Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with the December 31, 2023 presentation.
FENTON, Mich., Jan. 29, 2024 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces net income results of $3,784 and $14,629 for the quarter and year ended December 31, 2023, respectively.
Ronald L. Justice, President and CEO, stated, “Fentura reported another strong year of growth, as we ended 2023 with record total assets and total deposits. Throughout the year we experienced higher interest expenses as the rapid increase in interest rates impacted our cost of funds and reduced net interest income. Despite these trends, 2023 was another solid year of profitability as we benefited from record levels of interest income and excellent asset quality. In fact, net income and earnings per diluted share would have increased year-over-year had it not been for $523 in one-time legal and professional fees associated with 2023’s annual meeting and proxy contest. Strong earnings and asset quality combined with limited impacts from accumulated other comprehensive income produced a 10% year-over-year increase in total shareholders’ equity, which was a record $138.7 million at December 31, 2023.”
Mr. Justice continued, “Our operating and financial performance in 2023 is a testament to the hard work and commitment of Fentura’s team members and our commitment to community banking principles over the past 125 years. In addition, it reflects the community banking values and local support we provide across our Michigan communities. As we look to 2024, we expect another fluid operating environment primarily due to continued uncertainty around Federal Reserve interest rate and monetary policies. Despite these concerns, we are focused on supporting our communities that need value added and local financial partners like Fentura. During the year, we expect to make strategic investments in expanding our wealth management and treasury management capabilities to better serve our communities and deepen our customer relationships, while maintaining strong asset quality and controlling expenses that we believe will drive increased value for our shareholders.”
Following is a discussion of our financial performance as of, and for the year ended December 31, 2023. At the end of this document is a list of abbreviations and acronyms.
Results of Operations (unaudited)
The following table outlines our QTD results of operations and provides certain performance measures as of, and for the three months ended:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | |||||||||||||||
| INCOME STATEMENT DATA | |||||||||||||||||||
| Interest income | $ | 21,033 | $ | 20,416 | $ | 19,553 | $ | 18,679 | $ | 17,782 | |||||||||
| Interest expense | 8,526 | 7,757 | 6,469 | 5,335 | 3,645 | ||||||||||||||
| Net interest income | 12,507 | 12,659 | 13,084 | 13,344 | 14,137 | ||||||||||||||
| Credit loss expense | (190 | ) | (309 | ) | 205 | 236 | 847 | ||||||||||||
| Noninterest income | 2,145 | 2,338 | 2,460 | 2,328 | 1,949 | ||||||||||||||
| Noninterest expenses | 10,121 | 10,594 | 11,320 | 10,633 | 9,781 | ||||||||||||||
| Federal income tax expense | 937 | 937 | 793 | 959 | 1,094 | ||||||||||||||
| Net income | $ | 3,784 | $ | 3,775 | $ | 3,226 | $ | 3,844 | $ | 4,364 | |||||||||
| PER SHARE | |||||||||||||||||||
| Earnings | $ | 0.85 | $ | 0.85 | $ | 0.73 | $ | 0.87 | $ | 0.99 | |||||||||
| Dividends | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.09 | |||||||||
| Tangible book value(1) | $ | 28.92 | $ | 27.64 | $ | 27.16 | $ | 26.64 | $ | 26.22 | |||||||||
| Quoted market value | |||||||||||||||||||
| High | $ | 27.20 | $ | 23.74 | $ | 21.21 | $ | 24.10 | $ | 23.40 | |||||||||
| Low | $ | 22.26 | $ | 19.10 | $ | 18.70 | $ | 21.10 | $ | 21.60 | |||||||||
| Close(1) | $ | 27.20 | $ | 23.74 | $ | 19.35 | $ | 21.31 | $ | 22.20 | |||||||||
| PERFORMANCE RATIOS | |||||||||||||||||||
| Return on average assets | 0.86 | % | 0.86 | % | 0.76 | % | 0.92 | % | 1.06 | % | |||||||||
| Return on average shareholders' equity | 11.11 | % | 11.27 | % | 9.89 | % | 12.32 | % | 14.01 | % | |||||||||
| Return on average tangible shareholders' equity | 11.94 | % | 12.14 | % | 10.67 | % | 13.34 | % | 15.21 | % | |||||||||
| Efficiency ratio | 69.08 | % | 70.64 | % | 72.83 | % | 67.85 | % | 60.80 | % | |||||||||
| Yield on earning assets (FTE) | 5.06 | % | 4.92 | % | 4.85 | % | 4.75 | % | 4.57 | % | |||||||||
| Rate on interest bearing liabilities | 2.90 | % | 2.66 | % | 2.35 | % | 2.02 | % | 1.42 | % | |||||||||
| Net interest margin to earning assets (FTE) | 3.01 | % | 3.05 | % | 3.25 | % | 3.40 | % | 3.63 | % | |||||||||
| BALANCE SHEET DATA(1) | |||||||||||||||||||
| Total investment securities | $ | 107,615 | $ | 109,543 | $ | 117,563 | $ | 122,995 | $ | 125,049 | |||||||||
| Gross loans | $ | 1,473,471 | $ | 1,483,720 | $ | 1,472,288 | $ | 1,457,173 | $ | 1,436,166 | |||||||||
| Allowance for credit losses | $ | 15,400 | $ | 15,400 | $ | 15,400 | $ | 15,220 | $ | 13,000 | |||||||||
| Total assets | $ | 1,738,340 | $ | 1,744,939 | $ | 1,718,819 | $ | 1,749,073 | $ | 1,688,863 | |||||||||
| Total deposits | $ | 1,394,182 | $ | 1,401,797 | $ | 1,380,192 | $ | 1,353,918 | $ | 1,332,883 | |||||||||
| Borrowed funds | $ | 198,500 | $ | 201,050 | $ | 200,550 | $ | 259,050 | $ | 222,350 | |||||||||
| Total shareholders' equity | $ | 138,702 | $ | 132,902 | $ | 130,690 | $ | 128,247 | $ | 126,087 | |||||||||
| Net loans to total deposits | 104.58 | % | 104.75 | % | 105.56 | % | 106.50 | % | 106.77 | % | |||||||||
| Common shares outstanding | 4,470,871 | 4,466,221 | 4,460,053 | 4,453,951 | 4,439,725 | ||||||||||||||
| QTD BALANCE SHEET AVERAGES | |||||||||||||||||||
| Total assets | $ | 1,740,526 | $ | 1,739,510 | $ | 1,706,147 | $ | 1,687,175 | $ | 1,637,191 | |||||||||
| Earning assets | $ | 1,649,091 | $ | 1,646,848 | $ | 1,617,593 | $ | 1,595,605 | $ | 1,544,880 | |||||||||
| Interest bearing liabilities | $ | 1,165,064 | $ | 1,156,835 | $ | 1,105,807 | $ | 1,072,417 | $ | 1,016,876 | |||||||||
| Total shareholders' equity | $ | 135,157 | $ | 132,860 | $ | 130,860 | $ | 126,495 | $ | 123,567 | |||||||||
| Total tangible shareholders' equity | $ | 125,723 | $ | 123,349 | $ | 121,274 | $ | 116,834 | $ | 113,810 | |||||||||
| Earned common shares outstanding | 4,443,463 | 4,437,415 | 4,427,890 | 4,421,584 | 4,413,710 | ||||||||||||||
| Unvested stock grants | 26,018 | 26,668 | 29,916 | 29,007 | 24,460 | ||||||||||||||
| Total common shares outstanding | 4,469,481 | 4,464,083 | 4,457,806 | 4,450,591 | 4,438,170 | ||||||||||||||
| ASSET QUALITY | |||||||||||||||||||
| Nonperforming loans to gross loans (1) | 0.38 | % | 0.24 | % | 0.16 | % | 0.19 | % | 0.16 | % | |||||||||
| Nonperforming assets to total assets (1) | 0.35 | % | 0.23 | % | 0.16 | % | 0.17 | % | 0.15 | % | |||||||||
| Allowance for credit losses to gross loans (1) | 1.04 | % | 1.04 | % | 1.05 | % | 1.04 | % | 0.91 | % | |||||||||
| Net charge-offs (recoveries) to QTD average gross loans | (0.01 | )% | (0.03 | )% | — | % | — | % | — | % | |||||||||
| Provision for loan losses to QTD average gross loans | (0.01 | )% | (0.02 | )% | 0.01 | % | 0.02 | % | 0.06 | % | |||||||||
| CAPITAL RATIOS(1) | |||||||||||||||||||
| Total capital to risk weighted assets | 11.91 | % | 11.59 | % | 11.31 | % | 11.08 | % | 10.87 | % | |||||||||
| Tier 1 capital to risk weighted assets | 10.82 | % | 10.51 | % | 10.23 | % | 10.02 | % | 9.95 | % | |||||||||
| CET1 capital to risk weighted assets | 9.83 | % | 9.53 | % | 9.25 | % | 9.04 | % | 8.96 | % | |||||||||
| Tier 1 leverage ratio | 8.77 | % | 8.58 | % | 8.55 | % | 8.47 | % | 8.58 | % | |||||||||
| (1)At end of period | |||||||||||||||||||
The following table outlines our YTD results of operations and provides certain performance measures as of, and for the twelve months ended (unaudited):
| 12/31/2023 | 12/31/2022 | 12/31/2021 | 12/31/2020 | 12/31/2019 | |||||||||||||||
| INCOME STATEMENT DATA | |||||||||||||||||||
| Interest income | $ | 79,681 | $ | 59,220 | $ | 46,910 | $ | 45,979 | $ | 43,541 | |||||||||
| Interest expense | 28,087 | 6,767 | 2,736 | 5,924 | 8,627 | ||||||||||||||
| Net interest income | 51,594 | 52,453 | 44,174 | 40,055 | 34,914 | ||||||||||||||
| Credit loss expense | (58 | ) | 3,105 | (180 | ) | 5,634 | 1,335 | ||||||||||||
| Noninterest income | 9,271 | 9,880 | 14,080 | 19,640 | 8,163 | ||||||||||||||
| Noninterest expenses | 42,668 | 40,585 | 37,663 | 34,684 | 27,223 | ||||||||||||||
| Federal income tax expense | 3,626 | 3,710 | 4,192 | 3,913 | 2,941 | ||||||||||||||
| Net income | $ | 14,629 | $ | 14,933 | $ | 16,579 | $ | 15,464 | $ | 11,578 | |||||||||
| PER SHARE | |||||||||||||||||||
| Earnings | $ | 3.30 | $ | 3.38 | $ | 3.60 | $ | 3.31 | $ | 2.49 | |||||||||
| Dividends | $ | 0.40 | $ | 0.36 | $ | 0.32 | $ | 0.30 | $ | 0.28 | |||||||||
| Tangible book value(1) | $ | 28.92 | $ | 26.22 | $ | 25.43 | $ | 23.88 | $ | 20.87 | |||||||||
| Quoted market value | |||||||||||||||||||
| High | $ | 27.20 | $ | 29.25 | $ | 28.28 | $ | 26.00 | $ | 25.50 | |||||||||
| Low | $ | 18.70 | $ | 21.60 | $ | 21.90 | $ | 12.55 | $ | 20.05 | |||||||||
| Close(1) | $ | 27.20 | $ | 22.20 | $ | 28.28 | $ | 22.00 | $ | 25.23 | |||||||||
| PERFORMANCE RATIOS | |||||||||||||||||||
| Return on average assets | 0.85 | % | 0.98 | % | 1.26 | % | 1.29 | % | 1.20 | % | |||||||||
| Return on average shareholders' equity | 11.14 | % | 12.30 | % | 13.52 | % | 14.05 | % | 12.02 | % | |||||||||
| Return on average tangible shareholders' equity | 12.01 | % | 13.39 | % | 13.93 | % | 14.57 | % | 12.59 | % | |||||||||
| Efficiency ratio | 70.10 | % | 65.11 | % | 64.65 | % | 58.10 | % | 63.20 | % | |||||||||
| Yield on earning assets (FTE) | 4.90 | % | 4.15 | % | 3.80 | % | 4.01 | % | 4.77 | % | |||||||||
| Rate on interest bearing liabilities | 2.50 | % | 0.75 | % | 0.36 | % | 0.82 | % | 1.41 | % | |||||||||
| Net interest margin to earning assets (FTE) | 3.17 | % | 3.67 | % | 3.58 | % | 3.50 | % | 3.83 | % | |||||||||
| BALANCE SHEET DATA(1) | |||||||||||||||||||
| Total investment securities | $ | 107,615 | $ | 125,049 | $ | 164,942 | $ | 76,111 | $ | 61,621 | |||||||||
| Gross loans | $ | 1,473,471 | $ | 1,436,166 | $ | 1,100,092 | $ | 1,066,562 | $ | 870,555 | |||||||||
| Allowance for credit losses | $ | 15,400 | $ | 13,000 | $ | 10,500 | $ | 10,900 | $ | 5,813 | |||||||||
| Total assets | $ | 1,738,340 | $ | 1,688,863 | $ | 1,417,785 | $ | 1,251,446 | $ | 1,034,759 | |||||||||
| Total deposits | $ | 1,394,182 | $ | 1,332,883 | $ | 1,228,298 | $ | 1,071,976 | $ | 863,102 | |||||||||
| Borrowed funds | $ | 198,500 | $ | 222,350 | $ | 50,000 | $ | 49,000 | $ | 61,500 | |||||||||
| Total shareholders' equity | $ | 138,702 | $ | 126,087 | $ | 124,455 | $ | 115,868 | $ | 101,444 | |||||||||
| Net loans to total deposits | 104.58 | % | 106.77 | % | 88.71 | % | 98.48 | % | 100.19 | % | |||||||||
| Common shares outstanding | 4,470,871 | 4,439,725 | 4,496,701 | 4,694,275 | 4,664,369 | ||||||||||||||
| YTD BALANCE SHEET AVERAGES | |||||||||||||||||||
| Total assets | $ | 1,718,339 | $ | 1,523,419 | $ | 1,311,673 | $ | 1,200,605 | $ | 961,586 | |||||||||
| Earning assets | $ | 1,627,284 | $ | 1,429,605 | $ | 1,237,755 | $ | 1,147,570 | $ | 913,574 | |||||||||
| Interest bearing liabilities | $ | 1,125,032 | $ | 898,170 | $ | 754,622 | $ | 726,869 | $ | 612,549 | |||||||||
| Total shareholders' equity | $ | 131,341 | $ | 121,422 | $ | 122,629 | $ | 110,094 | $ | 96,358 | |||||||||
| Total tangible shareholders' equity | $ | 121,793 | $ | 111,548 | $ | 118,986 | $ | 106,140 | $ | 91,994 | |||||||||
| Earned common shares outstanding | 4,432,588 | 4,422,791 | 4,603,259 | 4,669,979 | 4,643,955 | ||||||||||||||
| Unvested stock grants | 27,902 | 25,212 | 20,984 | 14,027 | 9,917 | ||||||||||||||
| Total common shares outstanding | 4,460,490 | 4,448,003 | 4,624,243 | 4,684,006 | 4,653,872 | ||||||||||||||
| ASSET QUALITY | |||||||||||||||||||
| Nonperforming loans to gross loans (1) | 0.38 | % | 0.16 | % | 0.18 | % | 0.75 | % | 0.17 | % | |||||||||
| Nonperforming assets to total assets (1) | 0.35 | % | 0.15 | % | 0.17 | % | 0.64 | % | 0.14 | % | |||||||||
| Allowance for credit losses to gross loans (1) | 1.04 | % | 0.91 | % | 0.95 | % | 1.02 | % | 0.67 | % | |||||||||
| Net charge-offs (recoveries) to YTD average gross loans | (0.04 | )% | 0.05 | % | 0.02 | % | 0.05 | % | — | % | |||||||||
| Provision for loan losses to YTD average gross loans | — | % | 0.25 | % | (0.02 | )% | 0.56 | % | 0.16 | % | |||||||||
| CAPITAL RATIOS(1) | |||||||||||||||||||
| Total capital to risk weighted assets | 11.91 | % | 10.87 | % | 12.22 | % | 15.14 | % | 14.03 | % | |||||||||
| Tier 1 capital to risk weighted assets | 10.82 | % | 9.95 | % | 11.30 | % | 13.93 | % | 13.33 | % | |||||||||
| CET1 capital to risk weighted assets | 9.83 | % | 8.96 | % | 10.07 | % | 12.38 | % | 11.64 | % | |||||||||
| Tier 1 leverage ratio | 8.77 | % | 8.58 | % | 9.13 | % | 9.80 | % | 11.20 | % | |||||||||
| (1)At end of period | |||||||||||||||||||
Income Statement Breakdown and Analysis
| Quarter to Date | |||||||||||||||||||
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | |||||||||||||||
| Net income | $ | 3,784 | $ | 3,775 | $ | 3,226 | $ | 3,844 | $ | 4,364 | |||||||||
| Acquisition related items (net of tax) | |||||||||||||||||||
| Accretion on purchased loans | — | — | — | — | (20 | ) | |||||||||||||
| Amortization of core deposit intangibles | 60 | 60 | 60 | 60 | 85 | ||||||||||||||
| Amortization on acquired time deposits | — | — | — | — | (21 | ) | |||||||||||||
| Other acquisition related expenses | — | — | — | — | — | ||||||||||||||
| Total acquisition related items (net of tax) | 60 | 60 | 60 | 60 | 44 | ||||||||||||||
| Other nonrecurring items (net of tax) | |||||||||||||||||||
| Proxy contest related expenses | — | — | 413 | — | — | ||||||||||||||
| Prepayment penalties collected | (85 | ) | (29 | ) | (95 | ) | (9 | ) | (61 | ) | |||||||||
| Total other nonrecurring items (net of tax) | (85 | ) | (29 | ) | 318 | (9 | ) | (61 | ) | ||||||||||
| Adjusted net income from operations | $ | 3,759 | $ | 3,806 | $ | 3,604 | $ | 3,895 | $ | 4,347 | |||||||||
| Net interest income | $ | 12,507 | $ | 12,659 | $ | 13,084 | $ | 13,344 | $ | 14,137 | |||||||||
| Accretion on purchased loans | — | — | — | — | (25 | ) | |||||||||||||
| Prepayment penalties collected | (107 | ) | (37 | ) | (120 | ) | (12 | ) | (77 | ) | |||||||||
| Amortization on acquired time deposits | — | — | — | — | (27 | ) | |||||||||||||
| Adjusted net interest income | $ | 12,400 | $ | 12,622 | $ | 12,964 | $ | 13,332 | $ | 14,008 | |||||||||
| PERFORMANCE RATIOS | |||||||||||||||||||
| Based on adjusted net income from operations | |||||||||||||||||||
| Earnings per share | $ | 0.85 | $ | 0.86 | $ | 0.81 | $ | 0.88 | $ | 0.98 | |||||||||
| Return on average assets | 0.86 | % | 0.87 | % | 0.85 | % | 0.94 | % | 1.05 | % | |||||||||
| Return on average shareholders' equity | 11.03 | % | 11.37 | % | 11.05 | % | 12.49 | % | 13.96 | % | |||||||||
| Return on average tangible shareholders' equity | 11.86 | % | 12.24 | % | 11.92 | % | 13.52 | % | 15.15 | % | |||||||||
| Efficiency ratio | 69.06 | % | 70.31 | % | 69.51 | % | 67.41 | % | 60.62 | % | |||||||||
| Based on adjusted net interest income | |||||||||||||||||||
| Yield on earning assets (FTE) | 5.03 | % | 4.91 | % | 4.82 | % | 4.75 | % | 4.54 | % | |||||||||
| Rate on interest bearing liabilities | 2.90 | % | 2.66 | % | 2.35 | % | 2.02 | % | 1.41 | % | |||||||||
| Net interest margin to earning assets (FTE) | 2.98 | % | 3.04 | % | 3.22 | % | 3.40 | % | 3.60 | % | |||||||||
| Year to Date December 31 | Variance | |||||||||||||
| 2023 | 2022 | Amount | % | |||||||||||
| Net income | $ | 14,629 | $ | 14,933 | $ | (304 | ) | (2.04 | )% | |||||
| Acquisition related items (net of tax) | ||||||||||||||
| Accretion on purchased loans | — | (80 | ) | 80 | (100.00 | )% | ||||||||
| Amortization of core deposit intangibles | 240 | 340 | (100 | ) | (29.41 | )% | ||||||||
| Amortization on acquired time deposits | — | (84 | ) | 84 | (100.00 | )% | ||||||||
| Other acquisition related expenses | — | 213 | (213 | ) | (100.00 | )% | ||||||||
| Total acquisition related items (net of tax) | 240 | 389 | (149 | ) | (38.30 | )% | ||||||||
| Other nonrecurring items (net of tax) | ||||||||||||||
| Proxy contest related expenses | 413 | — | 413 | N/M | ||||||||||
| Prepayment penalties collected | (218 | ) | (390 | ) | 172 | (44.10 | )% | |||||||
| Total other nonrecurring items (net of tax) | 195 | (390 | ) | 585 | (150.00 | )% | ||||||||
| Adjusted net income from operations | $ | 15,064 | $ | 14,932 | $ | 132 | 0.88 | % | ||||||
| Net interest income | $ | 51,594 | $ | 52,453 | $ | (859 | ) | (1.64 | )% | |||||
| Accretion on purchased loans | — | (101 | ) | 101 | (100.00 | )% | ||||||||
| Prepayment penalties collected | (276 | ) | (493 | ) | 217 | (44.02 | )% | |||||||
| Amortization on acquired time deposits | — | (107 | ) | 107 | (100.00 | )% | ||||||||
| Adjusted net interest income | $ | 51,318 | $ | 51,752 | $ | (434 | ) | (0.84 | )% | |||||
| PERFORMANCE RATIOS | ||||||||||||||
| Based on adjusted net income from operations | ||||||||||||||
| Earnings per share | $ | 3.40 | $ | 3.38 | $ | 0.02 | 0.59 | % | ||||||
| Return on average assets | 0.88 | % | 0.98 | % | (0.10 | )% | ||||||||
| Return on average shareholders' equity | 11.47 | % | 12.30 | % | (0.83 | )% | ||||||||
| Return on average tangible shareholders' equity | 12.37 | % | 13.39 | % | (1.02 | )% | ||||||||
| Efficiency ratio | 69.06 | % | 64.72 | % | 4.34 | % | ||||||||
| Based on adjusted net interest income | ||||||||||||||
| Yield on earning assets (FTE) | 4.88 | % | 4.11 | % | 0.77 | % | ||||||||
| Rate on interest bearing liabilities | 2.50 | % | 0.74 | % | 1.76 | % | ||||||||
| Net interest margin to earning assets (FTE) | 3.15 | % | 3.62 | % | (0.47 | )% | ||||||||
Average Balances, Interest Rate, and Net Interest Income
The following tables present the daily average amount outstanding for each major category of interest earning assets, nonearning assets, interest bearing liabilities, and noninterest bearing liabilities. These tables also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a FTE basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances.
Net interest income is the amount by which interest income on earning assets exceeds the interest expenses on interest bearing liabilities. Net interest income, which includes loan fees, is influenced by changes in the balance and mix of assets and liabilities and market interest rates. We exert some control over these factors; however, FRB monetary policy and competition have a significant impact. For analytical purposes, net interest income is adjusted to a FTE basis by adding the income tax savings from interest on tax exempt loans, and nontaxable investment securities, thus making period-to-period comparisons more meaningful.
| Three Months Ended | |||||||||||||||||||||||||||||
| December 31, 2023 | September 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||
| Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | |||||||||||||||||||||
| Interest earning assets | |||||||||||||||||||||||||||||
| Total loans | $ | 1,477,899 | $ | 19,633 | 5.27 | % | $ | 1,477,343 | $ | 19,170 | 5.15 | % | $ | 1,397,113 | $ | 17,024 | 4.83 | % | |||||||||||
| Taxable investment securities | 95,263 | 374 | 1.56 | % | 101,549 | 397 | 1.55 | % | 112,321 | 443 | 1.56 | % | |||||||||||||||||
| Nontaxable investment securities | 12,166 | 68 | 2.22 | % | 12,670 | 70 | 2.19 | % | 14,326 | 81 | 2.24 | % | |||||||||||||||||
| Interest earning cash and cash equivalents | 54,584 | 760 | 5.52 | % | 43,865 | 594 | 5.37 | % | 12,261 | 116 | 3.75 | % | |||||||||||||||||
| Federal Home Loan Bank stock | 9,179 | 212 | 9.16 | % | 11,421 | 199 | 6.91 | % | 8,859 | 135 | 6.05 | % | |||||||||||||||||
| Total earning assets | 1,649,091 | 21,047 | 5.06 | % | 1,646,848 | 20,430 | 4.92 | % | 1,544,880 | 17,799 | 4.57 | % | |||||||||||||||||
| Nonearning assets | |||||||||||||||||||||||||||||
| Allowance for credit losses | (15,444 | ) | (15,503 | ) | (12,538 | ) | |||||||||||||||||||||||
| Premises and equipment, net | 14,875 | 15,210 | 15,866 | ||||||||||||||||||||||||||
| Accrued income and other assets | 92,004 | 92,955 | 88,983 | ||||||||||||||||||||||||||
| Total assets | $ | 1,740,526 | $ | 1,739,510 | $ | 1,637,191 | |||||||||||||||||||||||
| Interest bearing liabilities | |||||||||||||||||||||||||||||
| Interest bearing demand deposits | $ | 413,681 | $ | 3,540 | 3.40 | % | $ | 416,500 | $ | 3,230 | 3.08 | % | $ | 320,672 | $ | 1,383 | 1.71 | % | |||||||||||
| Savings deposits | 279,197 | 421 | 0.60 | % | 290,939 | 429 | 0.59 | % | 362,250 | 170 | 0.19 | % | |||||||||||||||||
| Time deposits | 271,375 | 2,709 | 3.96 | % | 248,389 | 2,280 | 3.64 | % | 133,166 | 523 | 1.56 | % | |||||||||||||||||
| Borrowed funds | 200,811 | 1,856 | 3.67 | % | 201,007 | 1,818 | 3.59 | % | 200,788 | 1,569 | 3.10 | % | |||||||||||||||||
| Total interest bearing liabilities | 1,165,064 | 8,526 | 2.90 | % | 1,156,835 | 7,757 | 2.66 | % | 1,016,876 | 3,645 | 1.42 | % | |||||||||||||||||
| Noninterest bearing liabilities | |||||||||||||||||||||||||||||
| Noninterest bearing deposits | 424,859 | 435,398 | 484,586 | ||||||||||||||||||||||||||
| Accrued interest and other liabilities | 15,446 | 14,417 | 12,162 | ||||||||||||||||||||||||||
| Shareholders' equity | 135,157 | 132,860 | 123,567 | ||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,740,526 | $ | 1,739,510 | $ | 1,637,191 | |||||||||||||||||||||||
| Net interest income (FTE) | $ | 12,521 | $ | 12,673 | $ | 14,154 | |||||||||||||||||||||||
| Net interest margin to earning assets (FTE) | 3.01 | % | 3.05 | % | 3.63 | % | |||||||||||||||||||||||
| Twelve Months Ended | |||||||||||||||||||
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||
| Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | ||||||||||||||
| Interest earning assets | |||||||||||||||||||
| Total loans | $ | 1,468,193 | $ | 75,382 | 5.13 | % | $ | 1,247,996 | $ | 56,610 | 4.54 | % | |||||||
| Taxable investment securities | 103,436 | 1,624 | 1.57 | % | 126,925 | 1,767 | 1.39 | % | |||||||||||
| Nontaxable investment securities | 13,093 | 295 | 2.25 | % | 15,215 | 342 | 2.25 | % | |||||||||||
| Interest earning cash and cash equivalents | 32,009 | 1,715 | 5.36 | % | 34,145 | 345 | 1.01 | % | |||||||||||
| Federal Home Loan Bank stock | 10,553 | 727 | 6.89 | % | 5,324 | 228 | 4.28 | % | |||||||||||
| Total earning assets | 1,627,284 | 79,743 | 4.90 | % | 1,429,605 | 59,292 | 4.15 | % | |||||||||||
| Nonearning assets | |||||||||||||||||||
| Allowance for credit losses | (15,328 | ) | (11,436 | ) | |||||||||||||||
| Premises and equipment, net | 15,226 | 16,455 | |||||||||||||||||
| Accrued income and other assets | 91,157 | 88,795 | |||||||||||||||||
| Total assets | $ | 1,718,339 | $ | 1,523,419 | |||||||||||||||
| Interest bearing liabilities | |||||||||||||||||||
| Interest bearing demand deposits | $ | 392,407 | $ | 11,467 | 2.92 | % | $ | 293,039 | $ | 2,523 | 0.86 | % | |||||||
| Savings deposits | 304,371 | 1,757 | 0.58 | % | 366,503 | 529 | 0.14 | % | |||||||||||
| Time deposits | 215,473 | 7,304 | 3.39 | % | 122,032 | 971 | 0.80 | % | |||||||||||
| Borrowed funds | 212,781 | 7,559 | 3.55 | % | 116,596 | 2,744 | 2.35 | % | |||||||||||
| Total interest bearing liabilities | 1,125,032 | 28,087 | 2.50 | % | 898,170 | 6,767 | 0.75 | % | |||||||||||
| Noninterest bearing liabilities | |||||||||||||||||||
| Noninterest bearing deposits | 447,517 | 488,370 | |||||||||||||||||
| Accrued interest and other liabilities | 14,449 | 15,457 | |||||||||||||||||
| Shareholders' equity | 131,341 | 121,422 | |||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,718,339 | $ | 1,523,419 | |||||||||||||||
| Net interest income (FTE) | $ | 51,656 | $ | 52,525 | |||||||||||||||
| Net interest margin to earning assets (FTE) | 3.17 | % | 3.67 | % | |||||||||||||||
Volume and Rate Variance Analysis
The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For the purpose of this table, changes in interest due to volume and rate were determined as follows:
Volume - change in volume multiplied by the previous period's rate.
Rate - change in the FTE rate multiplied by the previous period's volume.
The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
| Three Months Ended | Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||||
| December 31, 2023 | December 31, 2023 | December 31, 2023 | |||||||||||||||||||||||||||||||||
| Compared To | Compared To | Compared To | |||||||||||||||||||||||||||||||||
| September 30, 2023 | December 31, 2022 | December 31, 2022 | |||||||||||||||||||||||||||||||||
| Increase (Decrease) Due to | Increase (Decrease) Due to | Increase (Decrease) Due to | |||||||||||||||||||||||||||||||||
| Volume | Rate | Net | Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||||||||||||||
| Changes in interest income | |||||||||||||||||||||||||||||||||||
| Total loans | $ | 7 | $ | 456 | $ | 463 | $ | 1,013 | $ | 1,596 | $ | 2,609 | $ | 10,810 | $ | 7,962 | $ | 18,772 | |||||||||||||||||
| Taxable investment securities | (39 | ) | 16 | (23 | ) | (69 | ) | — | (69 | ) | (352 | ) | 209 | (143 | ) | ||||||||||||||||||||
| Nontaxable investment securities | (7 | ) | 5 | (2 | ) | (12 | ) | (1 | ) | (13 | ) | (47 | ) | — | (47 | ) | |||||||||||||||||||
| Interest earning cash and cash equivalents | 149 | 17 | 166 | 567 | 77 | 644 | (23 | ) | 1,393 | 1,370 | |||||||||||||||||||||||||
| Federal Home Loan Bank stock | (188 | ) | 201 | 13 | 5 | 72 | 77 | 308 | 191 | 499 | |||||||||||||||||||||||||
| Total changes in interest income | (78 | ) | 695 | 617 | 1,504 | 1,744 | 3,248 | 10,696 | 9,755 | 20,451 | |||||||||||||||||||||||||
| Changes in interest expense | |||||||||||||||||||||||||||||||||||
| Interest bearing demand deposits | (144 | ) | 454 | 310 | 489 | 1,668 | 2,157 | 1,110 | 7,834 | 8,944 | |||||||||||||||||||||||||
| Savings deposits | (46 | ) | 38 | (8 | ) | (261 | ) | 512 | 251 | (102 | ) | 1,330 | 1,228 | ||||||||||||||||||||||
| Time deposits | 220 | 209 | 429 | 881 | 1,305 | 2,186 | 1,212 | 5,121 | 6,333 | ||||||||||||||||||||||||||
| Borrowed funds | (12 | ) | 50 | 38 | — | 287 | 287 | 2,974 | 1,841 | 4,815 | |||||||||||||||||||||||||
| Total changes in interest expense | 18 | 751 | 769 | 1,109 | 3,772 | 4,881 | 5,194 | 16,126 | 21,320 | ||||||||||||||||||||||||||
| Net change in net interest income (FTE) | $ | (96 | ) | $ | (56 | ) | $ | (152 | ) | $ | 395 | $ | (2,028 | ) | $ | (1,633 | ) | $ | 5,502 | $ | (6,371 | ) | $ | (869 | ) | ||||||||||
| Average Yield/Rate for the Three Months Ended | ||||||||||||||
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Total earning assets | 5.06 | % | 4.92 | % | 4.85 | % | 4.75 | % | 4.57 | % | ||||
| Total interest bearing liabilities | 2.90 | % | 2.66 | % | 2.35 | % | 2.02 | % | 1.42 | % | ||||
| Net interest margin to earning assets (FTE) | 3.01 | % | 3.05 | % | 3.25 | % | 3.40 | % | 3.63 | % | ||||
| Quarter to Date Net Interest Income (FTE) | ||||||||||||||
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Interest income | $ | 21,033 | $ | 20,416 | $ | 19,553 | $ | 18,679 | $ | 17,782 | ||||
| FTE adjustment | 14 | 14 | 17 | 17 | 17 | |||||||||
| Total interest income (FTE) | 21,047 | 20,430 | 19,570 | 18,696 | 17,799 | |||||||||
| Total interest expense | 8,526 | 7,757 | 6,469 | 5,335 | 3,645 | |||||||||
| Net interest income (FTE) | $ | 12,521 | $ | 12,673 | $ | 13,101 | $ | 13,361 | $ | 14,154 | ||||
Noninterest Income
| Three Months Ended | ||||||||||||||||||
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||||||
| Service charges and fees | ||||||||||||||||||
| ATM and debit card income | $ | 549 | $ | 568 | $ | 570 | $ | 531 | $ | 559 | ||||||||
| Trust and investment services | 433 | 572 | 583 | 549 | 505 | |||||||||||||
| Service charges on deposit accounts | 211 | 244 | 224 | 218 | 245 | |||||||||||||
| Total | 1,193 | 1,384 | 1,377 | 1,298 | 1,309 | |||||||||||||
| Net gain on sales of residential mortgage loans | 96 | 164 | 198 | 161 | 24 | |||||||||||||
| Net gain on sales of commercial loans | 226 | — | 95 | — | — | |||||||||||||
| Changes in the fair value of MSR | (108 | ) | 119 | (8 | ) | 107 | (129 | ) | ||||||||||
| Change in fair value of equity investments | 42 | (28 | ) | (16 | ) | 15 | 2 | |||||||||||
| Other | ||||||||||||||||||
| Mortgage servicing fees | 398 | 398 | 406 | 406 | 415 | |||||||||||||
| Change in cash surrender value of corporate owned life insurance | 192 | 181 | 178 | 172 | 175 | |||||||||||||
| Other | 106 | 120 | 230 | 169 | 153 | |||||||||||||
| Total | 696 | 699 | 814 | 747 | 743 | |||||||||||||
| Total noninterest income | $ | 2,145 | $ | 2,338 | $ | 2,460 | $ | 2,328 | $ | 1,949 | ||||||||
| Memo items: | ||||||||||||||||||
| Residential mortgage operations | $ | 386 | $ | 681 | $ | 596 | $ | 674 | $ | 310 | ||||||||
| Twelve Months Ended December 31 | Variance | ||||||||||||
| 2023 | 2022 | Amount | % | ||||||||||
| Service charges and fees | |||||||||||||
| ATM and debit card income | $ | 2,218 | $ | 2,174 | $ | 44 | 2.02 | % | |||||
| Trust and investment services | 2,137 | 2,107 | 30 | 1.42 | % | ||||||||
| Service charges on deposit accounts | 897 | 1,002 | (105 | ) | (10.48 | )% | |||||||
| Total | 5,252 | 5,283 | (31 | ) | (0.59 | )% | |||||||
| Net gain on sales of residential mortgage loans | 619 | 725 | (106 | ) | (14.62 | )% | |||||||
| Net gain on sales of commercial loans | 321 | — | 321 | N/M | |||||||||
| Changes in the fair value of MSR | 110 | 830 | (720 | ) | (86.75 | )% | |||||||
| Change in fair value of equity investments | 13 | (116 | ) | 129 | (111.21 | )% | |||||||
| Other | |||||||||||||
| Mortgage servicing fees | 1,608 | 1,721 | (113 | ) | (6.57 | )% | |||||||
| Change in cash surrender value of corporate owned life insurance | 723 | 681 | 42 | 6.17 | % | ||||||||
| Other | 625 | 756 | (131 | ) | (17.33 | )% | |||||||
| Total | 2,956 | 3,158 | (202 | ) | (6.40 | )% | |||||||
| Total noninterest income | $ | 9,271 | $ | 9,880 | $ | (609 | ) | (6.16 | )% | ||||
| Memo items: | |||||||||||||
| Residential mortgage operations | $ | 2,337 | $ | 3,276 | $ | (939 | ) | (28.66 | )% | ||||
Residential Mortgage Operations
Residential mortgage operations includes net gains on sales of loans, net mortgage servicing rights income, and mortgage servicing fees.
Net gain on sales of residential mortgage loans represents the income earned on the sale of residential mortgage loans into the secondary market. Increases in interest rates and limited inventories have significantly driven down the volume of new originations and refinancing activity in 2023. While a majority of our residential mortgage loans originated have been portfolio loans, we have continued to actively sell residential mortgage loans into the secondary market. We expect this trend to continue in future periods.
Changes in the fair value of MSR are highly correlated to changes in interest rates and prepayment speeds. During the fourth quarter of 2023, the fair value of the servicing portfolio decreased due to a decline in the size of the servicing portfolio. During the fourth quarter of 2023, the serviced loan portfolio declined by $6,932. The overall direction of the fair value of MSR is expected to decline due to a reduction in the size of our servicing portfolio. This is a result of reduced levels of secondary market originations and prepayments. We expect this trend to continue in future periods.
Mortgage servicing fees includes the fees earned for servicing loans that have been sold into the secondary market. The annual decrease in mortgage servicing fees is directly related to the size of the serviced portfolio. Due to reduced levels of secondary market originations and prepayments, the serviced loan portfolio declined by $22,356, or 3.45%, since December 31, 2022. We expect mortgage servicing fees to trend modestly downward in future periods due to decreased secondary market originations.
All Other Noninterest Income
ATM and debit card income represents fees earned on ATM and debit card transactions. We expect these fees to approximate current levels into 2024.
Trust and investment services includes income earned from contracts with customers to manage assets for investment and/or to transact on their accounts through the wealth management and trust department. During the second quarter of 2023, we transitioned our wealth management program to a new platform that offers a robust, flexible technology platform and comprehensive financial solutions, which will provide our clients a full range of leading investment services and solutions. Trust services and wealth management fees are subject to market fluctuations and interest rate changes. We expect trust and investment services fees to modestly increase in future periods.
Service charges on deposit accounts includes fees earned from deposit customers for transaction-based charges, account maintenance and overdraft services. Service charges on deposit accounts are expected to decline slightly in 2024, primarily as a result of us lowering our fees charged to customers for overdraft services.
Net gain on sales of commercial loans represents the income earned from the sale of commercial loans into the secondary market. During the second and fourth quarters of 2023, we sold the guaranteed portion of select SBA loans. We have strategic initiatives in place to sell certain commercial loans throughout 2024.
Change in cash surrender value of corporate owned life insurance is expected to modestly increase in 2024.
Other includes miscellaneous other income items, none of which are individually significant.
Noninterest Expenses
| Three Months Ended | ||||||||||||||
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Compensation and benefits | $ | 5,521 | $ | 5,592 | $ | 5,492 | $ | 5,792 | $ | 5,329 | ||||
| Professional services | 695 | 726 | 1,237 | 766 | 594 | |||||||||
| Furniture and equipment | 696 | 668 | 685 | 726 | 772 | |||||||||
| Occupancy | 610 | 591 | 589 | 635 | 566 | |||||||||
| Data processing | 505 | 576 | 565 | 513 | 111 | |||||||||
| Advertising and promotional | 139 | 506 | 509 | 451 | 580 | |||||||||
| Loan and collection | 301 | 232 | 457 | 240 | 278 | |||||||||
| Other | ||||||||||||||
| FDIC insurance premiums | 270 | 330 | 330 | 201 | 149 | |||||||||
| ATM and debit card | 158 | 153 | 179 | 161 | 254 | |||||||||
| Telephone and communication | 103 | 115 | 100 | 119 | 110 | |||||||||
| Amortization of core deposit intangibles | 76 | 75 | 76 | 76 | 107 | |||||||||
| Other acquisition related expenses | — | — | — | — | — | |||||||||
| Other general and administrative | 1,047 | 1,030 | 1,101 | 953 | 931 | |||||||||
| Total | $ | 1,654 | $ | 1,703 | $ | 1,786 | $ | 1,510 | $ | 1,551 | ||||
| Total noninterest expenses | $ | 10,121 | $ | 10,594 | $ | 11,320 | $ | 10,633 | $ | 9,781 | ||||
| Twelve Months Ended December 31 | Variance | |||||||||||
| 2023 | 2022 | Amount | % | |||||||||
| Compensation and benefits | $ | 22,397 | $ | 21,449 | $ | 948 | 4.42 | % | ||||
| Professional services | 3,424 | 2,946 | 478 | 16.23 | % | |||||||
| Furniture and equipment | 2,775 | 3,217 | (442 | ) | (13.74 | )% | ||||||
| Occupancy | 2,425 | 2,327 | 98 | 4.21 | % | |||||||
| Data processing | 2,159 | 1,551 | 608 | 39.20 | % | |||||||
| Advertising and promotional | 1,605 | 1,589 | 16 | 1.01 | % | |||||||
| Loan and collection | 1,230 | 1,574 | (344 | ) | (21.86 | )% | ||||||
| Other | ||||||||||||
| FDIC insurance premiums | 1,131 | 621 | 510 | 82.13 | % | |||||||
| ATM and debit card | 651 | 711 | (60 | ) | (8.44 | )% | ||||||
| Telephone and communication | 437 | 439 | (2 | ) | (0.46 | )% | ||||||
| Amortization of core deposit intangibles | 303 | 430 | (127 | ) | (29.53 | )% | ||||||
| Other acquisition related expenses | — | 270 | (270 | ) | (100.00 | )% | ||||||
| Other general and administrative | 4,131 | 3,461 | 670 | 19.36 | % | |||||||
| Total | $ | 6,653 | $ | 5,932 | $ | 721 | 12.15 | % | ||||
| Total noninterest expenses | $ | 42,668 | $ | 40,585 | $ | 2,083 | 5.13 | % | ||||
Compensation and benefits includes salaries, commissions and incentives, employee benefits, and payroll taxes. Compensation and benefits increased in 2023 due to an increase in the size of the organization, merit increases, and market based adjustments. While there continues to be meaningful wage pressure, we expect a modest increase in overall compensation and benefits in 2024 due to merit increases and market based adjustments. These increases will be partially offset by decreases in commissions as loan originations continue to slow. This trend is expected to continue in future periods.
Professional services include expenses relating to third-party professional services. These services include, but are not limited to, regulatory, auditing, consulting, and legal. The increase in professional services during 2023 was due to an increase in expenses resulting from a proxy contest relating to our 2023 annual meeting of stockholders. The consulting and legal fees related to this matter totaled approximately $523. Professional services expenses are expected to approximate current levels in future periods.
Furniture and equipment and occupancy expenses primarily consist of depreciation, repairs and maintenance, certain service contracts, and other related items. These expenses are expected to approximate current levels in 2024.
Data processing primarily includes the expenses relating to our core data processor. These expenses normalized in 2023 due to receipt of renewal incentives from our core data processor during 2022. Data processing expenses are expected to modestly increase in 2024 due to annual contractual increases from our core data processor.
Advertising and promotional expenses includes media costs and any donations or sponsorships. The annual increase in such expenses is a result of enhanced marketing efforts to attract new and expand existing customer loan and deposit account relationships. Total advertising and promotional expenses are expected to decline in 2024 due to the expiration of certain long-term sponsorship commitments.
Loan and collection includes expenses related to the origination and collection of loans. Loan and collection expenses are expected to approximate current levels in future periods as loan growth is expected to approximate current levels.
FDIC insurance premiums typically fluctuate each period based on the size of the balance sheet, capital position and overall risk profile. These expenses increased in 2023 due to the FDIC increasing its assessment rate for all insured institutions effective January 1, 2023. FDIC insurance premiums are expected to moderately increase in 2024.
ATM and debit card expenses fluctuate based on customer and non-customer utilization of ATMs and customer debit card volumes. We expect these fees to approximate current levels in future periods.
Telephone and communication includes expenses relating to our communication systems. These expenses are expected to approximate current levels in future periods.
Amortization of core deposit intangibles relates to the core deposits acquired from Community Bancorp, Inc. on December 31, 2016 and FSB on December 1, 2021. These core deposit intangibles are being amortized using an accelerated sum-of-years-digits method over their estimated useful lives of seven years. The core deposit intangibles associated with the acquisition of Community Bancorp, Inc. were fully amortized as of December 31, 2023. The core deposit intangibles associated with the acquisition of FSB will be amortized through 2028.
Other acquisition related expenses includes expenses incurred during the first half of 2022 related to the acquisition of FSB.
Other general and administrative includes miscellaneous other expense items. These expenses increased in 2023 partially due to an increase in fraudulent activity (check, ACH and identity theft) on customer accounts. During 2023, expenses related to fraudulent activity totaled approximately $243. Other general and administrative expenses are expected to approximate current levels in future periods.
Balance Sheet Breakdown and Analysis
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| ASSETS | ||||||||||||||
| Cash and due from banks | $ | 90,661 | $ | 83,365 | $ | 59,181 | $ | 100,496 | $ | 57,844 | ||||
| Total investment securities | 107,615 | 109,543 | 117,563 | 122,995 | 125,049 | |||||||||
| Residential mortgage loans held-for-sale, at fair value | 747 | 1,037 | 1,106 | 875 | 493 | |||||||||
| Gross loans | 1,473,471 | 1,483,720 | 1,472,288 | 1,457,173 | 1,436,166 | |||||||||
| Less allowance for credit losses | 15,400 | 15,400 | 15,400 | 15,220 | 13,000 | |||||||||
| Net loans | 1,458,071 | 1,468,320 | 1,456,888 | 1,441,953 | 1,423,166 | |||||||||
| All other assets | 81,246 | 82,674 | 84,081 | 82,754 | 82,311 | |||||||||
| Total assets | $ | 1,738,340 | $ | 1,744,939 | $ | 1,718,819 | $ | 1,749,073 | $ | 1,688,863 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Total deposits | $ | 1,394,182 | $ | 1,401,797 | $ | 1,380,192 | $ | 1,353,918 | $ | 1,332,883 | ||||
| Total borrowed funds | 198,500 | 201,050 | 200,550 | 259,050 | 222,350 | |||||||||
| Accrued interest payable and other liabilities | 6,956 | 9,190 | 7,387 | 7,858 | 7,543 | |||||||||
| Total liabilities | 1,599,638 | 1,612,037 | 1,588,129 | 1,620,826 | 1,562,776 | |||||||||
| Total shareholders' equity | 138,702 | 132,902 | 130,690 | 128,247 | 126,087 | |||||||||
| Total liabilities and shareholders' equity | $ | 1,738,340 | $ | 1,744,939 | $ | 1,718,819 | $ | 1,749,073 | $ | 1,688,863 | ||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | ||||||||||||
| Variance | Variance | ||||||||||||
| Amount | % | Amount | % | ||||||||||
| ASSETS | |||||||||||||
| Cash and due from banks | $ | 7,296 | 8.75 | % | $ | 32,817 | 56.73 | % | |||||
| Total investment securities | (1,928 | ) | (1.76 | )% | (17,434 | ) | (13.94 | )% | |||||
| Residential mortgage loans held-for-sale, at fair value | (290 | ) | (27.97 | )% | 254 | 51.52 | % | ||||||
| Gross loans | (10,249 | ) | (0.69 | )% | 37,305 | 2.60 | % | ||||||
| Less allowance for credit losses | — | — | % | 2,400 | 18.46 | % | |||||||
| Net loans | (10,249 | ) | (0.70 | )% | 34,905 | 2.45 | % | ||||||
| All other assets | (1,428 | ) | (1.73 | )% | (1,065 | ) | (1.29 | )% | |||||
| Total assets | $ | (6,599 | ) | (0.38 | )% | $ | 49,477 | 2.93 | % | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||
| Total deposits | $ | (7,615 | ) | (0.54 | )% | $ | 61,299 | 4.60 | % | ||||
| Total borrowed funds | (2,550 | ) | (1.27 | )% | (23,850 | ) | (10.73 | )% | |||||
| Accrued interest payable and other liabilities | (2,234 | ) | (24.31 | )% | (587 | ) | (7.78 | )% | |||||
| Total liabilities | (12,399 | ) | (0.77 | )% | 36,862 | 2.36 | % | ||||||
| Total shareholders' equity | 5,800 | 4.36 | % | 12,615 | 10.00 | % | |||||||
| Total liabilities and shareholders' equity | $ | (6,599 | ) | (0.38 | )% | $ | 49,477 | 2.93 | % | ||||
Cash and due from banks
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | |||||||||||||
| Cash and due from banks | |||||||||||||||||
| Noninterest bearing | $ | 29,997 | $ | 35,121 | $ | 33,028 | $ | 24,376 | $ | 28,216 | |||||||
| Interest bearing | 60,664 | 48,244 | 26,153 | 76,120 | 29,628 | ||||||||||||
| Total | $ | 90,661 | $ | 83,365 | $ | 59,181 | $ | 100,496 | $ | 57,844 | |||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | ||||||||||||||||
| Variance | Variance | ||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||
| Cash and due from banks | |||||||||||||||||
| Noninterest bearing | $ | (5,124 | ) | (14.59 | )% | $ | 1,781 | 6.31 | % | ||||||||
| Interest bearing | 12,420 | 25.74 | % | 31,036 | 104.75 | % | |||||||||||
| Total | $ | 7,296 | 8.75 | % | $ | 32,817 | 56.73 | % | |||||||||
Cash and due from banks fluctuates from period to period based on loan demand and variances in deposit account balances.
Primary and secondary liquidity sources
The following table outlines our primary and secondary sources of liquidity as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Cash and cash equivalents | $ | 90,661 | $ | 83,365 | $ | 59,181 | $ | 100,496 | $ | 57,844 | ||||
| Fair value of unpledged investment securities | 80,247 | 82,103 | 82,041 | 102,368 | 103,819 | |||||||||
| FHLB borrowing availability | 170,000 | 170,000 | 170,000 | 111,500 | 144,567 | |||||||||
| Unsecured lines of credit | 20,000 | 20,000 | 20,000 | 20,000 | 26,500 | |||||||||
| Funds available through the Fed Discount Window | 111 | 110 | 119 | 119 | 113 | |||||||||
| Parent company line of credit | 3,500 | 950 | 1,450 | 1,450 | 1,650 | |||||||||
| Total liquidity sources | $ | 364,519 | $ | 356,528 | $ | 332,791 | $ | 335,933 | $ | 334,493 | ||||
The increase in cash and cash equivalents throughout 2023 was due to an increase in total deposits (see "Total deposits" below). The decrease in fair value of unpledged investment securities during 2023 was due to pledging additional securities in our investment portfolio for deposit relationships with collateral agreements. The increase in FHLB borrowing availability during 2023 was due to less utilization of FHLB advances as loan growth has moderated in recent periods.
In addition to the above liquidity sources, we also have the option of utilizing wholesale funding sources, such as brokered NOW accounts, brokered time deposits, and internet time deposits. Although wholesale funding sources are typically more expensive than core deposits and other liquidity sources, they are an integral part of our overall asset and liability management strategy.
Investment securities
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | |||||||||||||||
| Available-for-sale | |||||||||||||||||||
| U.S. Government and federal agency | $ | 22,425 | $ | 23,420 | $ | 24,411 | $ | 24,402 | $ | 24,394 | |||||||||
| State and municipal | 20,460 | 20,992 | 21,110 | 22,649 | 22,709 | ||||||||||||||
| Mortgage backed residential | 49,076 | 50,786 | 52,704 | 54,595 | 56,293 | ||||||||||||||
| Certificates of deposit | 2,728 | 3,956 | 6,679 | 7,426 | 7,426 | ||||||||||||||
| Collateralized mortgage obligations - agencies | 23,320 | 24,062 | 24,680 | 25,275 | 25,925 | ||||||||||||||
| Unrealized gain/(loss) on available-for-sale securities | (12,760 | ) | (15,958 | ) | (14,536 | ) | (13,940 | ) | (14,184 | ) | |||||||||
| Total available-for-sale | 105,249 | 107,258 | 115,048 | 120,407 | 122,563 | ||||||||||||||
| Held-to-maturity state and municipal | 878 | 879 | 1,081 | 1,168 | 1,171 | ||||||||||||||
| Equity securities | 1,488 | 1,406 | 1,434 | 1,420 | 1,315 | ||||||||||||||
| Total investment securities | $ | 107,615 | $ | 109,543 | $ | 117,563 | $ | 122,995 | $ | 125,049 | |||||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | ||||||||||||||||||
| Variance | Variance | ||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||
| Available-for-sale | |||||||||||||||||||
| U.S. Government and federal agency | (995 | ) | (4.25 | )% | $ | (1,969 | ) | (8.07 | )% | ||||||||||
| State and municipal | (532 | ) | (2.53 | )% | (2,249 | ) | (9.90 | )% | |||||||||||
| Mortgage backed residential | (1,710 | ) | (3.37 | )% | (7,217 | ) | (12.82 | )% | |||||||||||
| Certificates of deposit | (1,228 | ) | (31.04 | )% | (4,698 | ) | (63.26 | )% | |||||||||||
| Collateralized mortgage obligations - agencies | (742 | ) | (3.08 | )% | (2,605 | ) | (10.05 | )% | |||||||||||
| Unrealized gain/(loss) on available-for-sale securities | 3,198 | (20.04 | )% | 1,424 | (10.04 | )% | |||||||||||||
| Total available-for-sale | (2,009 | ) | (1.87 | )% | (17,314 | ) | (14.13 | )% | |||||||||||
| Held-to-maturity state and municipal | (1 | ) | (0.11 | )% | (293 | ) | (25.02 | )% | |||||||||||
| Equity securities | 82 | 5.83 | % | 173 | 13.16 | % | |||||||||||||
| Total investment securities | $ | (1,928 | ) | (1.76 | )% | $ | (17,434 | ) | (13.94 | )% | |||||||||
The amortized cost and fair value of AFS investment securities as of December 31, 2023 were as follows:
| Maturing | |||||||||||||||||
| Due in One Year or Less | After One Year But Within Five Years | After Five Years But Within Ten Years | After Ten Years | Securities with Variable Monthly Payments or Noncontractual Maturities | Total | ||||||||||||
| U.S. Government and federal agency | $ | 4,518 | $ | 17,907 | $ | — | $ | — | $ | — | $ | 22,425 | |||||
| State and municipal | 1,296 | 16,552 | 1,286 | 1,326 | — | 20,460 | |||||||||||
| Mortgage backed residential | — | 49,076 | 49,076 | ||||||||||||||
| Certificates of deposit | 749 | 1,979 | — | — | — | 2,728 | |||||||||||
| Collateralized mortgage obligations - agencies | — | — | — | — | 23,320 | 23,320 | |||||||||||
| Total amortized cost | $ | 6,563 | $ | 36,438 | $ | 1,286 | $ | 1,326 | $ | 72,396 | $ | 118,009 | |||||
| Fair value | $ | 6,429 | $ | 33,689 | $ | 1,191 | $ | 1,239 | $ | 62,701 | $ | 105,249 | |||||
The amortized cost and fair value of HTM investment securities as of December 31, 2023 were as follows:
| Maturing | |||||||||||||||||
| Due in One Year or Less | After One Year But Within Five Years | After Five Years But Within Ten Years | After Ten Years | Securities with Variable Monthly Payments or Noncontractual Maturities | Total | ||||||||||||
| State and municipal | $ | 343 | $ | 305 | $ | 230 | $ | — | $ | — | $ | 878 | |||||
| Fair value | $ | 341 | $ | 299 | $ | 228 | $ | — | $ | — | $ | 868 | |||||
Total investment securities declined in 2023 primarily due to maturities and prepayments. As a result of the current liquidity environment and overall market conditions, we have not replenished maturing securities with new purchases.
Residential mortgage loans held-for-sale, at fair value
Loans HFS represent the fair value of loans that have been committed to be sold to the secondary market, but have not yet been delivered. The level of loans HFS fluctuates based on loan demand as well as the timing of loan deliveries to the secondary market.
Loans and allowance for credit losses
As outlined in the following tables, our loan portfolio has continued to grow throughout the past 12 months, primarily in the commercial and residential mortgage segments. However, due to an acceleration of commercial loan payoffs during the fourth quarter of 2023, gross loans declined $10,249. As a result of current market conditions, we expect minimal loan growth into 2024. Specifically, our commercial pipeline declined significantly throughout 2023, and the requests that are being presented are lower dollar balances and often carry an SBA guarantee. Our allowance for credit losses increased $1,870 as a result of the adoption of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", as amended, on January 1, 2023. This was recorded as a cumulative-effect adjustment, net of tax, from retained earnings.
The following tables outline the composition and changes in the loan portfolio as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | |||||||||||||||
| Commercial and industrial | $ | 118,089 | $ | 125,330 | $ | 120,985 | $ | 111,557 | $ | 106,616 | |||||||||
| Commercial real estate | 870,693 | 874,870 | 870,761 | 874,690 | 869,496 | ||||||||||||||
| Total commercial loans | 988,782 | 1,000,200 | 991,746 | 986,247 | 976,112 | ||||||||||||||
| Residential mortgage | 431,836 | 431,740 | 430,065 | 418,987 | 406,408 | ||||||||||||||
| Home equity | 48,380 | 47,069 | 45,689 | 46,909 | 47,768 | ||||||||||||||
| Total residential real estate loans | 480,216 | 478,809 | 475,754 | 465,896 | 454,176 | ||||||||||||||
| Consumer | 4,473 | 4,711 | 4,788 | 5,030 | 5,878 | ||||||||||||||
| Gross loans | 1,473,471 | 1,483,720 | 1,472,288 | 1,457,173 | 1,436,166 | ||||||||||||||
| Allowance for credit losses | (15,400 | ) | (15,400 | ) | (15,400 | ) | (15,220 | ) | (13,000 | ) | |||||||||
| Loans, net | $ | 1,458,071 | $ | 1,468,320 | $ | 1,456,888 | $ | 1,441,953 | $ | 1,423,166 | |||||||||
| Memo items: | |||||||||||||||||||
| Residential mortgage loans serviced for others | $ | 624,765 | $ | 631,697 | $ | 632,018 | $ | 636,121 | $ | 647,121 | |||||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | ||||||||||||||||||
| Variance | Variance | ||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||
| Commercial and industrial | $ | (7,241 | ) | (5.78 | )% | $ | 11,473 | 10.76 | % | ||||||||||
| Commercial real estate | (4,177 | ) | (0.48 | )% | 1,197 | 0.14 | % | ||||||||||||
| Total commercial loans | (11,418 | ) | (1.14 | )% | 12,670 | 1.30 | % | ||||||||||||
| Residential mortgage | 96 | 0.02 | % | 25,428 | 6.26 | % | |||||||||||||
| Home equity | 1,311 | 2.79 | % | 612 | 1.28 | % | |||||||||||||
| Total residential real estate loans | 1,407 | 0.29 | % | 26,040 | 5.73 | % | |||||||||||||
| Consumer | (238 | ) | (5.05 | )% | (1,405 | ) | (23.90 | )% | |||||||||||
| Gross loans | (10,249 | ) | (0.69 | )% | 37,305 | 2.60 | % | ||||||||||||
| Allowance for credit losses | — | — | % | (2,400 | ) | 18.46 | % | ||||||||||||
| Loans, net | $ | (10,249 | ) | (0.70 | )% | $ | 34,905 | 2.45 | % | ||||||||||
| Memo items: | |||||||||||||||||||
| Residential mortgage loans serviced for others | $ | (6,932 | ) | (1.10 | )% | $ | (22,356 | ) | (3.45 | )% | |||||||||
The following table presents historical loan balances by portfolio segment and impairment evaluation as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Loans collectively evaluated for impairment | ||||||||||||||
| Commercial and industrial | $ | 115,665 | $ | 124,860 | $ | 120,854 | $ | 111,426 | $ | 106,616 | ||||
| Commercial real estate | 870,524 | 874,701 | 870,580 | 874,509 | 869,313 | |||||||||
| Residential mortgage | 429,109 | 428,927 | 428,147 | 416,879 | 404,308 | |||||||||
| Home equity | 48,136 | 46,898 | 45,535 | 46,761 | 47,728 | |||||||||
| Consumer | 4,473 | 4,711 | 4,788 | 5,020 | 5,871 | |||||||||
| Subtotal | 1,467,907 | 1,480,097 | 1,469,904 | 1,454,595 | 1,433,836 | |||||||||
| Loans individually evaluated for impairment | ||||||||||||||
| Commercial and industrial | 2,424 | 470 | 131 | 131 | — | |||||||||
| Commercial real estate | 169 | 169 | 181 | 181 | 183 | |||||||||
| Residential mortgage | 2,727 | 2,813 | 1,918 | 2,108 | 2,100 | |||||||||
| Home equity | 244 | 171 | 154 | 148 | 40 | |||||||||
| Consumer | — | — | — | 10 | 7 | |||||||||
| Subtotal | 5,564 | 3,623 | 2,384 | 2,578 | 2,330 | |||||||||
| Gross Loans | $ | 1,473,471 | $ | 1,483,720 | $ | 1,472,288 | $ | 1,457,173 | $ | 1,436,166 | ||||
The following table presents historical allowance for credit losses allocations by portfolio segment and impairment evaluation as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Loans collectively evaluated for impairment | ||||||||||||||
| Commercial and industrial | $ | 1,407 | $ | 1,362 | $ | 1,488 | $ | 1,324 | $ | 1,094 | ||||
| Commercial real estate | 8,467 | 8,703 | 8,991 | 8,765 | 7,480 | |||||||||
| Residential mortgage | 4,409 | 4,439 | 4,453 | 4,576 | 3,878 | |||||||||
| Home equity | 321 | 315 | 325 | 416 | 370 | |||||||||
| Consumer | 44 | 36 | 40 | 49 | 128 | |||||||||
| Unallocated | 355 | 294 | 49 | — | — | |||||||||
| Subtotal | 15,003 | 15,149 | 15,346 | 15,130 | 12,950 | |||||||||
| Loans individually evaluated for impairment | ||||||||||||||
| Commercial and industrial | 363 | 248 | 15 | 3 | — | |||||||||
| Commercial real estate | — | — | — | — | — | |||||||||
| Residential mortgage | 34 | 3 | 39 | 77 | 43 | |||||||||
| Home equity | — | — | — | — | — | |||||||||
| Consumer | — | — | — | 10 | 7 | |||||||||
| Unallocated | — | — | — | — | — | |||||||||
| Subtotal | 397 | 251 | 54 | 90 | 50 | |||||||||
| Allowance for credit losses | $ | 15,400 | $ | 15,400 | $ | 15,400 | $ | 15,220 | $ | 13,000 | ||||
| Commercial and industrial | $ | 1,770 | $ | 1,610 | $ | 1,503 | $ | 1,327 | $ | 1,094 | ||||
| Commercial real estate | 8,467 | 8,703 | 8,991 | 8,765 | 7,480 | |||||||||
| Residential mortgage | 4,443 | 4,442 | 4,492 | 4,653 | 3,921 | |||||||||
| Home equity | 321 | 315 | 325 | 416 | 370 | |||||||||
| Consumer | 44 | 36 | 40 | 59 | 135 | |||||||||
| Unallocated | 355 | 294 | 49 | — | — | |||||||||
| Allowance for credit losses | $ | 15,400 | $ | 15,400 | $ | 15,400 | $ | 15,220 | $ | 13,000 | ||||
Loan concentration analysis
As a result of the current economic conditions, there continues to be a heightened focus in the financial industry for non-owner occupied commercial real estate loans, most specifically retail and office space industries. While we continue to monitor various industries that have been impacted by the pandemic, we also continue to monitor the effects of inflation, supply chain disruption, rising interest rates, and office space usage associated with an increased remote workforce. The overall non-owner occupied commercial real estate loan portfolio has remained solid, and performance has not been lacking. Performance is based on debt service coverage ratio, loan to value ratio and payment trends. As of December 31, 2023, there were no delinquencies in the non-owner occupied commercial real estate loan portfolio. We expect loan demand in the non-owner occupied commercial real estate loan portfolio to experience insignificant growth, if any, in future periods.
The net lease pool is one of the largest growth pools in the non-owner occupied commercial real estate portfolio and continues to remain strong. Risk associated within this pool is minimal as these are national or regional tenants that are well vetted during origination and annually thereafter. Risk is further minimized in this pool as locations are spread out nationally.
During the fourth quarter of 2023, Rite Aid, which operates over 2,000 retail pharmacies across 17 states, filed for Chapter 11 bankruptcy protection. We have exposure in our loan portfolio to Rite Aid in the net lease and retail strip center non-owner occupied commercial real estate pools. Exposure in the net lease pool whereas Rite Aid is a single tenant consists of six loans totaling $10,082. Exposure in the retail strip center pool whereas Rite Aid is a tenant consists of three loans totaling $17,359. One loan in the retail strip center pool has been reported on the Rite Aid store closure listing, however, the loan is well-secured. We continue to actively monitor the status of the Rite Aid's filing and exit strategy from bankruptcy.
The ongoing pressures on the office sector due to remote work capabilities and less required office space, we continue to monitor the office pool more closely for potential deterioration. It is not expected that there will be much, if any, impact on portfolio performance in this pool in the near future due to existing lease terms, tenant mix, office size, and strong underwriting at origination. Due to current economic uncertainty and the pressures noted above it is unlikely that we will seek new loan originations in the non-owner occupied office pool in 2024.
Below is a description of each industry pool within the non-owner occupied commercial real estate loan portfolio:
Net lease: Loans in this pool represent national credit tenants (or franchisees of the same) or large regional tenants with excellent credit. These loans are typically single tenant net lease credits with strong debt service coverage ratios and lease terms that extend beyond the maturity of the loan.
Retail strip centers: Loans in this pool represent loans collateralized by retail strip centers. The tenant base within this pool consists primarily of retail space whose average lease periods run between one and ten years. Larger strip centers are usually anchored by a national or regional tenant. Guarantors in this category typically have large liquid reserves.
Office: Loans in this pool represent loans collateralized by non-owner occupied office buildings. The tenant base includes legal and other professional services whose average lease periods run from three to fifteen years.
Special use: Loans in this pool represent loans collateralized by special use buildings, which include hotels, motels, assisted living and nursing homes that are not classified as construction or SBA loans.
Industrial: Loans in pool represent investment properties used for manufacturing and production.
Medical office: Loans in this pool represent loans collateralized by non-owner occupied medical office buildings. The tenant base includes medical services whose average lease periods run from three to fifteen years.
Self storage: Loans in this pool represent self storage buildings. Loan terms are generally five years or less and the lease terms of the units are typically on a month-to-month basis.
Mixed use: Loans in this pool represent loans collateralized by mixed use real estate. The tenant base within this pool consists primarily of office-retail, office-residential or retail-residential space. The properties are most often purchased by individuals for investment purposes.
Retail: Loans in this pool represent loans collateralized by single tenant retail buildings whose average lease periods run over five years.
The following tables present the composition of current and historical non-owner occupied commercial real estate loans, based on loan collateral, by industry pool:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||||||
| Net lease | $ | 149,056 | $ | 160,077 | $ | 159,199 | $ | 161,392 | $ | 165,848 | ||||||||
| Retail strip centers | 98,588 | 96,567 | 96,310 | 95,726 | 89,671 | |||||||||||||
| Office | 61,822 | 62,959 | 62,062 | 59,867 | 60,166 | |||||||||||||
| Special use | 58,710 | 57,612 | 57,978 | 41,932 | 35,284 | |||||||||||||
| Industrial | 28,380 | 28,906 | 28,661 | 29,025 | 30,396 | |||||||||||||
| Medical office | 25,842 | 28,591 | 28,752 | 30,363 | 30,305 | |||||||||||||
| Self storage | 23,455 | 21,993 | 22,169 | 22,265 | 22,285 | |||||||||||||
| Mixed use | 17,335 | 19,833 | 19,412 | 19,054 | 19,208 | |||||||||||||
| Retail | 12,981 | 14,115 | 14,998 | 17,429 | 15,437 | |||||||||||||
| Total non-owner occupied commercial real estate loans | $ | 476,169 | $ | 490,653 | $ | 489,541 | $ | 477,053 | $ | 468,600 | ||||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | |||||||||||||||||
| Variance | Variance | |||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||
| Net lease | $ | (11,021 | ) | (6.88 | )% | $ | (16,792 | ) | (10.12 | )% | ||||||||
| Retail strip centers | 2,021 | 2.09 | % | 8,917 | 9.94 | % | ||||||||||||
| Office | (1,137 | ) | (1.81 | )% | 1,656 | 2.75 | % | |||||||||||
| Special use | 1,098 | 1.91 | % | 23,426 | 66.39 | % | ||||||||||||
| Industrial | (526 | ) | (1.82 | )% | (2,016 | ) | (6.63 | )% | ||||||||||
| Medical office | (2,749 | ) | (9.61 | )% | (4,463 | ) | (14.73 | )% | ||||||||||
| Self storage | 1,462 | 6.65 | % | 1,170 | 5.25 | % | ||||||||||||
| Mixed use | (2,498 | ) | (12.60 | )% | (1,873 | ) | (9.75 | )% | ||||||||||
| Retail | (1,134 | ) | (8.03 | )% | (2,456 | ) | (15.91 | )% | ||||||||||
| Total non-owner occupied commercial real estate loans | $ | (14,484 | ) | (2.95 | )% | $ | 7,569 | 1.62 | % | |||||||||
The following table presents the average loan size of current and historical non-owner occupied commercial real estate loans, based on loan collateral, by industry pool:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Net lease | $ | 1,316 | $ | 1,300 | $ | 1,292 | $ | 1,299 | $ | 1,307 | ||||
| Retail strip centers | 2,135 | 2,115 | 2,081 | 2,087 | 2,092 | |||||||||
| Office | 1,297 | 1,294 | 1,332 | 1,409 | 1,422 | |||||||||
| Special use | 2,079 | 2,134 | 2,342 | 1,951 | 1,703 | |||||||||
| Industrial | 1,092 | 1,072 | 1,025 | 1,038 | 1,050 | |||||||||
| Medical office | 1,078 | 1,145 | 1,159 | 1,193 | 1,212 | |||||||||
| Self storage | 1,380 | 1,692 | 1,583 | 1,590 | 1,714 | |||||||||
| Mixed use | 1,333 | 1,240 | 1,294 | 1,466 | 1,478 | |||||||||
| Retail | 461 | 429 | 450 | 474 | 459 | |||||||||
| Total non-owner occupied commercial real estate loans | $ | 1,379 | $ | 1,362 | $ | 1,366 | $ | 1,352 | $ | 1,346 | ||||
The following table presents current and historical non-owner occupied commercial real estate loans, based on loan collateral, by industry pool as a percentage of gross loans:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Net lease | 10.12 | % | 10.79 | % | 10.81 | % | 11.08 | % | 11.55 | % | ||||
| Retail strip centers | 6.69 | % | 6.51 | % | 6.54 | % | 6.57 | % | 6.24 | % | ||||
| Office | 4.20 | % | 4.24 | % | 4.22 | % | 4.11 | % | 4.19 | % | ||||
| Special use | 3.98 | % | 3.88 | % | 3.94 | % | 2.88 | % | 2.46 | % | ||||
| Industrial | 1.93 | % | 1.95 | % | 1.95 | % | 1.99 | % | 2.12 | % | ||||
| Medical office | 1.75 | % | 1.93 | % | 1.95 | % | 2.08 | % | 2.11 | % | ||||
| Self storage | 1.59 | % | 1.48 | % | 1.51 | % | 1.53 | % | 1.55 | % | ||||
| Mixed use | 1.18 | % | 1.34 | % | 1.32 | % | 1.31 | % | 1.34 | % | ||||
| Retail | 0.88 | % | 0.95 | % | 1.02 | % | 1.20 | % | 1.07 | % | ||||
| Total non-owner occupied commercial real estate loans to gross loans | 32.32 | % | 33.07 | % | 33.26 | % | 32.75 | % | 32.63 | % | ||||
Asset quality
The following table summarizes our current, past due, and nonaccrual loans as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Accruing interest | ||||||||||||||
| Current | $ | 1,463,668 | $ | 1,477,386 | $ | 1,466,354 | $ | 1,449,266 | $ | 1,428,691 | ||||
| Past due 30-89 days | 4,239 | 2,711 | 3,550 | 5,185 | 5,182 | |||||||||
| Past due 90 days or more | — | — | — | 144 | — | |||||||||
| Total accruing interest | 1,467,907 | 1,480,097 | 1,469,904 | 1,454,595 | 1,433,873 | |||||||||
| Nonaccrual | 5,564 | 3,623 | 2,384 | 2,578 | 2,293 | |||||||||
| Total loans | $ | 1,473,471 | $ | 1,483,720 | $ | 1,472,288 | $ | 1,457,173 | $ | 1,436,166 | ||||
| Total loans past due and in nonaccrual status | $ | 9,803 | $ | 6,334 | $ | 5,934 | $ | 7,907 | $ | 7,475 | ||||
The following table summarizes the our nonperforming assets as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Nonaccrual loans | $ | 5,564 | $ | 3,623 | $ | 2,384 | $ | 2,578 | $ | 2,293 | ||||
| Accruing loans past due 90 days or more | — | — | — | 144 | — | |||||||||
| Total nonperforming loans | 5,564 | 3,623 | 2,384 | 2,722 | 2,293 | |||||||||
| Other real estate owned | 597 | 345 | 345 | 293 | 293 | |||||||||
| Total nonperforming assets | $ | 6,161 | $ | 3,968 | $ | 2,729 | $ | 3,015 | $ | 2,586 | ||||
The following table summarizes our charge-offs, recoveries and provision for loan losses as of, and for the three-month periods ended:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||||
| Total charge-offs | $ | 110 | $ | 16 | $ | 41 | $ | 28 | $ | 58 | ||||||
| Total recoveries | 300 | 455 | 16 | 12 | 11 | |||||||||||
| Net charge-offs (recoveries) | $ | (190 | ) | $ | (439 | ) | $ | 25 | $ | 16 | $ | 47 | ||||
| Provision for loan losses | $ | (190 | ) | $ | (309 | ) | $ | 205 | $ | 236 | $ | 847 | ||||
Due to the efforts of our loan and collection team, we successfully recovered multiple previously charged-off loans during the third and fourth quarters of 2023. This led to net recoveries of $588 for the year ended December 31, 2023.
The following table summarizes the our primary asset quality measures as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Nonperforming loans to gross loans | 0.38 | % | 0.24 | % | 0.16 | % | 0.19 | % | 0.16 | % | ||||
| Nonperforming assets to total assets | 0.35 | % | 0.23 | % | 0.16 | % | 0.17 | % | 0.15 | % | ||||
| Allowance for credit losses to gross loans | 1.04 | % | 1.04 | % | 1.05 | % | 1.04 | % | 0.91 | % | ||||
| Net charge-offs (recoveries) to QTD average gross loans | (0.01 | )% | (0.03 | )% | — | % | — | % | — | % | ||||
| Provision for loan losses to QTD average gross loans | (0.01 | )% | (0.02 | )% | 0.01 | % | 0.02 | % | 0.06 | % | ||||
The following table summarizes the average loan size as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Commercial and industrial | $ | 334 | $ | 353 | $ | 346 | $ | 312 | $ | 311 | ||||
| Commercial real estate | 905 | 896 | 885 | 895 | 890 | |||||||||
| Total commercial loans | 752 | 751 | 743 | 739 | 740 | |||||||||
| Residential mortgage | 236 | 234 | 234 | 228 | 225 | |||||||||
| Home equity | 53 | 52 | 51 | 52 | 52 | |||||||||
| Total residential real estate loans | 175 | 174 | 174 | 170 | 166 | |||||||||
| Consumer | 13 | 12 | 12 | 13 | 13 | |||||||||
| Gross loans | $ | 337 | $ | 335 | $ | 333 | $ | 328 | $ | 323 | ||||
All other assets
The following tables outline the composition and changes in other assets as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||||||
| Premises and equipment, net | $ | 14,561 | $ | 14,928 | $ | 15,345 | $ | 15,219 | $ | 15,571 | ||||||||
| Federal Home Loan Bank stock | 9,179 | 9,179 | 11,498 | 10,958 | 10,215 | |||||||||||||
| Corporate owned life insurance | 27,466 | 27,274 | 27,047 | 26,869 | 26,697 | |||||||||||||
| Mortgage servicing rights | 8,776 | 8,884 | 8,765 | 8,773 | 8,666 | |||||||||||||
| Accrued interest receivable | 4,472 | 4,485 | 3,992 | 3,976 | 4,002 | |||||||||||||
| Goodwill | 8,853 | 8,853 | 8,853 | 8,853 | 8,853 | |||||||||||||
| Other assets | ||||||||||||||||||
| Core deposit intangibles | 533 | 609 | 684 | 760 | 836 | |||||||||||||
| Right-of-use assets | 1,333 | 1,426 | 1,510 | 1,107 | 1,204 | |||||||||||||
| Other real estate owned | 597 | 345 | 345 | 293 | 293 | |||||||||||||
| Other | 5,476 | 6,691 | 6,042 | 5,946 | 5,974 | |||||||||||||
| Total | 7,939 | 9,071 | 8,581 | 8,106 | 8,307 | |||||||||||||
| All other assets | $ | 81,246 | $ | 82,674 | $ | 84,081 | $ | 82,754 | $ | 82,311 | ||||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | |||||||||||||||||
| Variance | Variance | |||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||
| Premises and equipment, net | $ | (367 | ) | (2.46 | )% | $ | (1,010 | ) | (6.49 | )% | ||||||||
| Federal Home Loan Bank stock | — | — | % | (1,036 | ) | (10.14 | )% | |||||||||||
| Corporate owned life insurance | 192 | 0.70 | % | 769 | 2.88 | % | ||||||||||||
| Mortgage servicing rights | (108 | ) | (1.22 | )% | 110 | 1.27 | % | |||||||||||
| Accrued interest receivable | (13 | ) | (0.29 | )% | 470 | 11.74 | % | |||||||||||
| Goodwill | — | — | % | — | — | % | ||||||||||||
| Other assets | ||||||||||||||||||
| Core deposit intangibles | (76 | ) | (12.48 | )% | (303 | ) | (36.24 | )% | ||||||||||
| Right-of-use assets | (93 | ) | (6.52 | )% | 129 | 10.71 | % | |||||||||||
| Other real estate owned | 252 | 73.04 | % | 304 | 103.75 | % | ||||||||||||
| Other | (1,215 | ) | (18.16 | )% | (498 | ) | (8.34 | )% | ||||||||||
| Total | (1,132 | ) | (12.48 | )% | (368 | ) | (4.43 | )% | ||||||||||
| All other assets | $ | (1,428 | ) | (1.73 | )% | $ | (1,065 | ) | (1.29 | )% | ||||||||
The decrease in premises and equipment during 2023 was due to depreciation on our existing premises and equipment.
The decrease in FHLB stock during the third quarter of 2023 was due to our participation in a voluntary repurchase program offered by the FHLB. We anticipate our FHLB stock balance will remain consistent in future periods.
Total deposits
The following tables outline the composition and changes in the deposit portfolio as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||||||
| Noninterest bearing demand | $ | 423,019 | $ | 425,820 | $ | 457,204 | $ | 457,585 | $ | 461,390 | ||||||||
| Interest bearing | ||||||||||||||||||
| Savings | 273,302 | 293,310 | 301,872 | 323,254 | 351,066 | |||||||||||||
| Money market demand | 223,827 | 225,138 | 221,686 | 214,781 | 170,459 | |||||||||||||
| NOW | ||||||||||||||||||
| Retail NOW | 178,892 | 198,271 | 161,765 | 155,659 | 136,611 | |||||||||||||
| Brokered NOW | — | — | — | 60,005 | 40,009 | |||||||||||||
| Total NOW Accounts | 178,892 | 198,271 | 161,765 | 215,664 | 176,620 | |||||||||||||
| Time deposits | ||||||||||||||||||
| Other time deposits | 234,838 | 198,509 | 176,280 | 121,567 | 102,358 | |||||||||||||
| Brokered time deposits | 60,304 | 60,251 | 60,395 | 20,077 | 70,000 | |||||||||||||
| Internet time deposits | — | 498 | 990 | 990 | 990 | |||||||||||||
| Total time deposits | 295,142 | 259,258 | 237,665 | 142,634 | 173,348 | |||||||||||||
| Total deposits | $ | 1,394,182 | $ | 1,401,797 | $ | 1,380,192 | $ | 1,353,918 | $ | 1,332,883 | ||||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | |||||||||||||||||
| Variance | Variance | |||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||
| Noninterest bearing demand | $ | (2,801 | ) | (0.66 | )% | $ | (38,371 | ) | (8.32 | )% | ||||||||
| Interest bearing | ||||||||||||||||||
| Savings | (20,008 | ) | (6.82 | )% | (77,764 | ) | (22.15 | )% | ||||||||||
| Money market demand | (1,311 | ) | (0.58 | )% | 53,368 | 31.31 | % | |||||||||||
| NOW | ||||||||||||||||||
| Retail NOW | (19,379 | ) | (9.77 | )% | 42,281 | 30.95 | % | |||||||||||
| Brokered NOW | — | — | % | (40,009 | ) | (100.00 | )% | |||||||||||
| Total NOW Accounts | (19,379 | ) | (9.77 | )% | 2,272 | 1.29 | % | |||||||||||
| Time deposits | ||||||||||||||||||
| Other time deposits | 36,329 | 18.30 | % | 132,480 | 129.43 | % | ||||||||||||
| Brokered time deposits | 53 | 0.09 | % | (9,696 | ) | (13.85 | )% | |||||||||||
| Internet time deposits | (498 | ) | (100.00 | )% | (990 | ) | (100.00 | )% | ||||||||||
| Total time deposits | 35,884 | 13.84 | % | 121,794 | 70.26 | % | ||||||||||||
| Total deposits | $ | (7,615 | ) | (0.54 | )% | $ | 61,299 | 4.60 | % | |||||||||
Beginning in March 2022, the FOMC began raising its target federal funds rate in order to combat rising inflation. Since then, the FOMC has raised its target federal funds rate 11 times, from a target range of 0.00-0.25% to 5.25-5.50%, or 525 basis points. This rapid increase in interest rates has led to significant competition amongst financial institutions for deposits. Due to the overall uncertainty regarding potential rate changes in the future, customers have not sought out long-term funds, leading to a shift in demand to higher-yielding non-maturity deposit accounts as well as short-term time deposits. The FOMC has indicated in recent announcements that there may be federal fund rate decreases in 2024, but these potential decreases remain dependent on economic data. While these potential decreases may translate to a lower cost of funds for us, overall competition for deposits will likely continue to remain strong. While overall market liquidity continues to tighten and be extremely competitive, we have strategic initiatives in place to grow core market deposits in 2024.
As a result of the competitive deposit market and customer demand shifting to non-maturity deposit accounts and short-term time deposits, we navigated away from brokered NOW accounts and executed two brokered time deposits during the second quarter of 2023 totaling $40,251, which were split between two- and three-year maturities.
Total borrowed funds
The following tables outline the composition and changes in borrowed funds as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||||||
| Federal Home Loan Bank borrowings | $ | 180,000 | $ | 180,000 | $ | 180,000 | $ | 238,500 | $ | 202,000 | ||||||||
| Subordinated debentures | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | |||||||||||||
| Other borrowings | 4,500 | 7,050 | 6,550 | 6,550 | 6,350 | |||||||||||||
| Total borrowed funds | $ | 198,500 | $ | 201,050 | $ | 200,550 | $ | 259,050 | $ | 222,350 | ||||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | |||||||||||||||||
| Variance | Variance | |||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||
| Federal Home Loan Bank borrowings | $ | — | — | % | $ | (22,000 | ) | (10.89 | )% | |||||||||
| Subordinated debentures | — | — | % | — | — | % | ||||||||||||
| Other borrowings | (2,550 | ) | (36.17 | )% | (1,850 | ) | (29.13 | )% | ||||||||||
| Total borrowed funds | $ | (2,550 | ) | (1.27 | )% | $ | (23,850 | ) | (10.73 | )% | ||||||||
We utilize a mix of borrowed funds and organic deposit growth to fund loan demand. The increase in Federal Home Loan Bank borrowings in the first quarter of 2023 was the result of the highly competitive deposit landscape and the growth of our loan portfolio. However, as loan growth has slowed in recent periods, our reliance on FHLB advances has declined.
Wholesale funding sources
Although we have been successful at growing market deposits, we utilize wholesale funding sources when necessary to fill gaps when asset growth outpaces deposit growth. Our wholesale funding sources include Federal Home Loan Bank borrowings, correspondent Fed Funds lines and brokered deposits. Although wholesale funding sources are typically more expensive than core deposits, they are an integral part of our funding.
The following tables outline the composition and changes in wholesale funding sources as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||||||
| Federal Home Loan Bank borrowings | $ | 180,000 | $ | 180,000 | $ | 180,000 | $ | 238,500 | $ | 202,000 | ||||||||
| Subordinated debentures | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | |||||||||||||
| Other borrowings | 4,500 | 7,050 | 6,550 | 6,550 | 6,350 | |||||||||||||
| Brokered NOW accounts | — | — | — | 60,005 | 40,009 | |||||||||||||
| Brokered time deposits | 60,304 | 60,251 | 60,395 | 20,077 | 70,000 | |||||||||||||
| Internet time deposits | — | 498 | 990 | 990 | 990 | |||||||||||||
| Total wholesale funds | $ | 258,804 | $ | 261,799 | $ | 261,935 | $ | 340,122 | $ | 333,349 | ||||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | |||||||||||||||||
| Variance | Variance | |||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||
| Federal Home Loan Bank borrowings | $ | — | — | % | (22,000 | ) | (10.89 | )% | ||||||||||
| Subordinated debentures | — | — | % | — | — | % | ||||||||||||
| Other borrowings | (2,550 | ) | (36.17 | )% | (1,850 | ) | (29.13 | )% | ||||||||||
| Brokered NOW accounts | — | N/A | (40,009 | ) | (100.00 | )% | ||||||||||||
| Brokered time deposits | 53 | 0.09 | % | (9,696 | ) | (13.85 | )% | |||||||||||
| Internet time deposits | (498 | ) | (100.00 | )% | (990 | ) | (100.00 | )% | ||||||||||
| Total wholesale funds | $ | (2,995 | ) | (1.14 | )% | $ | (74,545 | ) | (22.36 | )% | ||||||||
During 2023, our reliance on wholesale funding sources decreased, as our outstanding FHLB borrowings and brokered NOW accounts declined. We replaced a portion of these wholesale funds by executing two brokered time deposits during the second quarter of 2023 totaling $40,251.
Accrued interest payable and other liabilities
Accrued interest payable and other liabilities includes accrued interest payable, federal income taxes payable, deferred federal income taxes payable, and all other liabilities (none of which are individually significant).
Total shareholders' equity
We are considered a “well-capitalized” institution, as our capital ratios exceed the minimum designated standards necessary in accordance with Basel III guidelines. As of December 31, 2023, the Bank's total capital ratio was 12.13%, tier 1 capital ratio was 11.03%, and tier 1 leverage ratio was 8.94%. The minimum requirements to be considered well-capitalized are a total capital ratio of 10.00%, tier 1 capital ratio of 8.00%, and tier 1 leverage ratio of 5.00%. While we continue to be considered well-capitalized, we are focused on enhancing our capital ratios through earnings of the Bank as well as asset growth moderation strategies in 2024.
The following tables outline the composition and changes in shareholders' equity as of:
| 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | |||||||||||||||
| Common stock | $ | 74,230 | $ | 74,118 | $ | 73,993 | $ | 73,868 | $ | 73,569 | |||||||||
| Retained earnings | 74,309 | 70,972 | 67,643 | 64,863 | 63,044 | ||||||||||||||
| Accumulated other comprehensive (loss) income | (9,837 | ) | (12,188 | ) | (10,946 | ) | (10,484 | ) | (10,526 | ) | |||||||||
| Total shareholders' equity | $ | 138,702 | $ | 132,902 | $ | 130,690 | $ | 128,247 | $ | 126,087 | |||||||||
| 12/31/2023 vs 9/30/2023 | 12/31/2023 vs 12/31/2022 | ||||||||||||||||||
| Variance | Variance | ||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||
| Common stock | $ | 112 | 0.15 | % | $ | 661 | 0.90 | % | |||||||||||
| Retained earnings | 3,337 | 4.70 | % | 11,265 | 17.87 | % | |||||||||||||
| Accumulated other comprehensive (loss) income | 2,351 | (19.29 | )% | 689 | (6.55 | )% | |||||||||||||
| Total shareholders' equity | $ | 5,800 | 4.36 | % | $ | 12,615 | 10.00 | % | |||||||||||
The Board of Directors has authorized the repurchase of up to $10,000 of common stock. As of December 31, 2023, we had $1,393 of common stock available to repurchase through the program. We did not execute any repurchases of our common stock during 2023.
Stock Performance
The following graph compares the cumulative total shareholder return on our common stock for the last five years with the cumulative total return on the ABA NASDAQ Community Bank Index (NASDAQ: ABAQ) over the same period. The graph assumes the value of an investment in our common stock and the ABA NASDAQ Community Bank Index was $100 at December 31, 2018 and all dividends were reinvested.
The graph accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/26344377-cd5f-4927-b69e-0d4ad40cd546
| Date | FETM | ABAQ Index | ||||
| 12/31/2018 | $ | 100.00 | $ | 100.00 | ||
| 12/31/2019 | 121.48 | 120.33 | ||||
| 12/31/2020 | 107.52 | 102.96 | ||||
| 12/31/2021 | 138.95 | 136.27 | ||||
| 12/31/2022 | 111.71 | 123.51 | ||||
| 12/31/2023 | 137.43 | 116.99 | ||||
Abbreviations and Acronyms
| ABA: American Bankers Association | FTE: Fully taxable equivalent |
| ACH: Automated Clearing House | GAAP: Generally Accepted Accounting Principles |
| ACL: Allowance for credit losses | HFS: Held-for-sale |
| AFS: Available-for-sale | HTM: Held-to-maturity |
| AIR: Accrued interest receivable | HFS: Held-for-sale |
| AOCI: Accumulated other comprehensive income | HTM: Held-to-maturity |
| ARRC: Alternative Reference Rates Committee | IRA: Individual retirement account |
| ASC: Accounting Standards Codification | ITM: Interactive Teller Machine |
| ASU: Accounting Standards Update | LIBOR: London Interbank Offered Rate |
| ATM: Automated teller machine | MSR: Mortgage servicing rights |
| CDI: Core deposit intangible | N/M: Not meaningful |
| CET1: Common equity tier 1 | NASDAQ: National Association of Securities Dealers Automated Quotations |
| COLI: Corporate owned life insurance | NOW: Negotiable order of withdrawal |
| DRIP: Dividend Reinvestment Plan | NSF: Non-sufficient funds |
| EPS: Earnings Per Common Share | OCI: Other comprehensive income |
| ESOP: Employee Stock Ownership Plan | OIS: Overnight Index Swap |
| FASB: Financial Accounting Standards Board | OREO: Other real estate owned |
| FDIC: Federal Deposit Insurance Corporation | OTTI: Other-than-temporary impairment |
| FHLB: Federal Home Loan Bank | QTD: Quarter-to-date |
| FHLLC: Fentura Holdings LLC | SAB: Staff Accounting Bulletin |
| FHLMC: Federal Home Loan Mortgage Corporation | SBA: U.S. Small Business Administration |
| FNMA: Federal National Mortgage Association | SEC: Securities and Exchange Commission |
| FOMC: Federal Open Market Committee | SERP: Supplemental Executive Retirement Plan |
| FRB: Federal Reserve Bank | SOFR: Secured Overnight Funding Rate |
| FSB: Farmers State Bank of Munith | TDR: Troubled debt restructuring |
About Fentura Financial, Inc. and The State Bank
Fentura Financial, Inc. is the holding company for The State Bank. It was formed in 1987 and is traded on the OTCQX exchange under the symbol FETM, and has been recognized as one of the Top 50 performing stocks on that exchange.
The State Bank is a commercial, retail and trust bank headquartered in Fenton, Michigan. It currently operates 20 full-service offices and one loan production center serving Bay, Genesee, Ingham, Jackson, Livingston, Oakland, Saginaw, and Shiawassee counties. The State Bank believes in the potential of banking to help create better lives, better businesses, and better communities, and works to achieve this through its full array of consumer, mortgage, SBA, commercial and wealth management banking and advisory services, together with philanthropic and volunteer support to organizations and groups within the communities it serves. More information can be found at www.thestatebank.com or www.fentura.com.
Cautionary Statement: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future growth in earning assets and net income. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
| Contacts: | Ronald L. Justice | Aaron D. Wirsing |
| President & CEO | Chief Financial Officer | |
| Fentura Financial, Inc. | Fentura Financial, Inc. | |
| 810.714.3902 | 810.714.3925 | |
| ron.justice@thestatebank.com | aaron.wirsing@thestatebank.com |
