202 2 ANNUA L REPORT
PERFORMANCE
with Clear Purpose
A 3-D rendering
of Kish Bank's
Altoona branch,
coming summer
2023.
Contents
Chairman’s Letter to the Shareholders
Financial Highlights
Independent Auditor’s Report
Financial Statements
Notes to Consolidated Financial Statements
Board of Directors and Officers
3
10
11
13
18
62
Front Cover, Top: Community members
Brandon Zlupko and Joy Vincent-Killian
with Caleb Shertzer, Kish Bank AVP and
Commercial Relationship Manager
Front Cover, Bottom: Chase and Allison
Peachey, owners of Peach View Farm, and
children
2022: The Confluence of Performance
and Client Fulfillment
This 2022 Annual Report to Shareholders provides
financial details of one of the most extraordinary
years in Kish’s 122-year history. While the numbers
on one hand tell the story of outstanding financial
performance as measured by revenue growth
and expanding profitability, they also reflect the
magnitude of the Corporation’s impact on the
lives of the people and communities we serve. For
that reason, this Shareholders’ Letter has client
testimonials woven throughout its pages. These
powerful perspectives provide a strong sense
of partnership with Kish that underscores and
validates our deeply held belief that it is Kish’s
singular focus on fulfilling client needs that leads
to our success and consistently produces such
exceptional financial results.
In reality, the story of 2022 is, like most of Kish’s
success stories, a multi-year tale. Quite simply,
sustained growth in the loan portfolio in recent
years drove loans outstanding from approximately
$600 million in 2018 to $879 million at the
beginning of 2022. So, Kish began the year hitting
on all cylinders just as the bank experienced a
swell of new business requests resulting from
customers who valued our response to the PPP
loan program. Thus, the strong base was further
fueled by continued upward momentum as loans
grew by $145 million, or 16.5%, to $1.02 billion by
year end 2022. This was especially noteworthy
William P. Hayes
Chairman of the Board
and Chief Executive Officer
2 Table of Contents
Chairman’s Letter to the Shareholders 3
given the national decline in loan demand
caused by the headwinds of dramatically
higher interest rates as the Fed tightened
monetary policy to combat inflation.
Kish’s expanding loan portfolio, rising
interest rates, and well-controlled funding
costs combined to elevate net interest
income by $4.9 million in 2022, up 14.5%
from the prior year end. Despite a $1.36
million decline in gains from mortgage loan
sales caused by sharply lower residential
mortgage demand, higher customer
numbers drove up bank service fees and
strength in several of Kish’s non-bank units.
Gains from the sale of real estate further
augmented the strong bottom line. The
combination of all of the above delivered
net income of $12.86 million, up 30.2% from
the prior year’s earnings of $9.88 million.
The sustained growth experienced in
2022 was driven largely by Kish’s ever-
sharpening focus on serving small and
medium-sized business customers and our
growing reputation for responsive service
to that segment. Commercial borrowers in
both our expanding central Pennsylvania
market and our northeastern Ohio market
were largely responsible for much of the
growth in the loan portfolio. As you read
the perspectives of some of our customers
throughout these pages, you will be struck
by the sense of trust and shared values that
they express, as well as a belief that Kish
has their best interests at heart.
Elevating lives is at the core of all that
we do at Kish. The entire Kish team is
What started in 1940 as one truck hauling
coal and lumber is now a fleet of nearly
100 trucks that can be seen on roadways
in the Northeast and Mid-Atlantic regions.
Like Kish, Zimmerman Truck Lines invests
in people and technology and prioritizes
customer service to ensure longevity.
“ Kish helps us with employee
benefits. They are very
helpful with assisting our
employees in choosing the
right products to prepare
for their future. Kish worked
closely with us to learn
our business and offered
flexibility that helped
us restructure our debt,
improve cash flow, and
implement processes to pay
dividends in the future.”
Mark Zimmerman
CEO, Zimmerman Truck Lines
Pictured right with David Wetzler, COO
Peach View Farm in Belleville is a multi-generational dairy farm owned by Chase and Allison Peachey, who
attribute their success to hard work, consistency, and the ability to adapt to the ever-changing economy and
new technology. They continuously think about growing and changing to benefit the next generation.
united by a belief that we can make lives
“ Kish has extensive knowledge
better for our clients, team members,
communities, and shareholders. To that
end, Kish’s powerful record of growth
speaks volumes about our capacity to
deliver for our clients and communities.
We invite you to visit WhyKish.com to
understand more of our value proposition
and the strong relationships we build.
These moving testimonials reflect Kish’s
powerful capacity to build partnerships not
and experience in the ag
and dairy industry. They
understand what we need to
prioritize for the future growth
and prosperity of the farm.”
Chase & Allison Peachey
Owners, Peach View Farm
just with customers, but with community
Kish empowers every team member with
organizations and charities. While Kish
supports dozens of local organizations
24 hours of paid time off for volunteer
activities each year, and our team members
financially each year, our team’s personal
readily answer the call to action. Through
investment in our communities through our
volunteerism, fundraising, and actions in
Kish Community Action Teams (“CATs”)
support of our communities by Kish’s CATs,
is a source of equal value and pride. To
we are truly making lives better for those
ensure active community engagement,
around us.
4 Chairman’s Letter to the Shareholders
Chairman’s Letter to the Shareholders 5
Of special note in 2022 was the team’s
It is a vision to which we are all deeply
incredibly successful Kish for the Cure
committed. Recruiting, developing, and
campaign, which raised a total of over
retaining the very best is the means by
$74,000 to support the fight against
which we will ensure our future success
cancer. These dollars were directed locally
and continued prosperity.
to the Bob Perks Cancer Assistance Fund,
Relay For Life of Mifflin/Juniata, and
through Pennsylvania Pink Zone to all area
hospitals. We are also proud of the growing
success of Kish’s Teach Children to Save
program, through which Kish volunteers
recently presented to over 8,500 school
children in classrooms across the region on
the importance of learning to save. These
efforts represent just the tip of the iceberg
of the impact of our team on the lives of
those in our communities, often those
who are the most in need. Once again, the
testimonials on WhyKish.com speak even
more fully to the value of our efforts to
make lives better.
None of what has been discussed so far
in this report would have been possible
without the incredible efforts of the
Kish team. While client testimonials
speak to the performance of the team
and our relationship managers, equally
impressive is the value of their support for
each other. The quality of our products;
the responsiveness of our branches,
support teams, and call center; the focus
on exceptional performance—all are
elements of the teamwork that flows from
the outstanding commitment the team
demonstrates for each other every day.
We have a vision of providing legendary
service with the best team in banking.
In addition to supporting our clients,
communities, and team members, everyone
at Kish also understands that to ensure
our sustainability as a leader in community
banking, we must maintain a visibility and
presence throughout our market. Our
branches are the conduits through which
Kish maintains service to our communities
at a consistently high level. 2022 saw the
successful opening of our new Mifflintown
and Pine Grove Mills banking branches, and
we will be excited to open our first branch
in Altoona in summer 2023.
“ We have a vision
of providing
legendary service
with the best team
in banking. It is
a vision to which
we are all deeply
committed.”
Since 1876, Juniata College has been an
institution centered on its students and
their success in the world. The College
is committed to delivering a uniquely
personalized approach to education to
each of its students. Juniata is one of
40 colleges in the book “Colleges That
Change Lives” and it remains a top 100
national liberal arts college.
“ Kish and Juniata are both
mission-centric organizations
who believe in our
communities and the people
we serve. It’s amazing the
parallels we have relative
to the 'how' of what we
each do. We are in different
industries, but our approach
is remarkably similar.”
Jim Troha
President, Juniata College
Pictured with Karla Wiser, Controller & CFO
Statistics show that for every 10
restaurants that open today, only one
will still be operating a year later. Hoss’s
Steak & Sea House’s key to success for
the last 40 years has been to consistently
give guests great food and excellent
service at a price that is affordable.
“ Kish was willing to enter
into a lending agreement
with Hoss’s when other
lenders turned away
from the hospitality
industry. Having a loan
with Kish allowed us to
keep a presence in the
communities that we have
served all these years.”
Carl Raup
CFO, Hoss's Steak & Sea House
6 Chairman’s Letter to the Shareholders
Chairman’s Letter to the Shareholders 7
Finally, a word about another critical
our communities. When Accumulated
The following pages provide full details
constituency. As a shareholder-owned
Other Comprehensive Income (“AOCI”) is
of the enormous success Kish Bancorp
company, producing consistent results
excluded, retained earnings elevated book
achieved in 2022, and we encourage your
for shareholders is what builds the loyalty
value per share to $33.38, compared to
in-depth review of all aspects of that
and long-term ownership that enables
$29.90 at year end 2021.
Kish to pursue long-term objectives. In
2022, that meant fully diluted earnings
per share growth of 30.32%, and return on
shareholders’ equity of 14.95%. 2022 also
represented the seventh consecutive year
as well as the ninth of the last 10 years
in which the board increased the annual
dividend, which was raised by almost
10% over 2021 dividends. Capital in the
form of retained earnings rose by 12.3% in
2022, well ahead of peers and continuing
to support growth and investment in
“ Several years ago, our then-
bank had gone through several
buyouts, and we decided to
switch to Kish. Kish was a local
bank who we felt understood our
needs and could help us grow. It
was the best decision for us.”
Andy Friberg
Owner & President, Spectra Wood
Spectra Wood, a second-generation family furniture manufacturer celebrating 54 years in business this year,
began in the basement of the family’s State College home and now operates two manufacturing facilities in
Centre and Mifflin Counties. They distribute to several top 100 furniture retailers in the U.S. and their furniture
quality remains at the highest level, despite the challenges that can accompany rapid expansion.
success. Please don’t hesitate to reach
out with any questions regarding our
2022 results. And while the numbers are
remarkable, we hope you’ll be even more
impressed by the compelling words you
have read from our clients throughout
these pages—from Mark Zimmerman of
Zimmerman Truck Lines, from Chase and
Allison Peachey of Peach View Farm, from
Carl Raup of Hoss’s Steak & Sea House,
from Jim Troha and Karla Wiser of Juniata
College, from Andy Friberg of Spectra
Wood, and from Mike and Darla Sevick of
Sevick Farm. They speak to the values that
lie at the core of Kish's mission and vision:
responsiveness, knowledge, stability, client-
centered relationships, professionalism, and
promises kept. It is these values on which
we will build Kish’s successful future, one
client at a time.
Sincerely,
William P. Hayes
Chairman of the Board
and Chief Executive Officer
Second-generation farmer Mike Sevick
started working on his now 54-year-old
family farm in 1988. Through a series
of carefully-thought-out decisions over
the years, the family has expanded the
farming operations from growing hay and
raising beef cattle to also growing corn,
wheat, soybeans, and green beans.
“ Kish helps us with insurance,
banking, and wealth
management. Our business’s
long-term success is due
to careful decision making,
and we rely on qualified
professionals with good
attitudes and excellent
skills. We were looking for,
and found Kish to be, a true
community bank that cares
about our unique financial
situation and delivers
personalized service.”
Mike & Darla Sevick
Owners, Sevick Farm
8 Chairman’s Letter to the Shareholders
Chairman’s Letter to the Shareholders 9
FOR THE YEAR
Net Income
Net Income Before Taxes
Total Dividends Declared
2022
12,860,301
$
2021
9,881,340
$
2020
8,039,287
$
2019
7,006,914
$
2018
6,029,683
$
15,283,348
11,232,900
9,278,885
7,903,452
3,448,214
2,988,353
2,804,384
2,585,444
6,670,247
2,396,453
$
1,295,448
$
1,232,779
$
1,106,609
$
918,309
$
850,508
AT YEAR END (IN $000s)
Total Assets
Total Loans (Net)
Total Deposits
Stockholders’ Equity
Loan Loss Reserve
Net Loan Losses (Recoveries)
1,013,170
1,037,120
71,972
10,335
225
868,153
1,002,645
77,100
10,560
(9)
RATIO ANALYSIS
Return on Average Assets*
Return on Average Equity*
Dividend Declared/Net Income
Loans/Deposits
Primary Capital/Total Assets
Total Capital/Risk Weighted Assets
Loan Loss Reserve/Loans
Net Loan Losses to Total Loans (Net)
1.02%
14.95%
26.81%
97.69%
6.35%
11.57%
1.01%
0.02%
PER SHARE DATA
Basic Earnings
Fully Diluted Earnings
Dividends Paid
Equity (Book Value)
Equity Plus Loan Loss Reserve
$
$5.02
$
4.90
1.31
27.41
31.35
0.85%
14.08%
30.24%
86.59%
7.11%
12.78%
1.20%
0.00%
3.88
3.76
1.14
29.39
33.42
755,960
877,796
69,962
9,771
(4)
0.79%
12.90%
34.88%
86.12%
7.21%
12.32%
1.28%
0.00%
679,519
710,226
64,352
7,499
(467)
0.79%
11.56%
36.90%
95.68%
7.82%
11.86%
1.09%
(0.07%)
630,440
682,350
59,728
6,642
10
0.72%
10.71%
39.74%
92.39%
7.80%
11.95%
1.04%
0.00%
$
3.20
$
3.12
1.08
26.93
30.69
$
2.80
2.70
1.00
24.90
27.80
2.44
2.35
0.94
23.41
26.01
Average Shares Outstanding (#)
2,625,612
2,626,931
2,597,978
2,499,536
2,499,673
Net Income (in millions)
Earnings & Dividends (per share)
Stock Valuation (per share)
Board of Directors and Stockholders
Kish Bancorp, Inc.
Reedsville, Pennsylvania
Opinion
We have audited the accompanying
consolidated financial statements of
Kish Bancorp, Inc. and subsidiaries (the
“Company”), which comprise the consolidated
balance sheets as of December 31, 2022 and
2021; the related consolidated statements of
income, comprehensive income, changes in
stockholders’ equity, and cash flows for the
years then ended; and the related notes to the
consolidated financial statements (collectively,
the “financial statements”).
In our opinion, the accompanying financial
statements present fairly, in all material
respects, the financial position of the
Company as of December 31, 2022 and 2021,
and the results of its operations and its cash
flows for the years then ended in accordance
with accounting principles generally accepted
in the United States of America.
We have also audited, in accordance with
auditing standards generally accepted in
the United States of America (GAAS), the
Company’s internal control over financial
reporting as of December 31, 2022, based
on criteria established in Internal Control—
Integrated Framework issued by the
Committee of Sponsoring Organizations of the
Treadway Commission in 2013, and our report
dated March 8, 2023, expressed an unmodified
opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
We conducted our audits in accordance
with GAAS. Our responsibilities under those
standards are further described in the
"Auditor’s Responsibilities for the Audit of
the Financial Statements" section of our
report. We are required to be independent of
the Company and to meet our other ethical
responsibilities, in accordance with the
relevant ethical requirements relating to our
audits. We believe that the audit evidence we
have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Responsibilities of Management for the
Financial Statements
Management is responsible for the preparation
and fair presentation of the financial
statements in accordance with accounting
principles generally accepted in the United
States of America, and for the design,
implementation, and maintenance of internal
control relevant to the preparation and fair
presentation of financial statements that are
free from material misstatement, whether due
to fraud or error.
In preparing the financial statements,
management is required to evaluate whether
there are conditions or events, considered in
the aggregate, that raise substantial doubt
about the Company’s ability to continue as a
going concern for a period of within one year
after the date the financial statements are
issued or available to be issued.
Auditor’s Responsibilities for the Audit of the
Financial Statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or
error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance
is a high level of assurance but is not
absolute assurance and, therefore, is not
a guarantee that an audit conducted in
accordance with GAAS will always detect
a material misstatement when it exists. The
risk of not detecting a material misstatement
resulting from fraud is higher than for one
resulting from error, as fraud may involve
* Due to fluctuations in the mark to market valuation for investment securities, these are not included in the totals for average assets and average equity.
10 Financial Highlights
Independent Auditor’s Report 11
KISH BANCORP, INC.
CONSOLIDATED BALANCE SHEET
certain internal control-related matters that
we identified during the audit.
Other Information Included in Annual Report
Management is responsible for the other
information included in the annual report. The
other information comprises the Chairman’s
Letter to the Stockholders and Financial
Highlights but does not include the financial
statements and our auditor's report thereon.
Our opinion on the financial statements
does not cover the other information, and
we do not express an opinion or any form of
assurance thereon.
In connection with our audit of the financial
statements, our responsibility is to read the
other information and consider whether a
material inconsistency exists between the
other information and the financial statements,
or whether the other information otherwise
appears to be materially misstated. If, based
on the work performed, we conclude that an
uncorrected material misstatement of the
other information exists, we are required to
describe it in our report.
Cranberry Township, Pennsylvania
March 8, 2023
S.R. Snodgrass, P.C.
2009 Mackenzie Way, Suite 340
Cranberry Township, Pennsylvania 16066
Phone: 724-934-0344 • Fax: 724-934-0345
collusion, forgery, intentional omissions,
misrepresentations, or the override of internal
control. Misstatements are considered
material if there is a substantial likelihood that,
individually or in the aggregate, they would
influence the judgment made by a reasonable
user based on the financial statements.
In performing an audit in accordance with
GAAS, we:
• Exercise professional judgment and
maintain professional skepticism throughout
the audit.
• Identify and assess the risks of material
misstatement of the financial statements,
whether due to fraud or error, and design
and perform audit procedures responsive
to those risks. Such procedures include
examining, on a test basis, evidence
regarding the amounts and disclosures in
the financial statements.
• Obtain an understanding of internal control
relevant to the audit in order to design
audit procedures that are appropriate in the
circumstances.
• Evaluate the appropriateness of accounting
policies used and the reasonableness of
significant accounting estimates made by
management, as well as evaluate the overall
presentation of the financial statements.
• Conclude whether, in our judgment, there
are conditions or events, considered in the
aggregate, that raise substantial doubt
about the Company’s ability to continue as
a going concern for a reasonable period of
time.
We are required to communicate with those
charged with governance regarding, among
other matters, the planned scope and timing
of the audit, significant audit findings, and
ASSETS
Cash and due from banks
Interest-bearing deposits with other institutions
Cash and cash equivalents
Certificates of deposit in other financial institutions
Investment securities available for sale, at fair value
Investment securities held to maturity, fair value of $10,070,997
and $10,125,458
Equity securities
Loans held for sale
Loans
Less allowance for loan losses
Net loans
Premises and equipment, net
Goodwill
Regulatory stock
Bank-owned life insurance
Accrued interest and other assets
TOTAL ASSETS
LIABILITIES
Deposits:
Noninterest-bearing
Interest-bearing demand
Savings
Money market
Time
Total deposits
Short-term borrowings
Other borrowings
Accrued interest and other liabilities
TOTAL LIABILITIES
STOCKHOLDERS' EQUITY
Preferred stock, $.50 par value; 500,000 shares authorized,
no shares issued and outstanding
Common stock, $.50 par value; 8,000,000 shares authorized,
2,697,500 shares issued; 2,639,544 and 2,630,682 shares outstanding
at December 31, 2022 and 2021, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost (57,956 and 66,818 shares at December 31,
2022 and 2021, respectively)
TOTAL STOCKHOLDERS' EQUITY
December 31,
2022
2021
$
11,082,445 $
9,024,003
20,106,448
7,006,334
86,755,383
93,761,717
245,000
155,308,551
245,000
178,747,138
10,763,833
2,858,117
631,414
9,777,862
2,693,580
3,255,070
1,023,505,114
10,335,231
1,013,169,883
878,713,345
10,559,852
868,153,493
25,578,343
3,560,942
5,968,700
23,780,368
17,256,582
$ 1,295,447,912 $ 1,232,778,795
26,795,671
3,560,942
7,256,300
23,628,587
31,123,166
$
189,976,622 $
115,230,051
131,688,405
331,948,502
268,276,138
1,037,119,718
177,079,925
81,754,614
116,688,640
365,815,741
261,306,427
1,002,645,347
100,326,547
52,413,653
33,616,318
1,223,476,236
67,433,957
67,184,620
18,415,231
1,155,679,155
-
-
1,348,750
2,897,790
85,844,293
(16,140,949 )
(1,978,208 )
71,971,676
1,348,750
2,885,343
76,432,206
(1,572,533 )
(1,994,126 )
77,099,640
12 Independent Auditor’s Report
Financial Statements 13
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 1,295,447,912 $ 1,232,778,795
See accompanying notes to consolidated financial statements.
2
KISH BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
KISH BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Net income
Other comprehensive income (loss)
Securities available for sale:
Change in unrealized holding losses on
available for sale securities
Tax effect
Change in unrealized gains related to cash flow hedges
Tax effect
Reclassification adjustment for net investment
securities gains realized in net income
Tax effect
Total other comprehensive loss
Year Ended December 31,
2021
2022
9,881,340
12,860,301 $
$
(24,578,671 )
5,161,521
6,138,078
(1,288,996 )
(440 )
92
(14,568,416 )
(3,841,990 )
806,818
3,141,412
(659,697 )
(12,582 )
2,642
(563,397 )
Total comprehensive income (loss)
$
(1,708,115 ) $
9,317,943
See accompanying notes to the consolidated financial statements.
INTEREST AND DIVIDEND INCOME
Interest and fees on loans:
Taxable
Exempt from federal income tax
Interest and dividends on investment securities:
Taxable
Exempt from federal income tax
Interest-bearing deposits with other institutions
Other dividend income
Total interest and dividend income
INTEREST EXPENSE
Deposits
Short-term borrowings
Other borrowings
Total interest expense
NET INTEREST INCOME
Provision for loan losses
Year Ended December 31,
2021
2022
$
41,423,419 $
965,252
34,194,495
1,271,421
3,654,621
229,151
369,155
552,108
47,193,706
5,072,657
239,630
3,636,717
8,949,004
38,244,702
-
3,121,595
266,146
117,397
630,944
39,601,998
2,861,943
26,332
3,324,818
6,213,093
33,388,905
780,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
38,244,702
32,608,905
NONINTEREST INCOME
Service fees on deposit accounts
Investment securities gains, net
Equity securities gains, net
Gain on sale of loans
Earnings on bank-owned life insurance
Insurance commissions
Travel agency commissions
Wealth management
Benefit management
Other
Total noninterest income
NONINTEREST EXPENSE
Salaries and employee benefits
Occupancy and equipment
Data processing
Professional fees
Advertising
Federal deposit insurance
Pennsylvania shares tax
Other
Total noninterest expense
Income before income taxes
Income tax expense
NET INCOME
EARNINGS PER SHARE
Basic
Diluted
See accompanying notes to the consolidated financial statements.
2,152,592
440
164,537
1,095,550
1,042,850
2,848,821
219,286
2,485,063
604,037
1,494,717
12,107,893
21,140,174
4,623,738
2,673,625
796,698
460,155
756,961
741,375
3,876,521
35,069,247
15,283,348
2,423,047
1,812,855
12,582
261,581
2,458,769
901,766
2,683,236
98,266
2,123,702
642,224
350,864
11,345,845
19,932,494
4,055,767
2,046,888
641,903
348,401
725,000
740,344
4,231,053
32,721,850
11,232,900
1,351,560
$
12,860,301 $
9,881,340
$
$
5.02 $
4.90 $
3.88
3.76
14 Financial Statements
Financial Statements 15
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l
KISH BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOW
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
12,860,301 $
9,881,340
Year Ended December 31,
2022
2021
Provision for loan losses
Investment securities gains, net
Equity security gains
Proceeds from sale of loans held for sale
Origination of loans held for sale
Gain on sales of loans
Depreciation, amortization, and accretion
Deferred income taxes
Increase in accrued interest receivable
(Decrease) increase in accrued interest payable
Earnings on bank-owned life insurance
Gain on sale of other assets
Impairment loss on other assets
Non-cash compensation - equity awards
Other, net
Net cash provided by operating activities
INVESTING ACTIVITIES
Maturities of certificates of deposit
Bank owned life insurance:
Purchases
Benefit proceeds
Investment securities available for sale:
Proceeds from repayments and maturities
Purchases
Investment securities held to maturity:
Proceeds from repayments and maturities
Purchases
Purchase of equity securities
Increase in loans, net
Purchase of regulatory stock
Redemption of regulatory stock
Purchase of premises and equipment
Proceeds from sale of other assets
Net cash used for investing activities
FINANCING ACTIVITIES
Increase in deposits, net
Increase (decrease) in short-term borrowings, net
Proceeds from other borrowings
Repayments of other borrowings
Collateral received on interest rate derivatives
Purchases of treasury stock
Proceeds from sale of treasury stock
Exercise of stock options
Cash dividends
Net cash provided by financing activities
Decrease in cash and cash equivalents
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest on deposits and borrowings
Income taxes
$
$
-
(440 )
(164,537 )
61,468,762
(57,749,556 )
(1,095,550 )
1,661,670
179,626
(1,450,648 )
1,025,784
(1,042,850 )
(482,001 )
-
746,352
236,415
16,193,328
780,000
(12,582 )
(261,581 )
64,671,378
(59,800,680 )
(2,458,769 )
1,947,006
(483,336 )
(14,566 )
(461,890 )
(901,766 )
(17,869 )
500,000
645,444
2,915,995
16,928,124
-
245,000
-
1,048,651
24,949,600
(26,954,481 )
1,000,000
(1,500,000 )
-
(144,785,142 )
(3,691,600 )
2,404,000
(2,977,122 )
727,704
(149,778,390 )
34,474,371
32,892,590
14,051,077
(28,822,044 )
11,500,000
(1,262,273 )
901,758
(357,472 )
(3,448,214 )
59,929,793
(73,655,269 )
93,761,717
20,106,448 $
(7,300,000 )
460,748
33,168,687
(84,560,068 )
-
(2,250,000 )
(299,712 )
(112,973,100 )
(93,400 )
999,800
(2,903,840 )
49,500
(175,456,385 )
124,848,918
(1,926,254 )
19,340,308
(16,812,498 )
-
(514,492 )
851,674
(174,813 )
(2,988,353 )
122,624,490
(35,903,771 )
129,665,488
93,761,717
7,964,220 $
2,185,000
6,729,860
1,925,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH CASH FLOW INFORMATION
Right of use assets and lease liabilities
$
156,379 $
150,062
See accompanying notes to consolidated financial statements.
6
16 Financial Statements
Financial Statements 17
KISH BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment Securities (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Presentation
Kish Bancorp, Inc. (the “Company”) is a diversified financial services organization whose principal
activity is the ownership and management of its subsidiaries, Kish Bank (the “Bank”), Kish Travel
Services, Inc., and the Bank’s subsidiaries, Tri-Valley Properties, LLC, Kish Agency, Inc., and Kish
Equities, LLC. The Company generates commercial and industrial, agricultural, commercial mortgage,
residential real estate, and consumer loans and deposit services to its customers located primarily in central
Pennsylvania and the surrounding areas. The Bank operates under a Pennsylvania Department of Banking
and Securities bank charter and provides full banking services. Deposits are insured by the Federal Deposit
Insurance Corporation (“FDIC”) to the extent provided by law. Kish Agency, Inc. provides insurance
products and services. Kish Travel Services, Inc. is a Pennsylvania business established to provide travel
services to its customers. Kish Equities, LLC is a subsidiary established to hold investments in equity
securities.
Securities are evaluated at least on a quarterly basis and more frequently when economic or market
conditions warrant such an evaluation to determine whether a decline in their value is other than temporary.
For debt securities, management considers whether the present value of cash flows expected to be collected
are less than the security’s amortized cost basis (the difference defined as the credit loss), the magnitude
and duration of the decline, the reasons underlying the decline and the Company’s intent to sell the security
or whether it is more likely than not that the Company would be required to sell the security before its
anticipated recovery in fair value, to determine whether the loss in value is other than temporary. Once a
decline in value is determined to be other than temporary, if the investor does not intend to sell the security,
and it is more likely than not that it will not be required to sell the security before recovery of the security’s
amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining
difference between fair value and amortized cost (the difference defined as the non-credit portion) is
recognized in other comprehensive income (loss), net of applicable taxes. Otherwise, the entire difference
between fair value and amortized cost is charged to earnings.
Equity Securities
The consolidated financial statements include the accounts of Kish Bancorp, Inc. and its subsidiaries, Kish
Bank and Kish Travel Services, Inc., after elimination of all significant intercompany transactions.
Equity securities are held at fair value. Holding gains and losses are recorded in non-interest income.
Dividends are recognized as income when earned.
The accounting principles followed by the Company and the methods of applying these principles conform
to U.S. generally accepted accounting principles (“GAAP”) and to general practice within the banking
industry. Management is required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the Consolidated Balance Sheet
date and revenues and expenses for that period. Actual results could differ from those estimates.
Investment Securities
Investment securities are classified at the time of purchase, based on management’s intention and ability,
as securities held to maturity, available for sale, or trading. Debt securities acquired with the intent and
ability to hold to maturity are stated at cost, adjusted for amortization of premium and accretion of discount,
which are computed using the interest method and recognized as adjustments of interest income. Debt
securities which are held principally as a source of liquidity are classified as available for sale. Unrealized
holding gains and losses for available for sale securities are reported as a separate component of
stockholders’ equity, net of tax, until realized. Realized security gains and losses are computed using the
specific identification method. Debt securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading securities and reported at fair value, with unrealized
gains and losses included in current earnings. The Company does not have trading securities as of
December 31, 2022 and 2021. Interest and dividends on investment securities is recognized as income
when earned.
Regulatory Stock
Common stock of the Federal Home Loan Bank (“FHLB”) of Pittsburgh represents ownership in an
institution that is wholly owned by other financial institutions. These equity securities are accounted for
at cost and are shown separately on the Consolidated Balance Sheet as regulatory stock.
The Bank is a member of the FHLB and, as such, is required to maintain a minimum investment in stock
of the FHLB that varies with the level of advances outstanding with the FHLB. The stock is bought from
and sold to the FHLB based upon its $100 par value. The stock does not have a readily determinable fair
value and, as such, is classified as restricted stock, carried at cost and evaluated by management. The
stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing
temporary declines. The determination of whether the par value will ultimately be recovered is influenced
by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared
with the capital stock amount and the length of time this situation has persisted; (b) commitments by the
FHLB to make payments required by law or regulation and the level of such payments in relation to the
operating performance; (c) the impact of legislative and regulatory changes on the customer base of the
FHLB; and (d) the liquidity position of the FHLB. Management evaluated the stock and concluded that
the stock was not impaired for the periods presented herein.
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
payoff generally are reported at their principal amount, net of the allowance for loan losses and deferred
origination fees or costs. Interest on loans is recognized as income when earned on the accrual method.
Generally, the policy has been to stop accruing interest on loans when it is determined that a reasonable
doubt exists as to the collectability of additional interest. Interest previously accrued but deemed
uncollectible is deducted from current interest income. Payments received on nonaccrual loans are
recorded as income or applied against principal according to management’s judgment as to the
collectability of such principal. Nonaccrual loans will generally be put back on accrual status after
demonstrating six consecutive months of no delinquency.
18 Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements 19
7
8
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans (Continued)
Allowance for Loan Losses (Continued)
The allowance for loan losses is established through provisions for loan losses charged against income.
Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent
recoveries, if any, are credited to the allowance.
Loan origination fees and certain direct loan origination costs are being deferred and the net amount
amortized is accounted for as an adjustment of the related loan’s yield. Management is amortizing these
amounts over the contractual life of the related loans using the level yield method.
In general, fixed rate, permanent residential mortgage loans originated by the Bank are held for sale and
are carried in the aggregate at the lower of cost or fair value. The Bank sells these loans to various other
financial institutions. Currently, the Bank retains the servicing of those loans sold to the FHLB and releases
the servicing of loans sold to all other institutions.
Allowance for Loan Losses
The allowance for loan losses represents the amount that management estimates is adequate to provide for
probable losses inherent in its loan portfolio as of the Consolidated Balance Sheet date. The allowance
method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and
all recoveries are credited to it. The allowance for loan losses is established through a provision for loan
losses charged to operations. The provision for loan losses is based on management’s periodic evaluation
of individual loans, economic factors, past loan loss experience, changes in the composition and volume
of the portfolio, and other relevant factors. The estimates used in determining the adequacy of the
allowance for loan losses, including the amounts and timing of future cash flows expected on impaired
loans, are particularly susceptible to change in the near term.
Impaired loans are those for which it is probable the Company will not be able to collect all amounts due
according to the contractual terms of the loan agreement. The Company evaluates commercial and
industrial, agricultural, state and political subdivisions, commercial real estate, and all troubled debt
restructuring loans for possible impairment. Consumer and residential real estate loans are also evaluated
if part of a commercial lending relationship. The Company individually evaluates such loans for
impairment and does not aggregate loans by major risk classifications. The definition of “impaired loans”
is not the same as the definition of “nonaccrual loans,” although the two categories overlap. Factors
considered by management in determining impairment include payment status and collateral value. The
amount of impairment for these types of loans is determined by the difference between the present value
of the expected cash flows related to the loan using the original interest rate and its recorded value, or as a
practical expedient in the case of collateralized loans, the difference between the fair value of the collateral
and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the
fair value of the collateral.
Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of
smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience
insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired.
Management determines the significance of payment delays on a case-by-case basis taking into
consideration all circumstances concerning the loan, the creditworthiness and payment history of the
borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and
interest owed.
In addition to the allowance for loan losses, the Company also estimates probable losses related to
unfunded lending commitments, such as letters of credit, financial guarantees, and unfunded loan
commitments. Unfunded lending commitments are subject to individual reviews and are analyzed and
segregated by risk according to the Company’s internal risk rating scale. These risk classifications, in
conjunction with an analysis of historical loss experience, current economic conditions, performance trends
within specific portfolio segments, and any other pertinent information, result in the estimation of the
reserve for unfunded lending commitments. Provision for credit losses related to the loan portfolio and
unfunded lending commitments are reported in the Consolidated Statement of Income.
Premises and Equipment
Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful lives of the related assets,
which range from 3 to 7 years for furniture, fixtures, and equipment, and 31 to 39½ years for building
premises. Leasehold improvements are depreciated over shorter of the term of the lease or useful life.
Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions
and improvements are capitalized.
Goodwill
The Company accounts for goodwill using a two-step process for testing the impairment of goodwill on at
least an annual basis. This approach could cause more volatility in the Company’s reported net income
because impairment losses, if any, could occur irregularly and in varying amounts.
Bank-Owned Life Insurance (“BOLI”)
The Company purchased life insurance policies on certain key employees. BOLI is recorded at its cash
surrender value, or the amount that can be realized.
Real Estate Owned
Real estate acquired by foreclosure is included with other assets on the Consolidated Balance Sheet at the
lower of the recorded investment in the property or its fair value less estimated costs of sale. Prior to
foreclosure, the value of the underlying collateral is written down by a charge to the allowance for loan
losses if necessary. Any subsequent write-downs are charged against operating expenses. Operating
expenses of such properties, net of related income and losses on their disposition, are included in other
noninterest expense.
Treasury Stock
Treasury stock is carried at cost. Sales are determined by the first-in, first-out method.
Advertising Costs
Advertising costs are expensed as the costs are incurred.
20 Notes to Consolidated Financial Statements
9
10
Notes to Consolidated Financial Statements 21
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Transfer of Assets
The Company and its subsidiaries file a consolidated federal income tax return. Deferred tax assets and
liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred
tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the provision for income taxes.
Earnings Per Share
The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share
are calculated utilizing net income as reported in the numerator and average shares outstanding in the
denominator. The computation of diluted earnings per share differs in that the dilutive effects of any stock
options and restricted stock awards are adjusted in the denominator. Treasury shares are not deemed
outstanding for earnings per share calculations.
Stock Options
For purposes of computing stock compensation expense, the Company estimated the fair values of stock
options using the Black-Scholes option-pricing model. The model requires the use of subjective
assumptions that can materially affect fair value estimates. The fair value of each option is amortized into
compensation expense on a straight-line basis between the grant date for the option and each vesting date.
The fair value of each stock option granted was estimated using the following weighted-average
assumptions:
Grant
Year
2022
2021
Expected
Dividend
Yield
3.31 %
3.63 %
Risk-Free
Interest Rate
2.56 %
1.19 %
Expected
Volatility
27.32 %
26.88 %
Expected
Life (in Years)
6.0
6.0
The weighted-average fair value of each stock option granted for 2022 and 2021 was $7.25 and $5.03,
respectively.
Mortgage Servicing Rights (“MSRs”)
The Company has agreements for the express purpose of selling loans in the secondary market. The
Company retains servicing rights for certain loans. Originated MSRs are recorded by allocating total costs
incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in
proportion to the estimated servicing income over the estimated life of the servicing portfolio. The
Company performs an impairment review of the MSRs and recognizes impairment through a valuation
account. MSRs are a component of accrued interest and other assets on the Consolidated Balance Sheet.
Gains and losses on sales of loans are recognized at settlement dates and are determined by the difference
between the sales proceeds and the carrying value of the loans. All sales are made with limited recourse.
For the years ended December 31, 2022 and 2021, the Company recorded gross servicing rights of
$279,743 and $336,339, respectively, with a reserve for impairment of $104,060 and $161,951,
respectively.
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from
the Company; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage
of that right) to pledge or exchange the transferred assets; and (3) the Company does not maintain effective
control over the transferred assets through an agreement to repurchase them before their maturity.
Cash Flow Information
The Company has defined cash and cash equivalents as those amounts included in the balance sheet
captions “Cash and due from banks” and “Interest-bearing deposits with other institutions” that have
original maturities of less than 90 days.
Reclassification of Comparative Amounts
Certain items previously reported have been reclassified to conform to the current year’s format. Such
reclassifications did not affect net income or stockholders’ equity.
Derivatives and Hedging Activities
The Company engages in a number of business activities that are vulnerable to interest rate risk. The
associated variability in cash flows related to interest rate risk may impact the results of operations of the
Company. The Company’s hedging objective is to reduce, to the extent possible, unpredictable cash flows
associated with interest rate risk, via approved hedging strategies, related to business strategies and
business objectives.
All derivatives are recorded on the Consolidated Balance Sheet at fair value. The accounting for changes
in the fair value of derivatives depends on whether the Company has elected to designate a derivative in a
hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the
criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the
exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular
risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a
hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions,
are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of
gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings
effect of the hedged forecasted transactions in a cash flow hedge.
Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings, together
and in the same income statement line item with changes in the fair value of the related hedged item.
Changes in the fair value of derivatives designated as cash flow hedges are recorded in accumulated other
comprehensive income (loss) and are reclassified into the line item in the income statement in which the
hedged item is recorded and in the same period in which the hedged item affects earnings. Hedge
ineffectiveness and gains and losses on the excluded component of a derivative in assessing hedge
effectiveness are recorded in earnings.
22 Notes to Consolidated Financial Statements
11
12
Notes to Consolidated Financial Statements 23
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Recent Accounting Pronouncements
The Company’s revenue is comprised of net interest income on financial assets and liabilities, and
noninterest income. Under FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from
Contracts with Customers, management determined that net interest income on financial assets and
liabilities and certain components of noninterest income resulting from investment securities gains, loan
servicing, gains on sales of loans, earnings on bank owned life insurance, gains on sales of mortgage loans
and gains on sales of securities available for sale are accounted for under other U.S. GAAP standards and
are not within the scope of ASC Topic 606.
Descriptions of revenue-generating activities reported in our Consolidated Statement of Income that are
within the scope of Topic 606 include:
Insurance and travel agency commissions
• Service fee income on deposit accounts
•
• Trust and investment advisory fees
• Benefit management consulting income
• ATM and debit card transaction fees
• Loan servicing fees
• Wire transfer fees
• Safe deposit box rentals
Non-transaction-based fees such as account maintenance fees, monthly statement fees, loan servicing fees
and safe deposit box rentals are considered to be provided to the customer under short-term contracts with
ongoing renewals. Revenue for these non-transaction-based fees is earned on a monthly basis, representing
the period over which the Company satisfies the performance obligations. Transaction-based fees such as
non-sufficient fund charges, stop payment charges and wire fees are recognized at the time the transaction
is executed as the contract duration does not extend beyond the service performed.
The Company earns fees from ATM transactions fees and debit card transaction fees from cardholder
transactions conducted through third party payment network providers which consist of interchange fees
earned from the payment networks as a debit card issuer. These fees are recognized when the transaction
occurs and are settled on a daily or monthly basis.
Revenues from trust and investment advisory services are generally recognized on a monthly basis and are
typically based on a percentage of the customer's assets under management or based on investment
solutions that are implemented for the customer.
Commission and fee income from insurance, benefit consulting and travel services are recognized as the
performance obligations are satisfied, either over the contract policy period or as sales commissions are
received when the performance obligation period does not extend beyond the sales transaction event.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of
Credit Losses on Financial Instruments, which changes the impairment model for most financial assets.
This Update is intended to improve financial reporting by requiring timelier recording of credit losses on
loans and other financial instruments held by financial institutions and other organizations. The underlying
premise of the Update is that financial assets measured at amortized cost should be presented at the net
amount expected to be collected, through an allowance for credit losses that is deducted from the amortized
cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses
that are expected to occur over the remaining life of a financial asset. The income statement will be affected
for the measurement of credit losses for newly recognized financial assets, as well as the expected increases
or decreases of expected credit losses that have taken place during the period. With certain exceptions,
transition to the new requirements will be through a cumulative-effect adjustment to opening retained
earnings as of the beginning of the first reporting period in which the guidance is adopted. This Update is
effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. We expect to recognize a one-time cumulative-effect adjustment to the allowance for loan losses
when the new standard is adopted in the first quarter of 2023. We have not yet finalized the overall impact
of the one-time adjustment at adoption in our the consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the
Effects of Reference Rate Reform on Financial Reporting, to provide temporary optional expedients and
exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the
financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates
to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply
certain modification accounting requirements to contracts affected by what the guidance calls “reference
rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the
contracts at the modification date or reassess a previous accounting determination. Also, entities can elect
various optional expedients that would allow them to continue applying hedge accounting for hedging
relationships affected by reference rate reform if certain criteria are met and can make a one-time election
to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference
rate reform. The amendments in this ASU are effective for all entities upon issuance. It is too early to
predict whether a new rate index replacement and the adoption of the ASU will have a material impact on
the Company’s financial statements.
24 Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements 25
13
14
2. EARNINGS PER SHARE
3.
INVESTMENT SECURITIES
There are no convertible securities that would affect the numerator in calculating basic and diluted earnings
per share; therefore, net income as presented on the Consolidated Statement of Income will be used as the
numerator. The following table sets forth the composition of the weighted-average common shares
(denominator) used in the basic and diluted earnings per share computation.
The amortized cost, gross unrealized gains and losses, and fair value of investment securities are as follows:
Gross
2022
Gross
2022
2021
Weighted-average common shares issued
2,697,500 2,697,500
Weighted-average treasury stock shares
(67,350 )
(74,553 )
Weighted-average unvested restricted stock awards
(70,807 )
(78,857 )
Basic weighted-average shares outstanding
2,559,343 2,544,090
Dilutive effect of outstanding restricted stock awards
31,181
39,581
Dilutive effect of outstanding stock options
35,088
43,260
Diluted weighted-average shares outstanding
2,625,612 2,626,931
For the year ended December 31, 2022, the Company excluded from the computation of diluted weighted-
average shares the impact of 42,059 options to purchase shares of the Company’s common stock, as the
effect would have been anti-dilutive.
For the year ended December 31, 2021, the Company excluded from the computation of diluted weighted-
average shares the impact of 41,425 options to purchase shares of the Company’s common stock, and 500
shares of restricted stock, as the effect would have been anti-dilutive.
Amortized Unrealized Unrealized
Cost
Gains
Losses
Fair
Value
Available for Sale:
U.S. treasury securities
U.S. government agency securities
Obligations of states and political
subdivisions
Corporate securities
Mortgage-backed securities in
government-sponsored entities
Collateralized mortgage obligations
Total Available for Sale
Held to Maturity:
Corporate Securities
$ 20,886,392 $
49,881,118
- $ (1,753,897 ) $ 19,132,495
- (6,873,567 ) 43,007,551
41,934,666
6,564,965
3,345 (7,661,301 ) 34,276,710
(113,026 ) 6,452,429
490
30,857,100
30,260,783
$ 180,385,024 $
1,976 (4,387,180 ) 26,471,896
- (4,293,313 ) 25,967,470
5,811 $ (25,082,284 ) $ 155,308,551
$ 10,763,833 $
- $
(692,836 ) $ 10,070,997
Gross
2021
Gross
Amortized Unrealized Unrealized
Cost
Gains
Losses
Fair
Value
Available for Sale:
U.S. treasury securities
U.S. government agency securities
Obligations of states and political
subdivisions
Corporate securities
Mortgage-backed securities in
government-sponsored entities
Collateralized mortgage obligations
Total Available for Sale
Held to Maturity:
Corporate Securities
- $ 4,926,520
$ 4,884,412 $
53,310,247 249,330 (936,051 ) 52,623,526
42,108 $
42,315,974
8,576,994 127,400
637,321 (370,663 ) 42,582,632
(19,185 ) 8,685,209
32,662,635
167,391 (173,303 ) 32,656,723
37,494,238 330,020 (551,730 ) 37,272,528
$ 179,244,500 $ 1,553,570 $ (2,050,932 ) $ 178,747,138
$ 9,777,862 $ 359,778 $
(12,182 ) $ 10,125,458
26 Notes to Consolidated Financial Statements
15
16
Notes to Consolidated Financial Statements 27
3.
INVESTMENT SECURITIES (Continued)
3.
INVESTMENT SECURITIES (Continued)
The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment
category and length of time that the individual securities have been in a continuous unrealized loss position,
at December 31, 2022 and 2021.
Less than Twelve
Months
2022
Twelve Months or
Greater
Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
$ 19,132,495 $ (1,753,897 ) $
- $
- $ 19,132,495 $ (1,753,897 )
10,219,323 (554,800 ) 32,788,228 (6,318,767 ) 43,007,551 (6,873,567 )
18,746,763 (3,690,444 ) 13,765,525 (3,970,857 ) 32,512,288 (7,661,301 )
(113,026 )
4,529,899
(77,955 ) 4,951,944
(35,071 ) 422,045
5,561,090 (605,497 ) 19,490,124 (3,781,683 ) 25,051,214 (4,387,180 )
14,034,828 (837,805 ) 11,932,642 (3,455,508 ) 25,967,470 (4,293,313 )
$ 72,224,398 $ (7,477,514 ) $ 78,398,564 $ (17,604,770 ) $ 150,622,962 $ (25,082,284 )
Available for Sale:
U.S. treasury securities
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
Collateralized mortgage
obligations
Total Available for
Sale
Held to Maturity:
Corporate Securities
$ 8,502,470 $ (511,364 ) $ 1,568,528 $
(181,473 ) $ 10,070,998 $
(692,836 )
Less than Twelve
Months
2021
Twelve Months or
Greater
Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
$ 20,975,310 $ (371,738 ) $ 17,288,237 $
(564,313 ) $ 38,263,547 $
(936,051 )
11,834,656 (138,817 ) 5,583,509
(225 ) 481,040
499,775
(231,846 ) 17,418,165
980,815
(18,960 )
(370,663 )
(19,185 )
26,314,541 (173,303 )
-
- 26,314,541
(173,303 )
15,414,720 (434,667 ) 1,901,420
(117,063 ) 17,316,140
(551,730 )
$ 75,039,002 $ (1,118,750 ) $ 25,254,206 $
(932,182 ) $ 100,293,208 $ (2,050,932 )
Available for Sale:
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
Collateralized mortgage
obligations
Total Available for
Sale
Held to Maturity:
Corporate Securities
$ 1,237,818 $
(12,182 ) $
- $
- $ 1,237,818 $
(12,182 )
The Company had 193 investment securities, consisting of 40 U.S. government agency securities, 66
obligations of states and political subdivisions, 23 different corporate securities, 32 mortgage-backed
securities, and 32 collateralized mortgage obligations that were in unrealized loss positions at December
31, 2022. Because the decline in market value is attributable to changes in interest rates and not credit
quality, and because the Company does not intend to sell the investments and it is not more likely than not
that the Company will be required to sell the investments before recovery of their amortized cost basis or
par value, which may be maturity, the Company does not consider those investments to be other-than-
temporarily impaired at December 31, 2022.
The amortized cost and fair value of debt securities at December 31, 2022, by contractual maturity, are
shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or without call or prepayment
penalties.
Available for Sale
Held to Maturity
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
$ 12,137,266 $ 12,083,998 $
- $
42,817,685
58,482,191
66,947,882
39,544,375
48,596,640
55,083,538
2,000,000
8,763,833
-
-
1,952,180
8,118,817
-
Total
$ 180,385,024 $ 155,308,551 $ 10,763,833 $ 10,070,997
Investment securities with a carrying value of $70,917,500 and $133,085,381 at December 31, 2022 and
2021, respectively, were pledged to secure deposits and other purposes as required by law.
The following is a summary of proceeds received, gross gains, and gross losses realized on the sale and
calls of investment securities available for sale for the years ended December 31:
2022
2021
Proceeds from sales
Proceeds from calls
Gross gains
Gross losses
$
- $
-
3,564,556
12,582
-
999,560
440
-
Equity Securities
The Company recognized changes in fair value of equity securities in equity securities gains (losses), net.
The following is a summary of unrealized and realized gains and losses recognized in net income on equity
securities during the years ended December 31, 2022 and 2021:
Net gains (losses) recognized in equity securities during the year
Less: Net gains (losses) realized on sale of equity securities during the year
Unrealized gains (losses) recognized in equity securities
2021
2022
$ 164,537 $ 261,581
-
$ 164,537 $ 261,581
-
28 Notes to Consolidated Financial Statements
17
18
Notes to Consolidated Financial Statements 29
4. LOANS
Major classifications of loans are summarized as follows at December 31:
4. LOANS (Continued)
COVID-19 Loan Forbearance Programs
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Less allowance for loan losses
Net loans
2022
2021
$ 489,329,128 $ 385,694,921
132,681,835 118,901,198
28,535,279 30,749,635
24,226,289 38,831,785
5,030,762 16,191,648
343,701,821 288,344,158
1,023,505,114 878,713,345
10,335,231 10,559,852
$ 1,013,169,883 $ 868,153,493
Mortgage loans serviced by the Company for others amounted to $29,009,755 and $34,542,424 at
December 31, 2022 and 2021, respectively.
The Company grants residential, commercial, and consumer loans to customers throughout its trade area,
which is concentrated in central Pennsylvania. Such loans are subject to, at origination, credit risk
assessment by management following the Company’s lending policy. Although the Company has a
diversified loan portfolio at December 31, 2022 and 2021, a substantial portion of its debtors’ ability to
honor their loan agreements is dependent upon the economic stability of its immediate trade area.
Paycheck Protection Program
During 2022 and 2021, the Company participated in the Paycheck Protection Program (“PPP”),
administered directly by the U.S. SBA. The PPP provides loans to small businesses who were affected by
economic conditions as a result of COVID-19, to provide cash-flow assistance to employers who maintain
their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities
and interest on existing debt during the COVID-19 emergency. As of December 31, 2022 and 2021, the
Company had outstanding PPP loan principal balances of $0 and $9,881,292, respectively. The loans were
fully guaranteed by the SBA and were eligible for forgiveness by the SBA to the extent that the proceeds
were used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24
weeks after the loan was made as long as certain conditions were met regarding employee retention and
compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to
the Company. PPP loans are included in the Commercial and Industrial category.
In accordance with the SBA terms and conditions on these PPP loans, the Company received fees
associated with the processing of these loans of approximately $254 thousand and $2.2 million during
2022 and 2021, respectively. Upon funding of the loans, these fees were deferred and amortized as earned
as adjustments to yield in accordance with FASB ASC 310-20-25-2. Deferred PPP fee income of $0 and
$256,211 was included in loans receivable at December 31, 2022 and 2021, respectively.
Section 4013 of the CARES Act provides that banks may elect not to categorize a loan modification as a
TDR if the loan modification is (1) related to COVID-19; (2) executed on a loan that was not more than
30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A)
60 days after the date on which the national emergency concerning the novel coronavirus disease (COVID–
19) outbreak declared by the President on March 13, 2020, under the National Emergencies Act terminates,
or (B) December 31, 2020. On April 7, 2020, federal banking regulators issued a revised interagency
statement that included guidance on their approach for the accounting of loan modifications in light of the
economic impact of the COVID-19 pandemic. The guidance interprets current accounting standards and
indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term
modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of
repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower
is less than 30 days past due on its contractual payments at the time a modification program is implemented.
According to the Interagency Statement on Loan Modifications and Reporting for Financial Institutions
Working with Customers Affected by the Coronavirus (Revised) issued by the federal bank regulatory
agencies on April 7, 2020, short-term loan modifications not otherwise eligible under Section 4013 that
are made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief
are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee
waivers, extensions of repayment terms, or other delays in payment that are insignificant.
During 2022 and 2021, no customers requested loan payment deferrals or payments of interest only. As
of December 31, 2022, no loans remained in deferral status. As of December 31, 2021, 6 loans remained
in deferral status, with outstanding balances of approximately $1.1 million. In accordance with Section
4013 of the CARES Act and the interagency guidance issued on April 7, 2020, these short-term deferrals
were not considered to be troubled debt restructurings.
Loans to Officers and Directors
In the normal course of business, loans are extended to directors, executive officers, and their associates.
A summary of loan activity for those directors, executive officers, and their associates with loan balances
in excess of $60,000 for the years ended December 31, 2022, and 2021, is as follows:
Balance
Amounts Balance
Amounts Balance
2020
Additions Collected
2021
Additions Collected
2022
$ 8,521,157 $ 1,678,032 $ (2,822,835 ) $ 7,376,354 $ 2,026,246 $ (2,223,781 ) $ 7,178,819
30 Notes to Consolidated Financial Statements
19
20
Notes to Consolidated Financial Statements 31
5. ALLOWANCE FOR LOAN LOSSES
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Management has an established methodology to determine the adequacy of the allowance for loan losses
that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance
for loan losses, the Company has segmented certain loans in the portfolio by product type. Loans are
segmented into the following pools: commercial real estate loans, commercial and industrial loans,
agricultural loans, state and political subdivision loans, consumer loans, and residential real estate loans.
Historical loss percentages for each risk category are calculated and used as the basis for calculating
allowance allocations. The historical loss percentages are calculated over a five-year period for all
portfolio segments. Certain qualitative factor adjustments are then added to the historical loss percentages
to calculate the adjusted factor applied to non-classified loans. Qualitative factors are reviewed each
quarter and adjusted based upon relevant changes within the Bank’s operating environment.
The following qualitative factors are analyzed to determine allocations for non-classified loans for each
portfolio segment:
• Changes in lending policies and procedures
• Changes in economic and business conditions
• Changes in nature and volume of the loan portfolio
• Changes in lending staff experience and ability
• Changes in past-due loans, nonaccrual loans, and classified loans
• Changes in credit risk management
• Changes in underlying value of collateral-dependent loans
• Levels of credit concentrations
• Effects of external factors, such as legal and regulatory requirements
We consider commercial real estate loans, commercial and industrial loans, agricultural loans, and
consumer loans to be riskier than one-to-four family residential mortgage loans. Commercial real estate
loans entail significant additional credit risks compared to one-to-four family residential mortgage loans,
as they involve large loan balances concentrated with single borrowers or groups of related borrowers. In
addition, the payment experience on loans secured by income-producing properties typically depends on
the successful operation of the related real estate project and/or business operation of the borrower who is
also the primary occupant, and thus may be subject to a greater extent to adverse conditions in the real
estate market and in the general economy. Commercial and industrial loans, along with agricultural loans,
involve a higher risk of default than residential mortgage loans of like duration since their repayment is
generally dependent on the successful operation of the borrower’s business and the sufficiency of
collateral, if any.
Repayment of agricultural loans can also be impacted by fluctuations in commodity prices. Although a
customer’s ability to repay for both one-to-four family residential mortgage loans and consumer loans is
highly dependent on the local economy, especially employment levels, consumer loans as a group
generally present a higher degree of risk because of the nature of collateral, if any. State and political
subdivision loans carry the lowest risk, as most state and political subdivision loans are either backed by
the full taxing authority of a municipality or the revenue of a municipal authority.
The following tables present, by portfolio segment, the changes in the allowance for loan losses and the
recorded investment in loans as of and for the years ended December 31:
2022
Commercial
and
State and
Political
Commercial
Real Estate Industrial Agricultural Subdivisions Consumer Real Estate Unallocated
Residential
Total
Allowance for
loan losses:
Beginning balance $ 5,270,205 $ 1,516,700 $
(335,107 )
125,000
272,247
Charge-offs
Recoveries
Provision
-
-
838,658
325,746 $
-
-
(39,277 )
176,685 $ 46,552 $ 1,961,277 $ 1,262,687 $ 10,559,852
(353,250 )
(1,153 )
128,629
-
-
-
-
252,311 (1,262,687 )
- (16,990 )
3,629
-
8,488
(69,741 )
Ending balance
$ 6,108,863 $ 1,578,840 $
286,469 $
106,944 $ 41,680 $ 2,212,435 $
- $ 10,335,231
Ending balance
individually
evaluated for
impairment
Ending balance
collectively
evaluated for
impairment
Loans:
Individually
evaluated for
impairment
Collectively
evaluated for
impairment
Ending balance
$
6,479 $
19,801 $
40,344 $
- $
283 $
148,327 $
- $
215,234
6,102,384 1,559,038
246,125
106,944 41,397 2,064,108
$ 6,108,863 $ 1,578,840 $
286,469 $
106,944 $ 41,680 $ 2,212,435 $
- 10,119,997
- $ 10,335,231
$
205,972 $
273,127 $
208,702 $
- $
9,317 $ 1,564,707
$
2,261,825
489,123,156 132,408,708 28,326,577 24,226,289 5,021,445 342,137,114
1,021,243,289
$ 489,329,128 $ 132,681,835 $ 28,535,279 $ 24,226,289 $ 5,030,762 $ 343,701,821
$ 1,023,505,114
32 Notes to Consolidated Financial Statements
21
22
Notes to Consolidated Financial Statements 33
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Commercial
Real Estate
Commercial
and
Industrial
2021
State and
Political
Residential
Agricultural Subdivisions Consumer Real Estate
Unallocated
Total
Allowance for
loan losses:
Beginning
balance
Charge-offs
Recoveries
Provision
$ 4,300,914 $
-
11,235
958,056
1,163,561 $
-
4,112
349,027
320,794 $
-
-
4,952
190,954 $
-
-
(14,269 )
57,154 $
(1,202 )
5,144
(14,544 )
1,871,288 $
(10,000 )
-
99,989
1,865,898 $
-
-
(603,211 )
9,770,563
(11,202 )
20,491
780,000
Ending balance
$ 5,270,205 $
1,516,700 $
325,746 $
176,685 $
46,552 $
1,961,277 $
1,262,687 $ 10,559,852
Ending balance
individually
evaluated for
impairment
Ending balance
collectively
evaluated for
impairment
Loans:
Individually
evaluated for
impairment
Collectively
evaluated for
impairment
$
22,224 $
250,050 $
44,087 $
- $
5,989 $
133,886 $
- $
456,236
5,247,981
$ 5,270,205 $
1,266,650
1,516,700 $
281,659
325,746 $
176,685
176,685 $
40,563
46,552 $
1,827,391
1,961,277 $
1,262,687 10,103,616
1,262,687 $ 10,559,852
$
254,364 $
860,865 $
288,518 $
- $
5,989 $
1,317,154
$
2,726,890
385,440,557 118,040,333 30,461,117 38,831,785 16,185,659 287,027,004
875,986,455
Ending balance
$ 385,694,921 $ 118,901,198 $ 30,749,635 $ 38,831,785 $ 16,191,648 $ 288,344,158
$ 878,713,345
From 2021 to 2022, increases in our reserve requirements for the commercial real estate, commercial and
industrial, and residential real estate loan pools related to loan portfolio growth of approximately $1.0
million, $0.3 million, and $0.3 million, respectively, were absorbed by unallocated reserves of
approximately $1.3 million carrying forward from 2021. Reserves for individually evaluated loans
decreased approximately $0.2 million during 2022 due primarily to the charge off of a non-performing
commercial and industrial loan. There were no material changes in reserves due to qualitative factor
adjustments during 2022. At December 31, 2021, the loan pool for commercial and industrial includes
outstanding PPP loans of approximately $9.9 million, for which the qualitative risk factors used for
calculating reserves are substantially lower due to the unique loan principal forgiveness and SBA loan
guarantee features of the PPP loan program. At December 31, 2022, there were no outstanding PPP loan
balances.
Credit Quality Information
The following tables represent the commercial credit exposures by internally assigned grades for the years
ended December 31, 2022 and 2021, respectively. The grading analysis estimates the capability of the
borrower to repay the contractual obligations under the loan agreements as scheduled or at all. The
Company’s internal credit risk grading system is based on experiences with similarly graded loans.
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Credit Quality Information (Continued)
The Company’s internally-assigned grades are as follows:
Pass loans are loans which are protected by the current net worth and paying capacity of the obligor or by
the value of the underlying collateral. Special Mention loans are loans where a potential weakness or risk
exists, which could cause a more serious problem if not corrected. Substandard loans are loans that have
a well-defined weakness based on objective evidence and are characterized by the distinct possibility that
the Company will sustain some loss if the deficiencies are not corrected. Doubtful loans have all the
weaknesses inherent in a substandard asset and these weaknesses make collection or liquidation in full
highly questionable and improbable, based on existing circumstances. Finally, loans classified as Loss are
considered uncollectible, or of such value that continuance as an asset is not warranted.
2022
Commercial
and
State and
Political
Commercial
Real Estate Industrial Agricultural Subdivisions
Total
Pass
Special Mention
Substandard
Doubtful
Total
$ 485,441,953 $ 131,670,430 $ 28,513,600 $ 24,226,289 $ 669,852,272
- 4,601,027
3,872,824
161,676
-
-
157,556
-
14,351
$ 489,329,128 $ 132,681,835 $ 28,535,279 $ 24,226,289 $ 674,772,531
728,203
161,676
121,526
-
-
21,679
2021
Commercial
and
State and
Political
Commercial
Real Estate Industrial Agricultural Subdivisions
Total
Pass
Special Mention
Substandard
Doubtful
Total
$ 376,729,845 $ 112,872,779 $ 30,662,188 $ 38,831,785 $ 559,096,597
- 14,007,652
8,949,282 5,058,370
828,911
-
828,911
-
244,379
-
141,138
15,794
$ 385,694,921 $ 118,901,198 $ 30,749,635 $ 38,831,785 $ 574,177,539
-
-
87,447
34 Notes to Consolidated Financial Statements
23
24
Notes to Consolidated Financial Statements 35
5. ALLOWANCE FOR LOAN LOSSES (Continued)
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Credit Quality Information (Continued)
Age Analysis of Past Due Loans by Class (Continued)
For consumer and residential real estate loans, the Company evaluates credit quality based on whether the
loan is considered performing or nonperforming. Nonperforming loans are those loans past due 90 days
or more and loans on nonaccrual. The following tables present the balances of consumer and residential
real estate loans by classes of loan portfolio based on payment performance as of December 31:
Consumer
2022
Residential
Real Estate
Total
Performing
Nonperforming
Total
$
$
5,030,762 $ 343,246,250 $ 348,277,013
455,571
5,030,762 $ 343,701,821 $ 348,732,583
455,571
-
Consumer
2021
Residential
Real Estate
Total
Performing
Nonperforming
Total
$ 16,185,659 $ 287,625,716 $ 303,811,375
724,431
$ 16,191,648 $ 288,344,158 $ 304,535,806
718,442
5,989
Age Analysis of Past Due Loans by Class
The following are tables which show the aging analysis of past due loans as of December 31:
2022
30-59
Days
Past Due Past Due Past Due Past Due Current
90 Days or
Greater
60-89
Days
Total
Total
Loans
90 Days
and
Accruing
30-59
Days
Past Due Past Due Past Due Past Due Current
90 Days or
Greater
60-89
Days
Total
Total
Loans
90 Days
and
Accruing
2021
$
- $
- $
15,794 $
15,794 $ 385,679,127 $ 385,694,921 $
67,725
162,058
141,138
370,921
118,530,277
118,901,198
-
-
87,447
87,447 30,662,188 30,749,635
-
-
-
-
-
-
-
41,322 409,445 718,442 1,169,209 287,174,949 288,344,158 326,690
$ 109,047 $ 571,503 $ 968,810 $ 1,649,360 $ 877,063,985 $ 878,713,345 $ 326,690
- 38,831,785 38,831,785
5,989 16,185,659 16,191,648
-
5,989
-
-
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total
Consumer mortgage loans held by the Company in the process of foreclosure amounted to $250,404 and
$303,674 as of December 31, 2022 and 2021, respectively.
Impaired Loans
Management considers commercial real estate loans, commercial and industrial loans, agricultural loans,
and state and political subdivision loans which are 90 days or more past due to be impaired. After
becoming 90 days or more past due, these categories of loans are measured for impairment. Any consumer
and residential real estate loans related to these delinquent loans are also considered to be impaired.
Troubled debt restructurings are measured for impairment at the time of restructuring. These loans are
analyzed to determine if it is probable that all amounts will not be collected according to the contractual
terms of the loan agreement. If management determines that the fair value of the impaired loan is less than
the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs, and
unamortized premium or discount), impairment is recognized through a provision or through a charge to
the allowance for loan losses.
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total
$ 211,804 $
- $
- $ 211,804 $ 489,117,324 $ 489,329,128 $
50,000
208,365
-
-
29,990
21,679 21,679 28,513,600 28,535,279
132,393,480
132,681,835
288,355
-
-
-
-
-
9,289
-
9,289
164,520 218,137 455,571 838,228 342,863,593 343,701,821 157,767
$ 435,613 $ 426,502 $ 507,240 $ 1,369,355 $ 1,022,135,759 $ 1,023,505,114 $ 157,767
- 24,226,289 24,226,289
5,030,762
5,021,473
-
-
-
-
36 Notes to Consolidated Financial Statements
25
26
Notes to Consolidated Financial Statements 37
5. ALLOWANCE FOR LOAN LOSSES (Continued)
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Impaired Loans (Continued)
Impaired Loans (Continued)
The following tables include the recorded investment and unpaid principal balances for impaired loans
with the associated allowance amount as of December 31:
2022
Unpaid
Recorded Principal Related
Investment Balance
Average
Recorded
Interest
Income
Allowance Investment Recognized
With an allowance recorded:
With no related allowance
recorded:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
$
115,207 $
115,207 $
- $
71,014 $
7,484
121,526
121,526
-
-
-
-
104,913
-
-
104,913
-
-
-
-
-
129,904
-
-
-
101,716
-
-
-
-
-
341,646
341,646
-
302,634
7,484
90,765
90,765
6,479
157,609
5,829
151,601
208,702
151,601
208,702
19,801
40,344
562,859
226,249
13,304
9,649
-
9,317
-
9,317
1,459,794 1,459,794
-
283
-
5,173
148,327 1,393,733
-
718
57,052
1,920,179 1,920,179
215,234 2,345,623
86,552
205,972
205,972
6,479
228,623
13,313
273,127
208,702
273,127
208,702
19,801
40,344
692,763
226,249
13,304
9,649
-
9,317
1,564,707 1,564,707
-
9,317
-
283
-
5,173
148,327 1,495,449
-
718
57,052
Unpaid
Recorded Principal Related
Investment Balance
Average
Recorded
Interest
Income
Allowance Investment Recognized
2021
With no related allowance
recorded:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
$
- $
- $
141,138
141,138
63,933
63,933
-
-
97,773
-
-
97,773
- $
-
-
-
-
-
- $
-
67,466
-
-
227,776
302,844
302,844
-
295,242
-
-
-
-
-
-
-
With an allowance recorded:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
254,364
254,364
22,224
277,669
15,898
719,727
224,585
719,727
224,585
250,050
44,087
695,390
231,991
11,081
8,341
-
5,989
1,219,381 1,219,381
-
5,989
-
5,989
133,886
-
2,754
644,639
-
-
18,121
2,424,046 2,424,046
456,236 1,852,443
53,441
254,364
254,364
22,224
277,669
15,898
860,865
288,518
860,865
288,518
250,050
44,087
695,390
299,457
11,081
8,341
-
5,989
1,317,154 1,317,154
-
5,989
-
5,989
133,886
-
2,754
872,415
-
-
18,121
Total
$ 2,726,890 $ 2,726,890 $
456,236 $ 2,147,685 $
53,441
Total
$ 2,261,825 $ 2,261,825 $
215,234 $ 2,648,257 $
94,036
Nonaccrual Loans
Loans are considered nonaccrual upon reaching 90 days of delinquency even though the Company may
be receiving partial payments of interest and partial repayments of principal on such loans. When a loan
is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income.
Interest income that would have been recorded on nonaccrual loans in accordance with their original
terms totaled approximately $61,839 and $42,671 as of December 31, 2022 and 2021, respectively.
38 Notes to Consolidated Financial Statements
27
28
Notes to Consolidated Financial Statements 39
5. ALLOWANCE FOR LOAN LOSSES (Continued)
6.
PREMISES AND EQUIPMENT
Nonaccrual Loans (Continued)
Major classifications of premises and equipment are summarized as follows:
The following table includes the loan balances on nonaccrual status as of December 31:
Commercial real estate
Commercial and industrial
Agricultural
Consumer
Residential real estate
Total
Troubled Debt Restructuring (TDR’s)
2022
2021
$ 14,351 $ 15,794
121,526 141,138
87,447
21,679
5,989
-
397,867 391,752
$ 555,423 $ 642,120
The Company’s loan portfolio also includes certain loans that have been modified in a troubled debt
restructuring, where economic concessions have been granted to borrowers who have experienced or are
expected to experience financial difficulties. These concessions typically result from the Company’s loss
mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of
principal, forbearance, or other actions.
When the Company modifies a loan, management evaluates any possible impairment based on the present
value of expected future cash flows, discounted at the contractual interest rate of the original loan
agreement. If management determines that the value of the modified loan is less than the recorded
investment in the loan, impairment is recognized either through a charge-off to the allowance or a specific
reserve. As of December 31, 2022 and 2021, specific reserve allocations of $175,363 and $283,715,
respectively, had been established against the troubled debt restructurings and no charge-offs for the
troubled debt restructurings were required.
There were no loans modified in a troubled debt restructuring from January 1, 2020 through December 31,
2021, that subsequently defaulted (i.e., 90 days or more past due following a modification) during the years
ended December 31, 2022 and 2021, respectively.
Loan modifications considered troubled debt restructurings completed during the year ended December
31, 2022 consist of one residential real estate loan and one unsecured consumer line of credit. The
Company’s outstanding recorded investment in the loans at the time of the restructuring was $314,487 and
$9,823, for the real estate loan and line of credit, respectively. Modifications to the real estate loan include
a lengthened maturity date and reduced monthly payment. The maturity date of the credit line was
extended. The Company’s outstanding recorded investment amount in these loans was not changed by the
TDR modifications.
Loan modifications considered troubled debt restructurings completed during the year ended December
31, 2021 consist of eleven commercial loans and a residential real estate loan, all with a single borrower.
The Company’s outstanding recorded investment in the loans at the time of the restructuring was $207,291
and $709,393, for the commercial loans and the real estate loan, respectively. Modifications include
changes to the loan maturity dates, and interest only payments for a number of the commercial loans. The
Company’s outstanding recorded investment amount in these loans was not changed by the TDR
modifications.
Land and land improvements
Buildings and leasehold improvements
Buildings - construction in progress
Furniture, fixtures, and equipment
Less accumulated depreciation
Total
2022
2021
9,396
$ 2,959,350 $ 2,394,918
32,069,851 30,278,415
911,279
9,750,458 9,168,725
44,789,055 42,753,337
17,993,384 17,174,994
$ 26,795,671 $ 25,578,343
Depreciation charged to operations was $1,464,812 in 2022 and $1,397,013 in 2021.
7. GOODWILL
As of December 31, 2022 and 2021, goodwill had a gross carrying amount of $4,174,955, and accumulated
amortization of $614,013 for a net carrying value of $3,560,942. The carrying amount of goodwill was
tested for impairment in the fourth quarter, after the annual forecasting process. There was no impairment
for the years ended December 31, 2022 and 2021.
8. DEPOSITS
The scheduled maturities of time deposits approximate the following:
Year Ending
December 31,
2023
2024
2025
2026
2027
Thereafter
Amount
145,142,981
100,495,532
7,475,553
6,865,368
6,282,160
2,014,544
268,276,138
$
$
The aggregate of all time deposit accounts of $250,000 or more amounted to $76,886,890 and $78,736,718
as of December 31, 2022 and 2021, respectively. As of December 31, 2022, there were no individual
depositors with balances in excess of 5% of total deposits. As of December 31, 2021, there was one
individual depositor with a deposit account balance in excess of 5% of total deposits, in the amount of
approximately $51.2 million.
40 Notes to Consolidated Financial Statements
29
30
Notes to Consolidated Financial Statements 41
9.
SHORT-TERM BORROWINGS
10. OTHER BORROWINGS (Continued)
Short-term borrowings include overnight repurchase agreements through the FHLB, federal funds
purchased, and repurchase agreements with customers. The outstanding balances and related information
for short-term borrowings are summarized as follows:
Balance at year-end
Average balance outstanding
Maximum month-end balance
Weighted-average rate at year-end
Weighted-average rate during the year
2022
2021
$ 100,326,547 $ 67,433,957
83,774,238 61,364,033
105,337,229 74,291,791
4.71 %
2.51 %
0.28 %
0.33 %
The collateral pledged on the repurchase agreements by the remaining contractual maturity of the
repurchase agreements in the Consolidated Balance Sheet as of years ended December 31, 2022 and 2021,
is presented in the following table.
Remaining
Contractual Maturity
Overnight and Continuous
December 31, December 31,
2022
2021
Securities of U.S. Government Agencies, U.S. Treasuries, and
obligations of state and political subdivisions pledged, fair value $
Repurchase agreements
2,161,670 $
786,231
6,620,013
874,393
10. OTHER BORROWINGS
The following table sets forth information concerning other borrowings:
Description
Maturity Range
To
From
Weighted-
Average
Interest
Rate
Stated Interest
Rate Range
To
From
At December 31,
2022
2021
05/22/23 08/04/26
Fixed rate
01/31/23 07/15/24
Fixed rate amortizing
Subordinated debt
08/25/24 03/03/26
Junior subordinated debt 03/17/35 11/23/35
2.38 %
1.60
4.24
4.99
1.62 %
1.33
4.00
4.46
2.64 % $ 16,821,000 $ 29,737,000
3,381,698
1.81
27,879,922
4.75
6,186,000
5.53
1,475,655
27,930,998
6,186,000
$ 52,413,653 $ 67,184,620
Maturities of other borrowings at December 31, 2022, are summarized as follows:
Year Ending
December 31,
2023
2024
2025
2026
2027
2028 and after
$
$
Amount
8,021,816
5,792,839
3,359,000
1,123,000
-
34,116,998
52,413,653
Weighted-
Average Rate
2.24 %
2.37
2.50
2.01
-
4.38
3.66
Borrowing capacity consists of credit arrangements with the FHLB. FHLB borrowings are subject to
annual renewal, incur no service charges, and are secured by a blanket security agreement on certain
investment and mortgage-backed securities, outstanding residential mortgages, and the Bank’s investment
in FHLB stock. As of December 31, 2022, the Bank’s maximum borrowing capacity with the FHLB was
approximately $473.1 million.
The Bank may request a Federal Reserve Advance secured by acceptable collateral. The Bank’s maximum
borrowing capacity with the Federal Reserve Bank as of December 31, 2022 is approximately $95.7
million.
The Bank maintains a $10.0 million, $10.0 million, and $5.0 million federal funds line of credit with three
other financial institutions. The Bank maintains a $750,000 Letter of Credit Facility with a financial
institution. The Bank did not have outstanding borrowings related to these lines of credit at December 31,
2022.
In 2014, the Company formed a special purpose entity (“Entity”) to issue $3,093,000 of fixed/floating rate
subordinated debt securities with a stated maturity of March 17, 2035. The rate on these securities is
determined quarterly and floats based on three-month LIBOR plus 2.00 percent. The Entity may redeem
them, in whole or in part, at face value on or after March 17, 2010. The Company borrowed the proceeds
from the Entity in the form of a $3,093,000 note payable, which is included in the liabilities section of the
Company’s Consolidated Balance Sheet.
In 2015, the Company formed an additional special purpose entity to issue $3,093,000 of fixed/floating
rate subordinated debt securities with a stated maturity of November 23, 2035. These securities had a fixed
rate of 6.11 percent until November 23, 2015, at which time the rate converted to floating, is determined
quarterly, and floats based on three-month LIBOR plus 1.50 percent. The Entity may redeem them, in
whole or in part, at face value on or after November 23, 2010. The Company borrowed the proceeds from
the Entity in the form of a $3,093,000 note payable, which is included in the liabilities section of the
Company’s Consolidated Balance Sheet.
In 2020, the Company issued $8,097,000 of fixed rate subordinated capital notes with stated maturities of
June 23, 2030 through April 1, 2031. These securities bear a fixed annual rate of 4.75 percent. The
Company may redeem them, in whole or in part, at face value on or after June 23, 2025. These borrowings
are included in the liabilities section of the Company’s Consolidated Balance Sheet.
42 Notes to Consolidated Financial Statements
31
32
Notes to Consolidated Financial Statements 43
10. OTHER BORROWINGS (Continued)
11. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
In 2021, the Company issued $20,000,000 of fixed rate subordinated capital notes with a stated maturity
of April 7, 2031. The fixed securities bear an annual rate of 4.00 percent. The Company may redeem them,
in whole or in part, at face value on or after April 7, 2026. These borrowings are included in the liabilities
section of the Company’s Consolidated Balance Sheet.
The Company’s minority interests in these entities were recorded at the initial investment amount and are
included in the accrued interest and other assets on the Consolidated Balance Sheet. These entities are not
consolidated as part of the Company’s consolidated financial statements.
11. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic
conditions. The Company principally manages its exposures to a wide variety of business and operational
risks through management of its core business activities. The Company manages economic risks, including
interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets
and liabilities and through the use of derivative financial instruments. Specifically, the Company enters
into derivative financial instruments to manage exposures that arise from business activities that result in
the receipt or payment of future known and uncertain cash amounts, the value of which are determined by
interest rates. The Company’s derivative financial instruments are used to manage differences in the
amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected
cash payments principally related to certain variable rate borrowings. The Company also has interest rate
derivatives that result from a service provided to certain qualifying customers and, therefore, are not used
to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book
with respect to its derivative instruments in order to minimize its net risk exposure resulting from such
transactions.
The Company has contracted with a third party to engage pay-fixed interest rate swap contracts and the
outstanding as of December 31, 2022, is being utilized to hedge $65.0 million in floating rate debt. At
December 31, 2022 and 2021, the information pertaining to outstanding interest rate swap agreements is
as follows:
Notional amount
Weighted-average pay rate
Receive rate
Weighted-average maturity in years
Unrealized gain (loss) relating to interest rate swaps
2022
2021
$ 147,437,424
$ 135,687,424
3.39 %
3.09 %
1 or 3-Mo.
Libor; 1-Mo.
Term SOFR
5.0
4,757,978
1 or 3-Mo.
Libor
5.9
(1,563,261 )
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest income and
expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company
has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate
swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a
counterparty in exchange for the Company making fixed interest payments. As of December 31, 2022 and
2021, the Company had six interest rate swaps with a notional of $65.0 million associated with the
Company’s cash outflows associated with various floating-rate amounts.
For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the
derivative is initially reported in other comprehensive income (outside of earnings), net of tax, and
subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective
portion of changes in the fair value of the derivative is recognized directly in earnings. The Company
assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the
derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The
Company did not recognize any hedge ineffectiveness in earnings during the periods ended December 31,
2022 and 2021. Amounts reported in accumulated other comprehensive income related to derivatives will
be reclassified to interest expense as interest payments are made on the Company’s variable-rate liabilities.
During the next twelve months, the Company estimates that $0 will be reclassified as an increase in interest
expense.
Credit-Risk-Related Contingent Features
The Company has agreements with certain of its derivative counterparties that contain the following
provisions:
•
•
•
if the Company defaults on any of its indebtedness, including default where repayment of the
indebtedness has not been accelerated by the lender, then the Company could also be declared in
default on its derivative obligations;
if the Company fails to maintain its status as a well/adequately capitalized institution, then the
counterparty could terminate the derivative positions, and the Company would be required to settle its
obligations under the agreements;
if the Company fails to maintain a specified minimum leverage ratio, then the Company could be
declared in default on its derivative obligations.
At December 31, 2022, the fair value of derivatives in a net asset position, which includes accrued interest
and any credit valuation adjustments related to these agreements, was $4,757,978. At December 31, 2022,
the Company had no required cash collateral with its derivative counterparties and was holding cash
collateral of certain derivative counterparties in the amount of $11,550,000.
44 Notes to Consolidated Financial Statements
33
34
Notes to Consolidated Financial Statements 45
11. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
11. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
Fair Values of Derivative Instruments on the Balance Sheet
Derivative Instruments (Continued)
The following table presents the fair values of derivative instruments in the consolidated balance sheet:
Assets
Liabilities
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Other assets
$ 11,650,894 Other liabilities $
(6,892,916 )
Other assets
$
2,277,931 Other liabilities $
(3,841,192 )
December 31, 2022
Interest rate derivatives
December 31, 2021
Interest rate derivatives
Derivative Instruments
The Company enters into interest rate swaps that allow our commercial loan customers to effectively
convert a variable-rate commercial loan agreement to a fixed-rate loan agreement. Under these agreements,
the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap
agreement, which serves to effectively swap the customer’s variable-rate into a fixed-rate. The Company
then enters into a swap agreement with a third party in order to economically hedge its exposure through
the customer agreement.
Although the Company has determined that the majority of the inputs used to value its derivatives fall
within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives
may use Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by
itself and its counterparties. However, at December 31, 2022, the Company has assessed the significance
of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has
determined they are not significant. As a result, the Company has determined that its derivative valuations
in their entirety are classified in Level 2 of the fair value hierarchy.
Interest
Rate
Received
Fair Value
December 31,
2022
2021
3 Mo. Libor
3 Mo. Libor
3 Mo. Libor
3 Mo. Libor
3 Mo. Libor
$
254,978 $
1,352,949
1,550,817
707,473
891,761
(151,818 )
(427,551 )
(627,802 )
(450,122 )
94,032
$
4,757,978 $
(1,563,261 )
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
$
(291,326 ) $
(232,956 )
45,994
(942,636 )
(2,163,077 )
(2,415,478 )
(167,466 )
(725,971 )
559,467
783,043
(12,933 )
416,196
523,823
197,103
-
(188,768 )
$
(6,892,916 ) $
2,277,931
Notional Amount
December 31,
2022
2021
Cash flow interest
rate swap
Maturing in 2024 $ 6,000,000 $ 6,000,000
22,000,000 22,000,000
Maturing in 2025
22,000,000 22,000,000
Maturing in 2026
10,000,000 10,000,000
Maturing in 2027
5,000,000 5,000,000
Maturing in 2030
$ 65,000,000 $ 65,000,000
Customer interest
rate swap
Interest
Rate
Paid
Fixed
Fixed
Fixed
Fixed
Fixed
Maturing in 2025 $ 9,100,000 $ 9,100,000
9,266,000 9,266,000
Maturing in 2026
10,776,388 1,026,388 1 Mo. Libor/1 Mo. SOFR+Margin
Maturing in 2027
10,470,000 10,470,000
Maturing in 2029
19,902,036 19,902,036
Maturing in 2030
17,203,000 17,203,000
Maturing in 2031
2,000,000
Maturing in 2032
3,720,000 3,720,000
Maturing in 2035
1 Mo. Libor + Margin
1 Mo. Libor + Margin
1 Mo. Libor + Margin
- 1 Mo. Libor/1 Mo. SOFR+Margin
1 Mo. Libor + Margin
1 Mo. Libor + Margin
1 Mo. Libor + Margin
$ 82,437,424 $ 70,687,424
Third party interest
rate swap
Maturing in 2025 $ 9,100,000 $ 9,100,000
9,266,000 9,266,000
Maturing in 2026
10,776,388 1,026,388
Maturing in 2027
10,470,000 10,470,000
Maturing in 2029
19,902,036 19,902,036
Maturing in 2030
17,203,000 17,203,000
Maturing in 2031
2,000,000
Maturing in 2032
-
3,720,000 3,720,000
Maturing in 2035
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
1 Mo. Libor + Margin
1 Mo. Libor + Margin
$
1 Mo. Libor/1 Mo. SOFR+Margin
1 Mo. Libor + Margin
1 Mo. Libor + Margin
1 Mo. Libor + Margin
1 Mo. Libor/1 Mo. SOFR+Margin
1 Mo. Libor + Margin
291,326 $
232,956
(45,994 )
942,636
2,163,077
2,415,478
167,466
725,971
(559,467 )
(783,043 )
12,933
(416,196 )
(523,823 )
(197,103 )
-
188,768
$ 82,437,424 $ 70,687,424
$
6,892,916 $
(2,277,931 )
46 Notes to Consolidated Financial Statements
35
36
Notes to Consolidated Financial Statements 47
12.
INCOME TAXES
12.
INCOME TAXES (Continued)
The provision for federal income taxes for the years ended December 31, 2022 and 2021 consists of:
The reconciliation between the federal statutory rate and the Company’s effective consolidated income tax
rate is as follows:
Current
Deferred
$
2022
2,243,421 $
179,626
2021
1,834,896
(483,336 )
Total provision
$
2,423,047 $
1,351,560
The tax effects of deductible and taxable temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 are as follows:
Deferred tax assets:
$
Allowance for loan losses
Deferred compensation
Deferred incentive credits
Asset valuation allowances
Employee compensation accruals
Nonaccrual interest receivable
Unrealized loss on swaps - balance sheet hedge
Unrealized loss on available-for-sale securities
Partnerships
Lease liability
Capital loss carryforward
Other
Deferred tax assets
Deferred tax liabilities:
Premises and equipment
Goodwill
Deferred loan fees
Unrealized gain on swaps - balance sheet hedge
Fair value adjustment - equity securities
Right of use asset
Deferred tax liabilities
2022
2021
2,170,398 $
431,972
203,917
62,437
290,265
12,986
-
5,266,059
105,907
927,950
978
691
9,473,560
660,323
405,166
35,880
975,427
166,196
904,204
3,147,196
2,217,569
445,183
231,723
74,594
289,464
8,961
313,569
104,445
77,367
953,122
804
1,174
4,717,975
546,798
378,674
92,236
-
131,643
935,252
2,084,603
Net deferred tax assets
$
6,326,364 $
2,633,372
No valuation allowance was established at December 31, 2022 and 2021, in view of the Company’s ability
to carryback taxes paid in previous years and certain tax strategies, coupled with the anticipated future
taxable income as evidenced by the Company’s earnings potential.
Provision at statutory rate
Tax-exempt interest
Life insurance income
Investment tax credits
Other
Income tax expense and
effective rate
2022
% of
Pretax
2021
% of
Pretax
Amount
$ 3,209,503
(250,825 )
(166,018 )
(329,442 )
(40,171 )
Income
21.0 %
(1.6 )
(1.1 )
(2.2 )
(0.3 )
Amount
$ 2,358,909
(322,889 )
(135,336 )
(329,442 )
(219,681 )
Income
21.0 %
(2.9 )
(1.2 )
(2.9 )
(2.0 )
$ 2,423,047
15.8 %
$ 1,351,560
12.0 %
The Company prescribes a recognition threshold and a measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from
tax positions should be recognized in the financial statements only when it is more likely than not that the
tax position will be sustained upon examination by the appropriate taxing authority that would have full
knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition
threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized
upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition
threshold should be recognized in the first subsequent financial reporting period in which that threshold is
met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition
threshold should be derecognized in the first subsequent financial reporting period in which that threshold
is no longer met.
There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The
Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the
provision for income taxes in the Consolidated Statement of Income. The Company’s federal and state
income tax returns for taxable years through 2018 have been closed for purposes of examination by the
Internal Revenue Service and the Pennsylvania Department of Revenue.
13. EMPLOYEE BENEFITS
Savings Plan
The Bank maintains a qualified 401(k) salary reduction and profit sharing plan that covers substantially all
employees. Under the plan, employees make voluntary, pretax contributions to their accounts, and the
Bank contributions to the plan are at the discretion of the Board of Directors. Contributions by the Bank
charged to operations were $531,135 and $491,112 for the years ended December 31, 2022 and 2021,
respectively. The fair value of plan assets includes $3,049,640 and $3,207,662 pertaining to the value of
the Company’s common stock that is held by the plan as of December 31, 2022 and 2021, respectively.
48 Notes to Consolidated Financial Statements
37
38
Notes to Consolidated Financial Statements 49
13. EMPLOYEE BENEFITS (Continued)
Deferred Compensation Plan
13. EMPLOYEE BENEFITS (Continued)
Stock Option Plan
The Company has nonqualified deferred compensation plans that allow directors and senior executives to
defer fees and salaries. Outstanding balances under these arrangements as of December 31, 2022 and 2021
were $2,057,010 and $2,119,917, respectively, and are reported as “Other liabilities” on the Consolidated
Balance Sheet. Expenses related to these plans were a gain of $228,263 and a loss of $240,839 for the
years ended December 31, 2022 and 2021, respectively.
Restricted Stock Plan
The Company maintains a Restricted Stock Plan (the “Plan”). Employees and board members 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. Since inception of the Plan in 1988, the
Company has authorized share pools totaling 480,000 shares of the Company’s common stock to the plan.
The Plan has a remaining available share pool of 194,100 shares and 210,247 shares as of December 31,
2022 and 2021, respectively. The Plan assists the Company in attracting, retaining and motivating
employees and non-employee directors 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.
Compensation expense recognized related to restricted stock awards was $557,833 and $515,935 for the
years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, unrecognized
compensation cost related to restricted stock awards was $1,138,001, which is expected to be recognized
over a weighted average life of 3.17 years.
The following is a summary of the status of the Company’s outstanding restricted stock awards as of
December 31, 2022 and 2021, and changes therein during the years then ended:
Shares of
Restricted
Stock
Outstanding
Weighted-
Average
Grant Date
Fair Value
Outstanding at December 31, 2020
Granted
Released from Restrictions
Forfeited
Outstanding at December 31, 2021
Granted
Released from Restrictions
Forfeited
Outstanding at December 31, 2022
81,104 $
18,160
(24,236 )
(1,842 )
73,186
17,355
(22,089 )
(1,208 )
67,244 $
27.10
30.34
23.64
30.00
28.98
36.35
28.01
30.16
31.18
The Company has a stock option plan available for granting stock-based compensation awards to
employees and board members. The Company authorized a share pool of 760,000 shares of the Company’s
common stock for granting incentive stock options and non-qualified stock option awards. The stock
option plan has a remaining available share pool of 114,056 and 149,527 shares as of December 31, 2022
and 2021, respectively. The exercise price for the purchase of shares subject to a stock option may not be
less than 100 percent of the fair market value of the shares covered by the option on the date of the grant.
The term of stock options will not exceed ten years from the date of grant. Options granted are primarily
vested evenly over a three-year period from the grant date. Compensation expense recognized related to
stock option awards was $188,518 and $129,509 for the years ended December 31, 2022 and 2021,
respectively. As of December 31, 2022, unrecognized compensation cost related to stock option awards
was $312,282 which is expected to be recognized over a weighted-average life of 1.89 years.
The following table presents share data related to the outstanding option awards:
Incentive Stock Options
Weighted-
Average
Exercise
Price
Options
Outstanding
145,558 $
34,500
(11,140 )
(4,301 )
164,617
32,190
(14,788 )
(3,000 )
26.46
30.41
23.24
29.88
27.42
36.00
24.24
30.38
Outstanding, December 31, 2020
Granted
Exercised
Forfeited/Expired
Outstanding, December 31, 2021
Granted
Exercised
Forfeited/Expired
Non-Qualified Stock
Options
Weighted-
Average
Exercise
Price
22.65
30.05
22.54
28.87
23.34
36.00
19.16
28.89
Options
Outstanding
69,414 $
8,415
(7,545 )
(2,632 )
67,652
7,585
(15,820 )
(1,304 )
Outstanding, December 31, 2022
179,019 $
29.17
58,113 $
26.01
Exercisable at December 31, 2022
114,574 $
27.34
43,919 $
23.85
50 Notes to Consolidated Financial Statements
39
40
Notes to Consolidated Financial Statements 51
13. EMPLOYEE BENEFITS (Continued)
Stock Option Plan (Continued)
Option awards outstanding and exercisable as of December 31, 2022:
Incentive Stock Options
Expiration
Date
Exercise
Price
Share
Awards
Outstanding
Share
Awards
Exercisable
Remaining
Contractual
Life (years)
$
04/01/23
04/01/24
04/01/25
03/30/26
10/31/26
12/12/26
04/03/27
04/02/28
04/01/29
04/03/30
12/01/30
04/03/31
10/01/31
03/25/32
16.63
18.25
19.48
22.00
22.40
22.38
27.00
29.63
31.60
25.65
30.00
30.05
38.25
36.00
5,100
3,222
6,368
7,300
1,000
1,000
8,800
24,575
28,418
26,512
2,900
30,584
1,500
31,740
179,019
5,100
3,222
6,368
7,300
1,000
1,000
8,800
24,575
28,418
16,587
1,932
9,772
500
-
114,574
0.25
1.25
2.25
3.24
3.83
3.95
4.25
5.25
6.25
7.25
7.92
8.25
8.75
9.23
Non-Qualified Stock Options
Expiration
Date
Exercise
Price
Share
Awards
Outstanding
Share
Awards
Exercisable
Remaining
Contractual
Life (years)
$
04/01/23
04/01/24
04/01/25
03/30/26
10/31/26
12/12/26
04/03/27
04/02/28
04/01/29
04/03/30
10/28/30
04/03/31
03/25/32
16.63
18.25
19.48
22.00
22.40
22.38
27.00
29.63
31.60
25.65
28.25
30.05
36.00
3,900
2,222
5,820
9,124
1,000
1,000
10,096
1,260
2,980
3,507
666
2,344
-
43,919
0.25
1.25
2.25
3.25
3.83
3.95
4.25
5.25
6.25
7.25
7.82
8.25
9.23
3,900
2,222
5,820
9,124
1,000
1,000
10,096
1,260
2,980
5,091
1,000
7,035
7,585
58,113
41
52 Notes to Consolidated Financial Statements
14. COMMITMENTS
In the normal course of business, there are outstanding commitments and contingent liabilities such as
commitments to extend credit, financial guarantees, and letters of credit that are not reflected in the
accompanying consolidated financial statements. The Company does not anticipate any losses as a result
of these transactions. These instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the Consolidated Balance Sheet.
The contract or notional amounts of those instruments reflect the extent of involvement the Company has
in the particular classes of financial instruments that consisted of the following:
Commitments to extend credit
Standby letters of credit
Total
2022
2021
$ 390,351,246 $ 300,005,656
4,330,165
7,301,502
$ 397,652,748 $ 304,335,821
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily represent future cash
requirements.
Standby letters of credit represent conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. These instruments are issued primarily to support bid or
performance-related contracts. The coverage period for these instruments is typically a one-year period,
with an annual renewal option subject to prior approval by management. Fees earned from the issuance
of these letters are recognized upon expiration of the commitment period. For secured letters of credit, the
collateral is typically Bank deposit instruments or real estate.
Lease Commitments
The Company leases office space and real estate for its bank branches with terms ranging from two years
to eighteen years. The Company’s leases are classified as operating leases. In accordance with ASC 842,
operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-
use (ROU) asset and a corresponding lease liability. A combined ROU asset balance of $4,305,731 and
$4,453,581 related to these operating leases is included in Accrued Interest and Other Assets on the
consolidated balance sheet as of December 31, 2022 and 2021, respectively. A combined lease liability of
$4,418,809 and $4,538,678 related to these operating leases is included in Accrued Interest and Other
Liabilities on the consolidated balance sheet as of December 31, 2022 and 2021, respectively.
42
Notes to Consolidated Financial Statements 53
14. COMMITMENTS (Continued)
Lease Commitments (Continued)
Maturities of our lease liabilities for all operating leases for each of the next five years and thereafter are
as follows:
$
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: imputed interest
Present value of lease liabilities $
Operating Lease
Payments
433,419
442,592
420,621
345,209
342,537
3,603,250
5,587,628
1,168,819
4,418,809
The calculated amount of the lease liability in the preceding table is impacted by the length of the
lease term and the discount rate used to present value the minimum lease payments. The Company’s
lease agreement includes one or more options to renew at the Company’s discretion. If at lease
inception the Company considers the exercising of a renewal option to be reasonably certain, the
Company will include the extended term in the calculation of the ROU asset and lease liability.
Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this
rate is readily determinable. As most of our leases do not provide an implicit rate, we use the fully
collateralized FHLB borrowing rate, commensurate with the lease terms based on the information
available at the lease commencement date in determining the present value of the lease payments.
Our combined operating leases have a weighted-average discount rate of 3.22% and 3.25%, and a
weighted-average remaining lease term of 14.1 years and 14.2 years as of December 31, 2022 and 2021,
respectively.
Contingent Liabilities
The Company from time to time may be a party in various legal actions from the normal course of business
activities. Management believes the liability, if any, arising from such actions will not have a material
adverse effect on the Company’s financial position.
15. REGULATORY RESTRICTIONS
Loans
Federal law prevents the Company from borrowing from the Bank unless the loans are secured by specific
obligations. Further, such secured loans are limited in amount to 10 percent of the Bank’s common stock
and capital surplus. There were no such borrowings by the Company during 2022 and 2021.
Dividends
The Pennsylvania Banking Code restricts the availability of capital surplus for dividend purposes. At
December 31, 2022, the Bank had a capital surplus of $13,207,240 which was not available for distribution
to the Company as dividends.
16. REGULATORY CAPITAL
Federal regulations require the Company and the Bank to maintain minimum amounts of capital.
Specifically, each is required to maintain certain minimum dollar amounts and ratios of Total Tier I and
Common Equity Tier 1 capital to risk-weighted assets and of Tier I capital to average total assets.
In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act
(“FDICIA”) established five capital categories ranging from “well capitalized” to “critically
undercapitalized.” Should any institution fail to meet the requirements to be considered “adequately
capitalized,” it would become subject to a series of increasingly restrictive regulatory actions.
As of December 31, 2022 and 2021, the FDIC categorized the Company and the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be classified as a well capitalized
financial institution, Total risk-based, Common Equity Tier I, Tier I risk-based, and Tier I leverage capital
ratios must be at least 10 percent, 6.50 percent, 8 percent, and 5 percent, respectively.
The Company’s actual capital ratios are presented in the following table that shows the Company met all
regulatory capital requirements:
Total capital
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Common Equity Tier I
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Tier I capital
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Tier I capital
(to average assets)
Actual
For capital adequacy purposes
To be well capitalized
2022
2021
Amount
Ratio
Amount
Ratio
$ 129,819,958 11.57 %
89,781,117 8.00
112,226,396 10.00
$ 121,077,636 12.78 %
75,773,784 8.00
94,717,230 10.00
$ 85,694,466 7.64 %
50,501,878 4.50
72,947,157 6.50
$ 76,227,523 8.05 %
42,622,753 4.50
61,566,199 6.50
$ 91,694,466 8.17 %
67,335,838 6.00
89,781,117 8.00
$ 82,227,523 8.68 %
56,830,338 6.00
75,773,784 8.00
$ 91,694,466 6.96 %
52,701,512 4.00
65,876,890 5.00
$ 82,227,523 6.69 %
49,198,771 4.00
61,498,463 5.00
54 Notes to Consolidated Financial Statements
43
44
Notes to Consolidated Financial Statements 55
16. REGULATORY CAPITAL (Continued)
17. FAIR VALUE MEASUREMENTS (Continued)
The Bank’s actual capital ratios are presented in the following table which shows the Bank met all
regulatory capital requirements:
Total capital
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Common Equity Tier I
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Tier I capital
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Tier I capital
(to average assets)
Actual
For capital adequacy purposes
To be well capitalized
2022
2021
Amount
Ratio
Amount
Ratio
$ 120,906,721 10.71 %
90,281,978 8.00
112,852,473 10.00
$ 102,659,040 10.87 %
75,581,493 8.00
94,476,866 10.00
$ 110,378,229 9.78 %
50,783,613 4.50
73,354,107 6.50
$ 91,905,928 9.73 %
42,514,590 4.50
61,409,963 6.50
$ 110,378,229 9.78 %
67,711,484 6.00
90,281,978 8.00
$ 91,905,928 9.73 %
56,686,120 6.00
75,581,493 8.00
$ 110,378,229 8.39 %
52,638,947 4.00
65,798,684 5.00
$ 91,905,928 7.53 %
48,840,828 4.00
61,051,035 5.00
17. FAIR VALUE MEASUREMENTS
The following disclosures show the hierarchical disclosure framework associated with the level of pricing
observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing
observations are as follows:
Level I:
Level II:
Quoted prices are available in active markets for identical assets or liabilities as of the
reported date.
Pricing inputs are other than the quoted prices in active markets, which are either directly
or indirectly observable as of the reported date. The nature of these assets and liabilities
includes 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.
This hierarchy requires the use of observable market data when available.
The following tables present the assets and liabilities reported on the Consolidated Balance Sheet at their
fair value on a recurring basis as of December 31, 2022 and 2021, by level within the fair value hierarchy.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.
Level I
Level II
Level III
Total
December 31, 2022
Investment and equity securities at fair value:
$
U.S. treasury securities
U.S. government agency securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities in
government-sponsored entities
Collateralized mortgage obligations
Equity securities
- $ 19,132,495 $
- 43,007,551
- $ 19,132,495
- 43,007,551
-
34,276,710
- 6,452,429
-
34,276,710
- 6,452,429
-
26,471,896
- 25,967,470
-
2,858,117
-
26,471,896
- 25,967,470
- 2,858,117
Total
$ 2,858,117 $ 155,308,551 $
- $ 158,166,668
Derivatives at fair value: (1)
Assets
Liabilities
$
$
- $ 11,650,894 $
- $ (6,892,916 ) $
- $ 11,650,894
- $ (6,892,916 )
Level I
Level II
Level III
Total
December 31, 2021
Investment and equity securities at fair value:
$
U.S. treasury securities
U.S. government agency securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities in
government-sponsored entities
Collateralized mortgage obligations
Equity securities
- $ 4,926,520 $
- 52,623,526
- $ 4,926,520
- 52,623,526
-
42,582,632
- 8,685,209
-
42,582,632
- 8,685,209
32,656,722
-
- 37,272,529
-
2,693,580
32,656,722
-
- 37,272,529
- 2,693,580
Total
$ 2,693,580 $ 178,747,138 $
- $ 181,440,718
Derivatives at fair value: (1)
Assets
Liabilities
$
$
- $ 2,277,931 $
- $ (3,841,192 ) $
- $ 2,277,931
- $ (3,841,192 )
Level III:
Valuations derived from valuation techniques in which one or more significant inputs or
significant value drivers are unobservable.
(1) Derivative assets and liabilities at fair value are included in our Consolidated Balance Sheet in
Accrued interest and other assets and Accrued interest and other liabilities, respectively.
56 Notes to Consolidated Financial Statements
45
46
Notes to Consolidated Financial Statements 57
17. FAIR VALUE MEASUREMENTS (Continued)
Investment Securities
17. FAIR VALUE MEASUREMENTS (Continued)
Mortgage Servicing Rights (Continued)
The fair market value of investment securities is equal to the available quoted market price. If no quoted
market price is available, fair value is estimated using the quoted market price for similar securities. Fair
value for certain held to maturity securities were determined utilizing discounted cash flow models, due to
the absence of a current market to provide reliable market quotes for the instruments.
Impaired Loans
The Company has measured impairment on loans generally based on the fair value of the loan’s collateral
on a non-recurring basis. Fair value is generally determined based upon independent third-party appraisals
of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal,
changes in market conditions, or observable deterioration of the property since the appraisal was
completed. Additionally, management makes estimates about expected costs to sell the property which are
also included in the net realizable value. If the fair value of the collateral dependent loan is less than the
carrying amount of the loan, a specific reserve for the loan is made in the allowance for loan losses, or a
charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and
the loan is included in the table above as a Level III measurement.
Derivatives
Derivative instruments are recorded at fair value based upon commercially reasonable industry and market
practices for valuing similar financial instruments. Certain inputs to the credit valuation models may be
based on assumptions and best estimates that are not readily observable in the marketplace. Valuations do
not reflect trading costs or counterparty charges that could apply if positions are terminated.
Mortgage Servicing Rights
Mortgage servicing rights are accounted for under the amortization method and are adjusted to the lower
of aggregate cost or estimated fair value on a semi-annual basis or more frequently as deemed
appropriate. Fair value is estimated by projecting and discounting future cash flows. Various assumptions
including future cash flows, market discount rates, expected prepayment rates, servicing costs, and other
factors are used in the valuation of mortgage servicing rights.
The following tables present the assets measured on a nonrecurring basis on the Consolidated Balance
Sheet at their fair value as of December 31, 2022 and 2021, by level within the fair value hierarchy.
Impaired loans that are collateral dependent are written down to fair value through the establishment of
specific reserves. Techniques used to value the collateral that secure the impaired loans include: quoted
market prices for identical assets classified as Level I inputs and observable inputs employed by certified
appraisers for similar assets classified as Level II inputs. In cases where valuation techniques included
inputs that are unobservable and are based on estimates and assumptions developed by management based
on the best information available under each circumstance, the asset valuation is classified as Level III
input. Other real estate owned is measured at fair value, less cost to sell at the date of foreclosure.
Valuations are periodically performed by management and the assets are carried at the lower of carrying
amount, or fair value less cost to sell. The fair value for mortgage servicing rights is estimated by
discounting contractual cash flows and adjusting for prepayment estimates. Discount rates are based upon
rates generally charged for such loans with similar characteristics.
Assets:
Impaired loans
Mortgage servicing rights
Assets:
Impaired loans
Mortgage servicing rights
Level I
Level II
Level III Total
December 31, 2022
$
- $
-
- $ 2,046,591 $ 2,046,591
- 175,683 175,683
Level I
Level II
Level III Total
December 31, 2021
$
- $
-
- $ 2,270,654 $ 2,270,654
- 174,388 174,388
The following tables provide a listing of significant unobservable inputs used in the fair value measurement
process for items valued utilizing Level III techniques as of December 31, 2022 and 2021.
Valuation
December 31, 2022
Fair Value Techniques Unobservable Inputs
Range
Impaired loans
$ 1,844,464
Impaired loans
$ 202,127
Discounted
cash flows
Property
appraisals
Discount Rate
4.00% - 10.00% discount
Weighted Average (5.20%)
Management discount
for property type and
recent market volatility
15.00% - 100.00% discount
Weighted Average (23.13%)
Mortgage servicing
rights
$ 175,683
Discounted
cash flows
Discount rate
5.19% - 5.90% discount
Weighted Average (5.55%)
Prepayment speeds
1.30% - 5.28% prepayment factor
Weighted Average (1.50%)
Valuation
December 31, 2021
Fair Value Techniques Unobservable Inputs
Range
Impaired loans
$ 1,643,180
Impaired loans
$ 627,474
Discounted
cash flows
Property
appraisals
Discount Rate
4.50% - 10.00% discount
Weighted Average (5.02%)
Management discount
for property type and
recent market volatility
0.00% - 100.00% discount
Weighted Average (19.59%)
Mortgage servicing
rights
$ 174,388
Discounted
cash flows
Discount rate
1.77% - 2.47% discount
Weighted Average (2.12%)
Prepayment speeds
1.98% - 2.58% prepayment factor
Weighted Average (2.23%)
58 Notes to Consolidated Financial Statements
47
48
Notes to Consolidated Financial Statements 59
18. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
19. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The estimated fair values of the Company’s financial instruments not required to be measured or reported
at fair value at December 31, 2022 and 2021 are as follows:
The following table presents the changes in accumulated other comprehensive income (loss) by component
net of tax for the year ended December 31, 2022 and 2021:
Carrying
Value
Fair
Value
2022
Level
I
Level
II
Level
III
10,763,833 $
$
1,013,169,883
10,070,997 $
953,469,471
- $ 10,070,997 $
-
-
953,469,471
-
$ 1,037,119,718 $ 1,031,116,751 $ 734,720,701 $
52,413,653
48,344,590
-
- $ 296,396,050
48,344,590
-
Carrying
Value
Fair
Value
2021
Level
I
Level
II
Level
III
9,777,862 $
$
868,153,493
10,125,458 $
859,246,857
- $ 10,125,458 $
-
-
859,246,857
-
$ 1,002,645,347 $ 1,002,584,511 $ 741,338,920 $
67,184,620
66,483,805
-
- $ 261,245,591
66,483,805
-
Financial assets:
Investment securities
held to maturity
Net loans
Financial liabilities:
Deposits
Other borrowings
Financial assets:
Investment securities
held to maturity
Net loans
Financial liabilities:
Deposits
Other borrowings
As of December 31, 2022 and 2021, for cash and cash equivalents, certificates of deposits, loans held for
sale, regulatory stock, bank-owned life insurance, accrued interest receivable, short-term borrowings, and
accrued interest payable, the carrying value is a reasonable estimate of fair value.
Net Unrealized
Gains (Losses)
on Investment
Securities
Cash Flow
Hedges
Total
Accumulated other comprehensive
income (loss) , December 31, 2020
Other comprehensive loss before
reclassification
Amounts reclassified from
accumulated other comprehensive loss
Amounts from change to AOCI
related to cash flow hedges
Accumulated other comprehensive
loss, December 31, 2021
Other comprehensive loss before
reclassification
Amounts reclassified from
accumulated other comprehensive loss
Amounts from change to AOCI
related to cash flow hedges
Accumulated other comprehensive
income (loss), December 31, 2022
$
2,652,197 $
(3,661,333 ) $
(1,009,136 )
(3,035,172 )
-
(3,035,172 )
(9,940 )
-
(9,940 )
-
2,481,715
2,481,715
$
(392,915 ) $
(1,179,618 ) $
(1,572,533 )
(19,417,150 )
-
(19,417,150 )
(348 )
-
(348 )
-
4,849,082
4,849,082
$
(19,810,413 ) $
3,669,464 $
(16,140,949 )
The following table presents significant amounts reclassified out of each component of accumulated other
comprehensive loss for the year ended December 31, 2022 and 2021:
Amount Reclassified
from Accumulated
Other Comprehensive
Income
Affected Line Item
in the Consolidated
Statement of Income where
Net Income is Presented
Unrealized gains on investment
securities, December 31, 2022
Unrealized gains on investment
securities, December 31, 2021
$
$
$
$
440
(92 )
Investment securities gains, net
Income tax expense
348
12,582
(2,642 )
Investment securities gains, net
Income tax expense
9,940
20. SUBSEQUENT EVENTS
Management has reviewed events occurring through March 8, 2023, the date the financial statements
were issued, and no additional subsequent events occurred requiring accrual or disclosure.
60 Notes to Consolidated Financial Statements
49
50
Notes to Consolidated Financial Statements 61
BOARD OF DIRECTORS OF KISH BANCORP, INC.
William P. Hayes
Chairman
Paul G. Howes
Vice Chairman
Eric J. Barron
Member
William L. Dancy
Member
Michael K. Halloran
Member
Gregory T. Hayes
Member
William S. Lake
Member
Kathleen L. Rhine
Member
Paul H. Silvis
Member
James A. Troha
Member
Frances V. Vaughn
Member
George V. Woskob
Member
BOARD OF DIRECTORS OF KISH BANK
Clarissa J. Goodling, Member
Amy M. Muchler, Senior Vice President,
William P. Hayes, Chairman
Paul G. Howes, Vice Chairman
William L. Dancy, Member
Michael K. Halloran, Member
Gregory T. Hayes, Member
William S. Lake, Member
Kathleen L. Rhine, Member
Paul H. Silvis, Member
James A. Troha, Member
Frances V. Vaughn, Member
George V. Woskob, Member
BLAIR COUNTY REGIONAL BOARD
Maryann Joyce Bistline, Member
Elizabeth M. Burke, Member
George C. Ferris, II, Member
James P. Foreman, Member
Robert G. Okonak, Jr., Member
Randolph W. Tarpey, Member
William D. Thompson, III, Member
CENTRE COUNTY REGIONAL BOARD
A. Christian Baum, Member
Adam R. Fernsler, Member
H. Amos Goodall, Jr., Member
Paul G. Howes, Member
Oscar W. Johnston, Member
Michael J. Krentzman, Member
Maureen L. Mulvihill, Member
Kathleen L. Rhine, Member
Paul H. Silvis, Member
George V. Woskob, Member
Brandon M. Zlupko, Member
HUNTINGDON COUNTY
REGIONAL BOARD
Wayne A. Hearn, Member
James J. Lakso, Member
Pamela F. Prosser, Member
Burgess A. Smith, Member
Delmont R. Sunderland, Member
Angela D. Thompson, Member
Douglas A. Tietjens, Member
James A. Troha, Member
Frances V. Vaughn, Member
JUNIATA COUNTY
REGIONAL BOARD
Philip D. Bomberger, Member
Jeffrey N. Brown, Member
Ronald N. Colledge, Member
Vincenzo Evola, Jr., Member
Maxwell R. Manbeck, Member
Robert J. Rowles, Member
Anita K. Rudy, Member
Audit Manager
Denise F. Quinn, Senior Vice President,
Middle Market Relationship Manager
Jeffrey D. Wilson, Senior Vice President,
CEO of Kish Agency
MIFFLIN COUNTY REGIONAL BOARD
Gary L. Wimer, Senior Vice President,
Christina Calkins-Mazur, Member
Susan L. Cannon, Member
William L. Dancy, Member
Michael K. Halloran, Member
Melinda K. Kenepp, Member
William S. Lake, Member
Managing Director - Ohio
Allan F. Bills, Vice President, Finance
Reporting and Analytics Manager
Timothy P. Burris, Vice President, Chief
Operating Officer of Kish Agency
Tina M. Collins, Vice President, Controller
Alta Corman-Wolf, Vice President,
Harvard K. McCardle, Member
Residential Lender
Beth N. Metz Gilmore, Vice President,
Human Resources Manager
Roxanne R. Greising, Vice President,
Credit Administration Director
Jeffrey A. Gum, Vice President,
Managing Director of Kish Benefits
Consulting
Allana L. Hartung, Vice President,
Commercial Relationship Manager
Jeffrey T. Hayes, Vice President,
Financial Advisor
Matthew D. Heaps, Vice President,
Commercial Relationship Manager
Edward M. Henderson, Vice President,
Wealth Advisor and Trust Officer
Ashley L. Henry, Vice President, Lending
Services Manager
Terry P. Horner, Vice President, Business
Development Officer
Holly A. Johnson, Vice President,
Mortgage Banking Manager
Lisa A. Kennedy, Vice President, Training
and Organizational Development
Manager
Marsha K. Kuhns, Vice President,
Residential Lender
John Q. Massie, Vice President,
Commercial Relationship Manager
Seth J. Napikoski, Vice President,
Commercial Relationship Manager
Melissa K. Royer, Vice President,
Technical Advisor
Cheryl E. Shope, Vice President,
Residential Lender
Wendy S. Strohecker, Vice President,
Bank Operations Manager
N. Robert Sunday, III, Vice President,
Compliance Officer
Alan J. Metzler, Member
John Pannizzo, Member
James L. Shilling, Jr., Member
KISH BANK EXECUTIVE LEADERSHIP
William P. Hayes, Chairman and Chief
Executive Officer
Gregory T. Hayes, President and Chief
Operating Officer
Mark J. Cvrkel, Executive Vice President,
Chief Financial Officer
Robert S. McMinn, Executive Vice
President, General Counsel
Richard A. Sarfert, Executive Vice
President, Chief Credit Officer
Suzanne M. White, Executive Vice
President, Chief Human Resources
Officer
Douglas C. Baxter, Senior Vice President,
Accounting and Controls Director
Kimberly A. Bubb, Senior Vice President,
Systems and Operations Director
Terra L. Decker, Senior Vice President,
Risk Officer
Garen M. Jenco, Senior Vice President,
Client Experience Officer
Thomas Minichiello, III, Senior Vice
President, Retail Banking Director
Mark E. Yerger, Senior Vice President,
Chief Information Officer
KISH BANK SENIOR OFFICERS
Robert L. Bilger, Senior Vice President,
Senior Lending Officer
Peter D. Collins, Senior Vice President,
Senior Portfolio Manager and
Commercial Lender
Wade E. Curry, LUTCF, Senior Vice
President, Kish Financial Solutions
Director
Kenneth M. Goetz, Senior Vice President,
Managing Director - Ohio
Kristie R. McKnight, Senior Vice President,
Middle Market Relationship Manager
62 Board of Directors and Officers
Board of Directors and Officers 63
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