236	$	(7,077	)	$	66,867	$	(7,197	)
U.S. treasury securities		-		-			149,791		(12,574	)		149,791		(12,574	)
Obligations of state and  political subdivisions		6,423		(108	)		89,377		(8,821	)		95,800		(8,929	)
Corporate obligations		800		(200	)		8,097		(1,216	)		8,897		(1,416	)
Mortgage-backed securities in government sponsored entities		18,718		(377	)		83,665		(14,238	)		102,383		(14,615	)
Total securities	$	30,572	$	(805	)	$	393,166	$	(43,926	)	$	423,738	$	(44,731	)

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

Gross Gains and Losses on Available-for-sale Securities

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

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

Unrealized Gains (Losses) Related to Equity Securities

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

	Three Months Ended June 30,						Six Months Ended June 30,
Equity securities	2023			2022			2023			2022
Net losses recognized in equity securities during the period	$	(74	)	$	(134	)	$	(292	)	$	(179	)
Less: Net gains realized on the sale of equity securities during the period		-			-			5			-
Net unrealized losses	$	(74	)	$	(134	)	$	(297	)	$	(179	)

Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

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

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	36,851	$	36,117
Due after one year through five years		180,628		165,964
Due after five years through ten years		100,654		90,278
Due after ten years		160,636		141,956
Total	$	478,769	$	434,315

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Loans (Tables)

6 Months Ended

Jun. 30, 2023

Loans [Abstract]

Loan Portfolio and Allowance for Loan Losses

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

	June 30, 2023		December 31, 2022
Real estate loans:
Residential	$	358,025	$	210,213
Commercial		1,080,513		876,569
Agricultural		312,302		313,614
Construction		156,927		80,691
Consumer		42,701		86,650
Other commercial loans		120,288		63,222
Other agricultural loans		30,615		34,832
State and political subdivision loans		61,471		59,208
Total		2,162,842		1,724,999
Allowance for credit losses - loans		21,652		18,552
Net loans	$	2,141,190	$	1,706,447

Components of the Allowance for Credit Losses

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

	June 30, 2023
Allowance for Credit Losses - Loans	$	21,652
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,391
Total allowance for credit losses	$	23,043

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

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

Activity in Allowance for Credit Losses

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

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure		Total
Balance at March 31, 2023	$	15,250		$	1,229	$	16,479
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(4	)		-		(4	)
Recoveries of loans previously charged-off		26			-		26
Net loans charged-off		22			-		22
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		100			162		262
Balance at June 30, 2023	$	21,652		$	1,391	$	23,043

	Allowance for Credit Losses -Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure		Total
Balance at December 31, 2022	$	18,552		$	165	$	18,717
Impact of adopting CECL		(3,300	)		1,064		(2,236	)
Allowance for credit loss on PCD acquired loans		1,689			-		1,689
Loans charge-off		(11	)		-		(11	)
Recoveries of loans previously charged-off		31			-		31
Net loans charged-off		20			-		20
Provision for credit losses - acquisition day 1 non-PCD		4,591			-		4,591
Provision for credit losses		100			162		262
Balance at June 30, 2023	$	21,652		$	1,391	$	23,043

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

	Allowance for Credit Losses - Loans			Reserve for unfunded commitments		Total
Balance at March 31, 2022	$	17,556		$	165	$	17,721
Loans charge-off		(446	)		-		(446	)
Recoveries of loans previously charged-off		10			-		10
Net loans charged-off		(436	)		-		(436	)
Provision for credit losses		450			-		450
Balance at June 30, 2022	$	17,570		$	165	$	17,735
Balance at December 31, 2021	$	17,304		$	165	$	17,469
Loans charge-off		(451	)		-		(451	)
Recoveries of loans previously charged-off		17			-		17
Net loans charged-off		(434	)		-		(434	)
Provision for credit losses		700			-		700
Balance at June 30, 2022	$	17,570		$	165	$	17,735

Activity of Allowance for Credit Losses - Loans by Portfolio Segment

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

	For the three months ended June 30, 2022
	Balance at March 31, 2022		Charge-offs			Recoveries		Provision			Balance at June 30, 2022
Real estate loans:
Residential	$	1,070	$	-		$	-	$	(55	)	$	1,015
Commercial		8,394		-			-		822			9,216
Agricultural		4,516		-			-		(32	)		4,484
Construction		497		-			-		66			563
Consumer		210		(12	)		5		261			464
Other commercial loans		1,380		(434	)		5		222			1,173
Other agricultural loans		551		-			-		(105	)		446
State and political subdivision loans		285		-			-		38			323
Unallocated		653		-			-		(767	)		(114	)
Total	$	17,556	$	(446	)	$	10	$	450		$	17,570

	For the six months ended June 30, 2022
	Balance at December 31, 2021		Charge-offs			Recoveries		Provision			Balance at June 30, 2022
Real estate loans:
Residential	$	1,147	$	-		$	-	$	(132	)	$	1,015
Commercial		8,099		-			-		1,117			9,216
Agricultural		4,729		-			-		(245	)		4,484
Construction		434		-			-		129			563
Consumer		262		(17	)		10		209			464
Other commercial loans		1,023		(434	)		7		577			1,173
Other agricultural loans		558		-			-		(112	)		446
State and political subdivision loans		281		-			-		42			323
Unallocated		771		-			-		(885	)		(114	)
Total	$	17,304	$	(451	)	$	17	$	700		$	17,570

Allowance for Credit Losses After Evaluation for Impairment

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

	Allowance for Credit Losses - Loans						Loans
June 30, 2023	Collectively evaluated for impairment		Individually evaluated for impairment		Total Allowance for Credit Losses - Loans		Collectively evaluated for impairment		Individually evaluated for impairment		Total Loans
Real estate loans:
Residential	$	2,552	$	123	$	2,675	$	356,592	$	1,433	$	358,025
Commercial		9,110		164		9,274		1,075,534		4,979		1,080,513
Agricultural		3,493		86		3,579		308,010		4,292		312,302
Construction		1,410		257		1,667		154,570		2,357		156,927
Consumer		446		813		1,259		41,625		1,076		42,701
Other commercial loans		1,713		764		2,477		118,024		2,264		120,288
Other agricultural loans		268		-		268		30,320		295		30,615
State and political subdivision loans		52		-		52		61,471		-		61,471
Unallocated		401		-		401		-		-		-
Total	$	19,445	$	2,207	$	21,652	$	2,146,146	$	16,696	$	2,162,842

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

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

Loan Receivables on Nonaccrual Status

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

	June 30, 2023								December 31, 2022
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	472	$	1,701	$	-	$	2,173	$	562	$	-	$	562
Home Equity		-		53		-		53		29		-		29
Commercial		353		1,510		129		1,992		2,778		-		2,778
Agricultural		182		2,810		-		2,992		3,222		-		3,222
Construction		2,357		-		-		2,357		-		-		-
Consumer		1,072		-		10		1,082		-		7		7
Other commercial loans		789		1,475		-		2,264		62		-		62
Other agricultural loans		-		299		-		299		285		-		285
State and political subdivision		-		-		-		-		-		-		-
	$	5,225	$	7,848	$	139	$	13,212	$	6,938	$	7	$	6,945

Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans and Leases

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

June 30, 2023	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	2,173	$	-	$	-	$	2,173
Home Equity		53		-		-		53
Commercial		1,863		-		-		1,863
Agricultural		2,992		-		-		2,992
Construction		2,357		-		-		2,357
Consumer		-		-		1,072		1,072
Other commercial loans		-		2,264		-		2,264
Other agricultural loans		-		299		-		299
State and political subdivision		-		-		-		-
	$	9,438	$	2,563	$	1,072	$	13,073

December 31, 2022	Real Estate		Other		None		Total
Real estate loans:
Mortgages	$	562	$	-	$	-	$	562
Home Equity		29		-		-		29
Commercial		2,778		-		-		2,778
Agricultural		3,222		-		-		3,222
Construction		-		-		-		-
Consumer		-		-		-		-
Other commercial loans		-		62		-		62
Other agricultural loans		-		285		-		285
State and political subdivision		-		-		-		-
	$	6,591	$	347	$	-	$	6,938

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

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

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	54,881	$	329,894	$	217,856	$	126,372	$	83,562	$	203,314	$	32,598	$	1,187	$	1,049,664
Special Mention		-		8,847		-		1,378		7,627		9,447		125		-		27,424
Substandard		-		251		6		195		254		1,980		731		8		3,425
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	54,881	$	338,992	$	217,862	$	127,945	$	91,443	$	214,741	$	33,454	$	1,195	$	1,080,513
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	10,468	$	54,241	$	30,666	$	33,222	$	27,167	$	126,373	$	11,466	$	1,344	$	294,947
Special Mention		-		3,028		1,261		-		-		6,819		85		-		11,193
Substandard		-		-		-		-		103		5,737		75		247		6,162
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	10,468	$	57,269	$	31,927	$	33,222	$	27,270	$	138,929	$	11,626	$	1,591	$	312,302
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	20,388	$	81,202	$	45,691	$	501	$	-	$	-	$	-	$	-	$	147,782
Special Mention		1,406		980		4,402		-		-		-		-		-		6,788
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	21,794	$	82,182	$	52,450	$	501	$	-	$	-	$	-	$	-	$	156,927
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	3,115	$	12,671	$	9,536	$	5,793	$	5,970	$	5,041	$	70,515	$	109	$	112,750
Special Mention		-		87		1,585		216		338		24		2,678		39		4,967
Substandard		-		-		-		763		198		1,298		286		-		2,545
Doubtful		-		-		-		-		-		-		-		26		26
Total	$	3,115	$	12,758	$	11,121	$	6,772	$	6,506	$	6,363	$	73,479	$	174	$	120,288
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other agricultural loans										-
Risk Rating
Pass	$	2,998	$	1,766	$	7,530	$	1,249	$	1,281	$	487	$	13,417	$	-	$	28,728
Special Mention		-		522		268		48		7		55		543		-		1,443
Substandard		-		-		-		-		8		377		25		34		444
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,998	$	2,288	$	7,798	$	1,297	$	1,296	$	919	$	13,985	$	-	$	30,615
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	94	$	18,733	$	12,124	$	4,438	$	5	$	26,077	$	-	$	-	$	61,471
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	94	$	18,733	$	12,124	$	4,438	$	5	$	26,077	$	-	$	-	$	61,471
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	91,944	$	498,507	$	323,403	$	171,575	$	117,985	$	361,292	$	127,996	$	2,640	$	1,695,342
Special Mention		1,406		13,464		7,516		1,642		7,972		16,345		3,431		39		51,815
Substandard		-		251		2,363		958		563		9,392		1,117		289		14,933
Doubtful		-		-		-		-		-		-		-		26		26
Total	$	93,350	$	512,222	$	333,282	$	174,175	$	126,520	$	387,029	$	132,544	$	2,994	$	1,762,116

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

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

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

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	12,084	$	88,543	$	49,595	$	30,895	$	19,334	$	106,346	$	-	$	-	$	306,797
Nonperforming		-		-		788		115		-		1,270		-		-		2,173
Total	$	12,084	$	88,543	$	50,383	$	31,010	$	19,334	$	107,616	$	-	$	-	$	308,970
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity										-
Payment Performance
Performing	$	2,130	$	3,217	$	2,046	$	2,439	$	2,685	$	8,914	$	27,127	$	444	$	49,002
Nonperforming		-		-		-		-		-		53		-		-		53
Total	$	2,130	$	3,217	$	2,046	$	2,439	$	2,685	$	8,967	$	27,127	$	444	$	49,055
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	3,708	$	1,267	$	650	$	551	$	597	$	3,332	$	31,505	$	9	$	41,619
Nonperforming		-		20		-		-		-		1,062		-		-		1,082
Total	$	3,708	$	1,287	$	650	$	551	$	597	$	4,394	$	31,505	$	9	$	42,701
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	-	$	9	$	-	$	10
Total										-
Payment Performance
Performing	$	17,922	$	93,027	$	52,291	$	33,885	$	22,616	$	118,592	$	58,632	$	453	$	397,418
Nonperforming		-		20		788		115		-		2,385		-		-		3,308
Total	$	17,922	$	93,047	$	53,079	$	34,000	$	22,616	$	120,977	$	58,632	$	453	$	400,726

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

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

Aging Analysis of Past Due Loan Receivables

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

June 30, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	-	$	1,225	$	1,708	$	2,933	$	306,037	$	308,970	$	-
Home Equity		110		7		30		147		48,908		49,055		-
Commercial		2,072		231		1,216		3,519		1,076,994		1,080,513		129
Agricultural		23		-		1,367		1,390		310,912		312,302		-
Construction		477		-		-		477		156,450		156,927		-
Consumer		389		8		1,082		1,479		41,222		42,701		10
Other commercial loans		154		829		1,475		2,458		117,830		120,288		-
Other agricultural loans		234		-		-		234		30,381		30,615		-
State and political subdivision loans		-		-		-		-		61,471		61,471		-
Total	$	3,459	$	2,300	$	6,878	$	12,637	$	2,150,205	$	2,162,842	$	139
Loans considered non-accrual	$	37	$	894	$	6,739	$	7,670	$	5,403	$	13,073
Loans still accruing		3,422		1,406		139		4,967		2,144,802		2,149,769
Total	$	3,459	$	2,300	$	6,878	$	12,637	$	2,150,205	$	2,162,842

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

Modifications to Borrowers Experiencing Financial Difficulty

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

	Three months ended June 30, 2023
	Number of loans		Amortized Cost Basis			% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		3		$	243		0.02	%
Agricultural		4			765		0.24	%
Total		7		$	1,008

	Six months ended June 30, 2023
	Number of loans		Amortized Cost Basis		% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	$	131		0.04	%
Commercial		7		1,992		0.18	%
Agricultural		4		765		0.24	%
Consumer		1		3		0.01	%
Total		13	$	2,891
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	$	91		0.01	%
Total		1	$	91

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

Three months ended June 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		3	Extended the weighted average loan maturity 5 months
Agricultural		4	Extended the weighted average loan maturity 2 months
Total		7

Six months ended June 30, 2023
Term Extension
Loan Type	Number of loans		Financial Effect
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Mortgages		1	Extended the loan maturity 4 months
Commercial		7	Extended the weighted average loan maturity 22 months
Agricultural		4	Extended the weighted average loan maturity 2 months
Consumer		1	Extended the loan maturity 24 months
Total		13
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty
Real estate loans:
Commercial		1	Extended the loan maturity 6 months
Total		1

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

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

	June 30, 2023
			30-89 Days		90 Days
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty	Current		Past Due		Or Greater		Total
Real estate loans:
Mortgages	$	131	$	-	$	-	$	131
Commercial		1,992		-		-		1,992
Agricultural		765		-		-		765
Consumer		3		-		-		3
Total	$	2,891	$	-	$	-	$	2,891
Non-Accruing Modified Loans to Borrowers experiencing Financial Difficulty
Real estate loans:
Commercial	$	91	$	-	$	-	$	91
Total	$	91	$	-	$	-	$	91

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2023

Goodwill and Other Intangible Assets [Abstract]

Gross Carrying Value and Accumulated Amortization of Intangible Assets

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

	June 30, 2023							December 31, 2022
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,575	$	(1,510	)	$	1,065	$	2,336	$	(1,362	)	$	974
Core deposit intangibles		4,713		(1,707	)		3,006		1,943		(1,645	)		298
Total amortized intangible assets	$	7,288	$	(3,217	)	$	4,071	$	4,279	$	(3,007	)	$	1,272
Unamortized intangible assets:
Goodwill	$	84,758						$	31,376

(1) Excludes fully amortized intangible assets

Future Amortization Expense for Amortized Intangible Assets

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

	MSRs		Core deposit intangibles		Total
Three months ended June 30, 2023 (actual)	$	75	$	31	$	106
Six months ended June 30, 2023 (actual)		148		62		210
Three months ended June 30, 2022 (actual)		78		40		118
Six months ended June 30, 2022 (actual)		160		80		240
Estimate for year ending December 31,
Remaining 2023		155		310		465
2024		271		564		835
2025		220		478		698
2026		170		395		565
2027		113		339		452
Thereafter		136		920		1,056
Total	$	1,065	$	3,006	$	4,071

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Employee Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2023

Employee Benefit Plans [Abstract]

Components of Net Periodic Benefit Costs

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022			Affected line item on the Consolidated Statement of Income
Service cost	$	77		$	100		$	155		$	178		Salary and Employee Benefits
Interest cost		110			79			220			138		Other Expenses
Expected return on plan assets		(197	)		(264	)		(394	)		(467	)	Other Expenses
Net amortization and deferral		7			12			14			48		Other Expenses
Net periodic benefit cost	$	(3	)	$	(73	)	$	(5	)	$	(103	)

Restricted Stock Activity

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

	Three months						Six months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,372		$	63.71			6,622		$	63.63
Granted		2,242			83.38			2,242			83.38
Forfeited		-			-			(161	)		(63.13	)
Vested		(2,360	)		(61.47	)		(2,449	)		(61.38	)
Outstanding, end of period		6,254		$	71.61			6,254		$	71.61

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Accumulated Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2023

Accumulated Comprehensive Loss [Abstract]

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

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

	Three months ended June 30, 2023
	Unrealized gain (loss) on available for sale  securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)			Total
Balance as of March 31, 2023	$	(30,422	)	$	(1,050	)	$	4,710		$	(26,762	)
Other comprehensive income (loss) before reclassifications (net of tax)		(4,736	)		-			888			(3,848	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			5			(414	)		(370	)
Net current period other comprehensive income (loss)		(4,697	)		5			474			(4,218	)
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)

	Six months ended June 30, 2023
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)			Total
Balance as of December 31, 2022	$	(37,514	)	$	(1,056	)	$	5,429		$	(33,141	)
Other comprehensive income before reclassifications (net of tax)		2,356			-			529			2,885
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		39			11			(774	)		(724	)
Net current period other comprehensive income (loss)		2,395			11			(245	)		2,161
Balance as of June 30, 2023	$	(35,119	)	$	(1,045	)	$	5,184		$	(30,980	)

	Three months ended June 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)		Total
Balance as of March 31, 2022	$	(16,276	)	$	(1,940	)	$	3,451	$	(14,765	)
Other comprehensive income (loss) before reclassifications (net of tax)		(12,652	)		-			831		(11,821	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			10			17		27
Net current period other comprehensive income (loss)		(12,652	)		10			848		(11,794	)
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299	$	(26,559	)

	Six months ended June 30, 2022
	Unrealized gain (loss) on available for sale securities (a)			Defined Benefit Pension Items (a)			Unrealized loss on interest rate swap (a)		Total
Balance as of December 31, 2021	$	304		$	(1,968	)	$	1,509	$	(155	)
Other comprehensive income (loss) before reclassifications (net of tax)		(29,232	)		-			2,741		(26,491	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			38			49		87
Net current period other comprehensive income (loss)		(29,232	)		38			2,790		(26,404	)
Balance as of June 30, 2022	$	(28,928	)	$	(1,930	)	$	4,299	$	(26,559	)

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

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

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

Details about accumulated other comprehensive income (loss)	Amount reclassified from accumulated comprehensive income (loss) (a)						Affected line item in the Consolidated Statement of Income
	Three Months Ended June 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	-		Available for sale securities gains, net
		12			-		Provision for income taxes
	$	(39	)	$	-		Net of tax
Defined benefit pension items
	$	(7	)	$	(12	)	Other expenses
		2			2		Provision for income taxes
	$	(5	)	$	(10	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	524		$	(21	)	Interest expense
		(110	)		4		Provision for income taxes
	$	414		$	(17	)	Net of tax
Total reclassifications	$	370		$	(27	)

Six Months Ended June 30,
	2023			2022
Unrealized gains and losses on available for sale securities
	$	(51	)	$	-		Available for sale securities gains, net
		12			-		Provision for income taxes
	$	(39	)	$	-		Net of tax
Defined benefit pension items
	$	(14	)	$	(48	)	Other expenses
		3			10		Provision for income taxes
	$	(11	)	$	(38	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	980		$	(62	)	Interest expense
		(206	)		13		Provision for income taxes
	$	774		$	(49	)	Net of tax
Total reclassifications	$	724		$	(87	)

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

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Measurements [Abstract]

Assets Measured at Fair Value on a Recurring Basis

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

June 30, 2023	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,849	$	-		$	-	$	1,849
Available for sale securities:
U.S. Agency securities		-		66,867			-		66,867
U.S. Treasury securities		149,791		-			-		149,791
Obligations of state and political subdivisions		-		100,443			-		100,443
Corporate obligations		-		12,207			-		12,207
Mortgage-backed securities in government sponsored entities		-		105,007			-		105,007
Loans held for sale		-		14,940			-		14,940
Derivative instruments		-		15,866			529		16,395
Liabilities
Derivative instruments		-		(9,303	)		-		(9,303	)

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

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

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

	IRLC- Asset
Balance acquired as part of the HVBC acquisition	$	657
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(128	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2023	$	529
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held as of June 30, 2023	$	(128	)
Change in unrealized loss for the period included other comprehensive loss for assets held as of June 16, 2023		-

Assets Measured at Fair Value on Non-recurring Basis

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

June 30, 2023	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	4,026	$	4,026
Other real estate owned		-		-		49		49
December 31, 2022	Level I		Level II		Level III		Total
Individually analyzed loans held for investment	$	-	$	-	$	496	$	496
Other real estate owned		-		-		297		297

Significant Unobservable Inputs Used in Fair Value Measurement Process

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

	Quantitative Information about Level 3 Fair Value Measurements at June 30, 2023
	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	529	Discounted cash flows	Pull-through rates		78.26%-95.76	%		84.53	%

Carrying Amount and Fair Value of Financial Instruments

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

June 30, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,814	$	4,814	$	-	$	-	$	4,814
Net loans		2,141,190		2,080,817		-		-		2,080,817
Financial liabilities:
Deposits		2,266,100		2,254,845		1,935,269		-		319,576
Borrowed funds		318,200		308,507		-		-		308,507
December 31, 2022
Financial assets:
Interest bearing time deposits with other banks	$	6,055	$	6,055	$	-	$	-	$	6,055
Loans held for sale		725		725		-		-		725
Net loans		1,706,447		1,662,514		-		-		1,662,514
Financial liabilities:
Deposits		1,844,208		1,832,037		1,566,517		-		265,520
Borrowed funds		257,278		246,288		-		-		246,288

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Basis of Presentation, Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Allowance for Credit Loss [Abstract]
Retained earnings	$ 162,499		$ 164,922
Related to unfunded commitments	1,391	$ 1,229	165	$ 165	$ 165	$ 165
Related to loans	$ (21,652)	$ (15,250)	(18,552)	$ (17,570)	$ (17,556)	$ (17,304)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Allowance for Credit Loss [Abstract]
Retained earnings			1,800
Related to unfunded commitments			1,064
Related to loans			$ 3,300

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Basis of Presentation, Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	$ 21,652	$ 15,250	$ 18,552	$ 17,570	$ 17,556	$ 17,304
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	1,391	1,229	165	165	165	165
Real Estate Loans [Member] | Residential [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	2,675	1,195	1,056	1,015	1,070	1,147
Real Estate Loans [Member] | Commercial [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	9,274	6,747	10,120	9,216	8,394	8,099
Real Estate Loans [Member] | Agricultural [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	3,579	3,409	4,589	4,484	4,516	4,729
Real Estate Loans [Member] | Construction [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	1,667	851	801	563	497	434
Consumer [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	1,259	1,220	135	464	210	262
Other Commercial Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	2,477	712	1,040	1,173	1,380	1,023
Other Agricultural Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	268	250	489	446	551	558
State and Political Subdivision Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	52	42	322	323	285	281
Unallocated [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	$ 401	$ 824	0	$ (114)	$ 653	$ 771
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(3,300)
Allowance for Credit Losses - Off-Balance Sheet credit Exposure			1,064
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Real Estate Loans [Member] | Residential [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			79
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Real Estate Loans [Member] | Commercial [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(3,070)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Real Estate Loans [Member] | Agricultural [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(1,145)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Real Estate Loans [Member] | Construction [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(103)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Consumer [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			1,040
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Other Commercial Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(328)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Other Agricultural Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(219)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | State and Political Subdivision Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			(280)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Unallocated [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			726
As Reported [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			15,252
Allowance for Credit Losses - Off-Balance Sheet credit Exposure			1,229
As Reported [Member] | Real Estate Loans [Member] | Residential [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			1,135
As Reported [Member] | Real Estate Loans [Member] | Commercial [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			7,050
As Reported [Member] | Real Estate Loans [Member] | Agricultural [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			3,444
As Reported [Member] | Real Estate Loans [Member] | Construction [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			698
As Reported [Member] | Consumer [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			1,175
As Reported [Member] | Other Commercial Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			712
As Reported [Member] | Other Agricultural Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			270
As Reported [Member] | State and Political Subdivision Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			42
As Reported [Member] | Unallocated [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses			$ 726

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Basis of Presentation, Accrued Interest Receivable on Loans and Leases (Details) $ in Millions	Jun. 30, 2023 USD ($)
Accrued Interest Receivable on Loans and Leases [Abstract]
Accrued interest receivable on loans held for investment	$ 6.3

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Acquisition of HV Bancorp, Inc., Summary (Details) $ / shares in Units, $ in Thousands		3 Months Ended	6 Months Ended
	Jun. 16, 2023 USD ($) $ / shares shares	Dec. 31, 2022 Branch Office $ / shares	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)
Acquisition of HV Bancorp, Inc [Abstract]
Cash			$ (4,905)	$ 0
HV Bancorp, Inc. [Member]
Acquisition of HV Bancorp, Inc [Abstract]
Acquired outstanding equity interest percentage		100.00%
Right to receive cash for each share of common stock (in dollars per share) | $ / shares		$ 30.5
Number of service branches | Branch		5
Number of mortgage production offices | Office		4
Number of business banking offices | Office		1
Total purchase of consideration amount	$ 76,665
Number of common shares issued for acquisition (in shares) | shares	693,858
Cash	$ 16,500
Share price (in dollars per share) | $ / shares	$ 86.67

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

[1] Excludes fully amortized intangible assets

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Acquisition of HV Bancorp, Inc., Asset Acquired and Liability Assumed (Details) - USD ($) $ in Thousands		Jun. 16, 2023	Jun. 30, 2023	Dec. 31, 2022
Fair Value of Liabilities Assumed [Abstract]
Goodwill	[1]		$ 84,758	$ 31,376
HV Bancorp, Inc. [Member]
Consideration Transferred [Abstract]
Total Purchase Price		$ 76,665
Fair Value of Assets Acquired [Abstract]
Cash and due from banks		18,017	18,017
Investment securities		79,248	79,248
Loans held for sale		10,750
Loans		475,338	475,338
Premises and equipment		2,310	2,310
Intangible assets		2,972	2,972
Bank owned life insurance		10,387	10,387
Interest receivable		2,226	2,226
Deferred taxes		8,392	8,392
Other assets		18,213	18,213
Total Non-cash assets acquired		627,853	663,218
Fair Value of Liabilities Assumed [Abstract]
Deposits		533,364
Borrowings		58,647	58,647
Accrued interest payable		885	885
Other liabilities		11,674	11,674
Total liabilities assumed		604,570	604,571
Total fair value of identifiable net assets		23,283
Goodwill		$ 53,382	$ 53,382
Maximum provisional period		12 months

[1] Excludes fully amortized intangible assets

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Acquisition of HV Bancorp, Inc., Fair Value of Acquired PCD and Non-PCD Loans (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jun. 16, 2023	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Accounting for Acquired Loans [Abstract]
Day 1 Provision for Credit Losses- Non-PCD Loans		$ 4,591	$ 0	$ 4,591	$ 0
Merger and acquisition		$ 8,402	$ 0	$ 8,646	$ 0
HV Bancorp, Inc. [Member]
Accounting for Acquired Loans [Abstract]
Loans acquired	$ 506,900
HV Bancorp, Inc. [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Loans acquired	$ 18,000
Loans acquired percentage	3.60%
Unpaid principal balance	$ 18,041
PCD Allowance for Credit Loss at Acquisition	(1,689)
(Discount) Premium on Acquired Loans	(1,123)
Fair Value of Loans at Acquisition	15,229
HV Bancorp, Inc. [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	488,852
(Discount) Premium on Acquired Loans	(28,743)
Fair Value of Loans at Acquisition	460,109
Day 1 Provision for Credit Losses- Non-PCD Loans	4,591
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Mortgages [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	2,398
PCD Allowance for Credit Loss at Acquisition	(108)
(Discount) Premium on Acquired Loans	0
Fair Value of Loans at Acquisition	2,290
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Mortgages [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	155,799
(Discount) Premium on Acquired Loans	(17,506)
Fair Value of Loans at Acquisition	138,293
Day 1 Provision for Credit Losses- Non-PCD Loans	1,015
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Home Equity [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	34
PCD Allowance for Credit Loss at Acquisition	0
(Discount) Premium on Acquired Loans	(4)
Fair Value of Loans at Acquisition	30
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Home Equity [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	2,165
(Discount) Premium on Acquired Loans	(55)
Fair Value of Loans at Acquisition	2,110
Day 1 Provision for Credit Losses- Non-PCD Loans	15
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Commercial [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	4,774
PCD Allowance for Credit Loss at Acquisition	(39)
(Discount) Premium on Acquired Loans	(507)
Fair Value of Loans at Acquisition	4,228
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Commercial [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	203,638
(Discount) Premium on Acquired Loans	(9,226)
Fair Value of Loans at Acquisition	194,412
Day 1 Provision for Credit Losses- Non-PCD Loans	1,968
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Construction [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	4,278
PCD Allowance for Credit Loss at Acquisition	(37)
(Discount) Premium on Acquired Loans	(293)
Fair Value of Loans at Acquisition	3,948
HV Bancorp, Inc. [Member] | Real Estate Loans [Member] | Construction [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	76,703
(Discount) Premium on Acquired Loans	(1,420)
Fair Value of Loans at Acquisition	75,283
Day 1 Provision for Credit Losses- Non-PCD Loans	747
HV Bancorp, Inc. [Member] | Consumer [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	1,343
PCD Allowance for Credit Loss at Acquisition	(677)
(Discount) Premium on Acquired Loans	(271)
Fair Value of Loans at Acquisition	395
HV Bancorp, Inc. [Member] | Consumer [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	2,794
(Discount) Premium on Acquired Loans	(222)
Fair Value of Loans at Acquisition	2,572
Day 1 Provision for Credit Losses- Non-PCD Loans	159
HV Bancorp, Inc. [Member] | Other Commercial Loans [Member] | PCD Acquired Loans [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	5,214
PCD Allowance for Credit Loss at Acquisition	(828)
(Discount) Premium on Acquired Loans	(48)
Fair Value of Loans at Acquisition	4,338
HV Bancorp, Inc. [Member] | Other Commercial Loans [Member] | Acquisition Day 1 Non-PCD [Member]
Accounting for Acquired Loans [Abstract]
Unpaid principal balance	47,753
(Discount) Premium on Acquired Loans	(314)
Fair Value of Loans at Acquisition	47,439
Day 1 Provision for Credit Losses- Non-PCD Loans	$ 687

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Acquisition of HV Bancorp, Inc., Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Pro Forma Information [Abstract]
Net interest income		$ 17,921	$ 17,729	$ 36,001	$ 33,991
Non-interest income		2,280	2,304	4,454	4,735
Net (loss) income		(4,144)	6,901	2,723	13,641
HV Bancorp, Inc. [Member]
Pro Forma Information [Abstract]
Net interest income	$ 917
Non-interest income	34
Net (loss) income	$ 590
Net interest income		18,901	23,572	38,004	44,960
Non-interest income		2,280	4,488	4,454	10,241
Net (loss) income		$ (3,461)	$ 8,587	$ 4,124	$ 13,557
Business Acquisition, Pro Forma (Loss) Earnings per Share [Abstract]
Basic (in dollars per share)		$ (0.72)	$ 1.84	$ 0.87	$ 2.91
Diluted (in dollars per share)		$ (0.72)	$ 1.84	$ 0.87	$ 2.91

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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Revenue from Customers [Abstract]
Service charges	$ 1,293	$ 1,324	$ 2,504	$ 2,572
Trust	181	184	411	433
Brokerage and insurance	442	501	956	982
Other	118	123	233	262
Revenue from customers	2,034	2,132	4,104	4,249
Service Charges [Member]
Revenue from Customers [Abstract]
Service charges	1,293	1,324	2,504	2,572
Overdraft Fees [Member]
Revenue from Customers [Abstract]
Service charges	371	312	730	619
Statement Fees [Member]
Revenue from Customers [Abstract]
Service charges	54	51	106	107
Interchange Revenue [Member]
Revenue from Customers [Abstract]
Service charges	764	819	1,461	1,542
ATM Income [Member]
Revenue from Customers [Abstract]
Service charges	34	66	72	155
Other Service Charges [Member]
Revenue from Customers [Abstract]
Service charges	$ 70	$ 76	$ 135	$ 149

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Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings per Share [Abstract]
Net income applicable to common stock	$ (4,144)	$ 6,901	$ 2,723	$ 13,641
Basic earnings per share computation [Abstract]
Weighted average common shares outstanding (in shares)	4,113,377	4,012,611	4,059,416	4,008,830
Earnings (loss) per share - basic (in dollars per share)	$ (1.01)	$ 1.72	$ 0.67	$ 3.4
Diluted earnings per share computation [Abstract]
Weighted average common shares outstanding for basic earnings per share (in shares)	4,113,377	4,012,611	4,059,416	4,008,830
Add: Dilutive effects of restricted stock (in shares)	0	15	0	104
Weighted average common shares outstanding for dilutive earnings per share (in shares)	4,113,377	4,012,626	4,059,416	4,008,934
Earnings (loss) per share - diluted (in dollars per share)	$ (1.01)	$ 1.72	$ 0.67	$ 3.4
Restricted Stock [Member]
Antidilutive Securities [Abstract]
Antidilutive restricted stock excluded from net income per share calculations (in shares)	6,078	3,121	6,078	6,264
Restricted Stock [Member] | Minimum [Member]
Antidilutive Securities [Abstract]
Antidilutive stock share price range (in dollars per share)	$ 44.93	$ 57.36	$ 44.93	$ 51.14
Restricted Stock [Member] | Maximum [Member]
Antidilutive Securities [Abstract]
Antidilutive stock share price range (in dollars per share)	$ 83.38	$ 67.85	$ 83.38	$ 67.85

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Investments, Amortized Cost, Gross Unrealized Gains and Losses and Fair Value of Investment (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Debt Securities [Abstract]
Amortized cost	$ 478,769	$ 486,993
Gross unrealized gains	277	50
Gross unrealized losses	(44,731)	(47,537)
Fair value	434,315	439,506
U.S. Agency Securities [Member]
Debt Securities [Abstract]
Amortized cost	74,064	78,556
Gross unrealized gains	0	0
Gross unrealized losses	(7,197)	(7,879)
Fair value	66,867	70,677
U.S. Treasury Securities [Member]
Debt Securities [Abstract]
Amortized cost	162,365	162,236
Gross unrealized gains	0	0
Gross unrealized losses	(12,574)	(13,666)
Fair value	149,791	148,570
Obligations of State and Political Subdivisions [Member]
Debt Securities [Abstract]
Amortized cost	109,365	120,562
Gross unrealized gains	7	35
Gross unrealized losses	(8,929)	(10,297)
Fair value	100,443	110,300
Corporate Obligations [Member]
Debt Securities [Abstract]
Amortized cost	13,363	10,335
Gross unrealized gains	260	0
Gross unrealized losses	(1,416)	(952)
Fair value	12,207	9,383
Mortgage-backed Securities in Government Sponsored Entities [Member]
Debt Securities [Abstract]
Amortized cost	119,612	115,304
Gross unrealized gains	10	15
Gross unrealized losses	(14,615)	(14,743)
Fair value	$ 105,007	$ 100,576

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Investments, Gross Unrealized Losses and Fair Value and Net Unrealized Gains (Losses) (Details) $ in Thousands	Jun. 30, 2023 USD ($) Security	Dec. 31, 2022 USD ($)
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Number of securities owned with fair value less than cost | Security	348
Less than twelve months, Fair value	$ 30,572	$ 181,562
Less than twelve months, Gross unrealized losses	(805)	(11,648)
Twelve months or greater, Fair value	393,166	246,164
Twelve months or greater, Gross unrealized losses	(43,926)	(35,889)
Total, Fair value	423,738	427,726
Total, Gross Unrealized Losses	(44,731)	(47,537)
U.S. Agency Securities [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	4,631	39,729
Less than twelve months, Gross unrealized losses	(120)	(1,892)
Twelve months or greater, Fair value	62,236	30,948
Twelve months or greater, Gross unrealized losses	(7,077)	(5,987)
Total, Fair value	66,867	70,677
Total, Gross Unrealized Losses	(7,197)	(7,879)
U.S. Treasury Securities [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	0	32,673
Less than twelve months, Gross unrealized losses	0	(1,337)
Twelve months or greater, Fair value	149,791	115,897
Twelve months or greater, Gross unrealized losses	(12,574)	(12,329)
Total, Fair value	149,791	148,570
Total, Gross Unrealized Losses	(12,574)	(13,666)
Obligations of State and Political Subdivisions [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	6,423	66,725
Less than twelve months, Gross unrealized losses	(108)	(4,887)
Twelve months or greater, Fair value	89,377	35,782
Twelve months or greater, Gross unrealized losses	(8,821)	(5,410)
Total, Fair value	95,800	102,507
Total, Gross Unrealized Losses	(8,929)	(10,297)
Corporate Obligations [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	800	2,165
Less than twelve months, Gross unrealized losses	(200)	(165)
Twelve months or greater, Fair value	8,097	6,218
Twelve months or greater, Gross unrealized losses	(1,216)	(787)
Total, Fair value	8,897	8,383
Total, Gross Unrealized Losses	(1,416)	(952)
Mortgage-backed Securities in Government Sponsored Entities [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	18,718	40,270
Less than twelve months, Gross unrealized losses	(377)	(3,367)
Twelve months or greater, Fair value	83,665	57,319
Twelve months or greater, Gross unrealized losses	(14,238)	(11,376)
Total, Fair value	102,383	97,589
Total, Gross Unrealized Losses	$ (14,615)	$ (14,743)

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Investments, Gross Gains and Losses, Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Investments [Abstract]
Accrued interest receivable on available-for-sale debt securities	$ 2,303		$ 2,303
Contractual payment of past due			90 days
Proceeds from sale of securities available-for-sale	86,504	$ 0	$ 86,504	$ 0
Gross gains and losses available-for-sale securities [Abstract]
Gross gains on available for sale securities	38	0	38	0
Gross losses on available for sale securities	(89)	0	(89)	0
Net losses	(51)	0	(51)	0
Equity securities [Abstract]
Net losses recognized in equity securities during the period	(74)	(134)	(292)	(179)
Less: Net gains realized on the sale of equity securities during the period	0	0	5	0
Net unrealized losses	(74)	$ (134)	(297)	$ (179)
Asset Pledged as Collateral [Member] | Public Funds, Other Deposit and Borrowings [Member]
Investment Securities Pledged [Abstract]
Investment securities pledged as collateral	$ 349,900		$ 349,900		$ 311,800

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Investments, Debt Securities, Amortized Cost and Fair Value by Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Available-for-Sale Debt Securities, Amortized Cost [Abstract]
Due in one year or less	$ 36,851
Due after one year through five years	180,628
Due after five years through ten years	100,654
Due after ten years	160,636
Amortized cost	478,769	$ 486,993
Available-for-Sale Debt Securities, Fair Value [Abstract]
Due in one year or less	36,117
Due after one year through five years	165,964
Due after five years through ten years	90,278
Due after ten years	141,956
Fair value	$ 434,315	$ 439,506

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Loans, Primary Segments Portfolio and Accretable Yield for PCI Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	$ 2,162,842		$ 1,724,999
Allowance for Credit Losses	21,652	$ 15,250	18,552	$ 17,570	$ 17,556	$ 17,304
Net loans	2,141,190		1,706,447
Residential [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	308,970
Commercial [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	1,080,513
Construction [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	156,927
Real Estate Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Net loans			296,863
Real Estate Loans [Member] | Residential [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	358,025		210,213
Allowance for Credit Losses	2,675	1,195	1,056	1,015	1,070	1,147
Real Estate Loans [Member] | Commercial [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	1,080,513		876,569
Allowance for Credit Losses	9,274	6,747	10,120	9,216	8,394	8,099
Net loans			876,569
Real Estate Loans [Member] | Agricultural [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	312,302		313,614
Allowance for Credit Losses	3,579	3,409	4,589	4,484	4,516	4,729
Real Estate Loans [Member] | Construction [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	156,927		80,691
Allowance for Credit Losses	1,667	851	801	563	497	434
Net loans			80,691
Consumer [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	42,701		86,650
Allowance for Credit Losses	1,259	1,220	135	464	210	262
Other Commercial Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	120,288		63,222
Allowance for Credit Losses	2,477	712	1,040	1,173	1,380	1,023
Net loans			63,222
Other Commercial Loans [Member] | Construction [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	120,288
Other Agricultural Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	30,615		34,832
Allowance for Credit Losses	268	250	489	446	551	558
Net loans			34,832
State and Political Subdivision Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	61,471		59,208
Allowance for Credit Losses	$ 52	$ 42	322	$ 323	$ 285	$ 281
Net loans			$ 59,208

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Loans, Components of the Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Financing Receivable, Allowance for Credit Loss [Abstract]
Allowance for Credit Losses	$ 21,652	$ 17,570	$ 21,652	$ 17,570
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	1,391	165	1,391	165
Total allowance for credit losses	23,043	17,735	23,043	17,735
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	15,250	17,556	18,552	17,304
Loans charge-off	(4)	(446)	(11)	(451)
Recoveries of loans previously charged-off	26	10	31	17
Net loans charged-off	22	(436)	20	(434)
Provision for credit losses	100	450	100	700
Balance at end of period	21,652	17,570	21,652	17,570
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability	1,229	165	165	165
Off-Balance-Sheet, credit loss, liability, provision for credit losses	162		162
Off-Balance-Sheet, credit loss, liability	1,391	165	1,391	165
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period	16,479	17,721	18,717	17,469
Loans charge-off	(4)	(446)	(11)	(451)
Recoveries of loans previously charged-off	26	10	31	17
Net loans charged-off	22	(436)	20	(434)
Provision for credit losses	262	450	262	700
Balance at end of period	23,043	$ 17,735	23,043	$ 17,735
PCD Acquired Loans [Member]
Financing Receivable, Allowance for Credit Loss [Abstract]
Allowance for Credit Losses
Allowance for Credit Losses - Off-Balance Sheet credit Exposure
Total allowance for credit losses
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	1,689		1,689
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability	0		0
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period	1,689		1,689
Acquisition Day 1 Non-PCD [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Provision for credit losses	4,591		4,591
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Provision for credit losses	$ 4,591		4,591
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Loss [Abstract]
Allowance for Credit Losses
Allowance for Credit Losses - Off-Balance Sheet credit Exposure
Total allowance for credit losses
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(3,300)
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability			1,064
Off-Balance-Sheet, credit loss, liability, credit loss expense (reversal)			1,064
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period			$ (2,236)

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Loans, Allowance for Loan Losses by Portfolio Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	$ 15,250	$ 17,556	$ 18,552	$ 17,304
Allowance for credit loss on PCD acquired loans	1,689		1,689
Charge-offs	(4)	(446)	(11)	(451)
Recoveries	26	10	31	17
Provision	4,691	450	4,691	700
Balance at end of period	21,652	17,570	21,652	17,570
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(3,300)
Residential [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			(1)
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			0
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			0
Real Estate Loans [Member] | Residential [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	1,195	1,070	1,056	1,147
Allowance for credit loss on PCD acquired loans	108		108
Charge-offs	(1)	0	(1)	0
Recoveries	0	0	0	0
Provision	1,373	(55)	1,433	(132)
Balance at end of period	2,675	1,015	2,675	1,015
Real Estate Loans [Member] | Residential [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			79
Real Estate Loans [Member] | Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	6,747	8,394	10,120	8,099
Allowance for credit loss on PCD acquired loans	39		39
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	2,488	822	2,185	1,117
Balance at end of period	9,274	9,216	9,274	9,216
Real Estate Loans [Member] | Commercial [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(3,070)
Real Estate Loans [Member] | Agricultural [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	3,409	4,516	4,589	4,729
Allowance for credit loss on PCD acquired loans	37		37
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	133	(32)	98	(245)
Balance at end of period	3,579	4,484	3,579	4,484
Real Estate Loans [Member] | Agricultural [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(1,145)
Real Estate Loans [Member] | Construction [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	851	497	801	434
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	816	66	969	129
Balance at end of period	1,667	563	1,667	563
Real Estate Loans [Member] | Construction [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(103)
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	1,220	210	135	262
Allowance for credit loss on PCD acquired loans	677		677
Charge-offs	(3)	(12)	(10)	(17)
Recoveries	23	5	27	10
Provision	(658)	261	(610)	209
Balance at end of period	1,259	464	1,259	464
Consumer [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			1,040
Other Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	712	1,380	1,040	1,023
Allowance for credit loss on PCD acquired loans	828		828
Charge-offs	0	(434)	0	(434)
Recoveries	3	5	4	7
Provision	934	222	933	577
Balance at end of period	2,477	1,173	2,477	1,173
Other Commercial Loans [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(328)
Other Agricultural Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	250	551	489	558
Allowance for credit loss on PCD acquired loans	0		0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	18	(105)	(2)	(112)
Balance at end of period	268	446	268	446
Other Agricultural Loans [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(219)
Subdivision Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	42	285	322	281
Allowance for credit loss on PCD acquired loans	0		0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	10	38	10	42
Balance at end of period	52	323	52	323
Subdivision Loans [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			(280)
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	824	653	0	771
Allowance for credit loss on PCD acquired loans	0		0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	(423)	(767)	(325)	(885)
Balance at end of period	$ 401	$ (114)	401	$ (114)
Unallocated [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period			$ 726

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Loans, Allowance for Credit Losses - Loans and Amortized Cost Basis of Loans Under CECL Methodology (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	$ 19,445		$ 102
Individually evaluated for impairment	2,207		18,450
Total Allowance for Credit Losses - Loans	21,652	$ 15,250	18,552	$ 17,570	$ 17,556	$ 17,304
Collectively evaluated for impairment	2,146,146		1,709,724
Individually evaluated for impairment	16,696		11,969
Loans acquired with deteriorated credit quality			3,306
Total Loans	2,162,842		1,724,999
Residential [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	308,970
Commercial [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	1,080,513
Construction [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	156,927
Real Estate Loans [Member] | Residential [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	2,552		4
Individually evaluated for impairment	123		1,052
Total Allowance for Credit Losses - Loans	2,675	1,195	1,056	1,015	1,070	1,147
Collectively evaluated for impairment	356,592		209,869
Individually evaluated for impairment	1,433		335
Loans acquired with deteriorated credit quality			9
Total Loans	358,025		210,213
Real Estate Loans [Member] | Commercial [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	9,110		57
Individually evaluated for impairment	164		10,063
Total Allowance for Credit Losses - Loans	9,274	6,747	10,120	9,216	8,394	8,099
Collectively evaluated for impairment	1,075,534		869,038
Individually evaluated for impairment	4,979		5,675
Loans acquired with deteriorated credit quality			1,856
Total Loans	1,080,513		876,569
Real Estate Loans [Member] | Agricultural [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	3,493		24
Individually evaluated for impairment	86		4,565
Total Allowance for Credit Losses - Loans	3,579	3,409	4,589	4,484	4,516	4,729
Collectively evaluated for impairment	308,010		306,793
Individually evaluated for impairment	4,292		5,380
Loans acquired with deteriorated credit quality			1,441
Total Loans	312,302		313,614
Real Estate Loans [Member] | Construction [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	1,410		0
Individually evaluated for impairment	257		801
Total Allowance for Credit Losses - Loans	1,667	851	801	563	497	434
Collectively evaluated for impairment	154,570		80,691
Individually evaluated for impairment	2,357		0
Loans acquired with deteriorated credit quality			0
Total Loans	156,927		80,691
Consumer [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	446		4
Individually evaluated for impairment	813		131
Total Allowance for Credit Losses - Loans	1,259	1,220	135	464	210	262
Collectively evaluated for impairment	41,625		86,646
Individually evaluated for impairment	1,076		4
Loans acquired with deteriorated credit quality			0
Total Loans	42,701		86,650
Other Commercial Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	1,713		13
Individually evaluated for impairment	764		1,027
Total Allowance for Credit Losses - Loans	2,477	712	1,040	1,173	1,380	1,023
Collectively evaluated for impairment	118,024		63,120
Individually evaluated for impairment	2,264		102
Loans acquired with deteriorated credit quality			0
Total Loans	120,288		63,222
Other Commercial Loans [Member] | Construction [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	120,288
Other Agricultural Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	268		0
Individually evaluated for impairment	0		489
Total Allowance for Credit Losses - Loans	268	250	489	446	551	558
Collectively evaluated for impairment	30,320		34,359
Individually evaluated for impairment	295		473
Loans acquired with deteriorated credit quality			0
Total Loans	30,615		34,832
State and Political Subdivision Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	52		0
Individually evaluated for impairment	0		322
Total Allowance for Credit Losses - Loans	52	42	322	323	285	281
Collectively evaluated for impairment	61,471		59,208
Individually evaluated for impairment	0		0
Loans acquired with deteriorated credit quality			0
Total Loans	61,471		59,208
Unallocated [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	401
Individually evaluated for impairment	0
Total Allowance for Credit Losses - Loans	401	$ 824	$ 0	$ (114)	$ 653	$ 771
Collectively evaluated for impairment	0
Individually evaluated for impairment	0
Total Loans	$ 0

XML

Loans, Credit Quality Indicator, Summary (Details) - Minimum [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($)
Financing Receivable [Abstract]
Amount over which all relationships to be reviewed, minimum	$ 500
Percentage of dollar volume of commercial loan portfolio to be reviewed	50.00%
Amount over which all new loans to be reviewed	$ 1,000
Amount over which all relationships to be reviewed	1,000
Amount which is 30 days past due to be reviewed for all aggregate loan relationships	$ 750

XML

Loans, Credit Exposures by Internally Assigned Grades, by Origination Year (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans	$ 2,162,842		$ 2,162,842		$ 1,724,999
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	4	$ 446	11	$ 451
Commercial Real Estate [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	54,881		54,881
2022	338,992		338,992
2021	217,862		217,862
2020	127,945		127,945
2019	91,443		91,443
Prior	214,741		214,741
Revolving Loans Amortized Cost Basis	33,454		33,454
Revolving Loans Converted to Term	1,195		1,195
Total loans	1,080,513		1,080,513
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			0
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	54,881		54,881
2022	329,894		329,894
2021	217,856		217,856
2020	126,372		126,372
2019	83,562		83,562
Prior	203,314		203,314
Revolving Loans Amortized Cost Basis	32,598		32,598
Revolving Loans Converted to Term	1,187		1,187
Total loans	1,049,664		1,049,664
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	8,847		8,847
2021	0		0
2020	1,378		1,378
2019	7,627		7,627
Prior	9,447		9,447
Revolving Loans Amortized Cost Basis	125		125
Revolving Loans Converted to Term	0		0
Total loans	27,424		27,424
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	251		251
2021	6		6
2020	195		195
2019	254		254
Prior	1,980		1,980
Revolving Loans Amortized Cost Basis	731		731
Revolving Loans Converted to Term	8		8
Total loans	3,425		3,425
Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
Agricultural Real Estate [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	10,468		10,468
2022	57,269		57,269
2021	31,927		31,927
2020	33,222		33,222
2019	27,270		27,270
Prior	138,929		138,929
Revolving Loans Amortized Cost Basis	11,626		11,626
Revolving Loans Converted to Term	1,591		1,591
Total loans	312,302		312,302
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			0
Agricultural Real Estate [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	10,468		10,468
2022	54,241		54,241
2021	30,666		30,666
2020	33,222		33,222
2019	27,167		27,167
Prior	126,373		126,373
Revolving Loans Amortized Cost Basis	11,466		11,466
Revolving Loans Converted to Term	1,344		1,344
Total loans	294,947		294,947
Agricultural Real Estate [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	3,028		3,028
2021	1,261		1,261
2020	0		0
2019	0		0
Prior	6,819		6,819
Revolving Loans Amortized Cost Basis	85		85
Revolving Loans Converted to Term	0		0
Total loans	11,193		11,193
Agricultural Real Estate [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	103		103
Prior	5,737		5,737
Revolving Loans Amortized Cost Basis	75		75
Revolving Loans Converted to Term	247		247
Total loans	6,162		6,162
Agricultural Real Estate [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
Construction [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	21,794		21,794
2022	82,182		82,182
2021	52,450		52,450
2020	501		501
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	156,927		156,927
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			0
Construction [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	20,388		20,388
2022	81,202		81,202
2021	45,691		45,691
2020	501		501
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	147,782		147,782
Construction [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,406		1,406
2022	980		980
2021	4,402		4,402
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	6,788		6,788
Construction [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	2,357		2,357
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	2,357		2,357
Construction [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
Other Commercial Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans	120,288		120,288		63,222
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs	0	434	0	434
Other Commercial Loans [Member] | Construction [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	3,115		3,115
2022	12,758		12,758
2021	11,121		11,121
2020	6,772		6,772
2019	6,506		6,506
Prior	6,363		6,363
Revolving Loans Amortized Cost Basis	73,479		73,479
Revolving Loans Converted to Term	174		174
Total loans	120,288		120,288
Other Commercial Loans [Member] | Construction [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	3,115		3,115
2022	12,671		12,671
2021	9,536		9,536
2020	5,793		5,793
2019	5,970		5,970
Prior	5,041		5,041
Revolving Loans Amortized Cost Basis	70,515		70,515
Revolving Loans Converted to Term	109		109
Total loans	112,750		112,750
Other Commercial Loans [Member] | Construction [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	87		87
2021	1,585		1,585
2020	216		216
2019	338		338
Prior	24		24
Revolving Loans Amortized Cost Basis	2,678		2,678
Revolving Loans Converted to Term	39		39
Total loans	4,967		4,967
Other Commercial Loans [Member] | Construction [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	763		763
2019	198		198
Prior	1,298		1,298
Revolving Loans Amortized Cost Basis	286		286
Revolving Loans Converted to Term	0		0
Total loans	2,545		2,545
Other Commercial Loans [Member] | Construction [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	26		26
Total loans	26		26
Other Agricultural Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,998		2,998
2022	2,288		2,288
2021	7,798		7,798
2020	1,297		1,297
2019	1,296		1,296
Prior	919		919
Revolving Loans Amortized Cost Basis	13,985		13,985
Revolving Loans Converted to Term	0		0
Total loans	30,615		30,615		34,832
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs	0	0	0	0
Other Agricultural Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,998		2,998
2022	1,766		1,766
2021	7,530		7,530
2020	1,249		1,249
2019	1,281		1,281
Prior	487		487
Revolving Loans Amortized Cost Basis	13,417		13,417
Revolving Loans Converted to Term	0		0
Total loans	28,728		28,728
Other Agricultural Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	522		522
2021	268		268
2020	48		48
2019	7		7
Prior	55		55
Revolving Loans Amortized Cost Basis	543		543
Revolving Loans Converted to Term	0		0
Total loans	1,443		1,443
Other Agricultural Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	8		8
Prior	377		377
Revolving Loans Amortized Cost Basis	25		25
Revolving Loans Converted to Term	34		34
Total loans	444		444
Other Agricultural Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
State and Political Subdivision Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	94		94
2022	18,733		18,733
2021	12,124		12,124
2020	4,438		4,438
2019	5		5
Prior	26,077		26,077
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	61,471		61,471		$ 59,208
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs	0	$ 0	0	$ 0
State and Political Subdivision Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	94		94
2022	18,733		18,733
2021	12,124		12,124
2020	4,438		4,438
2019	5		5
Prior	26,077		26,077
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	61,471		61,471
State and Political Subdivision Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
State and Political Subdivision Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
State and Political Subdivision Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	0		0
Total Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	93,350		93,350
2022	512,222		512,222
2021	333,282		333,282
2020	174,175		174,175
2019	126,520		126,520
Prior	387,029		387,029
Revolving Loans Amortized Cost Basis	132,544		132,544
Revolving Loans Converted to Term	2,994		2,994
Total loans	1,762,116		1,762,116
Total Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	91,944		91,944
2022	498,507		498,507
2021	323,403		323,403
2020	171,575		171,575
2019	117,985		117,985
Prior	361,292		361,292
Revolving Loans Amortized Cost Basis	127,996		127,996
Revolving Loans Converted to Term	2,640		2,640
Total loans	1,695,342		1,695,342
Total Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,406		1,406
2022	13,464		13,464
2021	7,516		7,516
2020	1,642		1,642
2019	7,972		7,972
Prior	16,345		16,345
Revolving Loans Amortized Cost Basis	3,431		3,431
Revolving Loans Converted to Term	39		39
Total loans	51,815		51,815
Total Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	251		251
2021	2,363		2,363
2020	958		958
2019	563		563
Prior	9,392		9,392
Revolving Loans Amortized Cost Basis	1,117		1,117
Revolving Loans Converted to Term	289		289
Total loans	14,933		14,933
Total Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	26		26
Total loans	$ 26		$ 26

XML

Loans, Internal Credit Risk Ratings for Loan Class Segments (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Financing Receivable by credit exposure [Abstract]
Total loans	$ 2,141,190	$ 1,706,447
Real Estate Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		296,863
Real Estate Loans [Member] | Commercial [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		876,569
Real Estate Loans [Member] | Commercial [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		842,912
Real Estate Loans [Member] | Commercial [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		28,047
Real Estate Loans [Member] | Commercial [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		5,610
Real Estate Loans [Member] | Commercial [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Commercial [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Agricultural [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		313,614
Real Estate Loans [Member] | Agricultural [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		295,443
Real Estate Loans [Member] | Agricultural [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		11,960
Real Estate Loans [Member] | Agricultural [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		6,211
Real Estate Loans [Member] | Agricultural [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Agricultural [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Construction [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		80,691
Real Estate Loans [Member] | Construction [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		75,703
Real Estate Loans [Member] | Construction [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		2,642
Real Estate Loans [Member] | Construction [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		2,346
Real Estate Loans [Member] | Construction [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member] | Construction [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Other Commercial Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		63,222
Other Commercial Loans [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		59,902
Other Commercial Loans [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		2,953
Other Commercial Loans [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		337
Other Commercial Loans [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		30
Other Commercial Loans [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Other Agricultural Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		34,832
Other Agricultural Loans [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		32,708
Other Agricultural Loans [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		1,307
Other Agricultural Loans [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		817
Other Agricultural Loans [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Other Agricultural Loans [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Subdivision Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		59,208
Subdivision Loans [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		59,208
Subdivision Loans [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Subdivision Loans [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Subdivision Loans [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Subdivision Loans [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Total Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		1,428,136
Total Loans [Member] | Pass [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		1,365,876
Total Loans [Member] | Special Mention [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		46,909
Total Loans [Member] | Substandard [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		15,321
Total Loans [Member] | Doubtful [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		30
Total Loans [Member] | Loss [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		$ 0

XML

Loans, Recorded Investment in Loan Classes Based on Payment Activity, By Origination Year (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
Total loans	$ 2,162,842		$ 2,162,842		$ 1,724,999
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	4	$ 446	11	$ 451
Residential Real Estate [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	12,084		12,084
2022	88,543		88,543
2021	50,383		50,383
2020	31,010		31,010
2019	19,334		19,334
Prior	107,616		107,616
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	308,970		308,970
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			1
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			1
Residential Real Estate [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	12,084		12,084
2022	88,543		88,543
2021	49,595		49,595
2020	30,895		30,895
2019	19,334		19,334
Prior	106,346		106,346
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	306,797		306,797
Residential Real Estate [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	788		788
2020	115		115
2019	0		0
Prior	1,270		1,270
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	2,173		2,173
Home Equity [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	2,130		2,130
2022	3,217		3,217
2021	2,046		2,046
2020	2,439		2,439
2019	2,685		2,685
Prior	8,967		8,967
Revolving Loans Amortized Cost Basis	27,127		27,127
Revolving Loans Converted to Term	444		444
Total loans	49,055		49,055
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			0
Prior			0
Revolving Loans Amortized Cost Basis			0
Revolving Loans Converted to Term			0
Gross charge-offs			0
Home Equity [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	2,130		2,130
2022	3,217		3,217
2021	2,046		2,046
2020	2,439		2,439
2019	2,685		2,685
Prior	8,914		8,914
Revolving Loans Amortized Cost Basis	27,127		27,127
Revolving Loans Converted to Term	444		444
Total loans	49,002		49,002
Home Equity [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	53		53
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	53		53
Consumer [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	3,708		3,708
2022	1,287		1,287
2021	650		650
2020	551		551
2019	597		597
Prior	4,394		4,394
Revolving Loans Amortized Cost Basis	31,505		31,505
Revolving Loans Converted to Term	9		9
Total loans	42,701		42,701
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			1
Prior			0
Revolving Loans Amortized Cost Basis			9
Revolving Loans Converted to Term			0
Gross charge-offs			10
Consumer [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	3,708		3,708
2022	1,267		1,267
2021	650		650
2020	551		551
2019	597		597
Prior	3,332		3,332
Revolving Loans Amortized Cost Basis	31,505		31,505
Revolving Loans Converted to Term	9		9
Total loans	41,619		41,619
Consumer [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	0		0
2022	20		20
2021	0		0
2020	0		0
2019	0		0
Prior	1,062		1,062
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	1,082		1,082
Mortgage, Home Equity, and Consumer [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	17,922		17,922
2022	93,047		93,047
2021	53,079		53,079
2020	34,000		34,000
2019	22,616		22,616
Prior	120,977		120,977
Revolving Loans Amortized Cost Basis	58,632		58,632
Revolving Loans Converted to Term	453		453
Total loans	400,726		400,726
Mortgage, Home Equity, and Consumer [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	17,922		17,922
2022	93,027		93,027
2021	52,291		52,291
2020	33,885		33,885
2019	22,616		22,616
Prior	118,592		118,592
Revolving Loans Amortized Cost Basis	58,632		58,632
Revolving Loans Converted to Term	453		453
Total loans	397,418		397,418
Mortgage, Home Equity, and Consumer [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2023	0		0
2022	20		20
2021	788		788
2020	115		115
2019	0		0
Prior	2,385		2,385
Revolving Loans Amortized Cost Basis	0		0
Revolving Loans Converted to Term	0		0
Total loans	3,308		3,308
Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
Total loans	358,025		358,025		$ 210,213
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	$ 1	$ 0	$ 1	$ 0

XML

Loans, Internal Credit Risk Ratings for Loan Class Segments by Performance Status (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Financing Receivable by credit exposure [Abstract]
Total loans	$ 2,141,190	$ 1,706,447
Consumer [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		86,650
Consumer [Member] | Performing [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		86,643
Consumer [Member] | Nonperforming [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		7
Consumer [Member] | PCI [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		0
Real Estate Loans [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		296,863
Real Estate Loans [Member] | Performing [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		296,256
Real Estate Loans [Member] | Nonperforming [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		598
Real Estate Loans [Member] | PCI [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		9
Real Estate Loans [Member] | Mortgages [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		162,569
Real Estate Loans [Member] | Mortgages [Member] | Performing [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		161,998
Real Estate Loans [Member] | Mortgages [Member] | Nonperforming [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		562
Real Estate Loans [Member] | Mortgages [Member] | PCI [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		9
Real Estate Loans [Member] | Home Equity [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		47,644
Real Estate Loans [Member] | Home Equity [Member] | Performing [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		47,615
Real Estate Loans [Member] | Home Equity [Member] | Nonperforming [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		29
Real Estate Loans [Member] | Home Equity [Member] | PCI [Member]
Financing Receivable by credit exposure [Abstract]
Total loans		$ 0

XML

Loans, Past Due (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Recorded investment of past due [Abstract]
Total past due	$ 2,162,842	$ 1,724,999
Current	2,150,205	1,714,673
PCI		3,306
Total financing receivables	2,162,842	1,724,999
90 days or greater past due and accruing	139	7
Financing receivables on nonaccrual status [Abstract]
Current and non-accrual	5,403	3,370
PCI Loans considered non accrual		0
Nonaccrual With a related allowance	5,225	6,938
Nonaccrual Without a related allowance	7,848
90 days or greater past due and accruing	139	7
Total loans receivables	13,073	6,938
Total non-performing loans	13,212	6,945
Financing receivables on accrual status [Abstract]
Current and still accruing	2,144,802	1,711,303
PCI Loans still accruing		3,306
Total financing receivables and still accruing	$ 2,149,769	1,718,061
Minimum [Member]
Financing receivables on nonaccrual status [Abstract]
Period of past due after which loans considered as non accrual	90 days
Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	$ 12,637	7,020
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	7,670	3,568
Financing receivables on accrual status [Abstract]
Total past due and still accruing	4,967	3,452
30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	3,459	3,276
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	37	46
Financing receivables on accrual status [Abstract]
Total past due and still accruing	3,422	3,230
60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	2,300	291
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	894	76
Financing receivables on accrual status [Abstract]
Total past due and still accruing	1,406	215
90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	6,878	3,453
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	6,739	3,446
Financing receivables on accrual status [Abstract]
Total past due and still accruing	139	7
Home Equity [Member]
Recorded investment of past due [Abstract]
Total past due	49,055
Commercial [Member]
Recorded investment of past due [Abstract]
Total past due	1,080,513
Construction [Member]
Recorded investment of past due [Abstract]
Total past due	156,927
Real Estate Loans [Member] | Mortgages [Member]
Recorded investment of past due [Abstract]
Current	306,037	161,843
PCI		9
Total financing receivables	308,970	162,569
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	472	562
Nonaccrual Without a related allowance	1,701
90 days or greater past due and accruing	0	0
Total loans receivables	2,173	562
Total non-performing loans	2,173	562
Real Estate Loans [Member] | Mortgages [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	2,933	717
Real Estate Loans [Member] | Mortgages [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	356
Real Estate Loans [Member] | Mortgages [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,225	132
Real Estate Loans [Member] | Mortgages [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,708	229
Real Estate Loans [Member] | Home Equity [Member]
Recorded investment of past due [Abstract]
Current	48,908	47,558
PCI		0
Total financing receivables	49,055	47,644
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	0	29
Nonaccrual Without a related allowance	53
90 days or greater past due and accruing	0	0
Total loans receivables	53	29
Total non-performing loans	53	29
Real Estate Loans [Member] | Home Equity [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	147	86
Real Estate Loans [Member] | Home Equity [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	110	48
Real Estate Loans [Member] | Home Equity [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	7	9
Real Estate Loans [Member] | Home Equity [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	30	29
Real Estate Loans [Member] | Commercial [Member]
Recorded investment of past due [Abstract]
Total past due	1,080,513	876,569
Current	1,076,994	871,745
PCI		1,856
Total financing receivables	1,080,513	876,569
90 days or greater past due and accruing	129	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	353	2,778
Nonaccrual Without a related allowance	1,510
90 days or greater past due and accruing	129	0
Total loans receivables	1,863	2,778
Total non-performing loans	1,992	2,778
Real Estate Loans [Member] | Commercial [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	3,519	2,968
Real Estate Loans [Member] | Commercial [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	2,072	1,065
Real Estate Loans [Member] | Commercial [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	231	115
Real Estate Loans [Member] | Commercial [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,216	1,788
Real Estate Loans [Member] | Agricultural [Member]
Recorded investment of past due [Abstract]
Total past due	312,302	313,614
Current	310,912	310,805
PCI		1,441
Total financing receivables	312,302	313,614
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	182	3,222
Nonaccrual Without a related allowance	2,810
90 days or greater past due and accruing	0	0
Total loans receivables	2,992	3,222
Total non-performing loans	2,992	3,222
Real Estate Loans [Member] | Agricultural [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,390	1,368
Real Estate Loans [Member] | Agricultural [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	23	0
Real Estate Loans [Member] | Agricultural [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
Real Estate Loans [Member] | Agricultural [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,367	1,368
Real Estate Loans [Member] | Construction [Member]
Recorded investment of past due [Abstract]
Total past due	156,927	80,691
Current	156,450	80,691
PCI		0
Total financing receivables	156,927	80,691
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	2,357	0
Nonaccrual Without a related allowance	0
90 days or greater past due and accruing	0	0
Total loans receivables	2,357	0
Total non-performing loans	2,357	0
Real Estate Loans [Member] | Construction [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	477	0
Real Estate Loans [Member] | Construction [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	477	0
Real Estate Loans [Member] | Construction [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
Real Estate Loans [Member] | Construction [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
Consumer [Member]
Recorded investment of past due [Abstract]
Total past due	42,701	86,650
Current	41,222	86,496
PCI		0
Total financing receivables	42,701	86,650
90 days or greater past due and accruing	10	7
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	1,072	0
Nonaccrual Without a related allowance	0
90 days or greater past due and accruing	10	7
Total loans receivables	1,072	0
Total non-performing loans	1,082	7
Consumer [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,479	154
Consumer [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	389	147
Consumer [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	8	0
Consumer [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,082	7
Other Commercial Loans [Member]
Recorded investment of past due [Abstract]
Total past due	120,288	63,222
Current	117,830	61,495
PCI		0
Total financing receivables	120,288	63,222
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	789	62
Nonaccrual Without a related allowance	1,475
90 days or greater past due and accruing	0	0
Total loans receivables	2,264	62
Total non-performing loans	2,264	62
Other Commercial Loans [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	2,458	1,727
Other Commercial Loans [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	154	1,660
Other Commercial Loans [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	829	35
Other Commercial Loans [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,475	32
Other Commercial Loans [Member] | Construction [Member]
Recorded investment of past due [Abstract]
Total past due	120,288
Other Agricultural Loans [Member]
Recorded investment of past due [Abstract]
Total past due	30,615	34,832
Current	30,381	34,832
PCI		0
Total financing receivables	30,615	34,832
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	0	285
Nonaccrual Without a related allowance	299
90 days or greater past due and accruing	0	0
Total loans receivables	299	285
Total non-performing loans	299	285
Other Agricultural Loans [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	234	0
Other Agricultural Loans [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	234	0
Other Agricultural Loans [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
Other Agricultural Loans [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
State and Political Subdivision Loans [Member]
Recorded investment of past due [Abstract]
Total past due	61,471	59,208
Current	61,471	59,208
PCI		0
Total financing receivables	61,471	59,208
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Nonaccrual With a related allowance	0	0
Nonaccrual Without a related allowance	0
90 days or greater past due and accruing	0	0
Total loans receivables	0	0
Total non-performing loans	0	0
State and Political Subdivision Loans [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
State and Political Subdivision Loans [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
State and Political Subdivision Loans [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	0
State and Political Subdivision Loans [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	$ 0	$ 0

XML

Loans, Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	$ 13,073	$ 6,938
Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	9,438	6,591
Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,563	347
None [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,072
Real Estate Loans [Member] | Mortgages [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,173	562
Real Estate Loans [Member] | Mortgages [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,173	562
Real Estate Loans [Member] | Mortgages [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Real Estate Loans [Member] | Home Equity [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	53	29
Real Estate Loans [Member] | Home Equity [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	53	29
Real Estate Loans [Member] | Home Equity [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Real Estate Loans [Member] | Commercial [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,863	2,778
Real Estate Loans [Member] | Commercial [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,863	2,778
Real Estate Loans [Member] | Commercial [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Real Estate Loans [Member] | Agricultural [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,992	3,222
Real Estate Loans [Member] | Agricultural [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,992	3,222
Real Estate Loans [Member] | Agricultural [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Real Estate Loans [Member] | Construction [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,357	0
Real Estate Loans [Member] | Construction [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,357	0
Real Estate Loans [Member] | Construction [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Consumer [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,072	0
Consumer [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Consumer [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Consumer [Member] | None [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,072
Other Commercial Loans [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,264	62
Other Commercial Loans [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Other Commercial Loans [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,264	62
Other Agricultural Loans [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	299	285
Other Agricultural Loans [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Other Agricultural Loans [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	299	285
State and Political Subdivision Loans [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
State and Political Subdivision Loans [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
State and Political Subdivision Loans [Member] | Other [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	$ 0	$ 0

XML

Loans, Modifications to Borrowers Experiencing Financial Difficulty (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023 USD ($) Loan	Jun. 30, 2023 USD ($) Loan
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan	7	13
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis	$ 1,008	$ 2,891
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan		1
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		$ 91
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty	$ 1,008	2,891
Non accruing modified loans to borrowers experiencing financial difficulty		91
Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		2,891
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		91
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		2,891
Non accruing modified loans to borrowers experiencing financial difficulty		91
30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Non accruing modified loans to borrowers experiencing financial difficulty		0
90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Non accruing modified loans to borrowers experiencing financial difficulty		$ 0
Real Estate Loans [Member] | Mortgages [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan		1
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		$ 131
Accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables		0.04%
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term		4 months
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		$ 131
Real Estate Loans [Member] | Mortgages [Member] | Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		131
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		131
Real Estate Loans [Member] | Mortgages [Member] | 30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Real Estate Loans [Member] | Mortgages [Member] | 90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		$ 0
Real Estate Loans [Member] | Commercial [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan	3	7
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis	$ 243	$ 1,992
Accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables	0.02%	0.18%
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term	5 months	22 months
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan		1
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		$ 91
Non accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables		0.01%
Non accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term		6 months
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty	$ 243	$ 1,992
Non accruing modified loans to borrowers experiencing financial difficulty		91
Real Estate Loans [Member] | Commercial [Member] | Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		1,992
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		91
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		1,992
Non accruing modified loans to borrowers experiencing financial difficulty		91
Real Estate Loans [Member] | Commercial [Member] | 30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Non accruing modified loans to borrowers experiencing financial difficulty		0
Real Estate Loans [Member] | Commercial [Member] | 90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Non accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Non accruing modified loans to borrowers experiencing financial difficulty		$ 0
Real Estate Loans [Member] | Agricultural [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan	4	4
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis	$ 765	$ 765
Accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables	0.24%	0.24%
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term	2 months	2 months
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty	$ 765	$ 765
Real Estate Loans [Member] | Agricultural [Member] | Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		765
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		765
Real Estate Loans [Member] | Agricultural [Member] | 30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Real Estate Loans [Member] | Agricultural [Member] | 90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		$ 0
Real Estate Loans [Member] | Consumer [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans | Loan		1
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		$ 3
Accruing modified loans to borrowers experiencing financial difficulty, % of total class financing receivables		0.01%
Accruing modified loans to borrowers experiencing financial difficulty, weighted average debt instrument term		24 months
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		$ 3
Real Estate Loans [Member] | Consumer [Member] | Current Member [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		3
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		3
Real Estate Loans [Member] | Consumer [Member] | 30-89 Days Past Due [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		0
Real Estate Loans [Member] | Consumer [Member] | 90 Days Or Greater [Member]
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Amortized cost basis		0
Amortized Cost And Payment Status Of Accruing And Nonaccrual Modified Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty		$ 0

XML

Loans, Foreclosed Assets Held for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Foreclosed assets held for sale [Abstract]
Foreclosed assets held for sale	$ 426	$ 543
Consumer Residential Mortgages [Member]
Foreclosed assets held for sale [Abstract]
Foreclosed assets held for sale	226
Formal foreclosure proceedings on potential foreclosure assets	$ 241

XML

Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Amortized intangible assets [Abstract]
Gross carrying value	[1]	$ 7,288		$ 7,288		$ 4,279
Accumulated amortization	[1]	(3,217)		(3,217)		(3,007)
Net carrying value	[1]	4,071		4,071		1,272
Unamortized intangible assets [Abstract]
Goodwill	[1]	84,758		84,758		31,376
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		106	$ 118	210	$ 240
Estimated Amortization Expense [Abstract]
Remaining 2023		465		465
2024		835		835
2025		698		698
2026		565		565
2027		452		452
Thereafter		1,056		1,056
Net carrying value	[1]	4,071		4,071		1,272
Mortgage Servicing Rights (MSRs) [Member]
Amortized intangible assets [Abstract]
Gross carrying value	[1]	2,575		2,575		2,336
Accumulated amortization	[1]	(1,510)		(1,510)		(1,362)
Net carrying value	[1]	1,065		1,065		974
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		75	78	148	160
Estimated Amortization Expense [Abstract]
Remaining 2023		155		155
2024		271		271
2025		220		220
2026		170		170
2027		113		113
Thereafter		136		136
Net carrying value	[1]	1,065		1,065		974
Core Deposit Intangibles [Member]
Amortized intangible assets [Abstract]
Gross carrying value	[1]	4,713		4,713		1,943
Accumulated amortization	[1]	(1,707)		(1,707)		(1,645)
Net carrying value	[1]	3,006		3,006		298
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		31	$ 40	62	$ 80
Estimated Amortization Expense [Abstract]
Remaining 2023		310		310
2024		564		564
2025		478		478
2026		395		395
2027		339		339
Thereafter		920		920
Net carrying value	[1]	$ 3,006		$ 3,006		$ 298

[1] Excludes fully amortized intangible assets

XML

Employee Benefit Plans, Noncontributory Defined Benefit Pension Plan (Details) - Pension Plan [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Components of net periodic benefit cost [Abstract]
Service cost	$ 77	$ 100	$ 155	$ 178
Interest cost	110	79	220	138
Expected return on plan assets	(197)	(264)	(394)	(467)
Net amortization and deferral	7	12	14	48
Net periodic benefit cost	(3)	$ (73)	(5)	$ (103)
Expected employer contribution to pension plan	$ 0		$ 0

XML

Employee Benefit Plans, Restricted Stock Plan (Details) - Restricted Stock [Member] - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Deferred Compensation Arrangements [Abstract]
Number of shares authorized (in shares)	150,000		150,000
Number of shares available for grant (in shares)	113,816		113,816
Unvested Shares [Roll Forward]
Outstanding, beginning of period (in shares)	6,372		6,622
Granted (in shares)	2,242		2,242
Forfeited (in shares)	0		(161)
Vested (in shares)	(2,360)		(2,449)
Outstanding, end of period (in shares)	6,254		6,254
Weighted Average Market Price [Roll Forward]
Outstanding, beginning of period (in dollars per share)	$ 63.71		$ 63.63
Granted (in dollars per share)	83.38		83.38
Forfeited (in dollars per share)	0		(63.13)
Vested (in dollars per share)	(61.47)		(61.38)
Outstanding, end of period (in dollars per share)	$ 71.61		$ 71.61
Additional General Disclosures [Abstract]
Share-based compensation expense	$ 51,000	$ 65,000	$ 116,000	$ 142,000
Compensation cost related to nonvested awards that has not yet been recognized	$ 448,000		$ 448,000
Period over which compensation cost is expected to be recognized			3 years

XML

Accumulated Comprehensive Loss, By Component (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance		$ 213,238	$ 202,745	$ 200,147	$ 212,492
Other comprehensive income (loss) before reclassifications (net of tax)		(3,848)	(11,821)	2,885	(26,491)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		(370)	27	(724)	87
Other comprehensive income (loss), net of tax		(4,218)	(11,794)	2,161	(26,404)
Balance		263,228	195,032	263,228	195,032
Accumulated Other Comprehensive Income [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance		(26,762)	(14,765)	(33,141)	(155)
Other comprehensive income (loss), net of tax		(4,218)	(11,794)	2,161	(26,404)
Balance		(30,980)	(26,559)	(30,980)	(26,559)
Unrealized Gain (Loss) on Available for Sale Securities [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	(30,422)	(16,276)	(37,514)	304
Other comprehensive income (loss) before reclassifications (net of tax)	[1]	(4,736)	(12,652)	2,356	(29,232)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)	[1]	39	0	39	0
Other comprehensive income (loss), net of tax	[1]	(4,697)	(12,652)	2,395	(29,232)
Balance	[1]	(35,119)	(28,928)	(35,119)	(28,928)
Defined Benefit Pension Items [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	(1,050)	(1,940)	(1,056)	(1,968)
Other comprehensive income (loss) before reclassifications (net of tax)	[1]	0	0	0	0
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)	[1]	5	10	11	38
Other comprehensive income (loss), net of tax	[1]	5	10	11	38
Balance	[1]	(1,045)	(1,930)	(1,045)	(1,930)
Unrealized Loss on Interest Rate Swap [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	4,710	3,451	5,429	1,509
Other comprehensive income (loss) before reclassifications (net of tax)	[1]	888	831	529	2,741
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)	[1]	(414)	17	(774)	49
Other comprehensive income (loss), net of tax	[1]	474	848	(245)	2,790
Balance	[1]	$ 5,184	$ 4,299	$ 5,184	$ 4,299

[1] Amounts in parentheses indicate debits on the Consolidated Balance Sheet.

XML

Accumulated Comprehensive Loss, Reclassification (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
AOCI Attributable to Parent [Abstract]
Available for sale security gains, net				$ (343)	$ (179)
Interest expense		$ (8,889)	$ (1,678)	(15,916)	(3,231)
Provision for income taxes		1,188	(1,482)	(421)	(2,954)
NET INCOME (LOSS)		(4,144)	6,901	2,723	13,641
Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
NET INCOME (LOSS)	[1]	370	(27)	724	(87)
Unrealized Gains and Losses on Available for Sale Securities [Member] | Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
Available for sale security gains, net	[1]	(51)	0	(51)	0
Provision for income taxes	[1]	12	0	12	0
NET INCOME (LOSS)	[1]	(39)	0	(39)	0
Defined Benefit Pension Items [Member] | Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
Other expenses	[1]	(7)	(12)	(14)	(48)
Provision for income taxes	[1]	2	2	3	10
NET INCOME (LOSS)	[1]	(5)	(10)	(11)	(38)
Unrealized Gain (Loss) on Interest Rate Swap [Member] | Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
Interest expense	[1]	524	(21)	980	(62)
Provision for income taxes	[1]	(110)	4	(206)	13
NET INCOME (LOSS)	[1]	$ 414	$ (17)	$ 774	$ (49)

[1] Amounts in parentheses indicate expenses and other amounts indicate income on the Consolidated Statement of Income

XML

Fair Value Measurements, Measured on a Recurring and Nonrecurring Basis (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Other Assets [Abstract]
Derivative instruments	$ 16,395	$ 16,599
Liabilities [Abstract]
Derivative instruments	(9,303)	(9,726)
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment, estimated selling cost	359	50
Recurring [Member]
Assets [Abstract]
Equity securities	1,849	2,208
Available for sale securities [Abstract]
U.S. Agency securities	66,867	70,677
U.S. Treasury securities	149,791	148,570
Obligations of state and political subdivisions	100,443	110,300
Corporate obligations	12,207	9,383
Mortgage-backed securities in government sponsored entities	105,007	100,576
Loans held for sale	14,940
Other Assets [Abstract]
Derivative instruments	16,395	16,599
Liabilities [Abstract]
Derivative instruments	(9,303)	(9,726)
Recurring [Member] | Level I [Member]
Assets [Abstract]
Equity securities	1,849	2,208
Available for sale securities [Abstract]
U.S. Agency securities	0	0
U.S. Treasury securities	149,791	148,570
Obligations of state and political subdivisions	0	0
Corporate obligations	0	0
Mortgage-backed securities in government sponsored entities	0	0
Loans held for sale	0	0
Other Assets [Abstract]
Derivative instruments	0	0
Liabilities [Abstract]
Derivative instruments	0	0
Recurring [Member] | Level II [Member]
Assets [Abstract]
Equity securities	0	0
Available for sale securities [Abstract]
U.S. Agency securities	66,867	70,677
U.S. Treasury securities	0	0
Obligations of state and political subdivisions	100,443	110,300
Corporate obligations	12,207	9,383
Mortgage-backed securities in government sponsored entities	105,007	100,576
Loans held for sale	14,940	0
Other Assets [Abstract]
Derivative instruments	15,866	16,599
Liabilities [Abstract]
Derivative instruments	(9,303)	(9,726)
Recurring [Member] | Level III [Member]
Assets [Abstract]
Equity securities	0	0
Available for sale securities [Abstract]
U.S. Agency securities	0	0
U.S. Treasury securities	0	0
Obligations of state and political subdivisions	0	0
Corporate obligations	0	0
Mortgage-backed securities in government sponsored entities	0	0
Loans held for sale	0	725
Other Assets [Abstract]
Derivative instruments	529	0
Liabilities [Abstract]
Derivative instruments	0	0
Nonrecurring [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment	4,026	496
Other real estate owned	49	297
Nonrecurring [Member] | Level I [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment	0	0
Other real estate owned	0	0
Nonrecurring [Member] | Level II [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment	0	0
Other real estate owned	0	0
Nonrecurring [Member] | Level III [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Individually analyzed loans held for investment	4,026	496
Other real estate owned	$ 49	$ 297

XML

Fair Value Measurements, Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3) (Details) - IRLC Assets [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 16, 2023
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance acquired as part of the HVBC acquisition	$ 657
Total unrealized losses: Included in other comprehensive loss	0
Total losses included in earnings and held at reporting date	(128)
Purchases, sales and settlements	0
Transfers in and/or out of Level 3	0
Ending Balance	529
Change in unrealized (losses) for the period included in earnings (or changes in net assets) for assets held	$ (128)
Change in unrealized loss for the period included other comprehensive loss for assets held		$ 0

XML

Fair Value Measurements, Quantitative Information about Level 3 Fair Value Measurements (Details) $ in Thousands	Jun. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	$ 16,395	$ 16,599
Net derivative liability	9,303	$ 9,726
IRLC Assets [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	529
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	529
Net derivative liability	$ 529
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member] | Valuation Technique, Discounted Cash Flow [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Derivative Asset, Measurement Input	0.7826
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member] | Valuation Technique, Discounted Cash Flow [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Derivative Asset, Measurement Input	0.9576
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member] | Valuation Technique, Discounted Cash Flow [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Derivative Asset, Measurement Input	0.8453

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Fair Value Measurements, Quantitative Information (Details) - Appraised Collateral Values [Member] $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Individually Analyzed Loans Held For Investment [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment	$ 4,026	$ 496
Individually Analyzed Loans Held For Investment [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	0 months	6 months
Individually Analyzed Loans Held For Investment [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	12 months	12 months
Individually Analyzed Loans Held For Investment [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	10 months 12 days	11 months 15 days
Individually Analyzed Loans Held For Investment [Member] | Discount for Time Since Appraisal [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0	0
Individually Analyzed Loans Held For Investment [Member] | Discount for Time Since Appraisal [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	1	1
Individually Analyzed Loans Held For Investment [Member] | Discount for Time Since Appraisal [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0.326	0.2516
Individually Analyzed Loans Held For Investment [Member] | Selling Costs [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0.08	0.08
Individually Analyzed Loans Held For Investment [Member] | Selling Costs [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0.10	0.10
Individually Analyzed Loans Held For Investment [Member] | Selling Costs [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment, Measurement input	0.0892	0.0841
Other Real Estate Owned [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Individually analyzed loans held for investment	$ 49	$ 297
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input	0.20
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input		0.20
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input		0.84
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input	0.20	0.3984

XML

Fair Value Measurements, By Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Financial assets [Abstract]
Interest bearing time deposits with other banks	$ 4,814	$ 6,055
Recurring [Member]
Financial assets [Abstract]
Loans held for sale	14,940
Level I [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	0	0
Loans held for sale	0	0
Net loans	0	0
Financial liabilities [Abstract]
Deposits	1,935,269	1,566,517
Borrowed funds	0	0
Level II [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	0	0
Loans held for sale	14,940	0
Net loans	0	0
Financial liabilities [Abstract]
Deposits	0	0
Borrowed funds	0	0
Level III [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	4,814	6,055
Loans held for sale	0	725
Net loans	2,080,817	1,662,514
Financial liabilities [Abstract]
Deposits	319,576	265,520
Borrowed funds	308,507	246,288
Carrying Amount [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	4,814	6,055
Loans held for sale		725
Net loans	2,141,190	1,706,447
Financial liabilities [Abstract]
Deposits	2,266,100	1,844,208
Borrowed funds	318,200	257,278
Fair Value [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	4,814	6,055
Loans held for sale		725
Net loans	2,080,817	1,662,514
Financial liabilities [Abstract]
Deposits	2,254,845	1,832,037
Borrowed funds	$ 308,507	$ 246,288