Open File > Duplicate

Ctrl+J : Copy Layer

Image > Canvas Size ( Alt+ Ctrl + C )   >  Relative   >  width: 1.5" , Hight: 1.5"

New Layer  >  Shift + F5 ( Fill ) Pattern > Wooden

Wooden Layer Selected  And Ctrl + Select  Photo of Photo Layer ( Duplicate Layer )

Ctrl + Shift + I  :  Inverse Selection

 Add Layer Mask

Layer Style  > Bevel & Emboss >

Technique : Chisel Hard  > Depth and Size Adjust

Color Overlay  > Blending Mode : Screen > Ok

Inner Shadow >  Distance & Size Increase