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, 2024

Or

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

EXCHANGE ACT OF 1934

For the transition period from_____________________ to ___________________

Commission file number 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, 2024, was 4,759,931.

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, 2024 and December 31, 2023	1
	Consolidated Statement of Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023	2
	Consolidated Statement of Comprehensive Income (Loss) for the Three and Six Months ended June 30, 2024 and 2023	3
	Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six Months ended June 30, 2024 and 2023	4
	Consolidated Statement of Cash Flows for the Six Months ended June 30, 2024 and 2023	5
	Notes to Consolidated Financial Statements	6-33
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34-58
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58-59
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	60
	Signatures	61

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(in thousands except share data)	June 30, 2024			December 31, 2023
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	22,023		$	37,733
Interest-bearing		16,410			15,085
Total cash and cash equivalents		38,433			52,818
Interest bearing time deposits with other banks		3,820			4,070
Equity securities		1,570			1,938
Available-for-sale securities		402,661			417,601
Loans held for sale		14,227			9,379
Loans (net of allowance for credit losses: 2024 $22,797 and 2023, $21,153)		2,232,919			2,227,683
Premises and equipment		20,899			21,384
Accrued interest receivable		10,782			11,043
Goodwill		85,758			85,758
Bank owned life insurance		49,746			49,897
Other intangibles		3,244			3,650
Fair value of derivative instruments		13,111			13,687
Deferred tax asset		17,185			17,339
Other assets		53,176			59,074
TOTAL ASSETS	$	2,947,531		$	2,975,321
LIABILITIES:
Deposits:
Noninterest-bearing	$	501,991		$	523,784
Interest-bearing		1,771,104			1,797,697
Total deposits		2,273,095			2,321,481
Borrowed funds		334,829			322,036
Accrued interest payable		5,482			4,298
Fair value of derivative instruments - liability		7,319			7,922
Other liabilities		40,336			39,918
TOTAL LIABILITIES		2,661,061			2,695,655
STOCKHOLDERS’ EQUITY:
Preferred Stock
$1.00 par value; authorized 3,000,000 shares at June 30, 2024 and December 31, 2023; none issued in 2024 or 2023		-			-
Common stock
$1.00 par value; authorized 25,000,000 shares at June 30, 2024 and December 31, 2023; issued 5,207,343 at June 30, 2024 and 5,160,754 at December 31, 2023		5,207			5,161
Additional paid-in capital		144,985			143,233
Retained earnings		178,588			172,975
Accumulated other comprehensive loss		(25,932	)		(24,911	)
Treasury stock, at cost: 447,857 shares at June 30, 2024 and 453,760 shares at December 31, 2023		(16,378	)		(16,792	)
TOTAL STOCKHOLDERS’ EQUITY		286,470			279,666
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,947,531		$	2,975,321

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)	2024			2023			2024			2023
INTEREST INCOME:
Interest and fees on loans	$	35,067		$	24,117		$	70,200		$	46,666
Interest-bearing deposits with banks		262			127			505			198
Investment securities:
Taxable		1,663			1,683			3,287			3,239
Nontaxable		520			572			1,052			1,189
Dividends		390			311			791			625
TOTAL INTEREST INCOME		37,902			26,810			75,835			51,917
INTEREST EXPENSE:
Deposits		12,655			5,480			24,976			9,419
Borrowed funds		3,947			3,409			8,601			6,497
TOTAL INTEREST EXPENSE		16,602			8,889			33,577			15,916
NET INTEREST INCOME		21,300			17,921			42,258			36,001
Provision for credit losses		2,002			262			2,787			262
Provision for credit losses - acquisition day 1 non-PCD		-			4,591			-			4,591
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		19,298			13,068			39,471			31,148
NON-INTEREST INCOME:
Service charges		1,385			1,293			2,757			2,504
Trust		201			181			445			411
Brokerage and insurance		563			442			1,228			956
Gains on loans sold		479			169			896			214
Equity security losses, net		(87	)		(74	)		(32	)		(292	)
Available for sale security losses, net		-			(51	)		-			(51	)
Gain on sale of Braavo division		-			-			1,102			-
Earnings on bank owned life insurance		328			234			996			452
Other		467			86			915			260
TOTAL NON-INTEREST INCOME		3,336			2,280			8,307			4,454
NON-INTEREST EXPENSES:
Salaries and employee benefits		9,617			7,916			19,907			15,593
Occupancy		1,266			814			2,590			1,649
Furniture and equipment		295			162			531			313
Professional fees		698			387			1,401			768
FDIC insurance		509			325			1,034			625
Pennsylvania shares tax		330			298			640			596
Amortization of intangibles		147			31			296			62
Merger and acquisition		-			8,402			-			8,646
Software expenses		494			372			1,008			723
ORE expenses (recoveries)		175			(11	)		162			15
Other		2,715			1,984			5,320			3,468
TOTAL NON-INTEREST EXPENSES		16,246			20,680			32,889			32,458
Income (loss) before provision (benefit) for income taxes		6,388			(5,332	)		14,889			3,144
Provision (benefit) for income taxes		1,113			(1,188	)		2,590			421
NET INCOME (LOSS)	$	5,275		$	(4,144	)	$	12,299		$	2,723
PER COMMON SHARE DATA:
Net Income (Loss) - Basic	$	1.11		$	(1.00	)	$	2.59		$	0.66
Net Income (Loss) - Diluted	$	1.11		$	(1.00	)	$	2.59		$	0.66
Cash Dividends Paid	$	0.485		$	0.475		$	0.970		$	0.949
Number of shares used in computation - basic		4,748,927			4,159,966			4,748,523			4,106,005
Number of shares used in computation - diluted		4,753,697			4,159,966			4,753,918			4,106,005

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)	2024			2023			2024			2023
Net income (loss)	$	5,275		$	(4,144	)	$	12,299		$	2,723
Other comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities		1,154			(5,995	)		(1,166	)		2,982
Income tax effect		(243	)		1,259			246			(626	)
Change in unrecognized pension cost		14			7			16			14
Income tax effect		(3	)		(2	)		(3	)		(3	)
Change in unrealized (loss) gain on interest rate swaps		(296	)		600			(144	)		(310	)
Income tax effect		62			(126	)		30			65
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		688			(4,218	)		(1,021	)		2,161
Comprehensive income (loss)	$	5,963		$	(8,362	)	$	11,278		$	4,884

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

3

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock				Additional Paid-in			Retained			Accumulated Other Comprehensive			Treasury
(in thousands, except share data)	Shares		Amount		Capital			Earnings			Income (Loss)			Stock			Total
Balance, March 31, 2024		5,160,754	$	5,161	$	143,227		$	177,693		$	(26,620	)	$	(16,787	)	$	282,674
Comprehensive income:
Net income									5,275									5,275
Net other comprehensive income												688						688
Stock dividend		46,589		46		2,001			(2,047	)								-
Purchase of treasury stock (881 shares)															(36	)		(36	)
Restricted stock, executive and Board of Director awards (6,786 shares)						(408	)								445			37
Restricted stock vesting						165												165
Cash dividends, $0.485 per share									(2,333	)								(2,333	)
Balance, June 30, 2024		5,207,343	$	5,207	$	144,985		$	178,588		$	(25,932	)	$	(16,378	)	$	286,470
Balance, December 31, 2023		5,160,754	$	5,161	$	143,233		$	172,975		$	(24,911	)	$	(16,792	)	$	279,666
Comprehensive income:
Net income									12,299									12,299
Net other comprehensive loss												(1,021	)					(1,021	)
Stock dividend		46,589		46		2,001			(2,047	)								-
Purchase of treasury stock (1,776 shares)															(81	)		(81	)
Restricted stock, executive and Board of Director awards (7,668 shares)						(417	)								495			78
Restricted stock vesting						168												168
Cash dividends, $0.970 per share									(4,639	)								(4,639	)
Balance, June 30, 2024		5,207,343	$	5,207	$	144,985		$	178,588		$	(25,932	)	$	(16,378	)	$	286,470
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, $0.475 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, $0.949 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

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)	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,299		$	2,723
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		2,787			4,853
Depreciation and amortization		958			530
Amortization and accretion of loans and other assets		(2,243	)		(825	)
Amortization and accretion of investment securities		759			826
Deferred income taxes		425			125
Investment securities losses, net		33			343
Earnings on bank owned life insurance		(996	)		(452	)
Vesting of restricted stock		168			150
Originations of loans held for sale		(74,816	)		(12,730	)
Proceeds from sales of loans held for sale		70,820			9,444
Realized gains on loans sold		(896	)		(214	)
Realized gains on sale of Braavo		(1,102	)		-
Decrease in accrued interest receivable		261			275
Gain on sale of foreclosed assets held for sale		(119	)		(67	)
Increase in accrued interest payable		1,184			139
Other, net		6,956			(2,219	)
Net cash provided by operating activities		16,478			2,901
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Proceeds from sales		-			86,504
Proceeds from maturity and principal repayments		27,061			10,336
Purchase of securities		(14,045	)		(10,246	)
Proceeds from sale of equity securities		335			67
Purchase of interest bearing time deposits with other banks		(100	)		-
Proceeds from matured interest bearing time deposits with other banks		350			1,241
Proceeds from life insurance		1,147			-
Proceeds from redemption of regulatory stock		15,665			10,839
Purchase of regulatory stock		(14,135	)		(12,789	)
Net (increase) decrease in loans		(13,486	)		40,119
Purchase of premises and equipment		(226	)		(1,926	)
Investments in low income housing partnerships		-			(591	)
Proceeds from sale of foreclosed assets held for sale		392			233
Proceeds from sale of Braavo assets		7,185			-
Acquisition, net of cash paid		-			4,905
Net cash provided by investing activities		10,143			128,692
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits		(48,385	)		(111,473	)
Proceeds from long-term borrowings		-			20,000
Repayments of long-term borrowings		(5,000	)		-
Net increase (decrease) in short-term borrowed funds		17,099			(17,731	)
Purchase of treasury and restricted stock		(81	)		-
Dividends paid		(4,639	)		(3,891	)
Net cash used by financing activities		(41,006	)		(113,095	)
Net (decrease) increase in cash and cash equivalents		(14,385	)		18,498
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		52,818			26,211
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	38,433		$	44,709
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	32,393		$	14,892
Income taxes paid	$	750		$	3,600
Loans transferred to foreclosed property	$	2,490		$	49
Right of use asset and liability	$	169		$	5
Stock Dividend	$	2,047		$	3,021
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, 2024 and for the periods ended June 30, 2024 and 2023 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, 2024 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, 2023.

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.

Allowance for Credit Losses – Loans and Leases

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.

7

Depending on the nature of the pool of financial assets with similar risk characteristics, the models utilized by the Company to estimate expected credit losses include a discounted cash flow (“DCF”) model that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a weighted average remaining maturity model which contemplates expected losses at a pool-level, utilizing historic loss information. The Company’s models for  estimating the allowance for credit losses consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. Management 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 Economic Forecasts

8

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

Forecast Reversion Period

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

Expected Recoveries on Charged-off Loans

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

Discount Rate

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

Individual Evaluation

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

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

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $8.4 million and $8.5 million at June 30, 2024 and December 31, 2023, respectively, 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 is then applied to calculate the reserve for unfunded commitments liability each period.

Note 2 – 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.

9

• 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, 2024 and 2023 (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	2024		2023		2024		2023
Service charges on deposit accounts
Overdraft fees	$	394		371	$	798	$	730
Statement fees		44		54		86		106
Interchange revenue		811		764		1,555		1,461
ATM income		33		34		66		72
Other service charges		103		70		252		135
Total Service Charges		1,385		1,293		2,757		2,504
Trust		201		181		445		411
Brokerage and insurance		563		442		1,228		956
Other		241		118		373		233
Total	$	2,390	$	2,034	$	4,803	$	4,104

10

Note 3 – Earnings per Share

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

	Three months ended June 30,					Six months ended June 30,
	2024		2023			2024		2023
Net income (loss) applicable to common stock	$	5,275,000	$	(4,144,000	)	$	12,299,000	$	2,723,000
Basic earnings per share computation
Weighted average common shares outstanding		4,748,927		4,159,966			4,748,523		4,106,005
Earnings (loss) per share - basic	$	1.11	$	(1.00	)	$	2.59	$	0.66
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,748,927		4,159,966			4,748,523		4,106,005
Add: Dilutive effects of restricted stock		4,770		-			5,395		-
Weighted average common shares outstanding for dilutive earnings per share		4,753,697		4,159,966			4,753,918		4,106,005
Earnings (loss) per share - diluted	$	1.11	$	(1.00	)	$	2.59	$	0.66

For the three months ended June 30, 2024 and 2023, there were 4,230 and 6,078 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 $60.16-$83.38 for the three month period ended June 30, 2024 and per share prices ranging from $44.93-$83.38 for the three month period ended June 30, 2023. For the six months ended June 30, 2024 and 2023, 4,230 and 6,078 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 $60.16-$83.38 for the six month period ended June 30, 2024 and prices ranging from $44.93-$83.38 for the six month period ended June 30, 2023.

Note 4 – Investments

The amortized cost, gross unrealized gains and losses, and fair value of investment securities at June 30, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
Available-for-sale securities:
U.S. agency securities	$	61,576	$	3	$	(5,746	)	$	-	$	55,833
U.S. treasury securities		138,582		-		(8,509	)		-		130,073
Obligations of state and political subdivisions		104,668		6		(7,967	)		-		96,707
Corporate obligations		13,422		273		(1,245	)		-		12,450
Mortgage-backed securities in government sponsored entities		121,321		49		(13,772	)		-		107,598
Total available-for-sale securities	$	439,569	$	331	$	(37,239	)	$	-	$	402,661

December 31, 2023
Available-for-sale securities:
U.S. agency securities	$	66,569	$	1	$	(5,799	)	$	-	$	60,771
U.S. treasury securities		152,485		-		(9,197	)		-		143,288
Obligations of state and political subdivisions		107,945		32		(6,190	)		-		101,787
Corporate obligations		13,394		245		(1,236	)		-		12,403
Mortgage-backed securities in government sponsored entities		112,950		7		(13,605	)		-		99,352
Total available-for-sale securities	$	453,343	$	285	$	(36,027	)	$	-	$	417,601

11

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, 2024 and December 31, 2023 (in thousands). As of June 30, 2024, the Company owned 317 securities whose fair value was less than their cost basis.

June 30, 2024	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	$	-	$	-		$	53,815	$	(5,746	)	$	53,815	$	(5,746	)
U.S. treasury securities		-		-			130,073		(8,509	)		130,073		(8,509	)
Obligations of state and political subdivisions		3,554		(23	)		88,349		(7,944	)		91,903		(7,967	)
Corporate obligations		-		-			9,024		(1,245	)		9,024		(1,245	)
Mortgage-backed securities in government sponsored entities		6,468		(13	)		91,736		(13,759	)		98,204		(13,772	)
Total securities	$	10,022	$	(36	)	$	372,997	$	(37,203	)	$	383,019	$	(37,239	)

December 31, 2023
U.S. agency securities	$	-	$	-		$	58,753	$	(5,799	)	$	58,753	$	(5,799	)
U.S. treasury securities		-		-			143,288		(9,197	)		143,288		(9,197	)
Obligations of states and political subdivisions		-		-			93,535		(6,190	)		93,535		(6,190	)
Corporate obligations		1,487		(265	)		8,320		(971	)		9,807		(1,236	)
Mortgage-backed securities in government sponsored entities		9,203		(31	)		88,553		(13,574	)		97,756		(13,605	)
Total securities	$	10,690	$	(296	)	$	392,449	$	(35,731	)	$	403,139	$	(36,027	)

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 $2,119,000 and $2,202,000 at June 30, 2024 and December 31,2023 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.

12

There were no sales of available for sale securities during the three and six months ended June 30, 2024. Proceeds from sales of securities available-for-sale for the three and six months ended June 30, 2023 were $86,504,000.

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2024		2023			2024		2023
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, 2024 and  2023, and the portion of unrealized gains for the period that relates to equity investments held at June 30, 2024 and 2023(in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
Equity securities	2024			2023			2024			2023
Net losses recognized in equity securities during the period	$	(87	)	$	(74	)	$	(32	)	$	(292	)
Less: Net (losses) gains realized on the sale of equity securities during the period		-			-			(4	)		5
Net unrealized losses	$	(87	)	$	(74	)	$	(28	)	$	(297	)

13

Investment securities with an approximate carrying value of $345.4 million and $353.3 million at June 30, 2024 and December 31, 2023, 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, 2024, by contractual maturity, are shown below (in thousands):

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	48,416	$	47,437
Due after one year through five years		143,357		132,756
Due after five years through ten years		85,933		77,550
Due after ten years		161,863		144,918
Total	$	439,569	$	402,661

Note 5 – Loans

The Company originates 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 HVBC acquisition 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, 2024 and December 31, 2023, 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, 2024 and December 31, 2023 (in thousands):

	June 30, 2024			December 31, 2023
Real estate loans:
Residential	$	354,588		$	359,990
Commercial		1,110,269			1,092,887
Agricultural		327,057			314,802
Construction		180,157			195,826
Consumer		70,542			61,316
Other commercial loans		130,851			136,168
Other agricultural loans		26,247			30,673
State and political subdivision loans		56,005			57,174
Total		2,255,716			2,248,836
Allowance for credit losses - loans		(22,797	)		(21,153	)
Net loans	$	2,232,919		$	2,227,683

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 credit 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. See Note 1, “Basis of Presentation”, for a summary of the impact of adopting CECL on January 1, 2023.

14

Under CECL, loans individually evaluated for impairment consist of non-accrual commercial loans and recently modified loans that were experiencing financial difficulty at the time of the modification.

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, 2024 and December 31, 2023 (in thousands):

	June 30, 2024		December 31, 2023
Allowance for Credit Losses - Loans	$	22,797	$	21,153
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,066		1,265
Total allowance for credit losses	$	23,863	$	22,418

The following table presents the activity in the allowance for credit losses for the three and six months ended June 30, 2024 and 2023 (in thousands):

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure			Total
Balance at March 31, 2024	$	21,598		$	938		$	22,536
Loans charge-off		(682	)		-			(682	)
Recoveries of loans previously charged-off		7			-			7
Net loans charged-off		(675	)		-			(675	)
Provision for credit losses		1,874			128			2,002
Balance at June 30, 2024	$	22,797		$	1,066		$	23,863
Balance at December 31, 2023	$	21,153		$	1,265		$	22,418
Loans charge-off		(1,356	)		-			(1,356	)
Recoveries of loans previously charged-off		14			-			14
Net loans charged-off		(1,342	)		-			(1,342	)
Provision for credit losses		2,986			(199	)		2,787
Balance at June 30, 2024	$	22,797		$	1,066		$	23,863

15

	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
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, 2024 and 2023 (in thousands):

	For the three months ended June 30, 2024
	Balance at March 31, 2024		Charge-offs			Recoveries		Provision			Balance at June 30, 2024
Real estate loans:
Residential	$	2,347	$	-		$	-	$	8		$	2,355
Commercial		9,741		-			-		542			10,283
Agricultural		3,672		-			-		98			3,770
Construction		1,595		-			-		32			1,627
Consumer		1,266		(7	)		5		(53	)		1,211
Other commercial loans		2,680		(675	)		2		1,249			3,256
Other agricultural loans		174		-			-		32			206
State and political subdivision loans		65		-			-		(2	)		63
Unallocated		58		-			-		(32	)		26
Total	$	21,598	$	(682	)	$	7	$	1,874		$	22,797

	For the six months ended June 30, 2024
	Balance at December 31, 2023		Charge-offs			Recoveries		Provision			Balance at June 30, 2024
Real estate loans:
Residential	$	2,354	$	-		$	-	$	1		$	2,355
Commercial		9,178		-			-		1,105			10,283
Agricultural		3,264		-			-		506			3,770
Construction		1,950		-			-		(323	)		1,627
Consumer		1,496		(37	)		10		(258	)		1,211
Other commercial loans		2,229		(1,319	)		4		2,342			3,256
Other agricultural loans		270		-			-		(64	)		206
State and political subdivision loans		45		-			-		18			63
Unallocated		367		-			-		(341	)		26
Total	$	21,153	$	(1,356	)	$	14	$	2,986		$	22,797

16

	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, 2024 and December 31, 2023:

	Allowance for Credit Losses - Loans						Loans
June 30, 2024	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,304	$	51	$	2,355	$	352,924	$	1,664	$	354,588
Commercial		10,164		119		10,283		1,107,745		2,524		1,110,269
Agricultural		3,753		17		3,770		324,538		2,519		327,057
Construction		1,627		-		1,627		178,209		1,948		180,157
Consumer		334		877		1,211		69,585		957		70,542
Other commercial loans		1,915		1,341		3,256		127,352		3,499		130,851
Other agricultural loans		206		-		206		25,836		411		26,247
State and political subdivision loans		63		-		63		56,005		-		56,005
Unallocated		26		-		26		-		-		-
Total	$	20,392	$	2,405	$	22,797	$	2,242,194	$	13,522	$	2,255,716

17

	Allowance for Credit Losses - Loans						Loans
December 31, 2023	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,285	$	69	$	2,354	$	358,358	$	1,632	$	359,990
Commercial		9,033		145		9,178		1,090,217		2,670		1,092,887
Agricultural		3,247		17		3,264		311,500		3,302		314,802
Construction		1,664		286		1,950		193,469		2,357		195,826
Consumer		557		939		1,496		60,377		939		61,316
Other commercial loans		1,713		516		2,229		134,472		1,696		136,168
Other agricultural loans		270		-		270		30,388		285		30,673
State and political subdivision loans		45		-		45		57,174		-		57,174
Unallocated		367		-		367		-		-		-
Total	$	19,181	$	1,972	$	21,153	$	2,235,955	$	12,881	$	2,248,836

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, 2024 and December 31, 2023, respectively. The balances are presented by class of loan receivable (in thousands):

	June 30, 2024								December 31, 2023
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	-	$	2,927	$	-	$	2,927	$	315	$	2,646	$	-	$	2,961
Home Equity		-		119		76		195		-		121		18		139
Commercial		1,248		1,276		168		2,692		256		879		404		1,539
Agricultural		181		2,338		-		2,519		181		2,489		75		2,745
Construction		-		1,948		-		1,948		2,357		-		-		2,357
Consumer		871		-		16		887		701		-		13		714
Other commercial loans		1,628		2,002		25		3,655		588		1,162		6		1,756
Other agricultural loans		-		411		-		411		-		492		-		492
	$	3,928	$	11,021	$	285	$	15,234	$	4,398	$	7,789	$	516	$	12,703

As of June 30, 2024, there were $11.0 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 charged down to the realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

18

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, 2024 and December 31, 2023 (in thousands):

June 30, 2024	Real Estate		Business Assets		None		Total
Real estate loans:
Mortgages	$	2,927	$	-	$	-	$	2,927
Home Equity		119		-		-		119
Commercial		2,524		-		-		2,524
Agricultural		2,519		-		-		2,519
Construction		1,948		-		-		1,948
Consumer		-		-		871		871
Other commercial loans		-		3,630		-		3,630
Other agricultural loans		-		411		-		411
	$	10,037	$	4,041	$	871	$	14,949

December 31, 2023	Real Estate		Business Assets		None		Total
Real estate loans:
Mortgages	$	2,961	$	-	$	-	$	2,961
Home Equity		121		-		-		121
Commercial		1,135		-		-		1,135
Agricultural		2,670		-		-		2,670
Construction		2,357		-		-		2,357
Consumer		-		-		701		701
Other commercial loans		-		1,750		-		1,750
Other agricultural loans		-		492		-		492
	$	9,244	$	2,242	$	701	$	12,187

Credit Quality Information

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

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

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

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

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

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

19

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 loan portfolio on an annual basis, 2) a large sample of relationships in aggregate over $1,000,000,  3) selected loan relationships over $750,000 which are over 30 days past due, or classified Special Mention, Substandard, Doubtful, or Loss, and 4) 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, 2024 and December 31, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	24,386	$	86,011	$	346,073	$	211,774	$	118,917	$	240,719	$	36,287	$	1,852	$	1,066,019
Special Mention		-		-		6,496		1,065		1,430		8,672		768		-		18,431
Substandard		-		572		13,045		545		194		10,725		330		408		25,819
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	24,386	$	86,583	$	365,614	$	213,384	$	120,541	$	260,116	$	37,385	$	2,260	$	1,110,269
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	13,464	$	26,962	$	48,430	$	27,830	$	30,726	$	136,181	$	14,772	$	119	$	298,484
Special Mention		3,059		185		10,349		1,292		-		7,919		2,202		562		25,568
Substandard		-		-		-		-		-		2,913		-		92		3,005
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	16,523	$	27,147	$	58,779	$	29,122	$	30,726	$	147,013	$	16,974	$	773	$	327,057
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	19,891	$	57,223	$	80,691	$	7,742	$	2,890	$	-	$	864	$	121	$	169,422
Special Mention		-		812		4,613		2,950		-		-		-		-		8,375
Substandard		-		-		412		1,948		-		-		-		-		2,360
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	19,891	$	58,035	$	85,716	$	12,640	$	2,890	$	-	$	864	$	121	$	180,157
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	27,900	$	26,364	$	7,742	$	7,540	$	2,208	$	4,030	$	40,759	$	83	$	116,626
Special Mention		330		-		1,919		1,419		2		81		5,312		36		9,099
Substandard		42		1,283		381		-		259		1,136		347		1,661		5,109
Doubtful		-		-		-		-		-		-		-		17		17
Total	$	28,272	$	27,647	$	10,042	$	8,959	$	2,469	$	5,247	$	46,418	$	1,797	$	130,851
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	6	$	-	$	1,313	$	-	$	1,319
Other agricultural loans										-
Risk Rating
Pass	$	2,392	$	2,630	$	1,157	$	4,912	$	518	$	412	$	11,491	$	-	$	23,512
Special Mention		734		-		405		401		-		-		739		-		2,279
Substandard		-		-		-		191		-		199		44		22		456
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,126	$	2,630	$	1,562	$	5,504	$	518	$	611	$	12,274	$	22	$	26,247
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	30	$	1,541	$	14,101	$	10,600	$	5,439	$	24,294	$	-	$	-	$	56,005
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	30	$	1,541	$	14,101	$	10,600	$	5,439	$	24,294	$	-	$	-	$	56,005
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	88,063	$	200,731	$	498,194	$	270,398	$	160,698	$	405,636	$	104,173	$	2,175	$	1,730,068
Special Mention		4,123		997		23,782		7,127		1,432		16,672		9,021		598		63,752
Substandard		42		1,855		13,838		2,684		453		14,973		721		2,183		36,749
Doubtful		-		-		-		-		-		-		-		17		17
Total	$	92,228	$	203,583	$	535,814	$	280,209	$	162,583	$	437,281	$	113,915	$	4,973	$	1,830,586

20

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	90,068	$	333,710	$	224,873	$	122,560	$	81,557	$	180,799	$	28,360	$	1,140	$	1,063,067
Special Mention		672		7,963		227		1,552		7,442		8,159		96		60		26,171
Substandard		-		1,302		6		-		158		1,444		317		422		3,649
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	90,740	$	342,975	$	225,106	$	124,112	$	89,157	$	190,402	$	28,773	$	1,622	$	1,092,887
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	22,632	$	47,479	$	28,990	$	32,058	$	25,406	$	118,700	$	10,495	$	460	$	286,220
Special Mention		574		9,165		1,499		-		962		7,038		3,535		-		22,773
Substandard		-		-		-		-		102		5,394		75		238		5,809
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	23,206	$	56,644	$	30,489	$	32,058	$	26,470	$	131,132	$	14,105	$	698	$	314,802
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction
Risk Rating
Pass	$	54,973	$	102,562	$	22,508	$	-	$	-	$	-	$	839	$	1,166	$	182,048
Special Mention		1,574		5,432		4,415		-		-		-		-		-		11,421
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	56,547	$	107,994	$	29,280	$	-	$	-	$	-	$	839	$	1,166	$	195,826
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans
Risk Rating
Pass	$	31,493	$	11,407	$	9,016	$	4,793	$	4,758	$	3,530	$	63,285	$	93	$	128,375
Special Mention		51		52		1,510		184		223		629		1,652		36		4,337
Substandard		52		97		-		-		149		967		502		1,667		3,434
Doubtful		-		-		-		-		-		-		-		22		22
Total	$	31,596	$	11,556	$	10,526	$	4,977	$	5,130	$	5,126	$	65,439	$	1,818	$	136,168
Current period gross charge-offs	$	200	$	-	$	-	$	763	$	-	$	-	$	-	$	-	$	963
Other agricultural loans
Risk Rating
Pass	$	3,902	$	1,520	$	6,448	$	1,046	$	532	$	305	$	15,331	$	-	$	29,084
Special Mention		-		473		16		42		-		-		488		29		1,048
Substandard		-		-		207		-		4		255		44		31		541
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,902	$	1,993	$	6,671	$	1,088	$	536	$	560	$	15,863	$	60	$	30,673
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans
Risk Rating
Pass	$	1,623	$	14,171	$	10,841	$	5,235	$	-	$	25,294	$	10	$	-	$	57,174
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,623	$	14,171	$	10,841	$	5,235	$	-	$	25,294	$	10	$	-	$	57,174
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total
Risk Rating
Pass	$	204,691	$	510,849	$	302,676	$	165,692	$	112,253	$	328,628	$	118,320	$	2,859	$	1,745,968
Special Mention		2,871		23,085		7,667		1,778		8,627		15,826		5,771		125		65,750
Substandard		52		1,399		2,570		-		413		8,060		938		2,358		15,790
Doubtful		-		-		-		-		-		-		-		22		22
Total	$	207,614	$	535,333	$	312,913	$	167,470	$	121,293	$	352,514	$	125,029	$	5,364	$	1,827,530

21

For residential real estate mortgage loans, home equity loans, and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail above, and all loans past due 90 or more days and still accruing. The following tables present the recorded investment in those loan classes based on payment activity, by origination year, as of June 30, 2024 and December 31, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	5,634	$	19,686	$	91,593	$	47,532	$	28,521	$	110,070	$	-	$	-	$	303,036
Nonperforming		-		-		384		746		579		1,218		-		-		2,927
Total	$	5,634	$	19,686	$	91,977	$	48,278	$	29,100	$	111,288	$	-	$	-	$	305,963
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Home equity										-
Payment Performance
Performing	$	1,321	$	3,755	$	2,736	$	1,843	$	1,753	$	9,089	$	27,646	$	287	$	48,430
Nonperforming		-		-		-		-		-		53		66		76		195
Total	$	1,321	$	3,755	$	2,736	$	1,843	$	1,753	$	9,142	$	27,712	$	363	$	48,625
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	1,304	$	1,363	$	746	$	461	$	377	$	2,823	$	62,579	$	2	$	69,655
Nonperforming		-		6		4		-		12		865		-		-		887
Total	$	1,304	$	1,369	$	750	$	461	$	389	$	3,688	$	62,579	$	2	$	70,542
Current period gross charge-offs	$	-	$	-	$	21	$	-	$	-	$	-	$	16	$	-	$	37
Total										-
Payment Performance
Performing	$	8,259	$	24,804	$	95,075	$	49,836	$	30,651	$	121,982	$	90,225	$	289	$	421,121
Nonperforming		-		6		388		746		591		2,136		66		76		4,009
Total	$	8,259	$	24,810	$	95,463	$	50,582	$	31,242	$	124,118	$	90,291	$	365	$	425,130

22

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	19,082	$	93,706	$	47,774	$	29,940	$	18,923	$	97,813	$	-	$	-	$	307,238
Nonperforming		-		399		766		396		-		1,400		-		-		2,961
Total	$	19,082	$	94,105	$	48,540	$	30,336	$	18,923	$	99,213	$	-	$	-	$	310,199
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity
Payment Performance
Performing	$	3,877	$	3,008	$	1,886	$	1,954	$	2,462	$	7,883	$	28,219	$	363	$	49,652
Nonperforming		-		-		-		-		-		72		67		-		139
Total	$	3,877	$	3,008	$	1,886	$	1,954	$	2,462	$	7,955	$	28,286	$	363	$	49,791
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer
Payment Performance
Performing	$	1,803	$	979	$	539	$	477	$	557	$	2,988	$	53,254	$	5	$	60,602
Nonperforming		-		21		-		-		-		693		-		-		714
Total	$	1,803	$	1,000	$	539	$	477	$	557	$	3,681	$	53,254	$	5	$	61,316
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	341	$	23	$	-	$	365
Total
Payment Performance
Performing	$	24,762	$	97,693	$	50,199	$	32,371	$	21,942	$	108,684	$	81,473	$	368	$	417,492
Nonperforming		-		420		766		396		-		2,165		67		-		3,814
Total	$	24,762	$	98,113	$	50,965	$	32,767	$	21,942	$	110,849	$	81,540	$	368	$	421,306

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, 2024 and December 31, 2023 (in thousands):

June 30, 2024	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	$	1,823	$	298	$	1,729	$	3,850	$	302,113	$	305,963	$	-
Home Equity		106		41		195		342		48,283		48,625		76
Commercial		5,280		8,794		2,543		16,617		1,093,652		1,110,269		168
Agricultural		2,151		369		181		2,701		324,356		327,057		-
Construction		978		-		1,948		2,926		177,231		180,157		-
Consumer		147		21		887		1,055		69,487		70,542		16
Other commercial loans		345		1,715		1,871		3,931		126,920		130,851		25
Other agricultural loans		432		146		191		769		25,478		26,247		-
State and political subdivision loans		-		-		-		-		56,005		56,005		-
Total	$	11,262	$	11,384	$	9,545	$	32,191	$	2,223,525	$	2,255,716	$	285
Loans considered non-accrual	$	67	$	1,920	$	9,260	$	11,247	$	3,702	$	14,949
Loans still accruing		11,195		9,464		285		20,944		2,219,823		2,240,767
Total	$	11,262	$	11,384	$	9,545	$	32,191	$	2,223,525	$	2,255,716

23

December 31, 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	$	2,682	$	360	$	2,240	$	5,282	$	304,917	$	310,199	$	-
Home Equity		145		67		71		283		49,508		49,791		18
Commercial		1,151		245		1,380		2,776		1,090,111		1,092,887		404
Agricultural		72		-		1,440		1,512		313,290		314,802		75
Construction		4,407		388		2,357		7,152		188,674		195,826		-
Consumer		16		282		23		321		60,995		61,316		13
Other commercial loans		670		366		319		1,355		134,813		136,168		6
Other agricultural loans		108		362		-		470		30,203		30,673		-
State and political subdivision loans		-		-		-		-		57,174		57,174		-
Total	$	9,251	$	2,070	$	7,830	$	19,151	$	2,229,685	$	2,248,836	$	516
Loans considered non-accrual	$	199	$	666	$	7,314	$	8,179	$	4,008	$	12,187
Loans still accruing		9,052		1,404		516		10,972		2,225,677		2,236,649
Total	$	9,251	$	2,070	$	7,830	$	19,151	$	2,229,685	$	2,248,836

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.

There were no loan modifications made during the six months ended June 30, 2024, for borrowers experiencing financial difficulty.

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, 2024 and December 31, 2023, included within other assets are $2,690,000 and $474,000, respectively, of foreclosed assets. As of June 30, 2024, included within the foreclosed assets are $131,000 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, 2024, the Company had initiated formal foreclosure proceedings on $521,000 of residential mortgage loans, the collateral properties which have not yet been transferred into foreclosed assets.

24

Note 6 – Goodwill and Other Intangible Assets

The following table provides the gross carrying value and accumulated amortization of intangible assets as of June 30, 2024 and December 31, 2023 (in thousands):

	June 30, 2024							December 31, 2023
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,501	$	(1,656	)	$	845	$	2,457	$	(1,502	)	$	955
Core deposit intangibles		4,713		(2,314	)		2,399		4,713		(2,018	)		2,695
Total amortized intangible assets	$	7,214	$	(3,970	)	$	3,244	$	7,170	$	(3,520	)	$	3,650
Unamortized intangible assets:
Goodwill	$	85,758						$	85,758

(1) Excludes fully amortized intangible assets

The following table provides the current year and estimated future amortization expense for amortized intangible assets for the next five years (in thousands). The Company based its projections of amortization expense shown below on existing asset balances at June 30, 2024. Future amortization expense may vary from these projections:

	MSRs		Core deposit intangibles		Total
Three months ended June 30, 2024 (actual)	$	74	$	147	$	221
Six months ended June 30, 2024 (actual)		154		296		450
Three months ended June 30, 2023 (actual)		75		31		106
Six months ended June 30, 2023 (actual)		148		62		210
Estimate for year ending December 31,
Remaining 2024		137		268		405
2025		235		478		713
2026		184		395		579
2027		127		339		466
2028		80		284		364
Thereafter		82		635		717
Total	$	845	$	2,399	$	3,244

Note 7 – 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 2023 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.

25

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, 2024 and 2023, respectively (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023			Affected line item on the Consolidated Statement of Income
Service cost	$	84		$	77		$	165		$	155		Salary and Employee Benefits
Interest cost		106			110			211			220		Other Expenses
Expected return on plan assets		(195	)		(197	)		(395	)		(394	)	Other Expenses
Net amortization and deferral		14			7			16			14		Other Expenses
Net periodic benefit cost	$	9		$	(3	)	$	(3	)	$	(5	)

The Bank does not expect to contribute to the Pension Plan during 2024.

Restricted Stock Plan

The Company maintains a Restricted Stock Plan (the “Plan”) whereby employees and non-employee corporate directors are eligible to receive awards of restricted stock based upon performance related requirements.  Awards granted under the Plan are in the form of the Company’s common stock and are subject to certain vesting requirements including continuous employment or service with the Company.  In April 2016, the Company’s stockholders authorized a total of 150,000 shares of the Company’s common stock to be made available under the Plan. As of June 30, 2024, 106,633 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, 2024:

	Three months						Six months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,651		$	72.04			6,707		$	71.94
Granted		5,930			43.15			5,930			43.15
Vested		(2,361	)		(69.75	)		(2,417	)		(69.52	)
Outstanding, end of period		10,220		$	55.81			10,220		$	55.81

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 $122,000 and $116,000 for the six months ended June 30, 2024 and 2023, respectively. For the three months ended June 30, 2024 and 2023, compensation expense totaled $57,000 and $51,000, respectively. At June 30, 2024, the total compensation cost related to nonvested awards that had not yet been recognized was $571,000, which is expected to be recognized over the next three years.

26

Note 8 – Accumulated Other Comprehensive Loss

The following tables present the changes in accumulated other comprehensive loss by component, net of tax, for the three and six months ended June 30, 2024 and 2023 (in thousands):

	Three months ended June 30, 2024
	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, 2024	$	(30,069	)	$	(970	)	$	4,419		$	(26,620	)
Other comprehensive income (loss) before reclassifications (net of tax)		911			-			263			1,174
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			11			(497	)		(486	)
Net current period other comprehensive income (loss)		911			11			(234	)		688
Balance as of June 30, 2024	$	(29,158	)	$	(959	)	$	4,185		$	(25,932	)

	Six months ended June 30, 2024
	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, 2023	$	(28,238	)	$	(972	)	$	4,299		$	(24,911	)
Other comprehensive income (loss) before reclassifications (net of tax)		(920	)		-			887			(33	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			13			(1,001	)		(988	)
Net current period other comprehensive income (loss)		(920	)		13			(114	)		(1,021	)
Balance as of June 30, 2024	$	(29,158	)	$	(959	)	$	4,185		$	(25,932	)

	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 (loss) 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	)

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

27

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, 2024 and 2023 (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,
	2024			2023
Unrealized gains and losses on available for sale securities
	$	-		$	(51	)	Available for sale securities losses, net
		-			12		Provision for income taxes
	$	-		$	(39	)	Net of tax
Defined benefit pension items
	$	(14	)	$	(7	)	Other expenses
		3			2		Provision for income taxes
	$	(11	)	$	(5	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	630		$	524		Interest expense
		(133	)		(110	)	Provision for income taxes
	$	497		$	414		Net of tax
Total reclassifications	$	486		$	370

Six Months Ended June 30,
	2024			2023
Unrealized gains and losses on available for sale securities
	$	-		$	(51	)	Available for sale securities losses, net
		-			12		Provision for income taxes
	$	-		$	(39	)	Net of tax
Defined benefit pension items
	$	(16	)	$	(14	)	Other expenses
		3			3		Provision for income taxes
	$	(13	)	$	(11	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	1,268		$	980		Interest expense
		(267	)		(206	)	Provision for income taxes
	$	1,001		$	774		Net of tax
Total reclassifications	$	988		$	724

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

28

Note 9 – Fair Value Measurements

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

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

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

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

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

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

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

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

29

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, 2024 and December 31, 2023 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, 2024	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,570	$	-		$	-	$	1,570
Available for sale securities:
U.S. Agency securities		-		55,833			-		55,833
U.S. Treasury securities		130,073		-			-		130,073
Obligations of state and political subdivisions		-		96,707			-		96,707
Corporate obligations		-		12,450			-		12,450
Mortgage-backed securities in government sponsored entities		-		107,598			-		107,598
Loans held for sale		-		14,227			-		14,227
Other Assets
Derivative instruments		-		12,617			494		13,111
Liabilities
Derivative instruments		-		(7,319	)		-		(7,319	)

December 31, 2023	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,938	$	-		$	-	$	1,938
Available for sale securities:
U.S. Agency securities		-		60,771			-		60,771
U.S. Treasuries securities		143,288		-			-		143,288
Obligations of state and political subdivisions		-		101,787			-		101,787
Corporate obligations		-		12,403			-		12,403
Mortgage-backed securities in government sponsored entities		-		99,352			-		99,352
Loans held for sale		-		9,379			-		9,379
Other Assets
Derivative instruments		-		13,363			324		13,687
Liabilities
Derivative instruments		-		(7,922	)		-		(7,922	)

The following tables represent the change in the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2024 and for the three months ended June 30, 2023 (in thousands):

	IRLC- Asset
Balance: December 31, 2023	$	324
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		170
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2024	$	494
Change in unrealized (losses) for the period included in earnings for assets held as of June 30, 2024	$	170

	IRLC- Asset
Beginning Balance: March 31, 2024	$	566
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(72	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2024	$	494
Change in unrealized (losses) for the period included in earnings for assets held as of June 30, 2024	$	(72	)

	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	)

At June 30, 2024 and December 31, 2023, the Company had classified as Level 3 $494,000 and $324,000, respectively, of net derivative assets and liabilities related to IRLC. The fair value of IRLCs is based on prices obtained for loans with similar characteristics from third parties, adjusted by the pull-through rate, which represents the Company’s best estimate of the probability that a committed loan will fund. The weighted average pull-through rates applied ranged from 77.00% to 99.66% at June 30, 2024.

30

Significant unobservable inputs for assets measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023 (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements
June 30, 2024	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	494	Discounted cash flows	Pull-through rates		77.00%-99.66	%		89.06	%
	Quantitative Information about Level 3 Fair Value Measurements
December 31, 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	$	324	Discounted cash flows	Pull-through rates		63.63%-94.24	%		85.43	%

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, 2024 and December 31, 2023 are included in the table below (in thousands):

June 30, 2024	Level I		Level II		Level III		Total
Collateral-dependent loans	$	-	$	-	$	1,742	$	1,742
Other real estate owned		-		-		2,690		2,690
December 31, 2023	Level I		Level II		Level III		Total
Collateral-dependent loans	$	-	$	-	$	3,885	$	3,885
Other real estate owned		-		-		97		97

• Collateral–Dependent Loans (in accordance with ASC 326) – The Company records nonrecurring adjustments of collateral-dependent loans held for investment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures that include recent sales prices for comparable properties and cost of construction. Periodically, in cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized in the form of a charge-off. The fair values above excluded estimated selling costs of $148,000 and $396,000 at June 30, 2024 and December 31, 2023, 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.

31

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, 2024	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Collateral-dependent loans	$	1,742	Appraised Collateral Values	Discount for time since appraisal		0-100	%		52.60	%
				Selling costs		8%-10	%		8.49	%
				Holding period	0 - 12 months			7.42 months
Other real estate owned		2,690	Appraised Collateral Values	Discount for time since appraisal		4.8-31.8	%		29.93	%

December 31, 2023	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Collateral-dependent loans		3,885	Appraised Collateral Values	Discount for time since appraisal		0-100	%		29.32	%
				Selling costs		8%-12	%		10.20	%
				Holding period	3 - 12 months			6.65 months
Other real estate owned		97	Appraised Collateral Values	Discount for time since appraisal		32	%		32.00	%

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, 2024	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	3,820	$	3,820	$	-	$	-	$	3,820
Net loans		2,232,919		2,146,574		-		-		2,146,574
Financial liabilities:
Deposits		2,273,095		2,266,614		1,788,429		-		478,185
Borrowed funds		334,829		318,729		-		-		318,729
December 31, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,070	$	4,070	$	-	$	-	$	4,070
Net loans		2,227,683		2,126,237		-		-		2,126,237
Financial liabilities:
Deposits		2,321,481		2,315,374		1,902,007		-		413,367
Borrowed funds		322,036		313,217		-		-		313,217

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.

32

Note 10 – Recent Accounting Pronouncements

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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, requires the amount of net income taxes paid for federal, state, and foreign taxes, as well as the amount paid to any jurisdiction that net taxes exceed a 5% quantitative threshold.  The amendments will require the disclosure of pre-tax income disaggregated between domestic and foreign, as well as income tax expense disaggregated by federal, state, and foreign.  The amendment also eliminates certain disclosures related to unrecognized tax benefits and certain temporary differences.  This ASU is effective for fiscal years beginning after December 15, 2024.  Early adoption is permitted in any annual period where financial statements have not yet been issued.  The amendments should be applied on a prospective basis but retrospective application is permitted.  The Company does not expect adoption of the standard to have a material impact on its Consolidated Financial Statements.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718), amended the guidance in ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements.  For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.  For all other entities, it is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years.  This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. This ASU removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification. The FASB does not expect these updates to have a significant effect on current accounting practice. That is because in most cases the amendments to the Codification remove references to Concept Statements that are extraneous and not required to understand or apply the guidance. However, the FASB has provided transition guidance if applying the updated guidance results in accounting changes for some entities. The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025.  This Update is not expected to have a significant impact on the Company’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.

33

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 or the yield curve could remain inverted for a longer period than anticipated.

• 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 and companies 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 weather, 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.

34

Additional factors that may affect our results are discussed under “Part II – Item 1A – Risk Factors” in this report and in the Company’s 2023 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 Company’s consolidated 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 and the Company’s audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.  The results of operations for the three and six months ended June 30, 2024 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, Lycoming 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 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 48 banking facilities, 39 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, Williamsport,  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. The Company has submitted to open a limited purpose banking office in Georgetown, Delaware and is awaiting regulatory authorization.

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.

35

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 purchase of securities from an issuer.  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 for loans and deposits, 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. Competition in our north central Pennsylvania market has increased as a result of other financial institutions expanding 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, 2024 and December 31, 2023, the Trust Department had $174.7 million and $167.9 million of assets under management, respectively.

36

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 assets are not assets of the Company. Assets owned and invested by customers of the Bank through the Bank’s Investment Representatives increased from $329.4 million at December 31, 2023 to $368.4 million at June 30, 2024. 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 $12,299,000 for the first six months of 2024 compared to $2,723,000 for last year’s comparable period, an increase of $9,576,000, or 351.7%, primarily due to the absence in the current period of one-time costs associated with the HVBC acquisition and the provision for credit losses. Basic earnings per share for the first six months of 2024 were $2.59, compared to $0.66 for last year’s comparable period, representing a 292.4% increase.  Annualized return on assets and return on equity for the six months of 2024 were 0.82% and 7.91%, respectively, compared with 0.23% and 2.22% for last year’s comparable period.

Net income for the three months ended June 30, 2024 was $5,275,000 compared to net loss of $4,144,000 in the comparable 2023 period, an increase of $9,419,000. Basic earnings (loss) per share for the three months ended June 30, 2024 were $1.11, compared to ($1.00) for last year’s comparable period, representing a 444.2% increase due to the absence in the current period of one-time costs associated with the acquisition and a decrease in the provision for credit losses. Annualized return on assets and return on equity for the quarter ended June 30, 2024 was 0.71% and 6.73%, respectively, compared with (0.68%) and (6.62%) for the same 2023 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 2024 was $42,258,000, an increase of $6,257,000, or 17.4%, compared to the same period in 2023.  For the first six months of 2024 the provision for credit losses was $2,787,000. The provision for the first six months of 2023 was $4,853,000, which included $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 increased $2,525,000. Consequently, net interest income after the provision for credit losses was $39,471,000 in the first six months of 2024 compared to $31,148,000 during the first six months of 2023.

For the three months ended June 30, 2024, net interest income was $21,300,000 compared to $17,921,000, an increase of $3,379,000, or 18.9%, over the comparable period in 2023. The provision for credit losses in the second quarter of 2024 was $2,002,000 compared to $4,853,000 in 2023, which included $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 increased $1,740,000. Consequently, net interest income after the provision for credit losses was $19,298,000 for the quarter ended June 30, 2024 compared to $13,068,000 in 2023.

37

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, 2024 and 2023 on a tax equivalent basis (dollars in thousands):

	Analysis of Average Balances and Interest Rates
	Six Months Ended
	June 30, 2024							June 30, 2023
	Average				Average			Average				Average
	Balance (1)		Interest		Rate			Balance (1)		Interest		Rate
(dollars in thousands)	$		$		%			$		$		%
ASSETS
Short-term investments:
Interest-bearing deposits at banks		30,119		445		2.97			16,395		108		1.33
Total short-term investments		30,119		445		2.97			16,395		108		1.33
Interest bearing time deposits at banks		3,937		60		3.06			6,028		90		3.00
Investment securities:
Taxable		359,142		4,078		2.27			384,453		3,864		2.01
Tax-exempt (3)		106,438		1,332		2.50			117,025		1,505		2.57
Total investment securities		465,580		5,410		2.32			501,478		5,369		2.14
Loans (2)(3)(4):
Residential mortgage loans		358,472		10,291		5.77			224,059		5,872		5.28
Construction		187,001		6,858		7.38			88,048		2,492		5.71
Commercial Loans		1,243,546		39,674		6.42			959,221		26,097		5.49
Agricultural Loans		345,287		8,887		5.18			344,882		8,474		4.95
Loans to state & political subdivisions		56,469		1,106		3.94			59,860		1,125		3.79
Other loans		89,472		3,599		8.09			79,199		2,828		7.20
Loans, net of discount		2,280,247		70,415		6.21			1,755,269		46,888		5.39
Total interest-earning assets		2,779,883		76,330		5.52			2,279,170		52,455		4.64
Cash and due from banks		9,511							7,716
Bank premises and equipment		21,171							18,292
Other assets		181,792							96,542
Total non-interest earning assets		212,474							122,550
Total assets		2,992,357							2,401,720
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
NOW accounts		783,055		9,999		2.57			527,960		3,584		1.37
Savings accounts		300,704		778		0.52			317,063		471		0.30
Money market accounts		381,209		5,765		3.04			325,841		3,121		1.93
Certificates of deposit		439,995		8,434		3.86			281,482		2,243		1.61
Total interest-bearing deposits		1,904,963		24,976		2.64			1,452,346		9,419		1.31
Other borrowed funds		350,354		8,601		4.94			303,344		6,497		4.32
Total interest-bearing liabilities		2,255,317		33,577		2.99			1,755,690		15,916		1.83
Demand deposits		376,632							386,104
Other liabilities		49,266							15,157
Total non-interest-bearing liabilities		425,898							401,261
Stockholders’ equity		311,142							244,769
Total liabilities & stockholders’ equity		2,992,357							2,401,720
Net interest income				42,753							36,539
Net interest spread (5)						2.53	%						2.81	%
Net interest income as a percentage of average interest-earning assets						3.09	%						3.23	%
Ratio of interest-earning assets to interest-bearing liabilities						123	%						130	%

(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.

38

	Analysis of Average Balances and Interest Rates
	Three Months Ended
	June 30, 2024							June 30, 2023
	Average				Average			Average				Average
	Balance (1)		Interest		Rate			Balance (1)		Interest		Rate
(dollars in thousands)	$		$		%			$		$		%
ASSETS
Short-term investments:
Interest-bearing deposits at banks		18,353		232		5.11			18,193		82		1.79
Total short-term investments		18,353		232		5.11			18,193		82		1.79
Interest bearing time deposits at banks		3,820		30		3.16			6,000		45		2.99
Investment securities:
Taxable		355,321		2,053		2.31			388,327		1,994		2.05
Tax-exempt (3)		105,379		658		2.50			113,674		725		2.55
Total investment securities		460,700		2,711		2.35			502,001		2,719		2.17
Loans (2)(3)(4):
Residential mortgage loans		358,448		5,232		5.87			236,167		3,168		5.39
Construction		184,103		3,367		7.36			90,635		1,353		5.99
Commercial Loans		1,251,484		20,154		6.48			983,666		13,772		5.62
Agricultural Loans		346,107		4,482		5.21			345,467		4,221		4.90
Loans to state & political subdivisions		56,290		556		3.97			60,395		582		3.87
Other loans		68,805		1,383		8.08			60,770		1,136		7.50
Loans, net of discount		2,265,237		35,174		6.25			1,777,100		24,232		5.47
Total interest-earning assets		2,748,110		38,147		5.58			2,303,294		27,078		4.72
Cash and due from banks		9,199							8,386
Bank premises and equipment		21,053							18,960
Other assets		195,528							102,155
Total non-interest earning assets		225,780							129,501
Total assets		2,973,890							2,432,795
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
NOW accounts		766,142		4,776		2.51			545,527		2,067		1.52
Savings accounts		299,318		391		0.53			314,745		265		0.34
Money market accounts		381,377		2,972		3.13			330,453		1,847		2.24
Certificates of deposit		457,570		4,516		3.97			283,694		1,301		1.84
Total interest-bearing deposits		1,904,407		12,655		2.67			1,474,419		5,480		1.49
Other borrowed funds		324,736		3,947		4.89			307,523		3,409		4.45
Total interest-bearing liabilities		2,229,143		16,602		3.00			1,781,942		8,889		2.00
Demand deposits		382,312							397,084
Other liabilities		49,051							3,379
Total non-interest-bearing liabilities		431,363							400,463
Stockholders’ equity		313,384							250,390
Total liabilities & stockholders’ equity		2,973,890							2,432,795
Net interest income				21,545							18,189
Net interest spread (5)						2.58	%						2.71	%
Net interest income as a percentage of average interest-earning assets						3.15	%						3.17	%
Ratio of interest-earning assets to interest-bearing liabilities						123	%						129	%

(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.

39

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, 2024 and 2023.  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, 2024 and 2023 (in thousands):

	For the Three Months				For the Six Months
	Ended June 30				Ended June 30
	2024		2023		2024		2023
Interest and dividend income from investment securities and interest bearing deposits at banks (non-tax adjusted)	$	2,835	$	2,693	$	5,635	$	5,251
Tax equivalent adjustment		138		153		280		316
Interest and dividend income from investment securities and interest bearing deposits at banks (tax equivalent basis)	$	2,973	$	2,846	$	5,915	$	5,567
Interest and fees on loans (non-tax adjusted)	$	35,067	$	24,117	$	70,200	$	46,666
Tax equivalent adjustment		107		115		215		222
Interest and fees on loans (tax equivalent basis)	$	35,174	$	24,232	$	70,415	$	46,888
Total interest income	$	37,902	$	26,810	$	75,835	$	51,917
Total interest expense		16,602		8,889		33,577		15,916
Net interest income		21,300		17,921		42,258		36,001
Total tax equivalent adjustment		245		268		495		538
Net interest income (tax equivalent basis)	$	21,545	$	18,189	$	42,753	$	36,539

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, 2024 vs 2023 (1)									Six months ended June 30, 2024 vs 2023 (1)
	Change in			Change			Total			Change in			Change			Total
	Volume			in Rate			Change			Volume			in Rate			Change
Interest Income:
Short-term investments:
Interest-bearing deposits at banks	$	-		$	150		$	150		$	137		$	200		$	337
Interest bearing time deposits at banks		(18	)		3			(15	)		(32	)		2			(30	)
Investment securities:
Taxable		(125	)		184			59			(219	)		433			214
Tax-exempt		(52	)		(15	)		(67	)		(133	)		(40	)		(173	)
Total investments		(177	)		169			(8	)		(352	)		393			41
Loans:
Residential mortgage loans		1,754			310			2,064			3,831			588			4,419
Construction		1,648			366			2,014			3,467			899			4,366
Commercial Loans		4,069			2,313			6,382			8,665			4,912			13,577
Agricultural Loans		(4	)		265			261			34			379			413
Loans to state & political subdivisions		(43	)		17			(26	)		(69	)		50			(19	)
Other loans		154			93			247			399			372			771
Total loans, net of discount		7,578			3,364			10,942			16,327			7,200			23,527
Total Interest Income		7,383			3,686			11,069			16,080			7,795			23,875
Interest Expense:
Interest-bearing deposits:
NOW accounts		1,036			1,673			2,709			2,287			4,128			6,415
Savings accounts		(13	)		139			126			(22	)		329			307
Money Market accounts		310			815			1,125			610			2,034			2,644
Certificates of deposit		1,111			2,104			3,215			1,783			4,408			6,191
Total interest-bearing deposits		2,444			4,731			7,175			4,658			10,899			15,557
Other borrowed funds		187			351			538			1,103			1,001			2,104
Total interest expense		2,631			5,082			7,713			5,761			11,900			17,661
Net interest income	$	4,752		$	(1,396	)	$	3,356		$	10,319		$	(4,105	)	$	6,214

(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.

Tax equivalent net interest income increased from $36,539,000 for the six month period ended June 30, 2023 to $42,753,000 for the six month period ended June 30, 2024, an increase of $6,214,000. The acquisition of HVBC had a substantial impact on the increase. The tax equivalent net interest margin decreased from 3.23% for the first six months of 2023 to 3.09% for the comparable period in 2024. The decrease is primarily caused by the increase in the cost of interest-bearing liabilities due to higher market interest rates in 2024 compared to 2023.

Total tax equivalent interest income for the 2024 six month period increased $23,875,000 as compared to the 2023 six month period. This increase was a result of an increase of $16,080,000 due to a change in volume as average interest-bearing assets increased $500.7 million. As a result of the higher market interest rate environment, the yield on average interest earning assets increased 0.88% from 4.64% to 5.52% resulting in an increase in interest income of $7,795,000.

40

Tax equivalent investment income for the six months ended June 30, 2024 increased $41,000 over the same period last year. The primary cause of the increase was due to the increase in yield on investment securities of 18 basis points to 2.32%.

• The average balance of taxable securities decreased $25.3 million, which resulted in a decrease in investment income of $219,000. The yield on taxable securities increased 26 basis points from 2.01% to 2.27% as a result of lower yielding securities maturing. This resulted in an increase in investment income of $433,000.

• The average balance of tax-exempt securities decreased $10.6 million, which resulted in a decrease in investment income of $133,000. The yield on taxable securities decreased 7 basis points from 2.57% to 2.50%. This resulted in a decrease in investment income of $40,000. For a discussion of the Company’s current investment strategy, see the “Financial Condition – Investments”.

Total loan interest income increased $23,527,000 for the six months ended June 30, 2024 compared to the same period last year, as a result of higher volume and yields.

• Interest income on residential mortgage loans increased $4,419,000. The change due to rate was an increase of $588,000 as the average yield on residential mortgages increased from 5.28% to 5.77% as a result of the higher interest rate environment during the second half of 2023 and all of 2024. The average balance of residential mortgage loans increased $134.4 million primarily due to the HVBC acquisition and additional organic growth. This resulted in an increase of $3,831,000 on total interest income due to volume.

• The average balance of construction loans increased $99.0 million as a result of projects in our Delaware market and the southeast Pennsylvania market as part of the HVBC acquisition. This resulted in an increase of $3,467,000 on total interest income due to volume. The change due to rate was an increase of $899,000 as the average yield on construction loans increased from 5.71% to 7.38% as a result of the higher interest rate environment during the second half of 2023 and all of 2024.

• The average balance of commercial loans increased $284.3 million from a year ago. The growth was primarily attributable to the HVCB acquisition. This had a positive impact of $8,665,000 on total interest income due to volume. The yield increased 0.93% to 6.42% as a result of the higher rate environment during the second half of 2023 and all of 2024, which increased loan interest income $4,912,000.

• Interest income on agricultural loans increased $413,000 from 2023 to 2024. The yield increased 23 basis points to 5.18% as a result of the higher rate environment during the second half of 2023 and all of 2024, which increased loan interest income $379,000.

• The average balance of other loans increased $10.3 million as a result of outstanding student loans. This resulted in an increase of $399,000 on total interest income due to volume. The average yield of other loans increased 89 basis points to 8.09% due to the higher rate environment resulting in an increase in income of $372,000.

Total interest expense increased $17,661,000 for the six months ended June 30, 2024 compared with the comparative period last year as a result of an increase in the volume of interest-bearing liabilities and an increase in rate on interest-bearing liabilities. Interest expense increased $5,761,000 due to volume as a result of an increase in interest bearing liabilities of $499.6 million. The average rate paid on interest-bearing liabilities increased from 1.83% to 2.99%. The increase was driven by the Federal Reserve interest rate increases in 2022 and 2023, which caused interest expense to increase $11,900,000.

• The average balance of interest bearing deposits increased $452.6 million from June 30, 2023 to June 30, 2024. The increase was due to the HVBC acquisition. The effect of these volume changes was an increase in interest expense of $4,658,000. The average rate paid on interest bearing deposits was 2.64% for the first six months of 2024 and 1.31% for the comparable period in 2023. This resulted in an increase in interest expense of $10,899,000. The increase was due to the Federal Reserve increasing interest rates during 2022 and 2023.

41

• The average balance of other borrowed funds increased $47.0 million. This resulted in an increase in interest expense of $1,103,000. There was an increase in the average rate paid on other borrowed funds from 4.32% to 4.94% due to the interest rate increases by the Federal Reserve that increased borrowings costs resulting in an increase in interest expense of $1,001,000.

Tax equivalent net interest income for the three months ended June 30, 2024 was $21,545,000 which compares to $18,189,000 for the same period last year.  This represents an increase of $3,356,000, or 18.5% and was primarily caused by an increase in the volume of interest earning assets due to the HVBC acquisition.

Total tax equivalent interest income was $38,147,000 for the three month period ended June 30, 2024, compared to $27,078,000 for the comparable period last year, an increase of $11,069,000. This increase was a result of an increase of $7,383,000 due to a change in volume as average interest-bearing assets increased $444.8 million due to the HVBC acquisition. As a result of the higher market interest rate environment, the yield on average interest earning assets increased 86 basis points from 4.72% to 5.58% resulting in an increase in interest income of $3,686,000.

Total loan interest income increased $11,069,000 for the three months ended June 30, 2024 compared to the same period last year, primarily as a result of the HVBC acquisition.

• Interest income on residential mortgage loans increased $2,064,000. The change due to rate was an increase of $310,000 as the average yield on residential mortgages increased from 5.39% to 5.87% as a result of the higher rate environment during the second half of 2023 and all of 2024.  The average balance of residential mortgage loans increased $122.3 million primarily as a result of the HVBC acquisition. This resulted in an increase of $1,754,000 on total interest income due to volume.

• The average balance of construction loans increased $93.5 million primarily as a result of the HVBC acquisition and the projects in our southeastern Pennsylvania market. This resulted in an increase of $1,648,000 on total interest income due to volume. The change due to rate was an increase of $366,000 as the average yield on construction loans increased from 5.99% to 7.39% as a result of the higher rate environment.

• The average balance of commercial loans increased $267.8 million from a year ago. The growth was primarily attributable to growth in the Delaware market and the HVBC acquisition. This had a positive impact of $4,069,000 on total interest income due to volume. The yield increased 86 basis points to 6.48% due to the higher rate environment experienced during the second half of 2023 and all of 2024, which increased loan interest income $2,313,000.

• The average yield of agricultural loans increased 31 basis points to 5.21% due to the higher rate environment resulting in an increase in income of $265,000.

• The average balance of other loans increased $8.0 million as a result of outstanding student loans. This resulted in an increase of $154,000 on total interest income due to volume. The average yield on other loans increased 58 basis points to 8.08% due to the rate earned on the student loans, resulting in an increase in interest income of $93,000.

Total interest expense increased $7,713,000 for the three months ended June 30, 2024 compared with the comparative period last year as a result of an increase in the volume of interest-bearing liabilities and an increase in rate on interest-bearing liabilities. Interest expense increased $2,631,000 due to volume as a result of an increase in interest bearing liabilities of $447.2 million. The average rate paid on interest-bearing liabilities increased from 2.00% to 3.00%. The increase was driven by the Federal Reserve interest rate increases in 2022 and 2023, which caused interest expenses to increase $5,082,000.

42

• The average balance of interest bearing deposits increased $429.9 million from June 30, 2023 to June 30, 2024 primarily due to the HVBC acquisition, which was offset by customer funds transferred to higher-yielding investment alternatives as well as a reduction in municipal deposits to fund projects in various municipalities. The effect of these volume changes was an increase in interest expense of $2,444,000. The average rate paid on interest bearing deposits was 2.67% for the three months ended June 30 2024 and 1.49% for the comparable period in 2023. This resulted in an increase in interest expense of $4,731,000. The increase was due to the Federal Reserve increasing interest rates during 2022 and 2023.

• The average balance of other borrowed funds increased $17.2 million from borrowings acquired as part of the HVBC acquisition. This resulted in an increase in interest expense of $187,000. There was an increase in the average rate paid on other borrowed funds from 4.45% to 4.89% due to the interest rate increases by the Federal Reserve that increased borrowings costs resulting in an increase in interest expense of $351,000.

Provision for Credit Losses

For the six month period ended June 30, 2024, we recorded a provision for credit losses of $2,787,000, which represents a decrease of $2,066,000 from the $4,853,000 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 2024 is $2,687,000 more than the comparable period in 2023 and is due to an increase in non-performing other commercial loans that were originated by HVBC that subsequent to the acquisition have deteriorated. The provision in 2024 is also higher due to an increase in past due loans, the vast majority of which were acquired as part of the HVBC acquisition, and an increase in classified loans. (see “Financial Condition – Allowance for Credit Losses and Credit Quality Risk”).

For the three months ended June 30, 2024, we recorded a provision for credit losses of $2,002,000, which represents a decrease of $2,851,000 from the $4,853,000 provision recorded in the corresponding three 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 2024 is $1,902,000 more than the comparable period in 2023 and is due to an increase in non-performing other commercial loans that were originated by HVBC that subsequent to the acquisition have deteriorated. The provision in 2024 is also higher due to an increase in past due loans, the vast majority of which were acquired as part of the HVBC acquisition, and an increase in classified loans.

Non-interest Income

The following table shows the breakdown of non-interest income for the three and six  months ended June 30, 2024 and 2023 (dollars in thousands):

	Six months ended June 30,						Change
	2024			2023			Amount		%
Service charges	$	2,757		$	2,504		$	253		10.1
Trust		445			411			34		8.3
Brokerage and insurance		1,228			956			272		28.5
Gains on loans sold		896			214			682		318.7
Equity security losses, net		(32	)		(292	)		260		(89.0	)
Available for sale security losses, net		-			(51	)		51		(100.0	)
Gain on sale of Braavo division		1,102			-			1,102	NA
Earnings on bank owned life insurance		996			452			544		120.4
Other		915			260			655		251.9
Total	$	8,307		$	4,454		$	3,853		86.5

43

	Three months ended June 30,						Change
	2024			2023			Amount			%
Service charges	$	1,385		$	1,293		$	92			7.1
Trust		201			181			20			11.0
Brokerage and insurance		563			442			121			27.4
Gains on loans sold		479			169			310			183.4
Equity security losses, net		(87	)		(74	)		(13	)		17.6
Available for sale security losses, net		-			(51	)		51			(100.0	)
Gain on sale of Braavo division		-			-			-		NA
Earnings on bank owned life insurance		328			234			94			40.2
Other		467			86			381			443.0
Total	$	3,336		$	2,280		$	1,056			46.3

Non-interest income for the six months ended June 30, 2024 totaled $8,307,000, an increase of $3,853,000 when compared to the same period in 2023. For the three months ended June 30, 2024, non-interest income increased $1,056,000 to $3,336,000.  During the first six months of 2024, net equity security losses amounted to $32,000 as a result of market losses associated with general banking stock losses compared with a $292,000 loss in the comparable 2023 period associated with market conditions for that period. There were no sales of available for sale securities  during the first six months of 2024. During the 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.

The increase in gains on loans sold for the three and six month periods ended June 30, 2024 compared to 2023 is attributable the HVBC acquisition and their residential lending model, which focused on originating and selling residential mortgage loans, which includes the use of interest rate locks and other derivative activities, which is included in other income. The increase in earnings on bank owned life insurance is due to the HVBC acquisition, as well as the death benefits  received upon the passing of a former employee. During the first quarter of 2024, the Company completed the sale of certain assets acquired as part of the HVB acquisition, which included loans and accrued interest, and software, as well as transferring certain contracts, processes and employees of a division internally known as Braavo. The proceeds from the sale totaled approximately $7.2 million and generated a pre-tax gain of approximately $1.1 million.

Non-interest Expense

The following tables reflect the breakdown of non-interest expense for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

	Six months ended June 30,				Change
	2024		2023		Amount			%
Salaries and employee benefits	$	19,907	$	15,593	$	4,314			27.7
Occupancy		2,590		1,649		941			57.1
Furniture and equipment		531		313		218			69.6
Professional fees		1,401		768		633			82.4
FDIC insurance		1,034		625		409			65.4
Pennsylvania shares tax		640		596		44			7.4
Amortization of intangibles		296		62		234			377.4
Merger and acquisition		-		8,646		(8,646	)		(100.0	)
Software expenses		1,008		723		285			39.4
ORE expenses		162		15		147			980.0
Other		5,320		3,468		1,852			53.4
Total	$	32,889	$	32,458	$	431			1.3

44

	Three months ended June 30,					Change
	2024		2023			Amount			%
Salaries and employee benefits	$	9,617	$	7,916		$	1,701			21.5
Occupancy		1,266		814			452			55.5
Furniture and equipment		295		162			133			82.1
Professional fees		698		387			311			80.4
FDIC insurance		509		325			184			56.6
Pennsylvania shares tax		330		298			32			10.7
Amortization of intangibles		147		31			116			374.2
Merger and acquisition		-		8,402			(8,402	)		(100.0	)
Software expenses		494		372			122			32.8
ORE expenses (recovery)		175		(11	)		186			(1,690.9	)
Other		2,715		1,984			731			36.8
Total	$	16,246	$	20,680		$	(4,434	)		(21.4	)

Non-interest expenses increased $431,000 for the six months ended June 30, 2024 compared to the same period in 2023. Salaries and employee benefits increased $4,314,000 or 27.7%. The increase was due to merit increases effective at the beginning of 2024, additional full time equivalent employees (FTE) of 78.6, which is an increase of 25.1%, and an increase in health care expenses due to higher claims on the Company’s partially self-funded plan and the additional headcount.

The decrease in merger and acquisition expenses was due to the absence in the current period of 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 occupancy, furniture and fixtures, amortization of intangibles, and software expenses was due to the HVBC acquisition. The increase in FDIC insurance is due to the acquisition and organic growth. Other expenses increased primarily due to the acquisition, with increases experienced in subscriptions, marketing and advertising, postage, printing, data communication expenses and FHLB letter of credit fees. Independent of the acquisition, other expenses increased due to insurance reimbursement received in 2023 to cover amounts previously charged-off.

For the three months ended June 30, 2024, non-interest expenses decreased $4,434,000 when compared to the same period in 2023. The changes in salaries and employee benefits, merger and acquisition expenses, occupancy, furniture and equipment, FDIC insurance, amortization of intangibles, software expenses and other expenses correspond to the changes for the six month period.

Provision for Income Taxes

The provision for income taxes was $2,590,000 for the six month period ended June 30, 2024 compared to $421,000 for the same period in 2023. The increase is primarily attributable to the increase in income before the provision for income taxes of $11,745,000 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 17.4% and 13.4% for the first six months of 2024 and 2023, respectively, compared to the statutory rate of 21%.

For the three months ended June 30, 2024, the provision for income taxes was $1,113,000 compared to a benefit of $1,188,000 for the same period in 2023. The increase is attributable to the increase in income before the provision for income taxes of $11,720,000 for the comparable periods due to the one-time acquisition costs. Our effective tax rate was 17.4% and (22.3)% for the three months ended June 30, 2024 and 2023, respectively.

We are invested in seven limited partnerships that have established low-income housing projects in our market areas, with our most recent investments made in the second half of 2022. Three projects are currently in construction phase with credits being recognized on two of the projects for the first time in 2023 with the expectation that the remaining one will generate credits in the second half of 2024. The remaining four partnership credits are fully utilized as of December 31, 2023. We anticipate recognizing an aggregate of $8.2 million of tax credits over the next 12 years.

45

Financial Condition

Total assets were $2.95 billion at June 30, 2024, a decrease of $27.8 million from $2.98 billion at December 31, 2023, due primarily to decreases in cash and investments securities. Cash and cash equivalents decreased $14.4 million to $38.4 million. Available for sale securities decreased $14.9 million. Total deposits decreased $48.4 million to $2.27 billion since year-end 2023, while borrowed funds increased $12.8 million to $283.6 million.

Cash and Cash Equivalents

Cash and cash equivalents totaled $38.4 million at June 30, 2024 compared to $52.8 million at December 31, 2023. The decrease is due to a decrease in the cash held at the Federal Reserve.  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.

Investments

The following table shows the composition of the investment portfolio (including debt and equity securities) as of June 30, 2024 and December 31, 2023 (dollars in thousands):

	June 30, 2024				December 31, 2023
	Amount		%		Amount		%
Debt securities:
U. S. Agency securities	$	55,833		13.8	$	60,771		14.5
U. S. Treasury notes		130,073		32.2		143,288		34.1
Obligations of state & political subdivisions		96,707		23.9		101,787		24.3
Corporate obligations		12,450		3.1		12,403		3.0
Mortgage-backed securities in government sponsored entities		107,598		26.6		99,352		23.6
Equity securities		1,570		0.4		1,938		0.5
Total	$	404,231		100.0	$	419,539		100.0

	June 30, 2024/
	December 31, 2023
	Change
	Amount			%
Debt securities:
U. S. Agency securities	$	(4,938	)		(8.1	)
U. S. Treasury notes		(13,215	)		(9.2	)
Obligations of state & political subdivisions		(5,080	)		(5.0	)
Corporate obligations		47			0.4
Mortgage-backed securities in government sponsored entities		8,246			8.3
Equity securities		(368	)		(19.0	)
Total	$	(15,308	)		(3.6	)

Our investment portfolio decreased by $15.3 million, or 3.6%, from December 31, 2023 to June 30, 2024. During 2024, we purchased $14.0 million of mortgage-backed securities in U.S government sponsored entities. We experienced $5.6 million of principal repayments and $21.5 million of calls and maturities. As a result of increases in market interest rates, the unrealized loss on available for sale investment portfolio increased $1.2 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, 2024 yielded 2.32%, compared to 2.14% in the comparable period in 2023, on a tax equivalent basis.

46

The investment strategy for 2024 has been to utilize cashflows from the investment portfolio to repay overnight borrowings, while reinvesting certain balances. 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.

Loans Held for Sale

Loans held for sale increased $4.8 million to $14.2 million as of June 30, 2024 from December 31, 2023 due to the second quarter typically being more active for residential home sales than the fourth quarter.

Loans

The following table shows the composition of the loan portfolio as of June 30, 2024 and December 31, 2023 (dollars in thousands):

	June 30,				December 31,
	2024				2023
	Amount		%		Amount		%
Real estate:
Residential	$	354,588		15.7	$	359,990		16.0
Commercial		1,110,269		49.2		1,092,887		48.6
Agricultural		327,057		14.5		314,802		14.0
Construction		180,157		8.0		195,826		8.7
Consumer		70,542		3.1		61,316		2.7
Other commercial loans		130,851		5.8		136,168		6.1
Other agricultural loans		26,247		1.2		30,673		1.4
State & political subdivision loans		56,005		2.5		57,174		2.5
Total loans		2,255,716		100.0		2,248,836		100.0
Less allowance for credit losses		22,797				21,153
Net loans	$	2,232,919			$	2,227,683

	June 30, 2024/
	December 31, 2023
	Change
	Amount			%
Real estate:
Residential	$	(5,402	)		(1.5	)
Commercial		17,382			1.6
Agricultural		12,255			3.9
Construction		(15,669	)		(8.0	)
Consumer		9,226			15.0
Other commercial loans		(5,317	)		(3.9	)
Other agricultural loans		(4,426	)		(14.4	)
State & political subdivision loans		(1,169	)		(2.0	)
Total loans	$	6,880			0.3

47

Lending efforts have historically been focused in north central Pennsylvania, the south central Pennsylvania counties of Lebanon, Schuylkill, Berks and Lancaster, the central Pennsylvania counties of Clinton and Centre, and southern New York. We have a limited branch office in Union County that is staffed by a lending team to primarily support agricultural opportunities in central Pennsylvania. In April 2020, we completed the MidCoast acquisition, which expanded our markets into the State of Delaware with activity centered around the cities of Wilmington and Dover, Delaware. Since the MidCoast acquisition, we have opened two additional branches in the Delaware market to better serve customers in the Wilmington market, as well as the surrounding area of Chester County, Pennsylvania. In June 2023, we completed the HVBC acquisition, which expanded our markets into south east Pennsylvania, including the counties of Montgomery, Bucks and Philadelphia. It also includes a Mortgage production office in Mount Laurel, New Jersey. In the fourth quarter of 2023, we opened an office in Williamsport, Pennsylvania, to further our efforts in central Pennsylvania. 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.

Loan activity in the first half of 2024 has been limited. The decrease in construction loans was due to the underlying projects being completed and transferred to the commercial and agricultural real estate portfolios. As part of the Braavo sale, we sold $6.1 million of other commercial loans. Due to timing, student loans increased in the first half of 2024 resulting in an increase in consumer loans.

The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have (1) total reported loans for construction, land development and other land acquisitions which represent 100% or more of an institution’s total risk-based capital; or (2) total commercial real estate loans representing 300% or more of the institution’s total risk-based capital and the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk. Institutions which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios and may be required to hold higher levels of capital. The Company, like many community banks, has a concentration in commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years. As of June 30, 2024, non-owner-occupied commercial real estate loans (including construction, land and land development loans) represented 305.2% of consolidated risk based capital. Construction, land and land development loans represented 64.4% of consolidated risk based capital. Management has extensive experience in commercial real estate lending and has implemented and continues to maintain heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio. We may be required to maintain higher levels of capital as a result of our commercial real estate concentrations, which could require us to obtain additional capital and may adversely affect shareholder returns. The Company has an extensive Capital Policy and Capital Plan, which includes pro-forma projections including stress testing within which the Board of Directors has established internal minimum targets for regulatory capital ratios that are in excess of well capitalized ratios. The Company continues to refine information reviewed related to commercial real estate and to implement additional monitoring and testing of commercial real estate loans.

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.

48

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 $22,797,000 or 1.01% of total loans as of June 30, 2024 as compared to $21,153,000 or 0.94% of loans as of December 31, 2023. The $1,644,000 increase is a result of a $2,986,000 provision for credit losses – loans less net charge-offs of $1,342,000. Net charge-offs for 2024 are driven by loans acquired as part of the HVBC acquisition due to collateral issues. 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, 2024 and December 31, 2023 (dollars in thousands):

	June 30,				December 31
	2024				2023
	Amount		%		Amount		%
Real estate loans:
Residential	$	2,355		15.7	$	2,354		16.0
Commercial		10,283		49.2		9,178		48.6
Agricultural		3,770		14.5		3,264		14.0
Construction		1,627		8.0		1,950		8.7
Consumer		1,211		3.1		1,496		2.7
Other commercial loans		3,256		5.8		2,229		6.1
Other agricultural loans		206		1.2		270		1.4
State & political subdivision loans		63		2.5		45		2.5
Unallocated		26		N/A		367		N/A
Total allowance for credit losses	$	22,797		100.0	$	21,153		100.0

The following table provides information related to credit loss experience and loan quality for the six months ended June 30, 2024 and the year ended December 31, 2023 (dollars in thousands).

June 30, 2024	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		$	-		$	358,472		0.00	%		0.66	%		0.86	%		77.31	%
Commercial		1,105			-			1,108,819		0.00	%		0.93	%		0.23	%		407.41	%
Agricultural		506			-			319,444		0.00	%		1.15	%		0.77	%		149.66	%
Construction		(323	)		-			187,001		0.00	%		0.90	%		1.08	%		83.52	%
Consumer		(258	)		(27	)		89,472		(0.03	%)		1.72	%		1.23	%		139.04	%
Other commercial loans		2,342			(1,315	)		134,727		(0.98	%)		2.49	%		2.77	%		89.70	%
Other agricultural loans		(64	)		-			25,843		0.00	%		0.78	%		1.57	%		50.12	%
State & political subdivision loans		18			-			56,469		0.00	%		0.11	%		0.00	%		NA
Unallocated		(341	)		-			-		NA			NA			NA			NA
Total	$	2,986		$	(1,342	)	$	2,280,247		(0.06	%)		1.01	%		0.66	%		152.50	%

49

December 31, 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	$	1,112		$	(1	)	$	290,971		0.00	%		0.65	%		0.86	%		76.38	%
Commercial		2,089			-			986,188		0.00	%		0.84	%		0.10	%		808.63	%
Agricultural		(217	)		-			312,423		0.00	%		1.04	%		0.85	%		122.25	%
Construction		1,252			-			135,315		0.00	%		1.00	%		1.20	%		82.73	%
Consumer		(31	)		(325	)		94,519		(0.34	%)		2.44	%		1.14	%		213.41	%
Other commercial loans		1,643			(954	)		95,300		(1.00	%)		1.64	%		1.29	%		127.37	%
Other agricultural loans		-			-			30,557		0.00	%		0.88	%		1.60	%		54.88	%
State & political subdivision loans		3			-			59,308		0.00	%		0.08	%		0.00	%		NA
Unallocated		(359	)		-			-		NA			NA			NA			NA
Total	$	5,492		$	(1,280	)	$	2,004,581		(0.06	%)		0.94	%		0.54	%		173.57	%

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) a large sample of relationships in aggregate over $1,000,000,  3) selected loan relationships over $750,000 which are over 30 days past due, or classified Special Mention, Substandard, Doubtful, or Loss, and 4) 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, 2024. 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, credit 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.

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 5 – Loans and Related Allowance for Credit Losses - Loans” to the consolidated financial statements.

50

The following table is a summary of our non-performing assets as of June 30, 2024 and December 31, 2023.

	June 30,		December 31,
(dollars in thousands)	2024		2023
Non-performing loans:
Non-accruing loans	$	14,949	$	12,187
Accrual loans - 90 days or more past due		285		516
Total non-performing loans		15,234		12,703
Foreclosed assets held for sale		2,690		474
Total non-performing assets	$	17,924	$	13,177

The increase in foreclosed assets held for sale is primarily due to a commercial construction loan that was foreclosed on during the second quarter of 2024.

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, 2023 to June 30, 2024 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.

	June 30, 2024								December 31, 2023
			Non-Performing Loans								Non-Performing Loans
	30 - 89 Days								30 - 89 Days
	Past Due		90 Days Past		Non-		Total Non-		Past Due		90 Days Past		Non-		Total Non-
(in thousands)	Accruing		Due Accruing		accrual		Performing		Accruing		Due Accruing		accrual		Performing
Real estate:
Residential	$	2,069	$	76	$	3,046	$	3,122	$	3,061	$	18	$	3,082	$	3,100
Commercial		14,073		168		2,524		2,692		1,396		404		1,135		1,539
Agricultural		2,521		-		2,519		2,519		73		75		2,670		2,745
Construction		978		-		1,948		1,948		4,795		-		2,357		2,357
Consumer		168		16		871		887		298		13		701		714
Other commercial loans		399		25		3,630		3,655		826		6		1,750		1,756
Other agricultural loans		451		-		411		411		7		-		492		492
Total nonperforming loans	$	20,659	$	285	$	14,949	$	15,234	$	10,456	$	516	$	12,187	$	12,703

	Change in Non-Performing Loans
	June 30, 2024 /December 31, 2023
(in thousands)	Amount			%
Real estate:
Residential	$	22			0.7
Commercial		1,153			74.9
Agricultural		(226	)		(8.2	)
Construction		(409	)		(17.4	)
Consumer		173			24.2
Other commercial loans		1,899			108.1
Other agricultural loans		(81	)		(16.5	)
Total nonperforming loans	$	2,531			19.9

51

Nonperforming loans increased $2.5 million during 2024. During the first half of 2024, the Bank placed one large commercial relationship, one large construction relationship and numerous other commercial loans on non-accrual status, while also foreclosing on one construction loan that was transferred to foreclosed assets held for sale, which accounts for the majority of the change in non-performing loans since year-end. At  June 30, 2024, approximately 52.3% of the Bank’s non-performing loans are associated with the following six customer relationships:

• A commercial loan relationship with $580,000 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, 2024. 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, 2024. 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, 2024.

• An agricultural loan customer with a total loan relationship of $1.4 million, secured by real estate, equipment and cattle, was on non-accrual status as of June 30, 2024. 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 continued through 2023. The customer did miss a portion of required payments in 2023, however, in January 2024 the customer modified the bankruptcy plan to account for these missed payments.  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 created cash flow difficulties for this customer.  Absent a sizable and sustained increase in milk prices, which is not assured, we will need to rely upon the collateral for repayment of interest and principal. During 2023, the Company had the underlying collateral appraised. Management determined that no specific reserve was required as of June 30, 2024.

• An agricultural loan customer with a total loan relationship of $1.1 million, secured by real estate was on non-accrual status as of June 30, 2024. The customer filed bankruptcy in the first quarter of 2023 with the plan approved in the second quarter of 2024. The first payment under the plan was received in the second quarter of 2024. We expect that we will need to rely upon the collateral for repayment of interest and principal. During 2023, the Company had the underlying collateral appraised.  Management reviewed the collateral and determined that no specific reserve was required as of June 30, 2024.

• A commercial construction loan customer with a total loan relationship of $1.9 million, secured by partially  developed real estate, was on non-accrual status as of June 30, 2024. The customer has experienced delays in developing the real estate for resale resulting in financing difficulties. Management reviewed the collateral and determined that no specific reserve was required as of June 30, 2024.

• A commercial and residential real estate customer with a total relationship of $1.2 million secured by a restaurant and residence was on non-accrual status as of June 30, 2024. The customer has experienced a slow-down in business at the restaurant as well as higher operating costs creating cashflow difficulties. Management reviewed the collateral and determined that a specific reserve of $80,000 was required as of June 30, 2024.

• A commercial loan relationship with $1.7 millin outstanding secured by residential and commercial real estate, a car collection and gun collection was on non-accrual status as of June 30, 2024. The Company lost a contract and has gone out of business. We expect that we will need to rely upon the collateral for repayment of interest and principal. Management determined that no specific reserve was required as of June 30, 2024.

Management believes that the allowance for credit losses - loans at June 30, 2024 was adequate at that date, which was based on the following factors:

• Six loan relationships comprise 52.38% of the non-performing loan balance, which required a specific reserve of $80,000 as of June 30, 2024.

52

• The Company has a history of low charge-offs, which were 0.12% of average loans on an annualized basis for 2024 and 0.09% for 2023.

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, 2024, and December 31, 2023, the cash surrender value of the life insurance was $49.8 million and $49.9 million, respectively. 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 $996,000 and $452,000 for the six month periods ended June 30, 2024 and 2023, respectively. During the first quarter of 2024, the Company received proceeds of $1,147,000, which included death benefits of $326,000 on a former employee of the Company. 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, 2024 and December 31, 2023, included in other liabilities on the Consolidated Balance Sheet was a liability of $582,000 and $610,000, respectively, for the obligation under the split-dollar benefit agreements.

Premises and Equipment

Premises and equipment decreased $485,000 to $20.9 million as of June 30, 2024 from December 31, 2023 as a result of depreciation.

Other assets

Other assets decreased $5.9 million to $53.2 million. The primary driver of the decrease was an investment security that matured, but did not settle as of December 31, 2023. It subsequently settled in 2024.

Deposits

The following table shows the composition of deposits as of June 30, 2024 and December 31, 2023 (dollars in thousands):

	June 30,				December 31,
	2024				2023
	Amount		%		Amount		%
Non-interest-bearing deposits	$	501,991		22.1	$	523,784		22.6
Interest bearing demand deposits		15,122		0.7		-		-
NOW accounts		586,906		25.8		670,712		28.9
Savings deposits		298,286		13.1		307,357		13.2
Money market deposit accounts		401,246		17.7		400,154		17.2
Certificates of deposit		469,544		20.6		419,474		18.1
Total	$	2,273,095		100.0	$	2,321,481		100.0

53

	June 30, 2024/
	December 31, 2023
	Change
	Amount			%
Non-interest-bearing deposits	$	(21,793	)		(4.2	)
Interest bearing demand deposits		15,122		NA
NOW accounts		(83,806	)		(12.5	)
Savings deposits		(9,071	)		(3.0	)
Money market deposit accounts		1,092			0.3
Certificates of deposit		50,070			11.9
Total	$	(48,386	)		(2.1	)

Deposits decreased $48.4 million since December 31, 2023. The reduction in deposits resulted from customer funds transferred to higher-yielding investment alternatives; and seasonal reductions in municipal deposits as well as withdrawals used to fund various projects within municipalities. Brokered deposits totaled $116.8 million and $109.3 million as of June 30, 2024 and December 31, 2023, respectively. At June 30, 2024, the Bank estimates that balances held by customers in excess of the FDIC insurance limit ($250,000 per insured account) totaled $1.04 billion, or 45.7% of the Bank’s total deposits. Included in this balance are balances held through Intrafi, which provides customers with  FDIC insurance coverage by placing customer funds with insured banks within the Intrafi network, as well as deposits collateralized by securities (almost exclusively municipal deposits). The total of these items was $498.0 million, or 21.9% of the Bank’s total deposits, as of June 30, 2024.

Borrowed Funds

Borrowed funds were $334.8 million and $322.0 million as of June 30, 2024 and December 31, 2023, respectively. The increase in borrowed funds was due to the increase in loans and the seasonal decline in deposits.

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, 2024 was $5,297,000 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.

54

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 $286.5 million at June 30, 2024 compared to $279.7 million at December 31, 2023, an increase of $6,804,000, or 2.4%.  Excluding accumulated other comprehensive loss, stockholders’ equity increased $7.8 million, or 2.6%. The accumulated comprehensive loss increased $1.0 million, which was primarily the result of the decrease in fair value of the Company’s available for sale investment portfolio caused by the increase in longer term market interest rates. For the first half of 2024, the Company had net income of $12.3 million and declared cash dividends of $4.6 million, or $0.97 per share, representing a cash dividend payout ratio of 37.7%.

All of the Company’s debt investment securities are classified as available-for-sale, making this portion of the Company’s balance sheet more sensitive to the changing market value of investments due to changes in market interest rates. As a result of increases in longer term market interest rates, the defined benefit plan obligations and the interest rate swaps entered into during 2020, accumulated other comprehensive loss increased approximately $1.0 million from December 31, 2023.

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.

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%. There is a two quarter grace period for a qualifying community bank to return to 9% as long as the CBLR is 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, 2024, the Bank leverage ratio under the CBLR framework was 8.88%, which is less than 9.0% requirement to be considered “well-capitalized”  under the CBLR. As such, as of June 30, 2024, and going forward, the Bank reverted to the prompt corrective action framework and will no  longer utilize the CBLR framework until such time as the CBLR exceeds 9%. The following table provides the Bank’s computed risk‑based capital ratios as of June 30, 2024, which reflects the Bank being “well capitalized” on that date (dollars in thousands):

55

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
June 30, 2024	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk Weighted Assets):
Company	$	275,549		11.66	%	$	189,074		8.00	%	$	236,342		10.00	%
Bank	$	279,717		11.85	%	$	188,787		8.00	%	$	235,984		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Company	$	233,086		9.86	%	$	141,805		6.00	%	$	189,074		8.00	%
Bank	$	256,443		10.87	%	$	141,590		6.00	%	$	188,787		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Company	$	225,586		9.54	%	$	106,354		4.50	%	$	153,622		6.50	%
Bank	$	256,443		10.87	%	$	106,193		4.50	%	$	153,389		6.50	%
Tier 1 Capital (to Average Assets):
Company	$	233,086		8.07	%	$	115,584		4.00	%	$	144,480		5.00	%
Bank	$	255,682		8.88	%	$	115,501		4.00	%	$	144,376		5.00	%

At December 31, 2023, the Bank leverage ratio under the CBLR framework was 8.54%. This ratio allowed the Bank to fall within the grace period of the CBLR as of December 31, 2023.

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, 2024 and December 31, 2023 (in thousands):

	June 30, 2024		December 31, 2023
Commitments to extend credit	$	462,409	$	546,006
Standby letters of credit		16,107		18,682
	$	478,516	$	564,688
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	$	1,066	$	938

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, 2024 and December 31, 2023 was $13,050,000 and $13,121,000, 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.

56

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 2024 were $226,000 compared to $1,926,000 during the same time period in 2023.

Short-term debt from the FHLB supplements the Bank’s availability of funds.  The Bank achieves liquidity primarily from temporary or short‑term investments in the Federal Reserve and the FHLB.  The Bank had a maximum borrowing capacity at the FHLB of approximately $1.11 billion, of which $367.4 million was outstanding, at June 30, 2024. The Bank also has two federal funds line with third party providers for $34.0 million as of June 30, 2024, which are unsecured and were undrawn upon as of June 30, 2024. The Company also has a borrower in custody line with the Federal Reserve Bank of approximately $14.2 million, which also was not drawn upon as of June 30, 2024. The Company has a $15.0 million line of credit with a New York community bank, of which $10.1 million was utilized as of June 30, 2024. The Company continues to evaluate its liquidity needs and as necessary finds additional sources.

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, 2024, Citizens Financial Services, Inc. (on an unconsolidated basis) had liquid assets of approximately $3.9 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, 2024, the Company has equity securities that represent only 0.05% 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).

57

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, 2024 (dollars in thousands):

			Change In			% Change In
	Prospective One-Year		Prospective			Prospective
Changes in Rates	Net Interest Income		Net Interest Income			Net Interest Income
-400 Shock	$	93,286	$	6,936			8.03
-300 Shock		91,313		4,963			5.75
-200 Shock		90,224		3,874			4.49
-100 Shock		88,709		2,359			2.73
Base		86,350		-			-
+100 Shock		84,010		(2,340	)		(2.71	)
+200 Shock		81,022		(5,328	)		(6.17	)
+300 Shock		78,534		(7,816	)		(9.05	)
+400 Shock		76,041		(10,309	)		(11.94	)

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

Item 3-Quantitative and Qualitative Disclosure about Market Risk

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

Item 4-Control and Procedures

(a) Disclosure Controls and Procedures

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

58

(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, 2024 that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting.

PART II ‑ OTHER INFORMATION

Item 1 ‑ Legal Proceedings

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

Item 1A – Risk Factors

In addition to the 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, 2023, which could materially affect our business, financial condition or future results. At June 30, 2024, the risk factors of the Company have not changed materially from those reported in our 2023 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.

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

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares (or units Purchased)		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans of Programs		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
4/1/24 to 4/30/24		-	$	0.00		-		149,112
5/1/24 to 5/31/24		881	$	42.02		881		148,231
6/1/24 to 6/30/24		-	$	0.00		-		148,231
Total		881	$	42.02		881		148,231

(1) On April 22, 2023, 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 $15.0 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.

59

Item 4 – Mine Safety Disclosure

Not applicable.

Item 5 ‑ Other Information

During the three months ended June 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” (as such term is defined in Item 408 of SEC Regulation S-K).

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, 2024, formatted in XBRL (Extensible Business Reporting Language): (i) The Consolidated Balance Sheet (unaudited), (ii) the Consolidated Statement of Income (unaudited), (iii) the Consolidated Statement of Comprehensive Income (unaudited), (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statement of Cash Flows (unaudited) and (vi) related notes (unaudited).
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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

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

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

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

⁽⁵⁾ Incorporated by reference to Exhibit 4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Commission on March 9, 2023.

60

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 8, 2024		/s/ Randall E. Black
	By: Randall E. Black
	President and Chief Executive Officer
	(Principal Executive Officer)
August 8, 2024		/s/ Stephen J. Guillaume
	By: Stephen J. Guillaume
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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 8, 2024		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 8, 2024		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, 2024 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 8, 2024

By:  /s/ Stephen J. Guillaume

By:  Stephen J. Guillaume

Chief Financial Officer

(Principal Financial and Accounting Officer)

Date:  August 8, 2024

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2024	Aug. 01, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2024
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
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		4,759,931

XML

CONSOLIDATED BALANCE SHEET - USD ($) $ in Thousands		Jun. 30, 2024	Dec. 31, 2023
Cash and due from banks:
Noninterest-bearing		$ 22,023	$ 37,733
Interest-bearing		16,410	15,085
Total cash and cash equivalents		38,433	52,818
Interest bearing time deposits with other banks		3,820	4,070
Equity securities		1,570	1,938
Available-for-sale securities		402,661	417,601
Loans held for sale		14,227	9,379
Loans (net of allowance for credit losses: 2024 $22,797 and 2023, $21,153)		2,232,919	2,227,683
Premises and equipment		20,899	21,384
Accrued interest receivable		10,782	11,043
Goodwill	[1]	85,758	85,758
Bank owned life insurance		49,746	49,897
Other intangibles		3,244	3,650
Fair value of derivative instruments		13,111	13,687
Deferred tax asset		17,185	17,339
Other assets		53,176	59,074
TOTAL ASSETS		2,947,531	2,975,321
Deposits:
Noninterest-bearing		501,991	523,784
Interest-bearing		1,771,104	1,797,697
Total deposits		2,273,095	2,321,481
Borrowed funds		334,829	322,036
Accrued interest payable		5,482	4,298
Fair value of derivative instruments - liability		7,319	7,922
Other liabilities		40,336	39,918
TOTAL LIABILITIES		2,661,061	2,695,655
STOCKHOLDERS' EQUITY:
Preferred Stock $1.00 par value; authorized 3,000,000 shares at June 30, 2024 and December 31, 2023; none issued in 2024 or 2023		0	0
Common stock $1.00 par value; authorized 25,000,000 shares at June 30, 2024 and December 31, 2023; issued 5,207,343 at June 30, 2024 and 5,160,754 at December 31, 2023		5,207	5,161
Additional paid-in capital		144,985	143,233
Retained earnings		178,588	172,975
Accumulated other comprehensive loss		(25,932)	(24,911)
Treasury stock, at cost: 447,857 shares at June 30, 2024 and 453,760 shares at December 31, 2023		(16,378)	(16,792)
TOTAL STOCKHOLDERS' EQUITY		286,470	279,666
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$ 2,947,531	$ 2,975,321

[1] Excludes fully amortized intangible assets

XML

CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
ASSETS:
Loans, allowance for credit losses - loans	$ 22,797	$ 21,153
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)	5,207,343	5,160,754
Treasury stock, shares (in shares)	447,857	453,760

XML

CONSOLIDATED STATEMENT OF INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
INTEREST INCOME:
Interest and fees on loans	$ 35,067	$ 24,117	$ 70,200	$ 46,666
Interest-bearing deposits with banks	262	127	505	198
Investment securities:
Taxable	1,663	1,683	3,287	3,239
Nontaxable	520	572	1,052	1,189
Dividends	390	311	791	625
TOTAL INTEREST INCOME	37,902	26,810	75,835	51,917
INTEREST EXPENSE:
Deposits	12,655	5,480	24,976	9,419
Borrowed funds	3,947	3,409	8,601	6,497
TOTAL INTEREST EXPENSE	16,602	8,889	33,577	15,916
NET INTEREST INCOME	21,300	17,921	42,258	36,001
Provision for credit losses	2,002	262	2,787	262
Provision for credit losses - acquisition day 1 non-PCD	0	4,591	0	4,591
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	19,298	13,068	39,471	31,148
NON-INTEREST INCOME:
Service charges	1,385	1,293	2,757	2,504
Trust	201	181	445	411
Brokerage and insurance	563	442	1,228	956
Gains on loans sold	479	169	896	214
Equity security losses, net	(87)	(74)	(32)	(292)
Available for sale security losses, net	0	(51)	0	(51)
Gain on sale of Braavo division	0	0	1,102	0
Earnings on bank owned life insurance	328	234	996	452
Other	467	86	915	260
TOTAL NON-INTEREST INCOME	3,336	2,280	8,307	4,454
NON-INTEREST EXPENSES:
Salaries and employee benefits	9,617	7,916	19,907	15,593
Occupancy	1,266	814	2,590	1,649
Furniture and equipment	295	162	531	313
Professional fees	698	387	1,401	768
FDIC insurance	509	325	1,034	625
Pennsylvania shares tax	330	298	640	596
Amortization of intangibles	147	31	296	62
Merger and acquisition	0	8,402	0	8,646
Software expenses	494	372	1,008	723
ORE expenses (recoveries)	175	(11)	162	15
Other	2,715	1,984	5,320	3,468
TOTAL NON-INTEREST EXPENSES	16,246	20,680	32,889	32,458
Income (loss) before provision (benefit) for income taxes	6,388	(5,332)	14,889	3,144
Provision (benefit) for income taxes	1,113	(1,188)	2,590	421
NET INCOME (LOSS)	$ 5,275	$ (4,144)	$ 12,299	$ 2,723
PER COMMON SHARE DATA:
Net Income (Loss) - Basic	$ 1.11	$ (1)	$ 2.59	$ 0.66
Net Income (Loss) - Diluted	1.11	(1)	2.59	0.66
Cash Dividends Paid (in dollars per share)	$ 0.485	$ 0.475	$ 0.97	$ 0.949
Number of shares used in computation - basic (in shares)	4,748,927	4,159,966	4,748,523	4,106,005
Number of shares used in computation - diluted (in shares)	4,753,697	4,159,966	4,753,918	4,106,005

XML

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) [Abstract]
Net income (loss)	$ 5,275	$ (4,144)	$ 12,299	$ 2,723
Other comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities	1,154	(5,995)	(1,166)	2,982
Income tax effect	(243)	1,259	246	(626)
Change in unrecognized pension cost	14	7	16	14
Income tax effect	(3)	(2)	(3)	(3)
Change in unrealized (loss) gain on interest rate swaps	(296)	600	(144)	(310)
Income tax effect	62	(126)	30	65
Less: Reclassification adjustment for investment security gains included in net income	0	51	0	51
Income tax effect	0	(12)	0	(12)
Other comprehensive income (loss), net of tax	688	(4,218)	(1,021)	2,161
Comprehensive income (loss)	$ 5,963	$ (8,362)	$ 11,278	$ 4,884

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, 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
Change in Accounting policy for allowance for credit losses			1,766			1,766
Cash dividends			(3,891)			(3,891)
Balance at Jun. 30, 2023	$ 5,161	143,351	162,499	(30,980)	(16,803)	263,228
Balance (in shares) at Jun. 30, 2023	5,160,754
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 (in shares) at Jun. 30, 2023	5,160,754
Balance at Dec. 31, 2023	$ 5,161	143,233	172,975	(24,911)	(16,792)	279,666
Balance (in shares) at Dec. 31, 2023	5,160,754
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)			12,299			12,299
Net other comprehensive income (loss)				(1,021)		(1,021)
Stock dividend	$ 46	2,001				0
Stock dividend			(2,047)
Stock dividend (in shares)	46,589
Purchase of treasury stock					(81)	(81)
Restricted stock, executive and Board of Director awards		(417)			495	78
Restricted stock vesting		168				168
Cash dividends			(4,639)			(4,639)
Balance at Jun. 30, 2024	$ 5,207	144,985	178,588	(25,932)	(16,378)	286,470
Balance (in shares) at Jun. 30, 2024	5,207,343
Balance at Mar. 31, 2024	$ 5,161	143,227	177,693	(26,620)	(16,787)	282,674
Balance (in shares) at Mar. 31, 2024	5,160,754
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)			5,275			5,275
Net other comprehensive income (loss)				688		688
Stock dividend	$ 46	2,001				0
Stock dividend			(2,047)
Stock dividend (in shares)	46,589
Purchase of treasury stock					(36)	(36)
Restricted stock, executive and Board of Director awards		(408)			445	37
Restricted stock vesting		165				165
Cash dividends			(2,333)			(2,333)
Balance at Jun. 30, 2024	$ 5,207	$ 144,985	$ 178,588	$ (25,932)	$ (16,378)	$ 286,470
Balance (in shares) at Jun. 30, 2024	5,207,343

XML

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY [Abstract]
Purchase of treasury stock (in shares)	881		1,776
Restricted stock (in shares)	6,786	2,652	7,668	2,652
Cash dividends (in dollars per share)	$ 0.485	$ 0.475	$ 0.97	$ 0.949

XML

CONSOLIDATED STATEMENT OF CASH FLOWS $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023 USD ($)	Jun. 30, 2024 USD ($)		Jun. 30, 2023 USD ($)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ (4,144)	$ 12,299		$ 2,723
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		2,787		4,853
Depreciation and amortization		958		530
Amortization and accretion of loans and other assets		(2,243)		(825)
Amortization and accretion of investment securities		759		826
Deferred income taxes		425		125
Investment securities losses, net		33		343
Earnings on bank owned life insurance	(234)	(996)		(452)
Vesting of restricted stock		168		150
Originations of loans held for sale		(74,816)		(12,730)
Proceeds from sales of loans held for sale		70,820		9,444
Realized gains on loans sold	(169)	(896)		(214)
Realized gains on sale of Braavo	0	(1,102)		0
Decrease in accrued interest receivable		261		275
Gain on sale of foreclosed assets held for sale		(119)		(67)
Increase in accrued interest payable		1,184		139
Other, net		6,956		(2,219)
Net cash provided by operating activities		16,478		2,901
Available-for-sale securities:
Proceeds from sales	86,504	0		86,504
Proceeds from maturity and principal repayments		27,061		10,336
Purchase of securities		(14,045)		(10,246)
Proceeds from sale of equity securities		335		67
Purchase of interest bearing time deposits with other banks		(100)		0
Proceeds from matured interest bearing time deposits with other banks		350		1,241
Proceeds from life insurance		1,147		0
Proceeds from redemption of regulatory stock		15,665		10,839
Purchase of regulatory stock		(14,135)		(12,789)
Net (increase) decrease in loans		(13,486)		40,119
Purchase of premises and equipment		(226)		(1,926)
Investments in low income housing partnerships		0		(591)
Proceeds from sale of foreclosed assets held for sale		392		233
Proceeds from sale of Braavo assets		7,185		0
Acquisition, net of cash paid		0		4,905
Net cash provided by investing activities		10,143		128,692
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits		(48,385)		(111,473)
Proceeds from long-term borrowings		0		20,000
Repayments of long-term borrowings		(5,000)		0
Net increase (decrease) in short-term borrowed funds		17,099		(17,731)
Purchase of treasury and restricted stock		(81)		0
Dividends paid		(4,639)		(3,891)
Net cash used by financing activities		(41,006)		(113,095)
Net (decrease) increase in cash and cash equivalents		(14,385)		18,498
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		52,818		26,211
CASH AND CASH EQUIVALENTS AT END OF PERIOD	44,709	38,433		44,709
Supplemental Disclosures of Cash Flow Information:
Interest paid		32,393		14,892
Income taxes paid		750		3,600
Loans transferred to foreclosed property		2,490		49
Right of use asset and liability		169		5
Stock Dividend		2,047		3,021
CECL adjustment		0		3,300
Non-cash assets acquired
Goodwill		$ 85,758	[1]
HV Bancorp, Inc. [Member]
Non-cash assets acquired
Available-for-sale securities	79,248			79,248
Interest bearing time deposits with other banks	0			0
Loans held for sale	10,750			10,750
Loans	475,338			475,338
Premises and equipment	2,310			2,310
Accrued interest receivable	2,226			2,226
Bank owned life insurance	10,387			10,387
Intangibles	2,972			2,972
Deferred tax asset	8,392			8,392
Other assets	18,213			18,213
Goodwill	53,382			53,382
Total non-cash assets acquired	663,218			663,218
Liabilities assumed
Noninterest-bearing deposits	197,549			197,549
Interest-bearing deposits	335,816			335,816
Accrued interest payable	885			885
Borrowed funds	58,647			58,647
Other liabilities	11,674			11,674
Total liabilities assumed	604,571			604,571
Net non-cash assets acquired	58,647			58,647
Cash and cash equivalents acquired	$ 18,017			$ 18,017

[1] Excludes fully amortized intangible assets

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2024

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, 2024 and for the periods ended June 30, 2024 and 2023 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, 2024 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, 2023.

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.

Allowance for Credit Losses – Loans and Leases

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.

Depending on the nature of the pool of financial assets with similar risk characteristics, the models utilized by the Company to estimate expected credit losses include a discounted cash flow (“DCF”) model that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a weighted average remaining maturity model which contemplates expected losses at a pool-level, utilizing historic loss information. The Company’s models for  estimating the allowance for credit losses consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. Management 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 Economic Forecasts

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

Forecast Reversion Period

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

Expected Recoveries on Charged-off Loans

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

Discount Rate

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

Individual Evaluation

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

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

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $8.4 million and $8.5 million at June 30, 2024 and December 31, 2023, respectively, 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 is then applied to calculate the reserve for unfunded commitments liability each period.

XML

Revenue Recognition

6 Months Ended

Jun. 30, 2024

Revenue Recognition [Abstract]

Revenue Recognition

Note 2 – 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, 2024 and 2023 (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	2024		2023		2024		2023
Service charges on deposit accounts
Overdraft fees	$	394		371	$	798	$	730
Statement fees		44		54		86		106
Interchange revenue		811		764		1,555		1,461
ATM income		33		34		66		72
Other service charges		103		70		252		135
Total Service Charges		1,385		1,293		2,757		2,504
Trust		201		181		445		411
Brokerage and insurance		563		442		1,228		956
Other		241		118		373		233
Total	$	2,390	$	2,034	$	4,803	$	4,104

XML

Earnings per Share

6 Months Ended

Jun. 30, 2024

Earnings per Share [Abstract]

Earnings per Share

Note 3 – Earnings per Share

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

	Three months ended June 30,					Six months ended June 30,
	2024		2023			2024		2023
Net income (loss) applicable to common stock	$	5,275,000	$	(4,144,000	)	$	12,299,000	$	2,723,000
Basic earnings per share computation
Weighted average common shares outstanding		4,748,927		4,159,966			4,748,523		4,106,005
Earnings (loss) per share - basic	$	1.11	$	(1.00	)	$	2.59	$	0.66
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,748,927		4,159,966			4,748,523		4,106,005
Add: Dilutive effects of restricted stock		4,770		-			5,395		-
Weighted average common shares outstanding for dilutive earnings per share		4,753,697		4,159,966			4,753,918		4,106,005
Earnings (loss) per share - diluted	$	1.11	$	(1.00	)	$	2.59	$	0.66

For the three months ended June 30, 2024 and 2023, there were 4,230 and 6,078 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 $60.16-$83.38 for the three month period ended June 30, 2024 and per share prices ranging from $44.93-$83.38 for the three month period ended June 30, 2023. For the six months ended June 30, 2024 and 2023, 4,230 and 6,078 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 $60.16-$83.38 for the six month period ended June 30, 2024 and prices ranging from $44.93-$83.38 for the six month period ended June 30, 2023.

XML

Investments

6 Months Ended

Jun. 30, 2024

Investments [Abstract]

Investments

Note 4 – Investments

The amortized cost, gross unrealized gains and losses, and fair value of investment securities at June 30, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
Available-for-sale securities:
U.S. agency securities	$	61,576	$	3	$	(5,746	)	$	-	$	55,833
U.S. treasury securities		138,582		-		(8,509	)		-		130,073
Obligations of state and political subdivisions		104,668		6		(7,967	)		-		96,707
Corporate obligations		13,422		273		(1,245	)		-		12,450
Mortgage-backed securities in government sponsored entities		121,321		49		(13,772	)		-		107,598
Total available-for-sale securities	$	439,569	$	331	$	(37,239	)	$	-	$	402,661

December 31, 2023
Available-for-sale securities:
U.S. agency securities	$	66,569	$	1	$	(5,799	)	$	-	$	60,771
U.S. treasury securities		152,485		-		(9,197	)		-		143,288
Obligations of state and political subdivisions		107,945		32		(6,190	)		-		101,787
Corporate obligations		13,394		245		(1,236	)		-		12,403
Mortgage-backed securities in government sponsored entities		112,950		7		(13,605	)		-		99,352
Total available-for-sale securities	$	453,343	$	285	$	(36,027	)	$	-	$	417,601

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, 2024 and December 31, 2023 (in thousands). As of June 30, 2024, the Company owned 317 securities whose fair value was less than their cost basis.

June 30, 2024	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	$	-	$	-		$	53,815	$	(5,746	)	$	53,815	$	(5,746	)
U.S. treasury securities		-		-			130,073		(8,509	)		130,073		(8,509	)
Obligations of state and political subdivisions		3,554		(23	)		88,349		(7,944	)		91,903		(7,967	)
Corporate obligations		-		-			9,024		(1,245	)		9,024		(1,245	)
Mortgage-backed securities in government sponsored entities		6,468		(13	)		91,736		(13,759	)		98,204		(13,772	)
Total securities	$	10,022	$	(36	)	$	372,997	$	(37,203	)	$	383,019	$	(37,239	)

December 31, 2023
U.S. agency securities	$	-	$	-		$	58,753	$	(5,799	)	$	58,753	$	(5,799	)
U.S. treasury securities		-		-			143,288		(9,197	)		143,288		(9,197	)
Obligations of states and political subdivisions		-		-			93,535		(6,190	)		93,535		(6,190	)
Corporate obligations		1,487		(265	)		8,320		(971	)		9,807		(1,236	)
Mortgage-backed securities in government sponsored entities		9,203		(31	)		88,553		(13,574	)		97,756		(13,605	)
Total securities	$	10,690	$	(296	)	$	392,449	$	(35,731	)	$	403,139	$	(36,027	)

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 $2,119,000 and $2,202,000 at June 30, 2024 and December 31,2023 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.

There were no sales of available for sale securities during the three and six months ended June 30, 2024. Proceeds from sales of securities available-for-sale for the three and six months ended June 30, 2023 were $86,504,000.

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2024		2023			2024		2023
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, 2024 and  2023, and the portion of unrealized gains for the period that relates to equity investments held at June 30, 2024 and 2023(in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
Equity securities	2024			2023			2024			2023
Net losses recognized in equity securities during the period	$	(87	)	$	(74	)	$	(32	)	$	(292	)
Less: Net (losses) gains realized on the sale of equity securities during the period		-			-			(4	)		5
Net unrealized losses	$	(87	)	$	(74	)	$	(28	)	$	(297	)

Investment securities with an approximate carrying value of $345.4 million and $353.3 million at June 30, 2024 and December 31, 2023, 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, 2024, by contractual maturity, are shown below (in thousands):

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	48,416	$	47,437
Due after one year through five years		143,357		132,756
Due after five years through ten years		85,933		77,550
Due after ten years		161,863		144,918
Total	$	439,569	$	402,661

XML

Loans

6 Months Ended

Jun. 30, 2024

Loans [Abstract]

Loans

Note 5 – Loans

The Company originates 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 HVBC acquisition 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, 2024 and December 31, 2023, 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, 2024 and December 31, 2023 (in thousands):

	June 30, 2024			December 31, 2023
Real estate loans:
Residential	$	354,588		$	359,990
Commercial		1,110,269			1,092,887
Agricultural		327,057			314,802
Construction		180,157			195,826
Consumer		70,542			61,316
Other commercial loans		130,851			136,168
Other agricultural loans		26,247			30,673
State and political subdivision loans		56,005			57,174
Total		2,255,716			2,248,836
Allowance for credit losses - loans		(22,797	)		(21,153	)
Net loans	$	2,232,919		$	2,227,683

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 credit 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. See Note 1, “Basis of Presentation”, for a summary of the impact of adopting CECL on January 1, 2023.

Under CECL, loans individually evaluated for impairment consist of non-accrual commercial loans and recently modified loans that were experiencing financial difficulty at the time of the modification.

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, 2024 and December 31, 2023 (in thousands):

	June 30, 2024		December 31, 2023
Allowance for Credit Losses - Loans	$	22,797	$	21,153
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,066		1,265
Total allowance for credit losses	$	23,863	$	22,418

The following table presents the activity in the allowance for credit losses for the three and six months ended June 30, 2024 and 2023 (in thousands):

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure			Total
Balance at March 31, 2024	$	21,598		$	938		$	22,536
Loans charge-off		(682	)		-			(682	)
Recoveries of loans previously charged-off		7			-			7
Net loans charged-off		(675	)		-			(675	)
Provision for credit losses		1,874			128			2,002
Balance at June 30, 2024	$	22,797		$	1,066		$	23,863
Balance at December 31, 2023	$	21,153		$	1,265		$	22,418
Loans charge-off		(1,356	)		-			(1,356	)
Recoveries of loans previously charged-off		14			-			14
Net loans charged-off		(1,342	)		-			(1,342	)
Provision for credit losses		2,986			(199	)		2,787
Balance at June 30, 2024	$	22,797		$	1,066		$	23,863

	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
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, 2024 and 2023 (in thousands):

	For the three months ended June 30, 2024
	Balance at March 31, 2024		Charge-offs			Recoveries		Provision			Balance at June 30, 2024
Real estate loans:
Residential	$	2,347	$	-		$	-	$	8		$	2,355
Commercial		9,741		-			-		542			10,283
Agricultural		3,672		-			-		98			3,770
Construction		1,595		-			-		32			1,627
Consumer		1,266		(7	)		5		(53	)		1,211
Other commercial loans		2,680		(675	)		2		1,249			3,256
Other agricultural loans		174		-			-		32			206
State and political subdivision loans		65		-			-		(2	)		63
Unallocated		58		-			-		(32	)		26
Total	$	21,598	$	(682	)	$	7	$	1,874		$	22,797

	For the six months ended June 30, 2024
	Balance at December 31, 2023		Charge-offs			Recoveries		Provision			Balance at June 30, 2024
Real estate loans:
Residential	$	2,354	$	-		$	-	$	1		$	2,355
Commercial		9,178		-			-		1,105			10,283
Agricultural		3,264		-			-		506			3,770
Construction		1,950		-			-		(323	)		1,627
Consumer		1,496		(37	)		10		(258	)		1,211
Other commercial loans		2,229		(1,319	)		4		2,342			3,256
Other agricultural loans		270		-			-		(64	)		206
State and political subdivision loans		45		-			-		18			63
Unallocated		367		-			-		(341	)		26
Total	$	21,153	$	(1,356	)	$	14	$	2,986		$	22,797

	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, 2024 and December 31, 2023:

	Allowance for Credit Losses - Loans						Loans
June 30, 2024	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,304	$	51	$	2,355	$	352,924	$	1,664	$	354,588
Commercial		10,164		119		10,283		1,107,745		2,524		1,110,269
Agricultural		3,753		17		3,770		324,538		2,519		327,057
Construction		1,627		-		1,627		178,209		1,948		180,157
Consumer		334		877		1,211		69,585		957		70,542
Other commercial loans		1,915		1,341		3,256		127,352		3,499		130,851
Other agricultural loans		206		-		206		25,836		411		26,247
State and political subdivision loans		63		-		63		56,005		-		56,005
Unallocated		26		-		26		-		-		-
Total	$	20,392	$	2,405	$	22,797	$	2,242,194	$	13,522	$	2,255,716

	Allowance for Credit Losses - Loans						Loans
December 31, 2023	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,285	$	69	$	2,354	$	358,358	$	1,632	$	359,990
Commercial		9,033		145		9,178		1,090,217		2,670		1,092,887
Agricultural		3,247		17		3,264		311,500		3,302		314,802
Construction		1,664		286		1,950		193,469		2,357		195,826
Consumer		557		939		1,496		60,377		939		61,316
Other commercial loans		1,713		516		2,229		134,472		1,696		136,168
Other agricultural loans		270		-		270		30,388		285		30,673
State and political subdivision loans		45		-		45		57,174		-		57,174
Unallocated		367		-		367		-		-		-
Total	$	19,181	$	1,972	$	21,153	$	2,235,955	$	12,881	$	2,248,836

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, 2024 and December 31, 2023, respectively. The balances are presented by class of loan receivable (in thousands):

	June 30, 2024								December 31, 2023
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	-	$	2,927	$	-	$	2,927	$	315	$	2,646	$	-	$	2,961
Home Equity		-		119		76		195		-		121		18		139
Commercial		1,248		1,276		168		2,692		256		879		404		1,539
Agricultural		181		2,338		-		2,519		181		2,489		75		2,745
Construction		-		1,948		-		1,948		2,357		-		-		2,357
Consumer		871		-		16		887		701		-		13		714
Other commercial loans		1,628		2,002		25		3,655		588		1,162		6		1,756
Other agricultural loans		-		411		-		411		-		492		-		492
	$	3,928	$	11,021	$	285	$	15,234	$	4,398	$	7,789	$	516	$	12,703

As of June 30, 2024, there were $11.0 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 charged 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, 2024 and December 31, 2023 (in thousands):

June 30, 2024	Real Estate		Business Assets		None		Total
Real estate loans:
Mortgages	$	2,927	$	-	$	-	$	2,927
Home Equity		119		-		-		119
Commercial		2,524		-		-		2,524
Agricultural		2,519		-		-		2,519
Construction		1,948		-		-		1,948
Consumer		-		-		871		871
Other commercial loans		-		3,630		-		3,630
Other agricultural loans		-		411		-		411
	$	10,037	$	4,041	$	871	$	14,949

December 31, 2023	Real Estate		Business Assets		None		Total
Real estate loans:
Mortgages	$	2,961	$	-	$	-	$	2,961
Home Equity		121		-		-		121
Commercial		1,135		-		-		1,135
Agricultural		2,670		-		-		2,670
Construction		2,357		-		-		2,357
Consumer		-		-		701		701
Other commercial loans		-		1,750		-		1,750
Other agricultural loans		-		492		-		492
	$	9,244	$	2,242	$	701	$	12,187

Credit Quality Information

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

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

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

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

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

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

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay the loan as agreed, the Company’s loan rating process includes several layers of internal and external oversight. The Company’s loan officers are responsible for the timely and accurate risk rating of the loans in each of their portfolios at origination and on an ongoing basis under the supervision of management.  All commercial, agricultural and state and political relationships over $500,000 are reviewed annually to ensure the appropriateness of the loan grade. In addition, the Company engages an external consultant on at least an annual basis to: 1) review a minimum of 50% of the dollar volume of the commercial loan portfolio on an annual basis, 2) a large sample of relationships in aggregate over $1,000,000,  3) selected loan relationships over $750,000 which are over 30 days past due, or classified Special Mention, Substandard, Doubtful, or Loss, and 4) 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, 2024 and December 31, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	24,386	$	86,011	$	346,073	$	211,774	$	118,917	$	240,719	$	36,287	$	1,852	$	1,066,019
Special Mention		-		-		6,496		1,065		1,430		8,672		768		-		18,431
Substandard		-		572		13,045		545		194		10,725		330		408		25,819
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	24,386	$	86,583	$	365,614	$	213,384	$	120,541	$	260,116	$	37,385	$	2,260	$	1,110,269
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	13,464	$	26,962	$	48,430	$	27,830	$	30,726	$	136,181	$	14,772	$	119	$	298,484
Special Mention		3,059		185		10,349		1,292		-		7,919		2,202		562		25,568
Substandard		-		-		-		-		-		2,913		-		92		3,005
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	16,523	$	27,147	$	58,779	$	29,122	$	30,726	$	147,013	$	16,974	$	773	$	327,057
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	19,891	$	57,223	$	80,691	$	7,742	$	2,890	$	-	$	864	$	121	$	169,422
Special Mention		-		812		4,613		2,950		-		-		-		-		8,375
Substandard		-		-		412		1,948		-		-		-		-		2,360
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	19,891	$	58,035	$	85,716	$	12,640	$	2,890	$	-	$	864	$	121	$	180,157
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	27,900	$	26,364	$	7,742	$	7,540	$	2,208	$	4,030	$	40,759	$	83	$	116,626
Special Mention		330		-		1,919		1,419		2		81		5,312		36		9,099
Substandard		42		1,283		381		-		259		1,136		347		1,661		5,109
Doubtful		-		-		-		-		-		-		-		17		17
Total	$	28,272	$	27,647	$	10,042	$	8,959	$	2,469	$	5,247	$	46,418	$	1,797	$	130,851
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	6	$	-	$	1,313	$	-	$	1,319
Other agricultural loans										-
Risk Rating
Pass	$	2,392	$	2,630	$	1,157	$	4,912	$	518	$	412	$	11,491	$	-	$	23,512
Special Mention		734		-		405		401		-		-		739		-		2,279
Substandard		-		-		-		191		-		199		44		22		456
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,126	$	2,630	$	1,562	$	5,504	$	518	$	611	$	12,274	$	22	$	26,247
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	30	$	1,541	$	14,101	$	10,600	$	5,439	$	24,294	$	-	$	-	$	56,005
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	30	$	1,541	$	14,101	$	10,600	$	5,439	$	24,294	$	-	$	-	$	56,005
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	88,063	$	200,731	$	498,194	$	270,398	$	160,698	$	405,636	$	104,173	$	2,175	$	1,730,068
Special Mention		4,123		997		23,782		7,127		1,432		16,672		9,021		598		63,752
Substandard		42		1,855		13,838		2,684		453		14,973		721		2,183		36,749
Doubtful		-		-		-		-		-		-		-		17		17
Total	$	92,228	$	203,583	$	535,814	$	280,209	$	162,583	$	437,281	$	113,915	$	4,973	$	1,830,586

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	90,068	$	333,710	$	224,873	$	122,560	$	81,557	$	180,799	$	28,360	$	1,140	$	1,063,067
Special Mention		672		7,963		227		1,552		7,442		8,159		96		60		26,171
Substandard		-		1,302		6		-		158		1,444		317		422		3,649
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	90,740	$	342,975	$	225,106	$	124,112	$	89,157	$	190,402	$	28,773	$	1,622	$	1,092,887
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	22,632	$	47,479	$	28,990	$	32,058	$	25,406	$	118,700	$	10,495	$	460	$	286,220
Special Mention		574		9,165		1,499		-		962		7,038		3,535		-		22,773
Substandard		-		-		-		-		102		5,394		75		238		5,809
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	23,206	$	56,644	$	30,489	$	32,058	$	26,470	$	131,132	$	14,105	$	698	$	314,802
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction
Risk Rating
Pass	$	54,973	$	102,562	$	22,508	$	-	$	-	$	-	$	839	$	1,166	$	182,048
Special Mention		1,574		5,432		4,415		-		-		-		-		-		11,421
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	56,547	$	107,994	$	29,280	$	-	$	-	$	-	$	839	$	1,166	$	195,826
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans
Risk Rating
Pass	$	31,493	$	11,407	$	9,016	$	4,793	$	4,758	$	3,530	$	63,285	$	93	$	128,375
Special Mention		51		52		1,510		184		223		629		1,652		36		4,337
Substandard		52		97		-		-		149		967		502		1,667		3,434
Doubtful		-		-		-		-		-		-		-		22		22
Total	$	31,596	$	11,556	$	10,526	$	4,977	$	5,130	$	5,126	$	65,439	$	1,818	$	136,168
Current period gross charge-offs	$	200	$	-	$	-	$	763	$	-	$	-	$	-	$	-	$	963
Other agricultural loans
Risk Rating
Pass	$	3,902	$	1,520	$	6,448	$	1,046	$	532	$	305	$	15,331	$	-	$	29,084
Special Mention		-		473		16		42		-		-		488		29		1,048
Substandard		-		-		207		-		4		255		44		31		541
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,902	$	1,993	$	6,671	$	1,088	$	536	$	560	$	15,863	$	60	$	30,673
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans
Risk Rating
Pass	$	1,623	$	14,171	$	10,841	$	5,235	$	-	$	25,294	$	10	$	-	$	57,174
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,623	$	14,171	$	10,841	$	5,235	$	-	$	25,294	$	10	$	-	$	57,174
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total
Risk Rating
Pass	$	204,691	$	510,849	$	302,676	$	165,692	$	112,253	$	328,628	$	118,320	$	2,859	$	1,745,968
Special Mention		2,871		23,085		7,667		1,778		8,627		15,826		5,771		125		65,750
Substandard		52		1,399		2,570		-		413		8,060		938		2,358		15,790
Doubtful		-		-		-		-		-		-		-		22		22
Total	$	207,614	$	535,333	$	312,913	$	167,470	$	121,293	$	352,514	$	125,029	$	5,364	$	1,827,530

For residential real estate mortgage loans, home equity loans, and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail above, and all loans past due 90 or more days and still accruing. The following tables present the recorded investment in those loan classes based on payment activity, by origination year, as of June 30, 2024 and December 31, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	5,634	$	19,686	$	91,593	$	47,532	$	28,521	$	110,070	$	-	$	-	$	303,036
Nonperforming		-		-		384		746		579		1,218		-		-		2,927
Total	$	5,634	$	19,686	$	91,977	$	48,278	$	29,100	$	111,288	$	-	$	-	$	305,963
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Home equity										-
Payment Performance
Performing	$	1,321	$	3,755	$	2,736	$	1,843	$	1,753	$	9,089	$	27,646	$	287	$	48,430
Nonperforming		-		-		-		-		-		53		66		76		195
Total	$	1,321	$	3,755	$	2,736	$	1,843	$	1,753	$	9,142	$	27,712	$	363	$	48,625
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	1,304	$	1,363	$	746	$	461	$	377	$	2,823	$	62,579	$	2	$	69,655
Nonperforming		-		6		4		-		12		865		-		-		887
Total	$	1,304	$	1,369	$	750	$	461	$	389	$	3,688	$	62,579	$	2	$	70,542
Current period gross charge-offs	$	-	$	-	$	21	$	-	$	-	$	-	$	16	$	-	$	37
Total										-
Payment Performance
Performing	$	8,259	$	24,804	$	95,075	$	49,836	$	30,651	$	121,982	$	90,225	$	289	$	421,121
Nonperforming		-		6		388		746		591		2,136		66		76		4,009
Total	$	8,259	$	24,810	$	95,463	$	50,582	$	31,242	$	124,118	$	90,291	$	365	$	425,130

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	19,082	$	93,706	$	47,774	$	29,940	$	18,923	$	97,813	$	-	$	-	$	307,238
Nonperforming		-		399		766		396		-		1,400		-		-		2,961
Total	$	19,082	$	94,105	$	48,540	$	30,336	$	18,923	$	99,213	$	-	$	-	$	310,199
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity
Payment Performance
Performing	$	3,877	$	3,008	$	1,886	$	1,954	$	2,462	$	7,883	$	28,219	$	363	$	49,652
Nonperforming		-		-		-		-		-		72		67		-		139
Total	$	3,877	$	3,008	$	1,886	$	1,954	$	2,462	$	7,955	$	28,286	$	363	$	49,791
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer
Payment Performance
Performing	$	1,803	$	979	$	539	$	477	$	557	$	2,988	$	53,254	$	5	$	60,602
Nonperforming		-		21		-		-		-		693		-		-		714
Total	$	1,803	$	1,000	$	539	$	477	$	557	$	3,681	$	53,254	$	5	$	61,316
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	341	$	23	$	-	$	365
Total
Payment Performance
Performing	$	24,762	$	97,693	$	50,199	$	32,371	$	21,942	$	108,684	$	81,473	$	368	$	417,492
Nonperforming		-		420		766		396		-		2,165		67		-		3,814
Total	$	24,762	$	98,113	$	50,965	$	32,767	$	21,942	$	110,849	$	81,540	$	368	$	421,306

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, 2024 and December 31, 2023 (in thousands):

June 30, 2024	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	$	1,823	$	298	$	1,729	$	3,850	$	302,113	$	305,963	$	-
Home Equity		106		41		195		342		48,283		48,625		76
Commercial		5,280		8,794		2,543		16,617		1,093,652		1,110,269		168
Agricultural		2,151		369		181		2,701		324,356		327,057		-
Construction		978		-		1,948		2,926		177,231		180,157		-
Consumer		147		21		887		1,055		69,487		70,542		16
Other commercial loans		345		1,715		1,871		3,931		126,920		130,851		25
Other agricultural loans		432		146		191		769		25,478		26,247		-
State and political subdivision loans		-		-		-		-		56,005		56,005		-
Total	$	11,262	$	11,384	$	9,545	$	32,191	$	2,223,525	$	2,255,716	$	285
Loans considered non-accrual	$	67	$	1,920	$	9,260	$	11,247	$	3,702	$	14,949
Loans still accruing		11,195		9,464		285		20,944		2,219,823		2,240,767
Total	$	11,262	$	11,384	$	9,545	$	32,191	$	2,223,525	$	2,255,716

December 31, 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	$	2,682	$	360	$	2,240	$	5,282	$	304,917	$	310,199	$	-
Home Equity		145		67		71		283		49,508		49,791		18
Commercial		1,151		245		1,380		2,776		1,090,111		1,092,887		404
Agricultural		72		-		1,440		1,512		313,290		314,802		75
Construction		4,407		388		2,357		7,152		188,674		195,826		-
Consumer		16		282		23		321		60,995		61,316		13
Other commercial loans		670		366		319		1,355		134,813		136,168		6
Other agricultural loans		108		362		-		470		30,203		30,673		-
State and political subdivision loans		-		-		-		-		57,174		57,174		-
Total	$	9,251	$	2,070	$	7,830	$	19,151	$	2,229,685	$	2,248,836	$	516
Loans considered non-accrual	$	199	$	666	$	7,314	$	8,179	$	4,008	$	12,187
Loans still accruing		9,052		1,404		516		10,972		2,225,677		2,236,649
Total	$	9,251	$	2,070	$	7,830	$	19,151	$	2,229,685	$	2,248,836

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.

There were no loan modifications made during the six months ended June 30, 2024, for borrowers experiencing financial difficulty.

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, 2024 and December 31, 2023, included within other assets are $2,690,000 and $474,000, respectively, of foreclosed assets. As of June 30, 2024, included within the foreclosed assets are $131,000 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, 2024, the Company had initiated formal foreclosure proceedings on $521,000 of residential mortgage loans, the collateral properties which have not yet been transferred into foreclosed assets.

XML

Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2024

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

Note 6 – Goodwill and Other Intangible Assets

The following table provides the gross carrying value and accumulated amortization of intangible assets as of June 30, 2024 and December 31, 2023 (in thousands):

	June 30, 2024							December 31, 2023
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,501	$	(1,656	)	$	845	$	2,457	$	(1,502	)	$	955
Core deposit intangibles		4,713		(2,314	)		2,399		4,713		(2,018	)		2,695
Total amortized intangible assets	$	7,214	$	(3,970	)	$	3,244	$	7,170	$	(3,520	)	$	3,650
Unamortized intangible assets:
Goodwill	$	85,758						$	85,758

(1) Excludes fully amortized intangible assets

The following table provides the current year and estimated future amortization expense for amortized intangible assets for the next five years (in thousands). The Company based its projections of amortization expense shown below on existing asset balances at June 30, 2024. Future amortization expense may vary from these projections:

	MSRs		Core deposit intangibles		Total
Three months ended June 30, 2024 (actual)	$	74	$	147	$	221
Six months ended June 30, 2024 (actual)		154		296		450
Three months ended June 30, 2023 (actual)		75		31		106
Six months ended June 30, 2023 (actual)		148		62		210
Estimate for year ending December 31,
Remaining 2024		137		268		405
2025		235		478		713
2026		184		395		579
2027		127		339		466
2028		80		284		364
Thereafter		82		635		717
Total	$	845	$	2,399	$	3,244

XML

Employee Benefit Plans

6 Months Ended

Jun. 30, 2024

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note 7 – 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 2023 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, 2024 and 2023, respectively (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023			Affected line item on the Consolidated Statement of Income
Service cost	$	84		$	77		$	165		$	155		Salary and Employee Benefits
Interest cost		106			110			211			220		Other Expenses
Expected return on plan assets		(195	)		(197	)		(395	)		(394	)	Other Expenses
Net amortization and deferral		14			7			16			14		Other Expenses
Net periodic benefit cost	$	9		$	(3	)	$	(3	)	$	(5	)

The Bank does not expect to contribute to the Pension Plan during 2024.

Restricted Stock Plan

The Company maintains a Restricted Stock Plan (the “Plan”) whereby employees and non-employee corporate directors are eligible to receive awards of restricted stock based upon performance related requirements.  Awards granted under the Plan are in the form of the Company’s common stock and are subject to certain vesting requirements including continuous employment or service with the Company.  In April 2016, the Company’s stockholders authorized a total of 150,000 shares of the Company’s common stock to be made available under the Plan. As of June 30, 2024, 106,633 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, 2024:

	Three months						Six months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,651		$	72.04			6,707		$	71.94
Granted		5,930			43.15			5,930			43.15
Vested		(2,361	)		(69.75	)		(2,417	)		(69.52	)
Outstanding, end of period		10,220		$	55.81			10,220		$	55.81

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 $122,000 and $116,000 for the six months ended June 30, 2024 and 2023, respectively. For the three months ended June 30, 2024 and 2023, compensation expense totaled $57,000 and $51,000, respectively. At June 30, 2024, the total compensation cost related to nonvested awards that had not yet been recognized was $571,000, which is expected to be recognized over the next three years.

XML

Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2024

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

Note 8 – Accumulated Other Comprehensive Loss

The following tables present the changes in accumulated other comprehensive loss by component, net of tax, for the three and six months ended June 30, 2024 and 2023 (in thousands):

	Three months ended June 30, 2024
	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, 2024	$	(30,069	)	$	(970	)	$	4,419		$	(26,620	)
Other comprehensive income (loss) before reclassifications (net of tax)		911			-			263			1,174
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			11			(497	)		(486	)
Net current period other comprehensive income (loss)		911			11			(234	)		688
Balance as of June 30, 2024	$	(29,158	)	$	(959	)	$	4,185		$	(25,932	)

	Six months ended June 30, 2024
	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, 2023	$	(28,238	)	$	(972	)	$	4,299		$	(24,911	)
Other comprehensive income (loss) before reclassifications (net of tax)		(920	)		-			887			(33	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			13			(1,001	)		(988	)
Net current period other comprehensive income (loss)		(920	)		13			(114	)		(1,021	)
Balance as of June 30, 2024	$	(29,158	)	$	(959	)	$	4,185		$	(25,932	)

	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 (loss) 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	)

(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, 2024 and 2023 (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,
	2024			2023
Unrealized gains and losses on available for sale securities
	$	-		$	(51	)	Available for sale securities losses, net
		-			12		Provision for income taxes
	$	-		$	(39	)	Net of tax
Defined benefit pension items
	$	(14	)	$	(7	)	Other expenses
		3			2		Provision for income taxes
	$	(11	)	$	(5	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	630		$	524		Interest expense
		(133	)		(110	)	Provision for income taxes
	$	497		$	414		Net of tax
Total reclassifications	$	486		$	370

Six Months Ended June 30,
	2024			2023
Unrealized gains and losses on available for sale securities
	$	-		$	(51	)	Available for sale securities losses, net
		-			12		Provision for income taxes
	$	-		$	(39	)	Net of tax
Defined benefit pension items
	$	(16	)	$	(14	)	Other expenses
		3			3		Provision for income taxes
	$	(13	)	$	(11	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	1,268		$	980		Interest expense
		(267	)		(206	)	Provision for income taxes
	$	1,001		$	774		Net of tax
Total reclassifications	$	988		$	724

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

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 9 – Fair Value Measurements

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

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

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

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

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

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

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

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

The following tables present the assets and liabilities reported on the Consolidated Balance Sheet at their fair value on a recurring basis as of June 30, 2024 and December 31, 2023 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, 2024	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,570	$	-		$	-	$	1,570
Available for sale securities:
U.S. Agency securities		-		55,833			-		55,833
U.S. Treasury securities		130,073		-			-		130,073
Obligations of state and political subdivisions		-		96,707			-		96,707
Corporate obligations		-		12,450			-		12,450
Mortgage-backed securities in government sponsored entities		-		107,598			-		107,598
Loans held for sale		-		14,227			-		14,227
Other Assets
Derivative instruments		-		12,617			494		13,111
Liabilities
Derivative instruments		-		(7,319	)		-		(7,319	)

December 31, 2023	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,938	$	-		$	-	$	1,938
Available for sale securities:
U.S. Agency securities		-		60,771			-		60,771
U.S. Treasuries securities		143,288		-			-		143,288
Obligations of state and political subdivisions		-		101,787			-		101,787
Corporate obligations		-		12,403			-		12,403
Mortgage-backed securities in government sponsored entities		-		99,352			-		99,352
Loans held for sale		-		9,379			-		9,379
Other Assets
Derivative instruments		-		13,363			324		13,687
Liabilities
Derivative instruments		-		(7,922	)		-		(7,922	)

The following tables represent the change in the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2024 and for the three months ended June 30, 2023 (in thousands):

	IRLC- Asset
Balance: December 31, 2023	$	324
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		170
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2024	$	494
Change in unrealized (losses) for the period included in earnings for assets held as of June 30, 2024	$	170

	IRLC- Asset
Beginning Balance: March 31, 2024	$	566
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(72	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2024	$	494
Change in unrealized (losses) for the period included in earnings for assets held as of June 30, 2024	$	(72	)

	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	)

At June 30, 2024 and December 31, 2023, the Company had classified as Level 3 $494,000 and $324,000, respectively, of net derivative assets and liabilities related to IRLC. The fair value of IRLCs is based on prices obtained for loans with similar characteristics from third parties, adjusted by the pull-through rate, which represents the Company’s best estimate of the probability that a committed loan will fund. The weighted average pull-through rates applied ranged from 77.00% to 99.66% at June 30, 2024.

Significant unobservable inputs for assets measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023 (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements
June 30, 2024	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	494	Discounted cash flows	Pull-through rates		77.00%-99.66	%		89.06	%
	Quantitative Information about Level 3 Fair Value Measurements
December 31, 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	$	324	Discounted cash flows	Pull-through rates		63.63%-94.24	%		85.43	%

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, 2024 and December 31, 2023 are included in the table below (in thousands):

June 30, 2024	Level I		Level II		Level III		Total
Collateral-dependent loans	$	-	$	-	$	1,742	$	1,742
Other real estate owned		-		-		2,690		2,690
December 31, 2023	Level I		Level II		Level III		Total
Collateral-dependent loans	$	-	$	-	$	3,885	$	3,885
Other real estate owned		-		-		97		97

• Collateral–Dependent Loans (in accordance with ASC 326) – The Company records nonrecurring adjustments of collateral-dependent loans held for investment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures that include recent sales prices for comparable properties and cost of construction. Periodically, in cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized in the form of a charge-off. The fair values above excluded estimated selling costs of $148,000 and $396,000 at June 30, 2024 and December 31, 2023, 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, 2024	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Collateral-dependent loans	$	1,742	Appraised Collateral Values	Discount for time since appraisal		0-100	%		52.60	%
				Selling costs		8%-10	%		8.49	%
				Holding period	0 - 12 months			7.42 months
Other real estate owned		2,690	Appraised Collateral Values	Discount for time since appraisal		4.8-31.8	%		29.93	%

December 31, 2023	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Collateral-dependent loans		3,885	Appraised Collateral Values	Discount for time since appraisal		0-100	%		29.32	%
				Selling costs		8%-12	%		10.20	%
				Holding period	3 - 12 months			6.65 months
Other real estate owned		97	Appraised Collateral Values	Discount for time since appraisal		32	%		32.00	%

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, 2024	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	3,820	$	3,820	$	-	$	-	$	3,820
Net loans		2,232,919		2,146,574		-		-		2,146,574
Financial liabilities:
Deposits		2,273,095		2,266,614		1,788,429		-		478,185
Borrowed funds		334,829		318,729		-		-		318,729
December 31, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,070	$	4,070	$	-	$	-	$	4,070
Net loans		2,227,683		2,126,237		-		-		2,126,237
Financial liabilities:
Deposits		2,321,481		2,315,374		1,902,007		-		413,367
Borrowed funds		322,036		313,217		-		-		313,217

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.

XML

Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2024

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 10 – Recent Accounting Pronouncements

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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, requires the amount of net income taxes paid for federal, state, and foreign taxes, as well as the amount paid to any jurisdiction that net taxes exceed a 5% quantitative threshold.  The amendments will require the disclosure of pre-tax income disaggregated between domestic and foreign, as well as income tax expense disaggregated by federal, state, and foreign.  The amendment also eliminates certain disclosures related to unrecognized tax benefits and certain temporary differences.  This ASU is effective for fiscal years beginning after December 15, 2024.  Early adoption is permitted in any annual period where financial statements have not yet been issued.  The amendments should be applied on a prospective basis but retrospective application is permitted.  The Company does not expect adoption of the standard to have a material impact on its Consolidated Financial Statements.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718), amended the guidance in ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements.  For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.  For all other entities, it is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years.  This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. This ASU removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification. The FASB does not expect these updates to have a significant effect on current accounting practice. That is because in most cases the amendments to the Codification remove references to Concept Statements that are extraneous and not required to understand or apply the guidance. However, the FASB has provided transition guidance if applying the updated guidance results in accounting changes for some entities. The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025.  This Update is not expected to have a significant impact on the Company’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.

XML

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

XML

Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2024

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, 2024 and for the periods ended June 30, 2024 and 2023 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, 2024 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, 2023.

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.

Allowance for Credit Losses - Loans and Leases

Allowance for Credit Losses – Loans and Leases

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.

Depending on the nature of the pool of financial assets with similar risk characteristics, the models utilized by the Company to estimate expected credit losses include a discounted cash flow (“DCF”) model that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a weighted average remaining maturity model which contemplates expected losses at a pool-level, utilizing historic loss information. The Company’s models for  estimating the allowance for credit losses consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. Management 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 Economic Forecasts

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

Forecast Reversion Period

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

Expected Recoveries on Charged-off Loans

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

Discount Rate

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

Individual Evaluation

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

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

Accrued Interest Receivable on Loans and Leases

Accrued Interest Receivable on Loans and Leases

Accrued interest receivable on loans held for investment totaled $8.4 million and $8.5 million at June 30, 2024 and December 31, 2023, respectively, 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 is then applied to calculate the reserve for unfunded commitments liability each period.

XML

Revenue Recognition (Policies)

6 Months Ended

Jun. 30, 2024

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.

XML

Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2024

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, requires the amount of net income taxes paid for federal, state, and foreign taxes, as well as the amount paid to any jurisdiction that net taxes exceed a 5% quantitative threshold.  The amendments will require the disclosure of pre-tax income disaggregated between domestic and foreign, as well as income tax expense disaggregated by federal, state, and foreign.  The amendment also eliminates certain disclosures related to unrecognized tax benefits and certain temporary differences.  This ASU is effective for fiscal years beginning after December 15, 2024.  Early adoption is permitted in any annual period where financial statements have not yet been issued.  The amendments should be applied on a prospective basis but retrospective application is permitted.  The Company does not expect adoption of the standard to have a material impact on its Consolidated Financial Statements.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718), amended the guidance in ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements.  For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.  For all other entities, it is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years.  This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. This ASU removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification. The FASB does not expect these updates to have a significant effect on current accounting practice. That is because in most cases the amendments to the Codification remove references to Concept Statements that are extraneous and not required to understand or apply the guidance. However, the FASB has provided transition guidance if applying the updated guidance results in accounting changes for some entities. The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025.  This Update is not expected to have a significant impact on the Company’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.

XML

Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2024

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

XML

Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2024

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, 2024 and 2023 (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	2024		2023		2024		2023
Service charges on deposit accounts
Overdraft fees	$	394		371	$	798	$	730
Statement fees		44		54		86		106
Interchange revenue		811		764		1,555		1,461
ATM income		33		34		66		72
Other service charges		103		70		252		135
Total Service Charges		1,385		1,293		2,757		2,504
Trust		201		181		445		411
Brokerage and insurance		563		442		1,228		956
Other		241		118		373		233
Total	$	2,390	$	2,034	$	4,803	$	4,104

XML

Earnings per Share (Tables)

6 Months Ended

Jun. 30, 2024

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,
	2024		2023			2024		2023
Net income (loss) applicable to common stock	$	5,275,000	$	(4,144,000	)	$	12,299,000	$	2,723,000
Basic earnings per share computation
Weighted average common shares outstanding		4,748,927		4,159,966			4,748,523		4,106,005
Earnings (loss) per share - basic	$	1.11	$	(1.00	)	$	2.59	$	0.66
Diluted earnings per share computation
Weighted average common shares outstanding for basic earnings per share		4,748,927		4,159,966			4,748,523		4,106,005
Add: Dilutive effects of restricted stock		4,770		-			5,395		-
Weighted average common shares outstanding for dilutive earnings per share		4,753,697		4,159,966			4,753,918		4,106,005
Earnings (loss) per share - diluted	$	1.11	$	(1.00	)	$	2.59	$	0.66

XML

Investments (Tables)

6 Months Ended

Jun. 30, 2024

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, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
Available-for-sale securities:
U.S. agency securities	$	61,576	$	3	$	(5,746	)	$	-	$	55,833
U.S. treasury securities		138,582		-		(8,509	)		-		130,073
Obligations of state and political subdivisions		104,668		6		(7,967	)		-		96,707
Corporate obligations		13,422		273		(1,245	)		-		12,450
Mortgage-backed securities in government sponsored entities		121,321		49		(13,772	)		-		107,598
Total available-for-sale securities	$	439,569	$	331	$	(37,239	)	$	-	$	402,661

December 31, 2023
Available-for-sale securities:
U.S. agency securities	$	66,569	$	1	$	(5,799	)	$	-	$	60,771
U.S. treasury securities		152,485		-		(9,197	)		-		143,288
Obligations of state and political subdivisions		107,945		32		(6,190	)		-		101,787
Corporate obligations		13,394		245		(1,236	)		-		12,403
Mortgage-backed securities in government sponsored entities		112,950		7		(13,605	)		-		99,352
Total available-for-sale securities	$	453,343	$	285	$	(36,027	)	$	-	$	417,601

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, 2024 and December 31, 2023 (in thousands). As of June 30, 2024, the Company owned 317 securities whose fair value was less than their cost basis.

June 30, 2024	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	$	-	$	-		$	53,815	$	(5,746	)	$	53,815	$	(5,746	)
U.S. treasury securities		-		-			130,073		(8,509	)		130,073		(8,509	)
Obligations of state and political subdivisions		3,554		(23	)		88,349		(7,944	)		91,903		(7,967	)
Corporate obligations		-		-			9,024		(1,245	)		9,024		(1,245	)
Mortgage-backed securities in government sponsored entities		6,468		(13	)		91,736		(13,759	)		98,204		(13,772	)
Total securities	$	10,022	$	(36	)	$	372,997	$	(37,203	)	$	383,019	$	(37,239	)

December 31, 2023
U.S. agency securities	$	-	$	-		$	58,753	$	(5,799	)	$	58,753	$	(5,799	)
U.S. treasury securities		-		-			143,288		(9,197	)		143,288		(9,197	)
Obligations of states and political subdivisions		-		-			93,535		(6,190	)		93,535		(6,190	)
Corporate obligations		1,487		(265	)		8,320		(971	)		9,807		(1,236	)
Mortgage-backed securities in government sponsored entities		9,203		(31	)		88,553		(13,574	)		97,756		(13,605	)
Total securities	$	10,690	$	(296	)	$	392,449	$	(35,731	)	$	403,139	$	(36,027	)

Gross Gains and Losses on Available-for-sale Securities

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2024		2023			2024		2023
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, 2024 and  2023, and the portion of unrealized gains for the period that relates to equity investments held at June 30, 2024 and 2023(in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
Equity securities	2024			2023			2024			2023
Net losses recognized in equity securities during the period	$	(87	)	$	(74	)	$	(32	)	$	(292	)
Less: Net (losses) gains realized on the sale of equity securities during the period		-			-			(4	)		5
Net unrealized losses	$	(87	)	$	(74	)	$	(28	)	$	(297	)

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, 2024, by contractual maturity, are shown below (in thousands):

	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in one year or less	$	48,416	$	47,437
Due after one year through five years		143,357		132,756
Due after five years through ten years		85,933		77,550
Due after ten years		161,863		144,918
Total	$	439,569	$	402,661

XML

Loans (Tables)

6 Months Ended

Jun. 30, 2024

Loans [Abstract]

Loan Portfolio and Allowance for Credit 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, 2024 and December 31, 2023 (in thousands):

	June 30, 2024			December 31, 2023
Real estate loans:
Residential	$	354,588		$	359,990
Commercial		1,110,269			1,092,887
Agricultural		327,057			314,802
Construction		180,157			195,826
Consumer		70,542			61,316
Other commercial loans		130,851			136,168
Other agricultural loans		26,247			30,673
State and political subdivision loans		56,005			57,174
Total		2,255,716			2,248,836
Allowance for credit losses - loans		(22,797	)		(21,153	)
Net loans	$	2,232,919		$	2,227,683

Components of the Allowance for Credit Losses

The following table presents the components of the allowance for credit losses as of June 30, 2024 and December 31, 2023 (in thousands):

	June 30, 2024		December 31, 2023
Allowance for Credit Losses - Loans	$	22,797	$	21,153
Allowance for Credit Losses - Off-Balance Sheet credit Exposure		1,066		1,265
Total allowance for credit losses	$	23,863	$	22,418

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, 2024 and 2023 (in thousands):

	Allowance for Credit Losses - Loans			Allowance for Credit Losses - Off-Balance Sheet credit Exposure			Total
Balance at March 31, 2024	$	21,598		$	938		$	22,536
Loans charge-off		(682	)		-			(682	)
Recoveries of loans previously charged-off		7			-			7
Net loans charged-off		(675	)		-			(675	)
Provision for credit losses		1,874			128			2,002
Balance at June 30, 2024	$	22,797		$	1,066		$	23,863
Balance at December 31, 2023	$	21,153		$	1,265		$	22,418
Loans charge-off		(1,356	)		-			(1,356	)
Recoveries of loans previously charged-off		14			-			14
Net loans charged-off		(1,342	)		-			(1,342	)
Provision for credit losses		2,986			(199	)		2,787
Balance at June 30, 2024	$	22,797		$	1,066		$	23,863

	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
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

Activity of Allowance for Credit Losses - Loans by Portfolio Segment

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, 2024 and 2023 (in thousands):

	For the three months ended June 30, 2024
	Balance at March 31, 2024		Charge-offs			Recoveries		Provision			Balance at June 30, 2024
Real estate loans:
Residential	$	2,347	$	-		$	-	$	8		$	2,355
Commercial		9,741		-			-		542			10,283
Agricultural		3,672		-			-		98			3,770
Construction		1,595		-			-		32			1,627
Consumer		1,266		(7	)		5		(53	)		1,211
Other commercial loans		2,680		(675	)		2		1,249			3,256
Other agricultural loans		174		-			-		32			206
State and political subdivision loans		65		-			-		(2	)		63
Unallocated		58		-			-		(32	)		26
Total	$	21,598	$	(682	)	$	7	$	1,874		$	22,797

	For the six months ended June 30, 2024
	Balance at December 31, 2023		Charge-offs			Recoveries		Provision			Balance at June 30, 2024
Real estate loans:
Residential	$	2,354	$	-		$	-	$	1		$	2,355
Commercial		9,178		-			-		1,105			10,283
Agricultural		3,264		-			-		506			3,770
Construction		1,950		-			-		(323	)		1,627
Consumer		1,496		(37	)		10		(258	)		1,211
Other commercial loans		2,229		(1,319	)		4		2,342			3,256
Other agricultural loans		270		-			-		(64	)		206
State and political subdivision loans		45		-			-		18			63
Unallocated		367		-			-		(341	)		26
Total	$	21,153	$	(1,356	)	$	14	$	2,986		$	22,797

	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

Loans and Allowance for Credit Losses by Portfolio Segment

The following table presents the allowance for credit losses – loans and amortized cost basis of loans under CECL methodology as of June 30, 2024 and December 31, 2023:

	Allowance for Credit Losses - Loans						Loans
June 30, 2024	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,304	$	51	$	2,355	$	352,924	$	1,664	$	354,588
Commercial		10,164		119		10,283		1,107,745		2,524		1,110,269
Agricultural		3,753		17		3,770		324,538		2,519		327,057
Construction		1,627		-		1,627		178,209		1,948		180,157
Consumer		334		877		1,211		69,585		957		70,542
Other commercial loans		1,915		1,341		3,256		127,352		3,499		130,851
Other agricultural loans		206		-		206		25,836		411		26,247
State and political subdivision loans		63		-		63		56,005		-		56,005
Unallocated		26		-		26		-		-		-
Total	$	20,392	$	2,405	$	22,797	$	2,242,194	$	13,522	$	2,255,716

	Allowance for Credit Losses - Loans						Loans
December 31, 2023	Collectively evaluated		Individually evaluated		Total Allowance for Credit Losses - Loans		Collectively evaluated		Individually evaluated		Total Loans
Real estate loans:
Residential	$	2,285	$	69	$	2,354	$	358,358	$	1,632	$	359,990
Commercial		9,033		145		9,178		1,090,217		2,670		1,092,887
Agricultural		3,247		17		3,264		311,500		3,302		314,802
Construction		1,664		286		1,950		193,469		2,357		195,826
Consumer		557		939		1,496		60,377		939		61,316
Other commercial loans		1,713		516		2,229		134,472		1,696		136,168
Other agricultural loans		270		-		270		30,388		285		30,673
State and political subdivision loans		45		-		45		57,174		-		57,174
Unallocated		367		-		367		-		-		-
Total	$	19,181	$	1,972	$	21,153	$	2,235,955	$	12,881	$	2,248,836

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, 2024 and December 31, 2023, respectively. The balances are presented by class of loan receivable (in thousands):

	June 30, 2024								December 31, 2023
	Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans		Nonaccrual With a related allowance		Nonaccrual Without a related allowance		90 days or greater past due and accruing		Total non-performing loans
Real estate loans:
Mortgages	$	-	$	2,927	$	-	$	2,927	$	315	$	2,646	$	-	$	2,961
Home Equity		-		119		76		195		-		121		18		139
Commercial		1,248		1,276		168		2,692		256		879		404		1,539
Agricultural		181		2,338		-		2,519		181		2,489		75		2,745
Construction		-		1,948		-		1,948		2,357		-		-		2,357
Consumer		871		-		16		887		701		-		13		714
Other commercial loans		1,628		2,002		25		3,655		588		1,162		6		1,756
Other agricultural loans		-		411		-		411		-		492		-		492
	$	3,928	$	11,021	$	285	$	15,234	$	4,398	$	7,789	$	516	$	12,703

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, 2024 and December 31, 2023 (in thousands):

June 30, 2024	Real Estate		Business Assets		None		Total
Real estate loans:
Mortgages	$	2,927	$	-	$	-	$	2,927
Home Equity		119		-		-		119
Commercial		2,524		-		-		2,524
Agricultural		2,519		-		-		2,519
Construction		1,948		-		-		1,948
Consumer		-		-		871		871
Other commercial loans		-		3,630		-		3,630
Other agricultural loans		-		411		-		411
	$	10,037	$	4,041	$	871	$	14,949

December 31, 2023	Real Estate		Business Assets		None		Total
Real estate loans:
Mortgages	$	2,961	$	-	$	-	$	2,961
Home Equity		121		-		-		121
Commercial		1,135		-		-		1,135
Agricultural		2,670		-		-		2,670
Construction		2,357		-		-		2,357
Consumer		-		-		701		701
Other commercial loans		-		1,750		-		1,750
Other agricultural loans		-		492		-		492
	$	9,244	$	2,242	$	701	$	12,187

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, 2024 and December 31, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	24,386	$	86,011	$	346,073	$	211,774	$	118,917	$	240,719	$	36,287	$	1,852	$	1,066,019
Special Mention		-		-		6,496		1,065		1,430		8,672		768		-		18,431
Substandard		-		572		13,045		545		194		10,725		330		408		25,819
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	24,386	$	86,583	$	365,614	$	213,384	$	120,541	$	260,116	$	37,385	$	2,260	$	1,110,269
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	13,464	$	26,962	$	48,430	$	27,830	$	30,726	$	136,181	$	14,772	$	119	$	298,484
Special Mention		3,059		185		10,349		1,292		-		7,919		2,202		562		25,568
Substandard		-		-		-		-		-		2,913		-		92		3,005
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	16,523	$	27,147	$	58,779	$	29,122	$	30,726	$	147,013	$	16,974	$	773	$	327,057
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction										-
Risk Rating
Pass	$	19,891	$	57,223	$	80,691	$	7,742	$	2,890	$	-	$	864	$	121	$	169,422
Special Mention		-		812		4,613		2,950		-		-		-		-		8,375
Substandard		-		-		412		1,948		-		-		-		-		2,360
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	19,891	$	58,035	$	85,716	$	12,640	$	2,890	$	-	$	864	$	121	$	180,157
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans										-
Risk Rating
Pass	$	27,900	$	26,364	$	7,742	$	7,540	$	2,208	$	4,030	$	40,759	$	83	$	116,626
Special Mention		330		-		1,919		1,419		2		81		5,312		36		9,099
Substandard		42		1,283		381		-		259		1,136		347		1,661		5,109
Doubtful		-		-		-		-		-		-		-		17		17
Total	$	28,272	$	27,647	$	10,042	$	8,959	$	2,469	$	5,247	$	46,418	$	1,797	$	130,851
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	6	$	-	$	1,313	$	-	$	1,319
Other agricultural loans										-
Risk Rating
Pass	$	2,392	$	2,630	$	1,157	$	4,912	$	518	$	412	$	11,491	$	-	$	23,512
Special Mention		734		-		405		401		-		-		739		-		2,279
Substandard		-		-		-		191		-		199		44		22		456
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,126	$	2,630	$	1,562	$	5,504	$	518	$	611	$	12,274	$	22	$	26,247
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans										-
Risk Rating
Pass	$	30	$	1,541	$	14,101	$	10,600	$	5,439	$	24,294	$	-	$	-	$	56,005
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	30	$	1,541	$	14,101	$	10,600	$	5,439	$	24,294	$	-	$	-	$	56,005
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total										-
Risk Rating
Pass	$	88,063	$	200,731	$	498,194	$	270,398	$	160,698	$	405,636	$	104,173	$	2,175	$	1,730,068
Special Mention		4,123		997		23,782		7,127		1,432		16,672		9,021		598		63,752
Substandard		42		1,855		13,838		2,684		453		14,973		721		2,183		36,749
Doubtful		-		-		-		-		-		-		-		17		17
Total	$	92,228	$	203,583	$	535,814	$	280,209	$	162,583	$	437,281	$	113,915	$	4,973	$	1,830,586

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Commercial real estate
Risk Rating
Pass	$	90,068	$	333,710	$	224,873	$	122,560	$	81,557	$	180,799	$	28,360	$	1,140	$	1,063,067
Special Mention		672		7,963		227		1,552		7,442		8,159		96		60		26,171
Substandard		-		1,302		6		-		158		1,444		317		422		3,649
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	90,740	$	342,975	$	225,106	$	124,112	$	89,157	$	190,402	$	28,773	$	1,622	$	1,092,887
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural real estate
Risk Rating
Pass	$	22,632	$	47,479	$	28,990	$	32,058	$	25,406	$	118,700	$	10,495	$	460	$	286,220
Special Mention		574		9,165		1,499		-		962		7,038		3,535		-		22,773
Substandard		-		-		-		-		102		5,394		75		238		5,809
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	23,206	$	56,644	$	30,489	$	32,058	$	26,470	$	131,132	$	14,105	$	698	$	314,802
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction
Risk Rating
Pass	$	54,973	$	102,562	$	22,508	$	-	$	-	$	-	$	839	$	1,166	$	182,048
Special Mention		1,574		5,432		4,415		-		-		-		-		-		11,421
Substandard		-		-		2,357		-		-		-		-		-		2,357
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	56,547	$	107,994	$	29,280	$	-	$	-	$	-	$	839	$	1,166	$	195,826
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Other commercial loans
Risk Rating
Pass	$	31,493	$	11,407	$	9,016	$	4,793	$	4,758	$	3,530	$	63,285	$	93	$	128,375
Special Mention		51		52		1,510		184		223		629		1,652		36		4,337
Substandard		52		97		-		-		149		967		502		1,667		3,434
Doubtful		-		-		-		-		-		-		-		22		22
Total	$	31,596	$	11,556	$	10,526	$	4,977	$	5,130	$	5,126	$	65,439	$	1,818	$	136,168
Current period gross charge-offs	$	200	$	-	$	-	$	763	$	-	$	-	$	-	$	-	$	963
Other agricultural loans
Risk Rating
Pass	$	3,902	$	1,520	$	6,448	$	1,046	$	532	$	305	$	15,331	$	-	$	29,084
Special Mention		-		473		16		42		-		-		488		29		1,048
Substandard		-		-		207		-		4		255		44		31		541
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,902	$	1,993	$	6,671	$	1,088	$	536	$	560	$	15,863	$	60	$	30,673
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
State and political subdivision loans
Risk Rating
Pass	$	1,623	$	14,171	$	10,841	$	5,235	$	-	$	25,294	$	10	$	-	$	57,174
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,623	$	14,171	$	10,841	$	5,235	$	-	$	25,294	$	10	$	-	$	57,174
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total
Risk Rating
Pass	$	204,691	$	510,849	$	302,676	$	165,692	$	112,253	$	328,628	$	118,320	$	2,859	$	1,745,968
Special Mention		2,871		23,085		7,667		1,778		8,627		15,826		5,771		125		65,750
Substandard		52		1,399		2,570		-		413		8,060		938		2,358		15,790
Doubtful		-		-		-		-		-		-		-		22		22
Total	$	207,614	$	535,333	$	312,913	$	167,470	$	121,293	$	352,514	$	125,029	$	5,364	$	1,827,530

For residential real estate mortgage loans, home equity loans, and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail above, and all loans past due 90 or more days and still accruing. The following tables present the recorded investment in those loan classes based on payment activity, by origination year, as of June 30, 2024 and December 31, 2023 (in thousands):

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	5,634	$	19,686	$	91,593	$	47,532	$	28,521	$	110,070	$	-	$	-	$	303,036
Nonperforming		-		-		384		746		579		1,218		-		-		2,927
Total	$	5,634	$	19,686	$	91,977	$	48,278	$	29,100	$	111,288	$	-	$	-	$	305,963
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Home equity										-
Payment Performance
Performing	$	1,321	$	3,755	$	2,736	$	1,843	$	1,753	$	9,089	$	27,646	$	287	$	48,430
Nonperforming		-		-		-		-		-		53		66		76		195
Total	$	1,321	$	3,755	$	2,736	$	1,843	$	1,753	$	9,142	$	27,712	$	363	$	48,625
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer										-
Payment Performance
Performing	$	1,304	$	1,363	$	746	$	461	$	377	$	2,823	$	62,579	$	2	$	69,655
Nonperforming		-		6		4		-		12		865		-		-		887
Total	$	1,304	$	1,369	$	750	$	461	$	389	$	3,688	$	62,579	$	2	$	70,542
Current period gross charge-offs	$	-	$	-	$	21	$	-	$	-	$	-	$	16	$	-	$	37
Total										-
Payment Performance
Performing	$	8,259	$	24,804	$	95,075	$	49,836	$	30,651	$	121,982	$	90,225	$	289	$	421,121
Nonperforming		-		6		388		746		591		2,136		66		76		4,009
Total	$	8,259	$	24,810	$	95,463	$	50,582	$	31,242	$	124,118	$	90,291	$	365	$	425,130

													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Residential real estate
Payment Performance
Performing	$	19,082	$	93,706	$	47,774	$	29,940	$	18,923	$	97,813	$	-	$	-	$	307,238
Nonperforming		-		399		766		396		-		1,400		-		-		2,961
Total	$	19,082	$	94,105	$	48,540	$	30,336	$	18,923	$	99,213	$	-	$	-	$	310,199
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1
Home equity
Payment Performance
Performing	$	3,877	$	3,008	$	1,886	$	1,954	$	2,462	$	7,883	$	28,219	$	363	$	49,652
Nonperforming		-		-		-		-		-		72		67		-		139
Total	$	3,877	$	3,008	$	1,886	$	1,954	$	2,462	$	7,955	$	28,286	$	363	$	49,791
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer
Payment Performance
Performing	$	1,803	$	979	$	539	$	477	$	557	$	2,988	$	53,254	$	5	$	60,602
Nonperforming		-		21		-		-		-		693		-		-		714
Total	$	1,803	$	1,000	$	539	$	477	$	557	$	3,681	$	53,254	$	5	$	61,316
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	1	$	341	$	23	$	-	$	365
Total
Payment Performance
Performing	$	24,762	$	97,693	$	50,199	$	32,371	$	21,942	$	108,684	$	81,473	$	368	$	417,492
Nonperforming		-		420		766		396		-		2,165		67		-		3,814
Total	$	24,762	$	98,113	$	50,965	$	32,767	$	21,942	$	110,849	$	81,540	$	368	$	421,306

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, 2024 and December 31, 2023 (in thousands):

June 30, 2024	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	$	1,823	$	298	$	1,729	$	3,850	$	302,113	$	305,963	$	-
Home Equity		106		41		195		342		48,283		48,625		76
Commercial		5,280		8,794		2,543		16,617		1,093,652		1,110,269		168
Agricultural		2,151		369		181		2,701		324,356		327,057		-
Construction		978		-		1,948		2,926		177,231		180,157		-
Consumer		147		21		887		1,055		69,487		70,542		16
Other commercial loans		345		1,715		1,871		3,931		126,920		130,851		25
Other agricultural loans		432		146		191		769		25,478		26,247		-
State and political subdivision loans		-		-		-		-		56,005		56,005		-
Total	$	11,262	$	11,384	$	9,545	$	32,191	$	2,223,525	$	2,255,716	$	285
Loans considered non-accrual	$	67	$	1,920	$	9,260	$	11,247	$	3,702	$	14,949
Loans still accruing		11,195		9,464		285		20,944		2,219,823		2,240,767
Total	$	11,262	$	11,384	$	9,545	$	32,191	$	2,223,525	$	2,255,716

December 31, 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	$	2,682	$	360	$	2,240	$	5,282	$	304,917	$	310,199	$	-
Home Equity		145		67		71		283		49,508		49,791		18
Commercial		1,151		245		1,380		2,776		1,090,111		1,092,887		404
Agricultural		72		-		1,440		1,512		313,290		314,802		75
Construction		4,407		388		2,357		7,152		188,674		195,826		-
Consumer		16		282		23		321		60,995		61,316		13
Other commercial loans		670		366		319		1,355		134,813		136,168		6
Other agricultural loans		108		362		-		470		30,203		30,673		-
State and political subdivision loans		-		-		-		-		57,174		57,174		-
Total	$	9,251	$	2,070	$	7,830	$	19,151	$	2,229,685	$	2,248,836	$	516
Loans considered non-accrual	$	199	$	666	$	7,314	$	8,179	$	4,008	$	12,187
Loans still accruing		9,052		1,404		516		10,972		2,225,677		2,236,649
Total	$	9,251	$	2,070	$	7,830	$	19,151	$	2,229,685	$	2,248,836

XML

Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2024

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, 2024 and December 31, 2023 (in thousands):

	June 30, 2024							December 31, 2023
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets (1):
MSRs	$	2,501	$	(1,656	)	$	845	$	2,457	$	(1,502	)	$	955
Core deposit intangibles		4,713		(2,314	)		2,399		4,713		(2,018	)		2,695
Total amortized intangible assets	$	7,214	$	(3,970	)	$	3,244	$	7,170	$	(3,520	)	$	3,650
Unamortized intangible assets:
Goodwill	$	85,758						$	85,758

(1) Excludes fully amortized intangible assets

Future Amortization Expense for Amortized Intangible Assets

The following table provides the current year and estimated future amortization expense for amortized intangible assets for the next five years (in thousands). The Company based its projections of amortization expense shown below on existing asset balances at June 30, 2024. Future amortization expense may vary from these projections:

	MSRs		Core deposit intangibles		Total
Three months ended June 30, 2024 (actual)	$	74	$	147	$	221
Six months ended June 30, 2024 (actual)		154		296		450
Three months ended June 30, 2023 (actual)		75		31		106
Six months ended June 30, 2023 (actual)		148		62		210
Estimate for year ending December 31,
Remaining 2024		137		268		405
2025		235		478		713
2026		184		395		579
2027		127		339		466
2028		80		284		364
Thereafter		82		635		717
Total	$	845	$	2,399	$	3,244

XML

Employee Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2024

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, 2024 and 2023, respectively (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023			Affected line item on the Consolidated Statement of Income
Service cost	$	84		$	77		$	165		$	155		Salary and Employee Benefits
Interest cost		106			110			211			220		Other Expenses
Expected return on plan assets		(195	)		(197	)		(395	)		(394	)	Other Expenses
Net amortization and deferral		14			7			16			14		Other Expenses
Net periodic benefit cost	$	9		$	(3	)	$	(3	)	$	(5	)

Restricted Stock Activity

The following table details the vesting, awarding and forfeiting of restricted stock during the three and six months ended June 30, 2024:

	Three months						Six months
	Unvested Shares			Weighted Average Market Price			Unvested Shares			Weighted Average Market Price
Outstanding, beginning of period		6,651		$	72.04			6,707		$	71.94
Granted		5,930			43.15			5,930			43.15
Vested		(2,361	)		(69.75	)		(2,417	)		(69.52	)
Outstanding, end of period		10,220		$	55.81			10,220		$	55.81

XML

Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2024

Accumulated Other Comprehensive Loss [Abstract]

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

The following tables present the changes in accumulated other comprehensive loss by component, net of tax, for the three and six months ended June 30, 2024 and 2023 (in thousands):

	Three months ended June 30, 2024
	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, 2024	$	(30,069	)	$	(970	)	$	4,419		$	(26,620	)
Other comprehensive income (loss) before reclassifications (net of tax)		911			-			263			1,174
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			11			(497	)		(486	)
Net current period other comprehensive income (loss)		911			11			(234	)		688
Balance as of June 30, 2024	$	(29,158	)	$	(959	)	$	4,185		$	(25,932	)

	Six months ended June 30, 2024
	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, 2023	$	(28,238	)	$	(972	)	$	4,299		$	(24,911	)
Other comprehensive income (loss) before reclassifications (net of tax)		(920	)		-			887			(33	)
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		-			13			(1,001	)		(988	)
Net current period other comprehensive income (loss)		(920	)		13			(114	)		(1,021	)
Balance as of June 30, 2024	$	(29,158	)	$	(959	)	$	4,185		$	(25,932	)

	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 (loss) 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	)

(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, 2024 and 2023 (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,
	2024			2023
Unrealized gains and losses on available for sale securities
	$	-		$	(51	)	Available for sale securities losses, net
		-			12		Provision for income taxes
	$	-		$	(39	)	Net of tax
Defined benefit pension items
	$	(14	)	$	(7	)	Other expenses
		3			2		Provision for income taxes
	$	(11	)	$	(5	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	630		$	524		Interest expense
		(133	)		(110	)	Provision for income taxes
	$	497		$	414		Net of tax
Total reclassifications	$	486		$	370

Six Months Ended June 30,
	2024			2023
Unrealized gains and losses on available for sale securities
	$	-		$	(51	)	Available for sale securities losses, net
		-			12		Provision for income taxes
	$	-		$	(39	)	Net of tax
Defined benefit pension items
	$	(16	)	$	(14	)	Other expenses
		3			3		Provision for income taxes
	$	(13	)	$	(11	)	Net of tax
Unrealized gain (loss) on interest rate swap	$	1,268		$	980		Interest expense
		(267	)		(206	)	Provision for income taxes
	$	1,001		$	774		Net of tax
Total reclassifications	$	988		$	724

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

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2024

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, 2024 and December 31, 2023 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, 2024	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,570	$	-		$	-	$	1,570
Available for sale securities:
U.S. Agency securities		-		55,833			-		55,833
U.S. Treasury securities		130,073		-			-		130,073
Obligations of state and political subdivisions		-		96,707			-		96,707
Corporate obligations		-		12,450			-		12,450
Mortgage-backed securities in government sponsored entities		-		107,598			-		107,598
Loans held for sale		-		14,227			-		14,227
Other Assets
Derivative instruments		-		12,617			494		13,111
Liabilities
Derivative instruments		-		(7,319	)		-		(7,319	)

December 31, 2023	Level I		Level II			Level III		Total
Fair value measurements on a recurring basis:
Assets
Equity securities	$	1,938	$	-		$	-	$	1,938
Available for sale securities:
U.S. Agency securities		-		60,771			-		60,771
U.S. Treasuries securities		143,288		-			-		143,288
Obligations of state and political subdivisions		-		101,787			-		101,787
Corporate obligations		-		12,403			-		12,403
Mortgage-backed securities in government sponsored entities		-		99,352			-		99,352
Loans held for sale		-		9,379			-		9,379
Other Assets
Derivative instruments		-		13,363			324		13,687
Liabilities
Derivative instruments		-		(7,922	)		-		(7,922	)

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

The following tables represent the change in the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2024 and for the three months ended June 30, 2023 (in thousands):

	IRLC- Asset
Balance: December 31, 2023	$	324
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		170
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2024	$	494
Change in unrealized (losses) for the period included in earnings for assets held as of June 30, 2024	$	170

	IRLC- Asset
Beginning Balance: March 31, 2024	$	566
Total unrealized losses:
Included in other comprehensive loss		-
Total losses included in earnings and held at reporting date		(72	)
Purchases, sales and settlements		-
Transfers in and/or out of Level 3		-
Ending Balance: June 30, 2024	$	494
Change in unrealized (losses) for the period included in earnings for assets held as of June 30, 2024	$	(72	)

	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	)

Assets Measured at Fair Value on Non-recurring Basis

Assets measured at fair value on a nonrecurring basis as of June 30, 2024 and December 31, 2023 are included in the table below (in thousands):

June 30, 2024	Level I		Level II		Level III		Total
Collateral-dependent loans	$	-	$	-	$	1,742	$	1,742
Other real estate owned		-		-		2,690		2,690
December 31, 2023	Level I		Level II		Level III		Total
Collateral-dependent loans	$	-	$	-	$	3,885	$	3,885
Other real estate owned		-		-		97		97

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, 2024 and December 31, 2023 (dollars in thousands):

	Quantitative Information about Level 3 Fair Value Measurements
June 30, 2024	Fair Value		Valuation Technique	Significant Unobservable Input	Range			Weighted Average
Measured at Fair Value on a Recurring Basis:
Net derivative asset and liability:
IRLC	$	494	Discounted cash flows	Pull-through rates		77.00%-99.66	%		89.06	%
	Quantitative Information about Level 3 Fair Value Measurements
December 31, 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	$	324	Discounted cash flows	Pull-through rates		63.63%-94.24	%		85.43	%

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, 2024	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Collateral-dependent loans	$	1,742	Appraised Collateral Values	Discount for time since appraisal		0-100	%		52.60	%
				Selling costs		8%-10	%		8.49	%
				Holding period	0 - 12 months			7.42 months
Other real estate owned		2,690	Appraised Collateral Values	Discount for time since appraisal		4.8-31.8	%		29.93	%

December 31, 2023	Fair Value		Valuation Technique(s)	Unobservable input	Range			Weighted average
Collateral-dependent loans		3,885	Appraised Collateral Values	Discount for time since appraisal		0-100	%		29.32	%
				Selling costs		8%-12	%		10.20	%
				Holding period	3 - 12 months			6.65 months
Other real estate owned		97	Appraised Collateral Values	Discount for time since appraisal		32	%		32.00	%

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, 2024	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	3,820	$	3,820	$	-	$	-	$	3,820
Net loans		2,232,919		2,146,574		-		-		2,146,574
Financial liabilities:
Deposits		2,273,095		2,266,614		1,788,429		-		478,185
Borrowed funds		334,829		318,729		-		-		318,729
December 31, 2023	Carrying Amount		Fair Value		Level I		Level II		Level III
Financial assets:
Interest bearing time deposits with other banks	$	4,070	$	4,070	$	-	$	-	$	4,070
Net loans		2,227,683		2,126,237		-		-		2,126,237
Financial liabilities:
Deposits		2,321,481		2,315,374		1,902,007		-		413,367
Borrowed funds		322,036		313,217		-		-		313,217

XML

Basis of Presentation, Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Mar. 31, 2024	Dec. 31, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022
Allowance for Credit Loss [Abstract]
Retained earnings	$ 178,588		$ 172,975
Related to unfunded commitments	1,066	$ 938	1,265	$ 1,391	$ 1,229	$ 165
Related to loans	$ (22,797)	$ (21,598)	$ (21,153)	$ (21,652)	$ (15,250)	(18,552)
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

XML

Basis of Presentation, Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Mar. 31, 2024	Dec. 31, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	$ 22,797	$ 21,598	$ 21,153	$ 21,652	$ 15,250	$ 18,552
Allowance for Credit Losses - Off-Balance Sheet credit Exposure	1,066	938	1,265	1,391	1,229	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	2,355	2,347	2,354	2,675	1,195	1,056
Real Estate Loans [Member] | Commercial [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	10,283	9,741	9,178	9,274	6,747	10,120
Real Estate Loans [Member] | Agricultural [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	3,770	3,672	3,264	3,579	3,409	4,589
Real Estate Loans [Member] | Construction [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	1,627	1,595	1,950	1,667	851	801
Consumer [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	1,211	1,266	1,496	1,259	1,220	135
Other Commercial Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	3,256	2,680	2,229	2,477	712	1,040
Other Agricultural Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	206	174	270	268	250	489
State and Political Subdivision Loans [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	63	65	45	52	42	322
Unallocated [Member]
Impact of Change from Incurred Loss Model to Current Expected Credit Loss Model [Abstract]
Allowance for Credit Losses	$ 26	$ 58	$ 367	$ 401	$ 824	0
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

XML

Basis of Presentation, Accrued Interest Receivable on Loans and Leases (Details) - USD ($) $ in Millions	Jun. 30, 2024	Dec. 31, 2023
Accrued Interest Receivable on Loans and Leases [Abstract]
Accrued interest receivable on loans held for investment	$ 8.4	$ 8.5

XML

Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Revenue from Customers [Abstract]
Service charges	$ 1,385	$ 1,293	$ 2,757	$ 2,504
Trust	201	181	445	411
Brokerage and insurance	563	442	1,228	956
Other	241	118	373	233
Revenue from customers	2,390	2,034	4,803	4,104
Service Charges [Member]
Revenue from Customers [Abstract]
Service charges	1,385	1,293	2,757	2,504
Overdraft Fees [Member]
Revenue from Customers [Abstract]
Service charges	394	371	798	730
Statement Fees [Member]
Revenue from Customers [Abstract]
Service charges	44	54	86	106
Interchange Revenue [Member]
Revenue from Customers [Abstract]
Service charges	811	764	1,555	1,461
ATM Income [Member]
Revenue from Customers [Abstract]
Service charges	33	34	66	72
Other Service Charges [Member]
Revenue from Customers [Abstract]
Service charges	$ 103	$ 70	$ 252	$ 135

XML

Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Earnings per Share [Abstract]
Net income (loss) applicable to common stock	$ 5,275	$ (4,144)	$ 12,299	$ 2,723
Basic earnings per share computation [Abstract]
Weighted average common shares outstanding (in shares)	4,748,927	4,159,966	4,748,523	4,106,005
Earnings (loss) per share - basic (in dollars per share)	$ 1.11	$ (1)	$ 2.59	$ 0.66
Diluted earnings per share computation [Abstract]
Weighted average common shares outstanding for basic earnings per share (in shares)	4,748,927	4,159,966	4,748,523	4,106,005
Add: Dilutive effects of restricted stock (in shares)	4,770	0	5,395	0
Weighted average common shares outstanding for dilutive earnings per share (in shares)	4,753,697	4,159,966	4,753,918	4,106,005
Earnings (loss) per share - diluted (in dollars per share)	$ 1.11	$ (1)	$ 2.59	$ 0.66
Restricted Stock [Member]
Antidilutive Securities [Abstract]
Antidilutive restricted stock excluded from net income per share calculations (in shares)	4,230	6,078	4,230	6,078
Restricted Stock [Member] | Minimum [Member]
Antidilutive Securities [Abstract]
Antidilutive stock share price range (in dollars per share)	$ 60.16	$ 44.93	$ 60.16	$ 44.93
Restricted Stock [Member] | Maximum [Member]
Antidilutive Securities [Abstract]
Antidilutive stock share price range (in dollars per share)	$ 83.38	$ 83.38	$ 83.38	$ 83.38

XML

Investments, Amortized Cost, Gross Unrealized Gains and Losses and Fair Value of Investment (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Debt Securities [Abstract]
Amortized cost	$ 439,569	$ 453,343
Gross unrealized gains	331	285
Gross unrealized losses	(37,239)	(36,027)
Allowance for credit losses	0	0
Fair value	402,661	417,601
U.S. Agency Securities [Member]
Debt Securities [Abstract]
Amortized cost	61,576	66,569
Gross unrealized gains	3	1
Gross unrealized losses	(5,746)	(5,799)
Allowance for credit losses	0	0
Fair value	55,833	60,771
U.S. Treasury Securities [Member]
Debt Securities [Abstract]
Amortized cost	138,582	152,485
Gross unrealized gains	0	0
Gross unrealized losses	(8,509)	(9,197)
Allowance for credit losses	0	0
Fair value	130,073	143,288
Obligations of State and Political Subdivisions [Member]
Debt Securities [Abstract]
Amortized cost	104,668	107,945
Gross unrealized gains	6	32
Gross unrealized losses	(7,967)	(6,190)
Allowance for credit losses	0	0
Fair value	96,707	101,787
Corporate Obligations [Member]
Debt Securities [Abstract]
Amortized cost	13,422	13,394
Gross unrealized gains	273	245
Gross unrealized losses	(1,245)	(1,236)
Allowance for credit losses	0	0
Fair value	12,450	12,403
Mortgage-backed Securities in Government Sponsored Entities [Member]
Debt Securities [Abstract]
Amortized cost	121,321	112,950
Gross unrealized gains	49	7
Gross unrealized losses	(13,772)	(13,605)
Allowance for credit losses	0	0
Fair value	$ 107,598	$ 99,352

XML

Investments, Gross Unrealized Losses and Fair Value and Net Unrealized Gains (Losses) (Details) $ in Thousands	Jun. 30, 2024 USD ($) Security	Dec. 31, 2023 USD ($)
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Number of securities owned with fair value less than cost | Security	317
Less than twelve months, Fair value	$ 10,022	$ 10,690
Less than twelve months, Gross unrealized losses	(36)	(296)
Twelve months or greater, Fair value	372,997	392,449
Twelve months or greater, Gross unrealized losses	(37,203)	(35,731)
Total, Fair value	383,019	403,139
Total, Gross Unrealized Losses	(37,239)	(36,027)
U.S. Agency Securities [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	0	0
Less than twelve months, Gross unrealized losses	0	0
Twelve months or greater, Fair value	53,815	58,753
Twelve months or greater, Gross unrealized losses	(5,746)	(5,799)
Total, Fair value	53,815	58,753
Total, Gross Unrealized Losses	(5,746)	(5,799)
U.S. Treasury Securities [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	0	0
Less than twelve months, Gross unrealized losses	0	0
Twelve months or greater, Fair value	130,073	143,288
Twelve months or greater, Gross unrealized losses	(8,509)	(9,197)
Total, Fair value	130,073	143,288
Total, Gross Unrealized Losses	(8,509)	(9,197)
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	3,554	0
Less than twelve months, Gross unrealized losses	(23)	0
Twelve months or greater, Fair value	88,349	93,535
Twelve months or greater, Gross unrealized losses	(7,944)	(6,190)
Total, Fair value	91,903	93,535
Total, Gross Unrealized Losses	(7,967)	(6,190)
Corporate Obligations [Member]
Available-for-sale, Debt Securities, Fair Value and Gross Unrealized Losses [Abstract]
Less than twelve months, Fair value	0	1,487
Less than twelve months, Gross unrealized losses	0	(265)
Twelve months or greater, Fair value	9,024	8,320
Twelve months or greater, Gross unrealized losses	(1,245)	(971)
Total, Fair value	9,024	9,807
Total, Gross Unrealized Losses	(1,245)	(1,236)
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	6,468	9,203
Less than twelve months, Gross unrealized losses	(13)	(31)
Twelve months or greater, Fair value	91,736	88,553
Twelve months or greater, Gross unrealized losses	(13,759)	(13,574)
Total, Fair value	98,204	97,756
Total, Gross Unrealized Losses	$ (13,772)	$ (13,605)

XML

Investments, Gross Gains and Losses, Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Investments [Abstract]
Accrued interest receivable on available-for-sale debt securities	$ 2,119		$ 2,119		$ 2,202
Debt Securities, Available-for-Sale, Accrued Interest, after Allowance for Credit Loss, Statement of Financial Position [Extensible Enumeration]	Interest Receivable	Interest Receivable	Interest Receivable	Interest Receivable
Contractual payment of past due			90 days
Proceeds from sale of securities available-for-sale	$ 0	$ 86,504	$ 0	$ 86,504
Gross gains and losses available-for-sale securities [Abstract]
Gross gains on available for sale securities	0	38	0	38
Gross losses on available for sale securities	0	(89)	0	(89)
Net losses	0	(51)	0	(51)
Equity securities [Abstract]
Net losses recognized in equity securities during the period	(87)	(74)	(32)	(292)
Less: Net (losses) gains realized on the sale of equity securities during the period	0	0	(4)	5
Net unrealized losses	(87)	$ (74)	(28)	$ (297)
Asset Pledged as Collateral [Member] | Public Funds, Other Deposit and Borrowings [Member]
Investment Securities Pledged [Abstract]
Investment securities pledged as collateral	$ 345,400		$ 345,400		$ 353,300

XML

Investments, Debt Securities, Amortized Cost and Fair Value by Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Available-for-Sale Debt Securities, Amortized Cost [Abstract]
Due in one year or less	$ 48,416
Due after one year through five years	143,357
Due after five years through ten years	85,933
Due after ten years	161,863
Amortized cost	439,569	$ 453,343
Available-for-Sale Debt Securities, Fair Value [Abstract]
Due in one year or less	47,437
Due after one year through five years	132,756
Due after five years through ten years	77,550
Due after ten years	144,918
Fair value	$ 402,661	$ 417,601

XML

Loans, Primary Segments Portfolio and Accretable Yield for PCI Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Mar. 31, 2024	Dec. 31, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	$ 2,255,716		$ 2,248,836
Allowance for Credit Losses	(22,797)	$ (21,598)	(21,153)	$ (21,652)	$ (15,250)	$ (18,552)
Net loans	2,232,919		2,227,683
Residential [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	305,963		310,199
Commercial [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	1,110,269		1,092,887
Construction [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	180,157		195,826
Real Estate Loans [Member] | Residential [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	354,588		359,990
Allowance for Credit Losses	(2,355)	(2,347)	(2,354)	(2,675)	(1,195)	(1,056)
Real Estate Loans [Member] | Commercial [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	1,110,269		1,092,887
Allowance for Credit Losses	(10,283)	(9,741)	(9,178)	(9,274)	(6,747)	(10,120)
Real Estate Loans [Member] | Agricultural [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	327,057		314,802
Allowance for Credit Losses	(3,770)	(3,672)	(3,264)	(3,579)	(3,409)	(4,589)
Real Estate Loans [Member] | Construction [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	180,157		195,826
Allowance for Credit Losses	(1,627)	(1,595)	(1,950)	(1,667)	(851)	(801)
Consumer [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	70,542		61,316
Allowance for Credit Losses	(1,211)	(1,266)	(1,496)	(1,259)	(1,220)	(135)
Other Commercial Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	130,851		136,168
Allowance for Credit Losses	(3,256)	(2,680)	(2,229)	(2,477)	(712)	(1,040)
Other Agricultural Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	26,247		30,673
Allowance for Credit Losses	(206)	(174)	(270)	(268)	(250)	(489)
State and Political Subdivision Loans [Member]
Segments of loan portfolio and allowance for loan losses [Abstract]
Total loans	56,005		57,174
Allowance for Credit Losses	$ (63)	$ (65)	$ (45)	$ (52)	$ (42)	$ (322)

XML

Loans, Components of the Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Financing Receivable, Allowance for Credit Loss [Abstract]
Allowance for Credit Losses	$ 22,797	$ 21,652	$ 22,797	$ 21,652	$ 21,153
Allowance for credit losses - off-balance sheet credit exposure	1,066	1,391	1,066	1,391	1,265
Total allowance for credit losses	23,863	23,043	23,863	23,043	22,418
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	21,598	15,250	21,153	18,552	18,552
Loans charge-off	(682)	(4)	(1,356)	(11)
Recoveries of loans previously charged-off	7	26	14	31
Net loans charged-off	(675)	22	(1,342)	20
Provision for credit losses	1,874	4,691	2,986	4,691
Balance at end of period	22,797	21,652	22,797	21,652	21,153
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability	938	1,229	1,265	165	165
Off-Balance-Sheet, credit loss, liability, provision for credit losses	128		(199)
Off-Balance-Sheet, credit loss, liability	1,066	1,391	1,066	1,391	1,265
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period	22,536	16,479	22,418	18,717	18,717
Loans charge-off	(682)	(4)	(1,356)	(11)
Recoveries of loans previously charged-off	7	26	14	31
Net loans charged-off	(675)	22	(1,342)	20
Provision for credit losses	2,002		2,787
Balance at end of period	$ 23,863	23,043	$ 23,863	23,043	22,418
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	1,689
Provision for credit losses		100		100
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability		0
Off-Balance-Sheet, credit loss, liability, provision for credit losses		162		162
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period		1,689		1,689	1,689
Provision for credit losses		262		262
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)	(3,300)
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Off-Balance-Sheet, credit loss, liability				1,064	1,064
Financing Receivable, Allowance for Credit Loss and Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]
Balance at beginning of period				$ (2,236)	$ (2,236)

XML

Loans, Allowance for Loan Losses by Portfolio Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	$ 21,598	$ 15,250	$ 21,153	$ 18,552	$ 18,552
Allowance for credit loss on PCD acquired loans		1,689		1,689
Charge-offs	(682)	(4)	(1,356)	(11)
Recoveries	7	26	14	31
Provision	1,874	4,691	2,986	4,691
Balance at end of period	22,797	21,652	22,797	21,652	21,153
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)	(3,300)
Residential [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			0		(1)
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			0		0
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Charge-offs			0		0
Real Estate Loans [Member] | Residential [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	2,347	1,195	2,354	1,056	1,056
Allowance for credit loss on PCD acquired loans		108		108
Charge-offs	0	(1)	0	(1)
Recoveries	0	0	0	0
Provision	8	1,373	1	1,433
Balance at end of period	2,355	2,675	2,355	2,675	2,354
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	79
Real Estate Loans [Member] | Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	9,741	6,747	9,178	10,120	10,120
Allowance for credit loss on PCD acquired loans		39		39
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	542	2,488	1,105	2,185
Balance at end of period	10,283	9,274	10,283	9,274	9,178
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)	(3,070)
Real Estate Loans [Member] | Agricultural [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	3,672	3,409	3,264	4,589	4,589
Allowance for credit loss on PCD acquired loans		37		37
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	98	133	506	98
Balance at end of period	3,770	3,579	3,770	3,579	3,264
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)	(1,145)
Real Estate Loans [Member] | Construction [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	1,595	851	1,950	801	801
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	32	816	(323)	969
Balance at end of period	1,627	1,667	1,627	1,667	1,950
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)	(103)
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	1,266	1,220	1,496	135	135
Allowance for credit loss on PCD acquired loans		677		677
Charge-offs	(7)	(3)	(37)	(10)
Recoveries	5	23	10	27
Provision	(53)	(658)	(258)	(610)
Balance at end of period	1,211	1,259	1,211	1,259	1,496
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	1,040
Other Commercial Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	2,680	712	2,229	1,040	1,040
Allowance for credit loss on PCD acquired loans		828		828
Charge-offs	(675)	0	(1,319)	0	(963)
Recoveries	2	3	4	4
Provision	1,249	934	2,342	933
Balance at end of period	3,256	2,477	3,256	2,477	2,229
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)	(328)
Other Agricultural Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	174	250	270	489	489
Allowance for credit loss on PCD acquired loans		0		0
Charge-offs	0	0	0	0	0
Recoveries	0	0	0	0
Provision	32	18	(64)	(2)
Balance at end of period	206	268	206	268	270
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)	(219)
State and Political Subdivision Loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	65	42	45	322	322
Allowance for credit loss on PCD acquired loans		0		0
Charge-offs	0	0	0	0	0
Recoveries	0	0	0	0
Provision	(2)	10	18	10
Balance at end of period	63	52	63	52	45
State and Political 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)	(280)
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance at beginning of period	58	824	367	0	0
Allowance for credit loss on PCD acquired loans		0		0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	(32)	(423)	(341)	(325)
Balance at end of period	$ 26	$ 401	$ 26	401	367
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	$ 726

XML

Loans, Allowance for Credit Losses - Loans and Amortized Cost Basis of Loans Under CECL Methodology (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Mar. 31, 2024	Dec. 31, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	$ 20,392		$ 19,181
Individually evaluated for impairment	2,405		1,972
Total Allowance for Credit Losses - Loans for impairment	22,797	$ 21,598	21,153	$ 21,652	$ 15,250	$ 18,552
Collectively evaluated for impairment	2,242,194		2,235,955
Individually evaluated for impairment	13,522		12,881
Total Loans	2,255,716		2,248,836
Residential [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	305,963		310,199
Commercial [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	1,110,269		1,092,887
Construction [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Total Loans	180,157		195,826
Real Estate Loans [Member] | Residential [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	2,304		2,285
Individually evaluated for impairment	51		69
Total Allowance for Credit Losses - Loans for impairment	2,355	2,347	2,354	2,675	1,195	1,056
Collectively evaluated for impairment	352,924		358,358
Individually evaluated for impairment	1,664		1,632
Total Loans	354,588		359,990
Real Estate Loans [Member] | Commercial [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	10,164		9,033
Individually evaluated for impairment	119		145
Total Allowance for Credit Losses - Loans for impairment	10,283	9,741	9,178	9,274	6,747	10,120
Collectively evaluated for impairment	1,107,745		1,090,217
Individually evaluated for impairment	2,524		2,670
Total Loans	1,110,269		1,092,887
Real Estate Loans [Member] | Agricultural [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	3,753		3,247
Individually evaluated for impairment	17		17
Total Allowance for Credit Losses - Loans for impairment	3,770	3,672	3,264	3,579	3,409	4,589
Collectively evaluated for impairment	324,538		311,500
Individually evaluated for impairment	2,519		3,302
Total Loans	327,057		314,802
Real Estate Loans [Member] | Construction [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	1,627		1,664
Individually evaluated for impairment	0		286
Total Allowance for Credit Losses - Loans for impairment	1,627	1,595	1,950	1,667	851	801
Collectively evaluated for impairment	178,209		193,469
Individually evaluated for impairment	1,948		2,357
Total Loans	180,157		195,826
Consumer [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	334		557
Individually evaluated for impairment	877		939
Total Allowance for Credit Losses - Loans for impairment	1,211	1,266	1,496	1,259	1,220	135
Collectively evaluated for impairment	69,585		60,377
Individually evaluated for impairment	957		939
Total Loans	70,542		61,316
Other Commercial Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	1,915		1,713
Individually evaluated for impairment	1,341		516
Total Allowance for Credit Losses - Loans for impairment	3,256	2,680	2,229	2,477	712	1,040
Collectively evaluated for impairment	127,352		134,472
Individually evaluated for impairment	3,499		1,696
Total Loans	130,851		136,168
Other Agricultural Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	206		270
Individually evaluated for impairment	0		0
Total Allowance for Credit Losses - Loans for impairment	206	174	270	268	250	489
Collectively evaluated for impairment	25,836		30,388
Individually evaluated for impairment	411		285
Total Loans	26,247		30,673
State and Political Subdivision Loans [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	63		45
Individually evaluated for impairment	0		0
Total Allowance for Credit Losses - Loans for impairment	63	65	45	52	42	322
Collectively evaluated for impairment	56,005		57,174
Individually evaluated for impairment	0		0
Total Loans	56,005		57,174
Unallocated [Member]
Loans And Leases Receivable, Allowance For Loan Losses [Abstract]
Collectively evaluated for impairment	26		367
Individually evaluated for impairment	0		0
Total Allowance for Credit Losses - Loans for impairment	26	$ 58	367	$ 401	$ 824	$ 0
Collectively evaluated for impairment	0		0
Individually evaluated for impairment	0		0
Total Loans	$ 0		$ 0

XML

Loans, Credit Quality Indicator, Summary (Details) - Minimum [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2024 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 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		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans	$ 2,255,716		$ 2,255,716		$ 2,248,836
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	682	$ 4	1,356	$ 11
Commercial Real Estate [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	24,386		24,386		90,740
2023/2022	86,583		86,583		342,975
2022/2021	365,614		365,614		225,106
2021/2020	213,384		213,384		124,112
2020/2019	120,541		120,541		89,157
Prior	260,116		260,116		190,402
Revolving Loans Amortized Cost Basis	37,385		37,385		28,773
Revolving Loans Converted to Term	2,260		2,260		1,622
Total loans	1,110,269		1,110,269		1,092,887
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		0
2023/2022			0		0
2022/2021			0		0
2021/2020			0		0
2020/2019			0		0
Prior			0		0
Revolving Loans Amortized Cost Basis			0		0
Revolving Loans Converted to Term			0		0
Gross charge-offs			0		0
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	24,386		24,386		90,068
2023/2022	86,011		86,011		333,710
2022/2021	346,073		346,073		224,873
2021/2020	211,774		211,774		122,560
2020/2019	118,917		118,917		81,557
Prior	240,719		240,719		180,799
Revolving Loans Amortized Cost Basis	36,287		36,287		28,360
Revolving Loans Converted to Term	1,852		1,852		1,140
Total loans	1,066,019		1,066,019		1,063,067
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		672
2023/2022	0		0		7,963
2022/2021	6,496		6,496		227
2021/2020	1,065		1,065		1,552
2020/2019	1,430		1,430		7,442
Prior	8,672		8,672		8,159
Revolving Loans Amortized Cost Basis	768		768		96
Revolving Loans Converted to Term	0		0		60
Total loans	18,431		18,431		26,171
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	572		572		1,302
2022/2021	13,045		13,045		6
2021/2020	545		545		0
2020/2019	194		194		158
Prior	10,725		10,725		1,444
Revolving Loans Amortized Cost Basis	330		330		317
Revolving Loans Converted to Term	408		408		422
Total loans	25,819		25,819		3,649
Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	0		0		0
Agricultural Real Estate [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	16,523		16,523		23,206
2023/2022	27,147		27,147		56,644
2022/2021	58,779		58,779		30,489
2021/2020	29,122		29,122		32,058
2020/2019	30,726		30,726		26,470
Prior	147,013		147,013		131,132
Revolving Loans Amortized Cost Basis	16,974		16,974		14,105
Revolving Loans Converted to Term	773		773		698
Total loans	327,057		327,057		314,802
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		0
2023/2022			0		0
2022/2021			0		0
2021/2020			0		0
2020/2019			0		0
Prior			0		0
Revolving Loans Amortized Cost Basis			0		0
Revolving Loans Converted to Term			0		0
Gross charge-offs			0		0
Agricultural Real Estate [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	13,464		13,464		22,632
2023/2022	26,962		26,962		47,479
2022/2021	48,430		48,430		28,990
2021/2020	27,830		27,830		32,058
2020/2019	30,726		30,726		25,406
Prior	136,181		136,181		118,700
Revolving Loans Amortized Cost Basis	14,772		14,772		10,495
Revolving Loans Converted to Term	119		119		460
Total loans	298,484		298,484		286,220
Agricultural Real Estate [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	3,059		3,059		574
2023/2022	185		185		9,165
2022/2021	10,349		10,349		1,499
2021/2020	1,292		1,292		0
2020/2019	0		0		962
Prior	7,919		7,919		7,038
Revolving Loans Amortized Cost Basis	2,202		2,202		3,535
Revolving Loans Converted to Term	562		562		0
Total loans	25,568		25,568		22,773
Agricultural Real Estate [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		102
Prior	2,913		2,913		5,394
Revolving Loans Amortized Cost Basis	0		0		75
Revolving Loans Converted to Term	92		92		238
Total loans	3,005		3,005		5,809
Agricultural Real Estate [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	0		0		0
Construction [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	19,891		19,891		56,547
2023/2022	58,035		58,035		107,994
2022/2021	85,716		85,716		29,280
2021/2020	12,640		12,640		0
2020/2019	2,890		2,890		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	864		864		839
Revolving Loans Converted to Term	121		121		1,166
Total loans	180,157		180,157		195,826
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		0
2023/2022			0		0
2022/2021			0		0
2021/2020			0		0
2020/2019			0		0
Prior			0		0
Revolving Loans Amortized Cost Basis			0		0
Revolving Loans Converted to Term			0		0
Gross charge-offs			0		0
Construction [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	19,891		19,891		54,973
2023/2022	57,223		57,223		102,562
2022/2021	80,691		80,691		22,508
2021/2020	7,742		7,742		0
2020/2019	2,890		2,890		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	864		864		839
Revolving Loans Converted to Term	121		121		1,166
Total loans	169,422		169,422		182,048
Construction [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		1,574
2023/2022	812		812		5,432
2022/2021	4,613		4,613		4,415
2021/2020	2,950		2,950		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	8,375		8,375		11,421
Construction [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	412		412		2,357
2021/2020	1,948		1,948		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	2,360		2,360		2,357
Construction [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	0		0		0
Other Commercial Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	28,272		28,272		31,596
2023/2022	27,647		27,647		11,556
2022/2021	10,042		10,042		10,526
2021/2020	8,959		8,959		4,977
2020/2019	2,469		2,469		5,130
Prior	5,247		5,247		5,126
Revolving Loans Amortized Cost Basis	46,418		46,418		65,439
Revolving Loans Converted to Term	1,797		1,797		1,818
Total loans	130,851		130,851		136,168
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		200
2023/2022			0		0
2022/2021			0		0
2021/2020			0		763
2020/2019			6		0
Prior			0		0
Revolving Loans Amortized Cost Basis			1,313		0
Revolving Loans Converted to Term			0		0
Gross charge-offs	675	0	1,319	0	963
Other Commercial Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	27,900		27,900		31,493
2023/2022	26,364		26,364		11,407
2022/2021	7,742		7,742		9,016
2021/2020	7,540		7,540		4,793
2020/2019	2,208		2,208		4,758
Prior	4,030		4,030		3,530
Revolving Loans Amortized Cost Basis	40,759		40,759		63,285
Revolving Loans Converted to Term	83		83		93
Total loans	116,626		116,626		128,375
Other Commercial Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	330		330		51
2023/2022	0		0		52
2022/2021	1,919		1,919		1,510
2021/2020	1,419		1,419		184
2020/2019	2		2		223
Prior	81		81		629
Revolving Loans Amortized Cost Basis	5,312		5,312		1,652
Revolving Loans Converted to Term	36		36		36
Total loans	9,099		9,099		4,337
Other Commercial Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	42		42		52
2023/2022	1,283		1,283		97
2022/2021	381		381		0
2021/2020	0		0		0
2020/2019	259		259		149
Prior	1,136		1,136		967
Revolving Loans Amortized Cost Basis	347		347		502
Revolving Loans Converted to Term	1,661		1,661		1,667
Total loans	5,109		5,109		3,434
Other Commercial Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	17		17		22
Total loans	17		17		22
Other Agricultural Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	3,126		3,126		3,902
2023/2022	2,630		2,630		1,993
2022/2021	1,562		1,562		6,671
2021/2020	5,504		5,504		1,088
2020/2019	518		518		536
Prior	611		611		560
Revolving Loans Amortized Cost Basis	12,274		12,274		15,863
Revolving Loans Converted to Term	22		22		60
Total loans	26,247		26,247		30,673
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		0
2023/2022			0		0
2022/2021			0		0
2021/2020			0		0
2020/2019			0		0
Prior			0		0
Revolving Loans Amortized Cost Basis			0		0
Revolving Loans Converted to Term			0		0
Gross charge-offs	0	0	0	0	0
Other Agricultural Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	2,392		2,392		3,902
2023/2022	2,630		2,630		1,520
2022/2021	1,157		1,157		6,448
2021/2020	4,912		4,912		1,046
2020/2019	518		518		532
Prior	412		412		305
Revolving Loans Amortized Cost Basis	11,491		11,491		15,331
Revolving Loans Converted to Term	0		0		0
Total loans	23,512		23,512		29,084
Other Agricultural Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	734		734		0
2023/2022	0		0		473
2022/2021	405		405		16
2021/2020	401		401		42
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	739		739		488
Revolving Loans Converted to Term	0		0		29
Total loans	2,279		2,279		1,048
Other Agricultural Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		207
2021/2020	191		191		0
2020/2019	0		0		4
Prior	199		199		255
Revolving Loans Amortized Cost Basis	44		44		44
Revolving Loans Converted to Term	22		22		31
Total loans	456		456		541
Other Agricultural Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	0		0		0
State and Political Subdivision Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	30		30		1,623
2023/2022	1,541		1,541		14,171
2022/2021	14,101		14,101		10,841
2021/2020	10,600		10,600		5,235
2020/2019	5,439		5,439		0
Prior	24,294		24,294		25,294
Revolving Loans Amortized Cost Basis	0		0		10
Revolving Loans Converted to Term	0		0		0
Total loans	56,005		56,005		57,174
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		0
2023/2022			0		0
2022/2021			0		0
2021/2020			0		0
2020/2019			0		0
Prior			0		0
Revolving Loans Amortized Cost Basis			0		0
Revolving Loans Converted to Term			0		0
Gross charge-offs	0	$ 0	0	$ 0	0
State and Political Subdivision Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	30		30		1,623
2023/2022	1,541		1,541		14,171
2022/2021	14,101		14,101		10,841
2021/2020	10,600		10,600		5,235
2020/2019	5,439		5,439		0
Prior	24,294		24,294		25,294
Revolving Loans Amortized Cost Basis	0		0		10
Revolving Loans Converted to Term	0		0		0
Total loans	56,005		56,005		57,174
State and Political Subdivision Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	0		0		0
State and Political Subdivision Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	0		0		0
State and Political Subdivision Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	0		0		0
Total Loans [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	92,228		92,228		207,614
2023/2022	203,583		203,583		535,333
2022/2021	535,814		535,814		312,913
2021/2020	280,209		280,209		167,470
2020/2019	162,583		162,583		121,293
Prior	437,281		437,281		352,514
Revolving Loans Amortized Cost Basis	113,915		113,915		125,029
Revolving Loans Converted to Term	4,973		4,973		5,364
Total loans	1,830,586		1,830,586		1,827,530
Total Loans [Member] | Pass [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	88,063		88,063		204,691
2023/2022	200,731		200,731		510,849
2022/2021	498,194		498,194		302,676
2021/2020	270,398		270,398		165,692
2020/2019	160,698		160,698		112,253
Prior	405,636		405,636		328,628
Revolving Loans Amortized Cost Basis	104,173		104,173		118,320
Revolving Loans Converted to Term	2,175		2,175		2,859
Total loans	1,730,068		1,730,068		1,745,968
Total Loans [Member] | Special Mention [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	4,123		4,123		2,871
2023/2022	997		997		23,085
2022/2021	23,782		23,782		7,667
2021/2020	7,127		7,127		1,778
2020/2019	1,432		1,432		8,627
Prior	16,672		16,672		15,826
Revolving Loans Amortized Cost Basis	9,021		9,021		5,771
Revolving Loans Converted to Term	598		598		125
Total loans	63,752		63,752		65,750
Total Loans [Member] | Substandard [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	42		42		52
2023/2022	1,855		1,855		1,399
2022/2021	13,838		13,838		2,570
2021/2020	2,684		2,684		0
2020/2019	453		453		413
Prior	14,973		14,973		8,060
Revolving Loans Amortized Cost Basis	721		721		938
Revolving Loans Converted to Term	2,183		2,183		2,358
Total loans	36,749		36,749		15,790
Total Loans [Member] | Doubtful [Member]
Financing Receivable, before Allowance for Credit Loss, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	0		0		0
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	17		17		22
Total loans	$ 17		$ 17		$ 22

XML

Loans, Recorded Investment in Loan Classes Based on Payment Activity, By Origination Year (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
Total loans	$ 2,255,716		$ 2,255,716		$ 2,248,836
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	682	$ 4	1,356	$ 11
Residential Real Estate [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	5,634		5,634		19,082
2023/2022	19,686		19,686		94,105
2022/2021	91,977		91,977		48,540
2021/2020	48,278		48,278		30,336
2020/2019	29,100		29,100		18,923
Prior	111,288		111,288		99,213
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	305,963		305,963		310,199
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		0
2023/2022			0		0
2022/2021			0		0
2021/2020			0		0
2020/2019			0		0
Prior			0		1
Revolving Loans Amortized Cost Basis			0		0
Revolving Loans Converted to Term			0		0
Gross charge-offs			0		1
Residential Real Estate [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	5,634		5,634		19,082
2023/2022	19,686		19,686		93,706
2022/2021	91,593		91,593		47,774
2021/2020	47,532		47,532		29,940
2020/2019	28,521		28,521		18,923
Prior	110,070		110,070		97,813
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	303,036		303,036		307,238
Residential Real Estate [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		399
2022/2021	384		384		766
2021/2020	746		746		396
2020/2019	579		579		0
Prior	1,218		1,218		1,400
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	2,927		2,927		2,961
Home Equity [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	1,321		1,321		3,877
2023/2022	3,755		3,755		3,008
2022/2021	2,736		2,736		1,886
2021/2020	1,843		1,843		1,954
2020/2019	1,753		1,753		2,462
Prior	9,142		9,142		7,955
Revolving Loans Amortized Cost Basis	27,712		27,712		28,286
Revolving Loans Converted to Term	363		363		363
Total loans	48,625		48,625		49,791
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		0
2023/2022			0		0
2022/2021			0		0
2021/2020			0		0
2020/2019			0		0
Prior			0		0
Revolving Loans Amortized Cost Basis			0		0
Revolving Loans Converted to Term			0		0
Gross charge-offs			0		0
Home Equity [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	1,321		1,321		3,877
2023/2022	3,755		3,755		3,008
2022/2021	2,736		2,736		1,886
2021/2020	1,843		1,843		1,954
2020/2019	1,753		1,753		2,462
Prior	9,089		9,089		7,883
Revolving Loans Amortized Cost Basis	27,646		27,646		28,219
Revolving Loans Converted to Term	287		287		363
Total loans	48,430		48,430		49,652
Home Equity [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	0		0		0
2022/2021	0		0		0
2021/2020	0		0		0
2020/2019	0		0		0
Prior	53		53		72
Revolving Loans Amortized Cost Basis	66		66		67
Revolving Loans Converted to Term	76		76		0
Total loans	195		195		139
Consumer [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	1,304		1,304		1,803
2023/2022	1,369		1,369		1,000
2022/2021	750		750		539
2021/2020	461		461		477
2020/2019	389		389		557
Prior	3,688		3,688		3,681
Revolving Loans Amortized Cost Basis	62,579		62,579		53,254
Revolving Loans Converted to Term	2		2		5
Total loans	70,542		70,542		61,316
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
2024/2023			0		0
2023/2022			0		0
2022/2021			21		0
2021/2020			0		0
2020/2019			0		1
Prior			0		341
Revolving Loans Amortized Cost Basis			16		23
Revolving Loans Converted to Term			0		0
Gross charge-offs			37		365
Consumer [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	1,304		1,304		1,803
2023/2022	1,363		1,363		979
2022/2021	746		746		539
2021/2020	461		461		477
2020/2019	377		377		557
Prior	2,823		2,823		2,988
Revolving Loans Amortized Cost Basis	62,579		62,579		53,254
Revolving Loans Converted to Term	2		2		5
Total loans	69,655		69,655		60,602
Consumer [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	6		6		21
2022/2021	4		4		0
2021/2020	0		0		0
2020/2019	12		12		0
Prior	865		865		693
Revolving Loans Amortized Cost Basis	0		0		0
Revolving Loans Converted to Term	0		0		0
Total loans	887		887		714
Mortgage, Home Equity, and Consumer [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	8,259		8,259		24,762
2023/2022	24,810		24,810		98,113
2022/2021	95,463		95,463		50,965
2021/2020	50,582		50,582		32,767
2020/2019	31,242		31,242		21,942
Prior	124,118		124,118		110,849
Revolving Loans Amortized Cost Basis	90,291		90,291		81,540
Revolving Loans Converted to Term	365		365		368
Total loans	425,130		425,130		421,306
Mortgage, Home Equity, and Consumer [Member] | Performing [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	8,259		8,259		24,762
2023/2022	24,804		24,804		97,693
2022/2021	95,075		95,075		50,199
2021/2020	49,836		49,836		32,371
2020/2019	30,651		30,651		21,942
Prior	121,982		121,982		108,684
Revolving Loans Amortized Cost Basis	90,225		90,225		81,473
Revolving Loans Converted to Term	289		289		368
Total loans	421,121		421,121		417,492
Mortgage, Home Equity, and Consumer [Member] | Nonperforming [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
2024/2023	0		0		0
2023/2022	6		6		420
2022/2021	388		388		766
2021/2020	746		746		396
2020/2019	591		591		0
Prior	2,136		2,136		2,165
Revolving Loans Amortized Cost Basis	66		66		67
Revolving Loans Converted to Term	76		76		0
Total loans	4,009		4,009		3,814
Real Estate Loans [Member] | Residential Real Estate [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
Total loans	354,588		354,588		359,990
Financing Receivable, Current period gross charge-offs by Portfolio Class and Origination Year [Abstract]
Gross charge-offs	0	$ 1	0	$ 1
Real Estate Loans [Member] | Home Equity [Member]
Financing Receivable, Credit Exposures by Internally Assigned Grades, by Origination Year [Abstract]
Total loans	$ 48,625		$ 48,625		$ 49,791

XML

Loans, Past Due (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Dec. 31, 2023
Recorded investment of past due [Abstract]
Total past due	$ 2,255,716	$ 2,248,836
90 days or greater past due and accruing	285	516
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	14,949	12,187
Nonaccrual With a related allowance	3,928	4,398
Nonaccrual Without a related allowance	11,021	7,789
90 days or greater past due and accruing	285	516
Total non-performing loans	15,234	12,703
Financing receivables on accrual status [Abstract]
Total financing receivables and still accruing	$ 2,240,767	2,236,649
Minimum [Member]
Financing receivables on nonaccrual status [Abstract]
Period of past due after which loans considered as non accrual	90 days
Current [Member]
Recorded investment of past due [Abstract]
Total past due	$ 2,223,525	2,229,685
Financing receivables on nonaccrual status [Abstract]
Current and non-accrual	3,702	4,008
Financing receivable nonaccrual status	2,223,525	2,229,685
Financing receivables on accrual status [Abstract]
Current and still accruing	2,219,823	2,225,677
Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	32,191	19,151
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	11,247	8,179
Financing receivables on accrual status [Abstract]
Total past due and still accruing	20,944	10,972
30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	11,262	9,251
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	67	199
Financing receivables on accrual status [Abstract]
Total past due and still accruing	11,195	9,052
60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	11,384	2,070
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	1,920	666
Financing receivables on accrual status [Abstract]
Total past due and still accruing	9,464	1,404
90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	9,545	7,830
Financing receivables on nonaccrual status [Abstract]
Total past due and non-accrual	9,260	7,314
Financing receivables on accrual status [Abstract]
Total past due and still accruing	285	516
Home Equity [Member]
Recorded investment of past due [Abstract]
Total past due	48,625	49,791
Commercial [Member]
Recorded investment of past due [Abstract]
Total past due	1,110,269	1,092,887
Construction [Member]
Recorded investment of past due [Abstract]
Total past due	180,157	195,826
Real Estate Loans [Member] | Mortgages [Member]
Recorded investment of past due [Abstract]
Total past due	305,963	310,199
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	2,927	2,961
Nonaccrual With a related allowance	0	315
Nonaccrual Without a related allowance	2,927	2,646
90 days or greater past due and accruing	0	0
Total non-performing loans	2,927	2,961
Real Estate Loans [Member] | Mortgages [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	302,113	304,917
Real Estate Loans [Member] | Mortgages [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	3,850	5,282
Real Estate Loans [Member] | Mortgages [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,823	2,682
Real Estate Loans [Member] | Mortgages [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	298	360
Real Estate Loans [Member] | Mortgages [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,729	2,240
Real Estate Loans [Member] | Home Equity [Member]
Recorded investment of past due [Abstract]
Total past due	48,625	49,791
90 days or greater past due and accruing	76	18
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	119	121
Nonaccrual With a related allowance	0	0
Nonaccrual Without a related allowance	119	121
90 days or greater past due and accruing	76	18
Total non-performing loans	195	139
Real Estate Loans [Member] | Home Equity [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	48,283	49,508
Real Estate Loans [Member] | Home Equity [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	342	283
Real Estate Loans [Member] | Home Equity [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	106	145
Real Estate Loans [Member] | Home Equity [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	41	67
Real Estate Loans [Member] | Home Equity [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	195	71
Real Estate Loans [Member] | Commercial [Member]
Recorded investment of past due [Abstract]
Total past due	1,110,269	1,092,887
90 days or greater past due and accruing	168	404
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	2,524	1,135
Nonaccrual With a related allowance	1,248	256
Nonaccrual Without a related allowance	1,276	879
90 days or greater past due and accruing	168	404
Total non-performing loans	2,692	1,539
Real Estate Loans [Member] | Commercial [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	1,093,652	1,090,111
Real Estate Loans [Member] | Commercial [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	16,617	2,776
Real Estate Loans [Member] | Commercial [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	5,280	1,151
Real Estate Loans [Member] | Commercial [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	8,794	245
Real Estate Loans [Member] | Commercial [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	2,543	1,380
Real Estate Loans [Member] | Agricultural [Member]
Recorded investment of past due [Abstract]
Total past due	327,057	314,802
90 days or greater past due and accruing	0	75
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	2,519	2,670
Nonaccrual With a related allowance	181	181
Nonaccrual Without a related allowance	2,338	2,489
90 days or greater past due and accruing	0	75
Total non-performing loans	2,519	2,745
Real Estate Loans [Member] | Agricultural [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	324,356	313,290
Real Estate Loans [Member] | Agricultural [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	2,701	1,512
Real Estate Loans [Member] | Agricultural [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	2,151	72
Real Estate Loans [Member] | Agricultural [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	369	0
Real Estate Loans [Member] | Agricultural [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	181	1,440
Real Estate Loans [Member] | Construction [Member]
Recorded investment of past due [Abstract]
Total past due	180,157	195,826
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	1,948	2,357
Nonaccrual With a related allowance	0	2,357
Nonaccrual Without a related allowance	1,948	0
90 days or greater past due and accruing	0	0
Total non-performing loans	1,948	2,357
Real Estate Loans [Member] | Construction [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	177,231	188,674
Real Estate Loans [Member] | Construction [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	2,926	7,152
Real Estate Loans [Member] | Construction [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	978	4,407
Real Estate Loans [Member] | Construction [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	0	388
Real Estate Loans [Member] | Construction [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,948	2,357
Consumer [Member]
Recorded investment of past due [Abstract]
Total past due	70,542	61,316
90 days or greater past due and accruing	16	13
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	871	701
Nonaccrual With a related allowance	871	701
Nonaccrual Without a related allowance	0	0
90 days or greater past due and accruing	16	13
Total non-performing loans	887	714
Consumer [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	69,487	60,995
Consumer [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,055	321
Consumer [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	147	16
Consumer [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	21	282
Consumer [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	887	23
Other Commercial Loans [Member]
Recorded investment of past due [Abstract]
Total past due	130,851	136,168
90 days or greater past due and accruing	25	6
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	3,630	1,750
Nonaccrual With a related allowance	1,628	588
Nonaccrual Without a related allowance	2,002	1,162
90 days or greater past due and accruing	25	6
Total non-performing loans	3,655	1,756
Other Commercial Loans [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	126,920	134,813
Other Commercial Loans [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	3,931	1,355
Other Commercial Loans [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	345	670
Other Commercial Loans [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	1,715	366
Other Commercial Loans [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	1,871	319
Other Agricultural Loans [Member]
Recorded investment of past due [Abstract]
Total past due	26,247	30,673
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
Financing receivable nonaccrual status	411	492
Nonaccrual With a related allowance	0	0
Nonaccrual Without a related allowance	411	492
90 days or greater past due and accruing	0	0
Total non-performing loans	411	492
Other Agricultural Loans [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	25,478	30,203
Other Agricultural Loans [Member] | Total Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	769	470
Other Agricultural Loans [Member] | 30 to 59 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	432	108
Other Agricultural Loans [Member] | 60 to 89 Days Past Due [Member]
Recorded investment of past due [Abstract]
Total past due	146	362
Other Agricultural Loans [Member] | 90 Days Or Greater [Member]
Recorded investment of past due [Abstract]
Total past due	191	0
State and Political Subdivision Loans [Member]
Recorded investment of past due [Abstract]
Total past due	56,005	57,174
90 days or greater past due and accruing	0	0
Financing receivables on nonaccrual status [Abstract]
90 days or greater past due and accruing	0	0
State and Political Subdivision Loans [Member] | Current [Member]
Recorded investment of past due [Abstract]
Total past due	56,005	57,174
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, 2024	Dec. 31, 2023
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	$ 14,949	$ 12,187
Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	10,037	9,244
Business Assets [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	4,041	2,242
None [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	871	701
Real Estate Loans [Member] | Mortgages [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,927	2,961
Real Estate Loans [Member] | Mortgages [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,927	2,961
Real Estate Loans [Member] | Mortgages [Member] | Business Assets [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	119	121
Real Estate Loans [Member] | Home Equity [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	119	121
Real Estate Loans [Member] | Home Equity [Member] | Business Assets [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	2,524	1,135
Real Estate Loans [Member] | Commercial [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,524	1,135
Real Estate Loans [Member] | Commercial [Member] | Business Assets [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	2,519	2,670
Real Estate Loans [Member] | Agricultural [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	2,519	2,670
Real Estate Loans [Member] | Agricultural [Member] | Business Assets [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	1,948	2,357
Real Estate Loans [Member] | Construction [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	1,948	2,357
Real Estate Loans [Member] | Construction [Member] | Business Assets [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	871	701
Consumer [Member] | Real Estate [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	0	0
Consumer [Member] | Business Assets [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	871	701
Other Commercial Loans [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	3,630	1,750
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] | Business Assets [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	3,630	1,750
Other Agricultural Loans [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	411	492
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] | Business Assets [Member]
Amortized Cost Basis of Collateral-Dependent Nonaccrual Loans [Abstract]
Financing Receivable, Nonaccrual	$ 411	$ 492

XML

Loans, Modifications to Borrowers Experiencing Financial Difficulty (Details)	6 Months Ended
	Jun. 30, 2024 Loan
Loans [Abstract]
Accruing modified loans to borrowers experiencing financial difficulty, Number of loans	0

XML

Loans, Foreclosed Assets Held for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Foreclosed assets held for sale [Abstract]
Foreclosed assets held for sale	$ 2,690	$ 474
Consumer Residential Mortgages [Member]
Foreclosed assets held for sale [Abstract]
Foreclosed assets held for sale	131
Formal foreclosure proceedings on potential foreclosure assets	$ 521

XML

Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Amortized intangible assets [Abstract]
Gross carrying value	[1]	$ 7,214		$ 7,214		$ 7,170
Accumulated amortization	[1]	(3,970)		(3,970)		(3,520)
Net carrying value	[1]	3,244		3,244		3,650
Unamortized intangible assets [Abstract]
Goodwill	[1]	85,758		85,758		85,758
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		221	$ 106	450	$ 210
Estimated Amortization Expense [Abstract]
Remaining 2024		405		405
2025		713		713
2026		579		579
2027		466		466
2028		364		364
Thereafter		717		717
Net carrying value	[1]	3,244		3,244		3,650
Mortgage Servicing Rights (MSRs) [Member]
Amortized intangible assets [Abstract]
Gross carrying value	[1]	2,501		2,501		2,457
Accumulated amortization	[1]	(1,656)		(1,656)		(1,502)
Net carrying value	[1]	845		845		955
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		74	75	154	148
Estimated Amortization Expense [Abstract]
Remaining 2024		137		137
2025		235		235
2026		184		184
2027		127		127
2028		80		80
Thereafter		82		82
Net carrying value	[1]	845		845		955
Core Deposit Intangibles [Member]
Amortized intangible assets [Abstract]
Gross carrying value	[1]	4,713		4,713		4,713
Accumulated amortization	[1]	(2,314)		(2,314)		(2,018)
Net carrying value	[1]	2,399		2,399		2,695
Actual and Estimated Future Amortization Expense [Abstract]
Amortization expense		147	$ 31	296	$ 62
Estimated Amortization Expense [Abstract]
Remaining 2024		268		268
2025		478		478
2026		395		395
2027		339		339
2028		284		284
Thereafter		635		635
Net carrying value	[1]	$ 2,399		$ 2,399		$ 2,695

[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, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Components of net periodic benefit cost [Abstract]
Service cost	$ 84	$ 77	$ 165	$ 155
Interest cost	106	110	211	220
Expected return on plan assets	(195)	(197)	(395)	(394)
Net amortization and deferral	14	7	16	14
Net periodic benefit cost	9	$ (3)	(3)	$ (5)
Expected employer contribution to pension plan	$ 0		$ 0

XML

Employee Benefit Plans, Restricted Stock Plan (Details) - Restricted Stock [Member] - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Deferred Compensation Arrangements [Abstract]
Number of shares authorized (in shares)	150,000		150,000
Number of shares available for grant (in shares)	106,633		106,633
Unvested Shares [Roll Forward]
Outstanding, beginning of period (in shares)	6,651		6,707
Granted (in shares)	5,930		5,930
Vested (in shares)	(2,361)		(2,417)
Outstanding, end of period (in shares)	10,220		10,220
Weighted Average Market Price [Roll Forward]
Outstanding, beginning of period (in dollars per share)	$ 72.04		$ 71.94
Granted (in dollars per share)	43.15		43.15
Vested (in dollars per share)	(69.75)		(69.52)
Outstanding, end of period (in dollars per share)	$ 55.81		$ 55.81
Additional General Disclosures [Abstract]
Share-based compensation expense	$ 57	$ 51	$ 122	$ 116
Compensation cost related to nonvested awards that has not yet been recognized	$ 571		$ 571
Period over which compensation cost is expected to be recognized			3 years

XML

Accumulated Other Comprehensive Loss, By Component (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance		$ 282,674	$ 213,238	$ 279,666	$ 200,147
Other comprehensive income (loss) before reclassifications (net of tax)		1,174	(3,848)	(33)	2,885
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)		(486)	(370)	(988)	(724)
Other comprehensive income (loss), net of tax		688	(4,218)	(1,021)	2,161
Balance		286,470	263,228	286,470	263,228
Accumulated Other Comprehensive (Loss) Income [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance		(26,620)	(26,762)	(24,911)	(33,141)
Other comprehensive income (loss), net of tax		688	(4,218)	(1,021)	2,161
Balance		(25,932)	(30,980)	(25,932)	(30,980)
Unrealized Gain (Loss) on Available for Sale Securities [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	(30,069)	(30,422)	(28,238)	(37,514)
Other comprehensive income (loss) before reclassifications (net of tax)	[1]	911	(4,736)	(920)	2,356
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)	[1]	0	39	0	39
Other comprehensive income (loss), net of tax	[1]	911	(4,697)	(920)	2,395
Balance	[1]	(29,158)	(35,119)	(29,158)	(35,119)
Defined Benefit Pension Items [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	(970)	(1,050)	(972)	(1,056)
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]	11	5	13	11
Other comprehensive income (loss), net of tax	[1]	11	5	13	11
Balance	[1]	(959)	(1,045)	(959)	(1,045)
Unrealized Loss on Interest Rate Swap [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance	[1]	4,419	4,710	4,299	5,429
Other comprehensive income (loss) before reclassifications (net of tax)	[1]	263	888	887	529
Amounts reclassified from accumulated other comprehensive income (loss) (net of tax)	[1]	(497)	(414)	(1,001)	(774)
Other comprehensive income (loss), net of tax	[1]	(234)	474	(114)	(245)
Balance	[1]	$ 4,185	$ 5,184	$ 4,185	$ 5,184

[1] Amounts in parentheses indicate debits on the Consolidated Balance Sheet.

XML

Accumulated Other Comprehensive Loss, Reclassification (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
AOCI Attributable to Parent [Abstract]
Available for sale securities losses, net				$ (33)	$ (343)
Interest expense		$ (16,602)	$ (8,889)	(33,577)	(15,916)
Provision for income taxes		(1,113)	1,188	(2,590)	(421)
NET INCOME (LOSS)		5,275	(4,144)	12,299	2,723
Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
NET INCOME (LOSS)	[1]	486	370	988	724
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 securities losses, net	[1]	0	(51)	0	(51)
Provision for income taxes	[1]	0	12	0	12
NET INCOME (LOSS)	[1]	0	(39)	0	(39)
Defined Benefit Pension Items [Member] | Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
Other expenses	[1]	(14)	(7)	(16)	(14)
Provision for income taxes	[1]	3	2	3	3
NET INCOME (LOSS)	[1]	(11)	(5)	(13)	(11)
Unrealized Gain (Loss) on Interest Rate Swap [Member] | Amount Reclassified from Accumulated Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent [Abstract]
Interest expense	[1]	630	524	1,268	980
Provision for income taxes	[1]	(133)	(110)	(267)	(206)
NET INCOME (LOSS)	[1]	$ 497	$ 414	$ 1,001	$ 774

[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, 2024	Dec. 31, 2023
Other Assets [Abstract]
Derivative instruments	$ 13,111	$ 13,687
Liabilities [Abstract]
Derivative instruments	(7,319)	(7,922)
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Collateral-Dependent Loans, estimated selling cost	148	396
Recurring [Member]
Assets [Abstract]
Equity securities	1,570	1,938
Available for sale securities [Abstract]
U.S. Agency securities	55,833	60,771
U.S. Treasury securities	130,073	143,288
Obligations of state and political subdivisions	96,707	101,787
Corporate obligations	12,450	12,403
Mortgage-backed securities in government sponsored entities	107,598	99,352
Loans held for sale	14,227	9,379
Other Assets [Abstract]
Derivative instruments	13,111	13,687
Liabilities [Abstract]
Derivative instruments	(7,319)	(7,922)
Recurring [Member] | Level I [Member]
Assets [Abstract]
Equity securities	1,570	1,938
Available for sale securities [Abstract]
U.S. Agency securities	0	0
U.S. Treasury securities	130,073	143,288
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	55,833	60,771
U.S. Treasury securities	0	0
Obligations of state and political subdivisions	96,707	101,787
Corporate obligations	12,450	12,403
Mortgage-backed securities in government sponsored entities	107,598	99,352
Loans held for sale	14,227	9,379
Other Assets [Abstract]
Derivative instruments	12,617	13,363
Liabilities [Abstract]
Derivative instruments	(7,319)	(7,922)
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	0
Other Assets [Abstract]
Derivative instruments	494	324
Liabilities [Abstract]
Derivative instruments	0	0
Nonrecurring [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Collateral-dependent loans	1,742	3,885
Other real estate owned	2,690	97
Nonrecurring [Member] | Level I [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Collateral-dependent loans	0	0
Other real estate owned	0	0
Nonrecurring [Member] | Level II [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Collateral-dependent loans	0	0
Other real estate owned	0	0
Nonrecurring [Member] | Level III [Member]
Fair value assets and liabilities measured on non-recurring basis [Abstract]
Collateral-dependent loans	1,742	3,885
Other real estate owned	$ 2,690	$ 97

XML

Fair Value Measurements, Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3) (Details) - IRLC Assets [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance	$ 566	$ 657	$ 324
Total unrealized losses: Included in other comprehensive loss	0	0	0
Total losses included in earnings and held at reporting date	(72)	(128)	170
Purchases, sales and settlements	0	0	0
Transfers in and/or out of Level 3	0	0	0
Ending Balance	494	529	494
Change in unrealized (losses) for the period included in earnings for assets held	$ (72)	$ (128)	$ 170

XML

Fair Value Measurements, Quantitative Information about Level 3 Fair Value Measurements (Details) $ in Thousands	Jun. 30, 2024 USD ($)	Dec. 31, 2023 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	$ 13,111	$ 13,687
Net derivative liability	7,319	7,922
IRLC Assets [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	494	324
Fair Value, Inputs, Level 3 [Member] | IRLC Assets [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Net derivative asset	494	324
Net derivative liability	$ 494	$ 324
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	0.77	0.6363
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	0.9966	0.9424
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	0.8906	0.8543

XML

Fair Value Measurements, Quantitative Information (Details) - Appraised Collateral Values [Member] $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2024 USD ($)	Dec. 31, 2023 USD ($)
Collateral-Dependent Loans [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Collateral-dependent loans	$ 1,742	$ 3,885
Collateral-Dependent Loans [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	0 months	3 months
Collateral-Dependent Loans [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	12 months	12 months
Collateral-Dependent Loans [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Holding period	7 months 12 days	6 months 19 days
Collateral-Dependent Loans [Member] | Discount for Time Since Appraisal [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Collateral-dependent loans, Measurement input	0	0
Collateral-Dependent Loans [Member] | Discount for Time Since Appraisal [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Collateral-dependent loans, Measurement input	1	1
Collateral-Dependent Loans [Member] | Discount for Time Since Appraisal [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Collateral-dependent loans, Measurement input	0.526	0.2932
Collateral-Dependent Loans [Member] | Selling Costs [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Collateral-dependent loans, Measurement input	0.08	0.08
Collateral-Dependent Loans [Member] | Selling Costs [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Collateral-dependent loans, Measurement input	0.10	0.12
Collateral-Dependent Loans [Member] | Selling Costs [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Collateral-dependent loans, Measurement input	0.0849	0.102
Other Real Estate Owned [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Collateral-dependent loans	$ 2,690	$ 97
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input		0.32
Other Real Estate Owned [Member] | Discount for Time Since Appraisal [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Abstract]
Other real estate owned, Measurement input	0.048
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	0.318
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	0.2993	0.32

XML

Fair Value Measurements, By Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Financial assets [Abstract]
Interest bearing time deposits with other banks	$ 3,820	$ 4,070
Level I [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	0	0
Net loans	0	0
Financial liabilities [Abstract]
Deposits	1,788,429	1,902,007
Borrowed funds	0	0
Level II [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	0	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	3,820	4,070
Net loans	2,146,574	2,126,237
Financial liabilities [Abstract]
Deposits	478,185	413,367
Borrowed funds	318,729	313,217
Carrying Amount [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	3,820	4,070
Net loans	2,232,919	2,227,683
Financial liabilities [Abstract]
Deposits	2,273,095	2,321,481
Borrowed funds	334,829	322,036
Fair Value [Member] | Recurring [Member]
Financial assets [Abstract]
Interest bearing time deposits with other banks	3,820	4,070
Net loans	2,146,574	2,126,237
Financial liabilities [Abstract]
Deposits	2,266,614	2,315,374
Borrowed funds	$ 318,729	$ 313,217