First Bankers Trustshares, Inc.
2022 Annual Report
Corporate Information ............................................................................. 1
Board of Director Committees ................................................................ 2
Letter to Stockholders ............................................................................. 3
Selected Financial Data (unaudited) .................................................. 4-5
Management’s Report on Internal
Controls Over Financial Reporting ...................................................... 6-7
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (unaudited) ........... 8-12
Independent Auditor’s Reports ....................................................... 13-16
Consolidated Financial Statements
Balance Sheets ..................................................................................... 17
Statements of Income .......................................................................... 18
Statements of Comprehensive Income ............................................... 19
Statements of Changes in Stockholders’ Equity ................................. 20
Statements of Cash Flows ............................................................... 21-22
Notes to Consolidated Financial Statements ................................. 23-45
Board of Directors ............................................................................ 46-47
Officers .................................................................................................. 48
Corporate Description
First Bankers Trustshares, Inc. (FBTI) is a bank holding company for First
Bankers Trust Company, N.A., FBIL Statutory Trust II and FBIL Statutory Trust
III. The Company was incorporated on August 25, 1988 and is headquartered
in Quincy, Illinois.
First Bankers Trustshares’ mission, through its subsidiaries, is to provide
comprehensive financial products and services to its retail, institutional, and
corporate customers.
First Bankers Trust Company, N.A. , a community-oriented financial institution
which traces its beginnings to 1946, operates 9 banking facilities in Adams,
Hancock, McDonough, Sangamon and Schuyler counties in West Central
Illinois and one loan production office in St. Clair county Illinois.
FBIL Statutory Trust II and FBIL Statutory Trust III were capitalized in September
2003 and August 2004, respectively, for the purpose of issuing Company
Obligated Mandatorily Redeemable Preferred Securities.
For additional financial information contact:
Allen W. Shafer, President and CEO
First Bankers Trustshares, Inc.
(217) 228-8000
Stockholder Information
Common shares authorized:
Common shares outstanding as of
December 31, 2022:
Certificate holders of record:
*As of December 31, 2022
6,000,000
2,986,281
219*
Inquiries regarding transfer requirements, lost certificates, changes of address
and account status should be directed to the corporation’s transfer agent:
AST Shareholder Services
6201 15th Avenue
Brooklyn, NY 11219
Corporate Address
First Bankers Trustshares, Inc.
1201 Broadway
P.O. Box 3566
Quincy, IL 62301
Independent Auditors
RSM US LLP
201 1rd St. SE, Ste. 800
Cedar Rapids, IA 52401
General Counsel
Norton Rose Fulbright US LLP
2200 Ross Avenue, Suite 3600
Dallas, TX 75201-2784
Corporate Information
Gnuse
Emeritus, First Bankers Trustshares, Inc.
Trustshares, Inc.
Trust Company, N.A.
President/Chairman/CEO Ameren Illinois
Corporation
First Bankers Trustshares, Inc. Board of Directors
Donald K. Gnuse
Board Member
Carl Adams, Jr.
Chairman, Illinois Ayers Oil Company
TI-Trust Director
Scott A. Cisel
Former
Strategic Advisor to Energy Internet
President of Cisel Consulting, LLC
William D. Daniels
Chairman of the Board, First Bankers
Chairman of the Board, First Bankers
Member, Harborstone Group, LLC
Mark E. Freiburg
Owner, Freiburg Insurance Agency & Freiburg Development
Owner, Diamond Construction, Inc.
Owner, Maxamillion, Inc.
Charles M.
President/CEO, United State Bank Lewistown, MO.
Arthur E. Greenbank
Former
and
Phyllis J. Hofmeister
Secretary, Robert Hofmeister
TI-Trust, Director
Kemia
M.
CEO, Lodestar Consulting and Executive Coaching
Southern Illinois University School of Medicine
Richard W. Schulte
Wright & Schulte, Attorney at Law
Allen W. Shafer
President/CEO, First Bankers Trust Company, N.A.
President/CEO, First Bankers Trustshares, Inc.
Steven E. Siebers
Attorney at Law,
Ti-Trust, Director
Executive Officers
Allen W. Shafer,
Seth H. Runkle,
President/CEO, First Bankers Trust Company, N.A.
President and CEO
CFO
First Bankers Trustshares, Inc.
Sarraf, M. D., M.P.H.
Inc.
Schmiedeskamp, Robertson, Neu & Mitchell
First Bankers Trustshares, Inc. Stock Prices
Market Value
(For the three
12/31/22 9/30/22 6/30/22 3/31/22 12/31/21
months period ended)
High
Low
$27.00
$28.50
$30.93
$31.45
$31.45
$22.75
$26.00
$27.27
$30.70
$30.46
Period End Close
$23.59
$27.00
$28.30
$30.95
$31.45
The following companies make a market in FBTI common stock:
Raymond James
225 S. Riverside Plaza
7th Floor
Chicago, IL 60606
(800) 800-4693
Janney Montgomery Scott LLC
1475 Peachtree St. NE.
Suite 800
Atlanta, GA 30309
(844) 273-2189
Stifel Nicolas & Co., Inc.
501 N. Broadway
St. Louis, MO 63102
(800) 679-5446
Monroe Financial Partners
100 N. Riverside Plaza, Suite 1620
Chicago, IL 60606
(312) 327-2530
D.A. Davidson & Co.
75 West Front St.
Suite 5
Red Bank, NJ 07701
1
Board of Director Committees
The Audit and the Governance And Compensation Committees are chaired by a board member. They are given the necessary resources to lead
their committees, monitor the committee actions, and report to the full Board the committee’s activities. The committees are staffed with
employees who have been carefully chosen to support the Board member chairperson and provide the expertise and support to allow the
committee to accomplish its objective.
THE COMMITTEES
1. Audit Committee
Chair: Charles M. Gnuse
Board Members: Arthur E. Greenbank, Phyllis J. Hofmeister and Kemia M. Sarraf, M.D., M.P.H.
The Audit Committee is comprised of independent Directors and assists the Board with its oversight of the systems and procedures
relating to the Company’s financial reporting process, internal accounting and financial controls, and risk management program. The
Committee also assists with the administration and monitoring of the internal audit process, the annual independent audit of the
Company’s annual financial statements, and the Company’s compliance with legal and regulatory requirements. The qualification,
independence and performance of the Company’s independent, registered public accounting firm, are also monitored by the
Committee.
2. Governance And Compensation Committee (HR)
Chair: Scott A. Cisel
Board Members: Carl Adams, Jr., Phyllis J. Hofmeister, Richard W. Schulte and Steven E. Siebers
This is a Holding Company committee with the following responsibilities: address corporate governance matters; establish
qualifications and independence requirements for Directors; recommend nominees for election to the Board; approve a management
succession policy and review the identified candidates; oversee employee compensation and benefit plans; approve incentive
compensation arrangements; and assess the contributions of current Directors. This committee will meet at least four times a year.
2
Dear Stockholders of First Bankers Trustshares, Inc.,
2022
was another year of notable achievements for First Bankers
We are pleased to report that
Trustshares, Inc. The Company achieved near all-time record earnings, driven by strong organic
loan growth at a time when the country and our customers started to return to levels of normalcy
not seen since before the pandemic. The economic environment also started to transition, with
higher inflation becoming a trend, leading away from an extended period of low interest rates.
The Company made progress against
repurchase plan and generating record loan growth exceeding 15% for the year. In addition, we
enhanced our digital capabilities, completing the migration to a new online banking platform,
providing
our business and retail customers with significantly enhanced capabilities.
many strategic initiatives, including completing a stock
The following insights, as well as additional details on the Company’s performance can be found in
the following pages:
Net income of $8.8 Million
Earnings per Share of $2.92, an increase of 10.6%
Loans growing to a record $551.3 Million
Letter to Stockholders
William D. Daniels
Chairman of the Board
2023,
continue to
As we look forward to
year. There will
over the next twelve months, most notably in the
a persistently high interest rate environment, though this will also present opportunities for
Company, as we strive to help our customers and communities achieve their dreams.
we are excited to continue building on the momentum exhibited this
be challenges
form of
the
We look forward to hearing from you at the annual meeting on Tuesday, May 9, 2023. The
meeting will be held at the corporate headquarters located at 1201 Broadway, Quincy, Illinois. The
meeting will start at
9:00 a.m.
Allen W. Shafer
President and CEO
Thank you for
Inc.
your continued confidence and
ongoing investment
in
First Bankers Trustshares,
William D. Daniels
Chairman of the Board
First Bankers Trustshares, Inc.
Allen W. Shafer
President and CEO
First Bankers Trustshares, Inc.
3
Selected Financial Data (unaudited)
(Amounts in Thousands of Dollars, Except Per Share Data Statistics)
*
Year Ended December 31,
2022
2021
2020
2019
2018
2017
PER F O R MA NCE
Net income
$
8,823
$
8,170
$
7,843
$
8,319
$
8,382
$
7,392
Common stock cash dividends paid
$
2,316
$
2,223
$
2,101
$
1,977
$
1,852
$
1,728
Common stock cash dividend payout ratio
Return on average assets
26.25%
0.76%
27.21%
0.68%
26.79%
0.75%
23.77%
0.90%
22.10%
0.89%
23.38%
0.80%
Return on average adjusted stockholders’ equity 1
8.33%
8.13%
8.24%
8.99%
9.40%
8.88%
PER CO MMO N SHA R E
Ea r ni ngs, b a si c a nd di l ute d
Dividends paid on common stock
Adjusted book value 2
Stock price
High
Low
Close
$
2.92
$
2.64
$
2.54
$
2.69
$
2.72
$
2.40
$
0.76
$
0.72
$
0.68
$
0.64
$
0.60
$
0.56
$
35.78
$
33.46
$
31.54
$
29.68
$
29.79
$
27.67
$
31.45
$
32.00
$
33.00
$
36.00
$
37.95
$
31.00
$
22.75
$
27.75
$
24.75
$
30.25
$
30.01
$
25.95
$
23.59
$
31.45
$
27.75
$
31.20
$
32.00
$
30.75
Price/Earnings per share (at period end)
Market price/Book value (at period end)
8.1
0.66
11.9
0.94
10.9
0.88
11.6
1.05
11.8
1.07
12.8
1.11
Weighted average number of shares outstanding
3,027,147
3,089,997
3,093,398
3,089,247
3,087,488
3,086,805
A T DECE MB ER 31,
Assets
Investment securities
Loans held for sale
Loans (prior to allowance)
Deposits
Short-term borrowings and Federal Home
Loan Bank advances
Junior subordinated debentures
Adjusted stockholders’ equity 3
Adjusted equity to total assets 3
Common Equity Tier 1 capital ratio (risk based) 4
Tier 1 capital ratio (risk based)
Total capital ratio (risk based)
Leverage ratio
$
1,118,117
$
1,226,137
$
1,117,675
$
922,579
$
930,044
$
942,949
483,311
667,157
542,170
345,140
357,311
371,168
211
551,269
913,551
-
478,398
978,624
-
485,153
853,302
169
500,599
727,656
38
480,792
733,435
42
506,341
756,833
130,478
10,310
126,273
10,310
137,904
10,310
81,572
10,310
88,559
10,310
80,394
10,310
$
106,844
$
103,214
$
97,606
$
91,711
$
91,968
$
85,438
9.56%
15.28%
16.75%
18.01%
9.89%
8.42%
16.14%
17.76%
19.01%
8.62%
8.73%
15.78%
17.45%
18.71%
9.34%
9.94%
14.98%
16.67%
17.93%
10.79%
9.89%
14.89%
16.58%
17.84%
10.50%
9.06%
13.28%
14.90%
16.16%
9.94%
1 Return on average common stockholders’ equity is calculated by dividing net income by average common stockholders’ equity. Common stockholders’ equity is defined as equity less
accumulated other comprehensive income or loss.
2 Book value per share is calculated by dividing stockholders’ equity, excluding accumulated other comprehensive income or loss, by outstanding common shares.
3 Stockholders’ equity excludes accumulated other comprehensive income or loss.
4 Common Equity Tier 1 ratio was created by BASEL III regulatory changes, which went into effect in January 2015.
* This table includes results of discontinued operations through June 30, 2019.
4
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
1.25x
0.75x
0.25x
Selected Financial Data (unaudited)
Return on Average Assets
Return on Average Adjusted
Common Equity
0.89% 0.90%
0.80%
0.75%
0.68%
0.76%
15.00%
10.00%
5.00%
0.00%
8.88% 9.40% 8.99%
8.24% 8.13% 8.33%
2017
2018
2019
2020
2021
2022
2017
2018
2019
2020
2021
2022
Earnings Per Share
Price/Earnings Multiples
$2.72
$2.69
$2.54
$2.64
$2.40
$2.92
12.80x
11.80x
11.60x
11.90x
10.90x
8.10x
14.00x
12.00x
10.00x
8.00x
6.00x
4.00x
2.00x
0.00x
2017
2018
2019
2020
2021
2022
2017
2018
2019
2020
2021
2022
Market Price to Adjusted Book
Value
1.11x
1.07x
1.05x
0.88x
0.94x
0.66x
2017
2018
2019
2020
2021
2022
5
Management’s Report on Internal Controls over Financial Reporting
Management’s Report for FDICIA Requirements
Management Report
In this management report, the following subsidiary institution of the First Bankers Trustshares, Inc. and its subsidiaries (the
Company) that are subject to Part 363 are included in the statement of management's responsibilities; the report on
management's assessment of compliance with the Federal laws and regulations pertaining to insider loans and the Federal
and, if applicable, State laws and regulations pertaining to dividend restrictions; and the report on management's assessment
of internal control over financial reporting: First Bankers Trust Company, N.A.
Statement of Management's Responsibilities
The management of the Company is responsible for preparing the Company's annual financial statements in accordance
with accounting principles generally accepted in the United States of America; for establishing and maintaining an adequate
internal control structure and procedures for financial reporting, including controls over the preparation of regulatory financial
statements in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form
FR Y-9C); and for complying with the Federal laws and regulations pertaining to insider loans and the Federal and, if
applicable, state laws and regulations pertaining to dividend restrictions.
Management's Assessment of Compliance with Designated Laws and Regulations
The management of the Company has assessed the Company's compliance with the Federal laws and regulations pertaining
to insider loans and the Federal and, if applicable, state laws and regulations pertaining to dividend restrictions during the
fiscal year that ended on December 31, 2022. Based upon its assessment, management has concluded that the Company
complied with the Federal laws and regulations pertaining to insider loans and the Federal and, if applicable, state laws and
regulations pertaining to dividend restrictions during the fiscal year that ended on December 31, 2022.
Management's Assessment of Internal Control over Financial Reporting
The Company's internal control over financial reporting is a process effected by those charged with governance, management
and other personnel, designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of reliable financial statements in accordance with accounting principles generally accepted in the United States
of America and financial statements for regulatory reporting purposes, i.e., instructions for the Consolidated Financial
Statements for Bank Holding Companies (Form FR Y-9C). The Company's internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America and financial statements for regulatory reporting purposes, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and directors of the
Company; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized
acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures
may deteriorate.
Management is responsible for establishing and maintaining effective internal control over financial reporting including
controls over the preparation of regulatory financial statements. Management assessed the effectiveness of the Company's
internal control over financial reporting, including controls over the preparation of regulatory financial statements in
accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C), as
of December 31, 2022, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control - Integrated Framework in 2013. Based upon its assessment, management has concluded
that, as of December 31,2022, the Company's internal control over financial reporting, including controls over the preparation
of regulatory financial statements in accordance with the instructions for the Consolidated Financial Statements for Bank
Holding Companies (Form FR Y-9C), is effective based on the criteria established in Internal Control - Integrated Framework
issued in 2013.
6
Management’s Report on Internal Controls over Financial Reporting
Management's assessment of the effectiveness of internal control over financial reporting, including controls over the
preparation of regulatory financial statements in accordance with the instructions for the Consolidated Financial Statements
for Bank Holding Companies (Form FR Y-9C), as of December 31, 2022, has been audited by RSM US LLP, an independent
public accounting firm, as stated in their report dated March 10, 2023.
First Bankers Trustshares, Inc.
Allen W. Shafer
Chief Executive Officer
Seth H. Runkle
CFO
First Bankers Trustshares, Inc.
7
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Introduction
The following discussion of the financial condition and results of
operations of First Bankers Trustshares, Inc. provides an analysis of
the consolidated financial statements and focuses upon those
factors which had a significant influence on the overall 2022
performance.
The discussion should be read in conjunction with the Company’s
consolidated financial statements and notes thereto appearing
elsewhere in this Annual Report.
The Company was incorporated on August 25, 1988, and acquired
First Midwest Bank/M.C.N.A. (the Bank) on June 30, 1989. The Bank
acquisition was accounted for using purchase accounting. Prior to the
acquisition of the Bank, the Company did not engage in any
significant business activities.
Financial Management
The business of the Company is that of a community-oriented
financial institution offering a variety of financial services to meet the
needs of the communities it serves.
The Company attracts deposits from the general public and uses
such deposits, together with borrowings and other funds, to originate
one-to-four family residential mortgage loans, consumer loans,
business loans and agricultural loans in its primary market area. The
Company also invests in investment securities consisting primarily of
U.S. government or agency obligations, mortgage-backed securities,
financial institution certificates of deposit, and other liquid assets.
The Company’s goal is to achieve consistently high levels of earning
assets and loan/deposit ratios while maintaining effective expense
control and high customer service levels. The term “high level” means
the ability to profitably increase earning assets. As deposits have
become fully deregulated, sustained earnings enhancement has
focused on “earning asset” generation. The Company will focus on
lending money profitably, controlling credit quality, net interest
margin, operating expenses and on generating fee income from
banking operations.
Consolidated Balance Sheet Summary (Amounts in Thousands of Dollars)
*
A s s e t s
Cash and due fro m banks:
No n-interest bearing
Interest bearing
Securities
Federal funds so ld
Lo ans held fo r sale
Net lo ans
Other assets
TOTA L
2 0 2 2
C ha nge
2021
Change
2020
2019
2018
2017
$
16 ,8 8 5
139 .5 7 %
$
7,048
(26.60%)
$
9,602
$
9,274
$
9,014
$
12,725
10 ,4 7 2
4 8 3 ,311
6 9 7
211
5 4 0 ,4 6 2
6 6 ,0 7 9
( 7 3 .0 9 )
( 2 7 .5 6 )
( 6 0 .4 7 )
-
15 .7 4
4 9 .16
$
1,118 ,117
( 8 .8 1%)
38,918
667,157
1,763
-
(9.66)
23.05
(76.12)
-
43,078
542,170
7,382
-
22,551
345,140
13,031
169
28,616
357,311
16,706
38
12,854
371,168
2,608
42
466,949
(1.28)
472,996
488,811
467,993
497,238
44,302
1,226,137
$
4.37
9.70%
42,447
1,117,675
$
43,603
922,579
$
50,366
930,044
$
46,314
942,949
$
Lia bilit ie s & St o c k ho lde rs ' Equit y
Deposits
Sho rt-term bo rro wings
Federal Home Lo an B ank advances
Junior subo rdinated debentures
Other liabilities
Sto ckho lders’ equity
TOTA L
$
9 13 ,5 5 1
( 6 .6 5 %)
$
978,624
14.69%
$
853,302
$
727,656
$
733,435
$
756,833
8 5 ,4 7 8
4 5 ,0 0 0
10 ,3 10
7 ,18 6
5 6 ,5 9 2
( 2 8 .7 4 )
6 11.6 9
-
4 0 .9 3
( 4 6 .5 3 )
119,950
6,323
10,310
5,099
105,831
(9.53)
18.79
-
(28.02)
(2.97)
132,581
5,323
10,310
7,084
109,075
80,533
1,039
10,310
5,722
97,319
88,559
-
10,310
8,594
89,146
80,394
-
10,310
9,146
86,266
$
1,118 ,117
( 8 .8 1%)
$
1,226,137
9.70%
$
1,117,675
$
922,579
$
930,044
$
942,949
* This table includes disco ntinued o peratio ns fo r 2017 thro ugh June 30, 2019.
8
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
At December 31, 2022, the Company had assets of $1,118,117,000
compared to $1,226,137,000 at December 31, 2021. The decrease
in assets is primarily made up of a decrease in securities of
$183,846,000 (27.56%) and a decrease in cash due from banks of
$18,609,000 (40.48%). These assets were partially used to fund
an increase in net loans of $73,513,000 (15.74%) and an increase
in other assets of $21,777,000 (49.16%). The decrease in
securities, along with the increase in borrowings of $38,677,000 was
also used to fund the decline in deposits of $65,073,000 (6.65%) as
well as the decline in short-term borrowings of $34,472,000.
Approximately $45,082,000 of fixed rate long-term residential real
estate loans were sold in the secondary market during 2022, while
$51,935,000 were sold in 2021. Agricultural real estate loans
totaling approximately $5,422,000 were sold in the secondary
market during 2022, while $3,573,000 were sold
in 2021.
Management continues to place emphasis on the quality versus the
quantity of the credits placed in the portfolio.
Results of Operations Summary
The Company’s earnings are primarily dependent on net interest
income, the difference between interest income and interest
expense. Interest income is a function of the balances of loans,
securities and other interest earning assets outstanding during the
period and the yield earned on such assets. Interest expense is a
function of the balances of deposits and borrowings outstanding
during the same period and the rates paid on such deposits and
borrowings. The Company’s earnings are also affected by provisions
for loan losses, service charges, other non-interest income, and
expense and income taxes. Non-interest expense consists primarily
of employee compensation and benefits, occupancy and equipment
expenses and general and administrative expenses.
Consolidated Income Summary (Amounts in Thousands of Dollars)
Prevailing economic conditions as well as federal regulations
concerning monetary and fiscal policies as they pertain to financial
institutions significantly affect the Company. Deposit balances are
influenced by a number of factors including interest rates paid on
competing personal investments and the level of personal income
and savings within the institution’s market. In addition, growth of
deposit balances is influenced by the perceptions of customers
regarding the stability of the financial services industry. Lending
activities are influenced by the demand for housing, competition from
other lending institutions, as well as interest rate levels. The primary
sources of funds for lending activities include deposits, loan
payments, borrowings and funds provided from operations.
For the year ended December 31, 2022, the Company reported
consolidated net income of $8,823,000, a $653,000 (7.99%)
increase from 2021. Net interest income increased $3,525,000
(14.61%), other income decreased $1,289,000 (15.48%), other
expenses increased $1,364,000 (5.99%), and income tax expense
increased $139,000 (6.61%). The provision for loan losses
decreased $80,000 (13.79%).
Analysis of Net Income
The Company’s assets are primarily comprised of interest earning
assets including commercial, agricultural, consumer and real estate
loans, as well as federal funds sold, interest bearing deposits in
securities. Average earning assets equaled
banks and
$1,140,052,000 for the year ended December 31, 2022. A
combination of interest bearing and non-interest bearing deposits,
securities sold under agreement to repurchase, other borrowings and
capital funds are employed to finance these assets.
*
Interest inco me
Interest expense
Net interest inco me
2022
Change
2021
Change
2020
2019
2018
2017
$
3 1,12 7
15 .8 2 %
$
26,875
(11.98)%
$
30,534
$
32,761
$
32,075
$
30,141
( 3 ,4 7 8 )
2 7 ,6 4 9
2 6 .4 3
14 .6 1
(Reco very) pro visio n fo r lo an lo sses
5 0 0
( 13 .7 9 )
Net interest inco me after (reco very)
pro visio n fo r lo an lo sses
Other inco me
Other expenses
Inco me befo re taxes
Inco me tax expense
2 8 ,14 9
13 .9 5
7 ,0 4 0
( 15 .4 8 )
( 2 4 ,12 4 )
11,0 6 5
( 2 ,2 4 2 )
5 .9 9
7 .7 1
6 .6 1
(2,751)
24,124
580
24,704
8,329
(22,760)
10,273
(2,103)
(40.40)
(6.92)
(124.17)
5.04
10.77
8.33
2.44
(3.75)
(4,616)
25,918
(2,400)
23,518
7,519
(6,432)
26,329
(2,400)
23,929
13,153
(5,334)
26,741
(6,550)
20,191
17,524
(4,141)
26,000
(2,250)
23,750
17,179
(21,009)
(26,538)
(27,349)
(29,790)
10,028
(2,185)
10,544
(2,225)
10,366
(1,984)
11,139
(3,747)
NET INCOM E
$
8 ,8 2 3
7 .9 9 %
$
8,170
4.17%
$
7,843
$
8,319
$
8,382
$
7,392
* This table includes results o f disco ntinued o peratio ns thro ugh June 30, 2019.
9
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (unaudited)
Years Ended December 31,
2022
2021
2020
(Amounts in Thousands of Dollars)
Interest income
$
30,457
$
24,485
$
28,794
Loan fees
Interest expense
670
2,390
1,740
(3,478)
(2,751)
(4,616)
NET INTEREST INCOME
$
27,649
$
24,124
$
25,918
Average earning assets
$
1,140,052
$
1,145,775
$
990,625
Net interest margin
2.43%
2.11%
2.62%
The yield on average earning assets for the year ended December 31,
2022 was 2.73%, while the average cost of funds for the same period
was 0.38% on average interest bearing liabilities of $913,383,000.
The yield on average earning assets for the year ended December 31,
2021 was 2.35%, while the average cost of funds for the same period
was 0.30% on average interest bearing liabilities of $913,705,000.
The increase in net interest income of $3,525,000 can be attributed
to the 0.38% increase in the yield on average earning assets, and an
increase of $36,686,000 in average gross loans. This was partially
offset by the .08% increase in the cost of funds, while the average
interest bearing liabilities remained flat.
Allowance for Loan Losses
The allowance for loan losses as a percentage of gross loans
outstanding is 1.96% as of December 31, 2022, compared to 2.39%
as of December 31, 2021. Net loan charge-offs totaled $142,000 for
the year ended December 31, 2022 compared to $128,000 in 2021.
The amounts recorded in the provision for loan losses are determined
from management’s quarterly evaluation of the quality of the loan
portfolio. In this review, such factors as the volume and character of
the loan portfolio, general economic conditions and past loan loss
experience are considered. Management believes that the allowance
for loan losses is adequate to provide for possible losses in the
portfolio as of December 31, 2022.
Other Income
Other income may be divided into two broad categories – recurring
and non-recurring. Service charges on deposit accounts is a major
source of recurring other income. Investment securities gains and
other income vary annually. Other income for the year ended
December 31, 2022 was $7,040,000, a decrease of $1,289,000
(15.48%) from 2021, with a majority of the difference related to a
decrease in the gain on sale of loans and an increase in the loss on
sale of securities.
Other Expense
Other expense for the year ended December 31, 2022 totaled
$24,124,000 an increase of $1,364,000 (5.99%) from 2021.
Salaries and employee benefits expense aggregated 60.43% and
61.28% of total other expense for the years ended December 31,
2022 and 2021, respectively.
Non-Accrual and Past Due Loans, Leases and Other Real Estate Owned
(Amounts in Thousands of Dollars)
As of December 31,
2022
2021
2020
2019
2018
2017
Non-accrual loans and leases
$
7, 634
$
8,634
$
12,063
$
6,503
$
12,568
$
8,092
Other real estate owned (OREO)
-
400
-
377
681
32
Total non-accrual loans and OREO
$
7, 634
$
9,034
$
12,063
$
6,880
$
13,249
$
8,124
Loans and leases past due 90 days
or more and still accruing interest
42
3
447
11
-
22
TOTAL
$
7, 676
$
9,037
$
12,510
$
6,891
$
13,249
$
8,146
10
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Income Taxes
The Company files its federal income tax return on a consolidated basis
with the Bank. See Note 12 for detail of income taxes.
Management believes that it has structured its pricing mechanisms
such that the net interest margin should maintain acceptable levels in
2023, regardless of the changes in interest rates that may occur.
The following table shows the repricing period for interest-earning
assets and interest-bearing liabilities and the related repricing gap:
Repricing Period as of December 31, 2022
After
One Year
Through
through
After
One Year
Five Years
Five Years
(Amounts in Thousands of Dollars)
Interest-earning assets
$
151, 693
$
365, 889
$
546, 026
Interest-bearing liabilities
$
861, 241
$
22, 778
$
10, 310
Repricing gap (repricing
assets minus repricing
liabilities)
$
(709, 548)
$
343, 111
$
535, 716
Repricing Period as of December 31, 2021
After
One Year
Through
through
After
One Year
Five Years
Five Years
(Amounts in Thousands of Dollars)
Interest-earning assets
$
205,276
$
358,613
$
629,609
Interest-bearing liabilities
$
854,446
$
15,080
$
10,594
Repricing gap (repricing
assets minus repricing
liabilities)
$
(649,170)
$
343,533
$
619,015
Liquidity
The concept of liquidity comprises the ability of an enterprise to
maintain sufficient cash flow to meet its needs and obligations on a
timely basis. Bank liquidity must thus be considered in terms of the
nature and mix of the institution’s sources and uses of funds.
Bank liquidity is provided from both assets and liabilities. The asset
side provides liquidity through regular maturities of investment
securities and loans. Investment securities with maturities of one year
or less, deposits with banks and federal funds sold are a primary source
of asset liquidity. On December 31, 2022, these categories totaled
$44,639,000 or 3.99% of assets, compared to $90,106,000 or 7.35%
the previous year.
As of December 31, 2022 and 2021, securities held to maturity had
$37,000 and $167,000, respectively, of gross unrealized gains and
$6,003,000 and $0, respectively, of unrealized losses, on securities
which management intends to hold until maturity. Such amounts are
not expected to have a material effect on future earnings beyond the
usual amortization of premium and accretion of discount.
Closely related to the management of liquidity is the management of
rate sensitivity (management of variable rate assets and liabilities),
which focuses on maintaining stable net interest margin, an important
factor in earnings growth and stability. Emphasis is placed on
maintaining an evenly balanced rate sensitivity position to avoid wide
swings in margins and minimize risk due to changes in interest rates.
As market interest rates move up or down, the change in the fair value
of available-for-sale securities is recognized on a tax adjusted basis as
an unrealized gain or loss, through equity as Other Comprehensive
Income. In 2022, market interest rates rose at one of fastest rates in
history. This resulted in a decrease in fair value of $52.9 Million to the
Company’s debt securities portfolio. Gains or losses are not realized
until and unless a security is sold. No loss is realized if the security is
held to maturity. Security sales may be used for liquidity purposes,
though Management believes the Company has sufficient liquidity to
fund operations and continued growth without significant, if any,
security sales.
The Company’s Asset/Liability Committee
is charged with the
responsibility of prudently managing the volumes and mixes of assets
and liabilities of the subsidiary bank.
11
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (unaudited)
Capital
The ability to generate and maintain capital at adequate levels is critical
to the Company’s
long-term success. A common measure of
capitalization for financial institutions is primary capital as a percent of
total assets.
Regulations also require the Company and Bank to maintain certain
minimum capital levels in relation to consolidated Company assets.
Regulations require a minimum ratio of capital to risk-weighted assets
of 8%.
The Company’s capital, as defined by the regulations, was 18.01% of
risk-weighted assets as of December 31, 2022. In addition, a leverage
ratio of at least 4.00% is to be maintained. As of December 31, 2022,
the Company’s leverage ratio was 9.89%.
Total Risk Based Capital Ratio
17.84% 17.93% 18.71% 19.01%
18.01%
20.00%
15.00%
16.16%
10.00%
5.00%
0.00%
2017
2018
2019
2020
2021
2022
Asset Liability Management
Since changes in interest rates may have a significant impact on
operations, the Company has implemented, and currently maintains,
an asset liability management committee at the Bank to monitor and
react to the changes in interest rates and other economic conditions.
Research concerning interest rate risk is supplied by the Company from
information received from a third-party source. The committee acts
upon this information by adjusting pricing, fee income parameters
and/or marketing emphasis.
Common Stock Information and Dividends
The Company’s common stock is held by 219 certificate holders as of
December 31, 2022, and is traded in a limited over-the-counter
market.
On December 31, 2022 the market price of the Company’s common
stock was $23.59. Market price is based on stock transactions in the
market. Dividends on common stock of approximately $2,328,000
were declared by the Board of Directors of the Company for the year
ended December 31, 2022, versus $2,252,000 for the year ended
December 31, 2021.
Closing Share Price Data
$30.75 $32.00 $31.20
$31.45
$27.75
$23.59
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
2017
2018
2019
2020
2021
2022
Financial Report
Upon written request of any stockholder of record on December 31,
2022, the Company will provide, without charge, a copy of its 2022
Annual Report.
Notice of Annual Meeting of Stockholders
The annual meeting of stockholders will be Tuesday, May 9, 2023 at
9:00 a.m. at the corporate headquarters, 1201 Broadway, Quincy
Illinois.
12
Independent Auditor’s Report
Audit Committee
First Bankers Trustshares, Inc.
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of First Bankers Trustshares, Inc. and its
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 10, 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 within one year after the date that the financial statements are issued or available to
be issued.
13
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 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 certain internal control–related
matters that we identified during the audit.
Other Information Included in the Annual Report
Management is responsible for the other information included in the annual report. The other information
comprises selected financial data and management’s discussion and analysis of financial condition and
results of operations included in the annual report 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 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.
Cedar Rapids, Iowa
March 10, 2023
14
Independent Auditor’s Report
Audit Committee
First Bankers Trustshares, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited First Bankers Trustshares, Inc. and its subsidiaries’ (the Company) 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 (COSO)
in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2022, based on the criteria established in Internal Control—
Integrated Framework issued by COSO in 2013.
We also have audited, in accordance with auditing standards generally accepted in the United States of
America (GAAS), the consolidated financial statements of the Company, and our report dated March 10,
2023 expressed an unmodified opinion.
Basis for Opinion
We conducted our audit in accordance with GAAS. Our responsibilities under those standards are further
described in the “Auditor’s Responsibilities for the Audit of Internal Control Over Financial Reporting”
section of our audit report. We are required to be independent of the Company and to meet our ethical
responsibilities, in accordance with the relevant ethical requirements relating to our audit. 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 Internal Control Over Financial Reporting
Management is responsible for designing, implementing, and maintaining effective internal control over
financial reporting, and for its assessment about the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report for FDICIA Requirements.
Auditor’s Responsibilities for the Audit of Internal Control Over Financial Reporting
Our objectives are to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects and to issue an auditor’s report that includes our opinion
on internal control over financial reporting. Reasonable assurance is a high level of assurance but is not
absolute assurance and therefore is not a guarantee that an audit of internal control over financial
reporting conducted in accordance with GAAS will always detect a material weakness when it exists.
In performing an audit of internal control over financial reporting in accordance with GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Obtain an understanding of internal control over financial reporting, assess the risks that a material
weakness exists, and test and evaluate the design and operating effectiveness of internal control over
financial reporting based on the assessed risk.
15
Definition and Inherent Limitations of Internal Control Over Financial Reporting
An entity’s internal control over financial reporting is a process affected by those charged with
governance, management, and other personnel, designed to provide reasonable assurance regarding the
preparation of reliable financial statements in accordance with accounting principles generally accepted in
the United States of America. Because management’s assessment and our audit were conducted to meet
the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act
(FDICIA), our audit of the Company’s internal control over financial reporting included controls over the
preparation of financial statements in accordance with accounting principles generally accepted in the
United States of America and with the instructions to the Consolidated Financial Statements for Bank
Holding Companies (Form FR Y-9C). An entity's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally accepted in the United States of America,
and that the receipts and expenditures of the entity are being made only in accordance with
authorizations of management and those charged with governance; and (3) provide reasonable
assurance regarding prevention, or timely detection and correction, of unauthorized acquisition, use, or
disposition of the entity’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and
correct, misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Restriction on Use
This report is intended solely for the information and use of the Audit Committee and management of the
Company and the Federal Deposit Insurance Corporation and is not intended to be, and should not be,
used by anyone other than these specified parties.
Cedar Rapids, Iowa
March 10, 2023
16
Consolidated Balance Sheets
(Amounts in Thousands of Dollars, Except Share and Per Share Data)
Consolidated Financial Statements
December 31,
ASSETS
Cash and due from banks
Non-interest bearing
Interest bearing
Total Cash and Due from Banks
Securities held to maturity
Securities available for sale
Federal funds sold
Loans held for sale
Loans
Less allowance for loan losses
Net loans
Premises, furniture and equipment, net
Accrued interest receivable
Life insurance contracts
Goodwill and intangibles
Other assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing demands
Interest bearing demand
Savings
Time
Total deposits
Securities sold under agreements to repurchase
FHLB Advances
Junior subordinated debentures
Accrued interest payable
Other liabilities
Total Liabilities
Commitments and Contingencies (Note 9)
Stockholders’ Equity
Common stock, $1 par value; shares authorized 6,000,000; shares issued
3,605,725 and outstanding: 2022 2,986,281 and 2021 3,084,736 shares
Additional paid in capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock, at cost: 2022 619,444 and 2021 520,989 shares
Total Stockholders’ Equity
Total Liabilities And Stockholders' Equity
See Notes to Consolidated Financial Statements.
17
$
2022
2021
16,885
10,472
27,357
119,598
363,713
697
211
551,269
(10,807)
540,462
11,474
4,622
18,492
3,088
28,403
$
7,048
38,918
45,966
1,899
665,258
1,763
-
478,398
(11,449)
466,949
12,002
4,553
18,215
3,101
6,431
$
1,118,117
$
1,226,137
$
$
160,010
500,843
106,660
146,038
913,551
85,478
45,000
10,310
428
6,758
235,087
497,621
115,967
129,949
978,624
119,950
6,323
10,310
126
4,973
1,061,525
1,120,306
3,606
1,685
112,121
(50,252)
(10,568)
56,592
3,606
1,543
105,626
2,617
(7,561)
105,831
$
1,118,117
$
1,226,137
Consolidated Financial Statements
Consolidated Statements of Income
(Amounts in Thousands of Dollars, Except Share and Per Share Data)
Year Ended December 31,
INTEREST INCOME
Loans, including fee income:
Taxable
Non-taxable
Securities:
Taxable
Non-taxable
Other
Total interest income
INTEREST EXPENSE
Deposits:
Interest bearing demand and savings
Time
Total interest on deposits
Junior subordinated debentures
Other
Total interest expense
Net interest income
(Recovery) provision for loan losses
Net interest income after provision for loan losses
OTHER INCOME
Service charges on deposit accounts
Gain on sale of loans
Investment securities (losses) gains, net
Other
Total other income
OTHER EXPENSES
Salaries and employee benefits
Occupancy expense, net
Equipment expense
Computer processing
Professional services
Other
Total other expenses
Income before income taxes
Income taxes
Net income
Earnings per share of common stock, basic and diluted
Average common shares outstanding
See Notes to Consolidated Financial Statements.
18
2022
2021
$
21,101
449
$
20,065
459
7,494
1,577
506
31,127
1,683
693
2,376
479
623
3,478
27,649
(500)
28,149
1,150
578
(643)
5,955
7,040
14,578
1,252
464
2,774
513
4,543
24,124
11,065
2,242
4,991
1,222
138
26,875
989
937
1,926
309
516
2,751
24,124
(580)
24,704
919
824
857
5,729
8,329
13,947
1,174
577
1,957
697
4,408
22,760
10,273
2,103
$
8,823
$
8,170
$
2.92
$
2.64
3,027,147
3,089,997
Consolidated Financial Statements
Consolidated Statements of Comprehensive Income
(Amounts In Thousands of Dollars)
Year Ended December 31,
Net income
Other comprehensive (loss):
Unrealized (losses) on securities available for sale:
Unrealized holding (losses) arising during the year before tax
Net unrealized holding (losses) on debt securities transferred from available for sale to
held to maturity
Reclassification adjustment for gains (losses) included in net income before tax
Tax (benefit)
Other comprehensive (loss), net of tax
Comprehensive (loss)
See Notes to Consolidated Financial Statements.
2022
2021
$
8,823
$
8,170
(51,295)
(23,290)
(643)
(73,942)
(21,073)
(52,869)
(11,525)
-
857
(12,382)
(3,530)
(8,852)
$
(44,046)
$
(682)
19
Consolidated Financial Statements
Consolidated Statements of Changes in Stockholders' Equity
(Amounts in Thousands of Dollars, Except Share and Per Share Data)
Years Ended December 31, 2022 and 2021
Balance, December 31, 2020
Net income
Other comprehensive loss,
net of tax
Restricted stock award
Treasury stock repurchased
Common stock dividends declared
(amount per share $ .73)
Balance, December 31, 2021
Net income
Other comprehensive loss,
net of tax
Restricted stock award
Treasury stock repurchased
Common stock dividends declared
(amount per share $ .77)
Balance, December 31, 2022
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
$
3,606
$
1,448
$
99,708
$
11,469
$
(7,156)
$
109,075
-
-
-
-
-
-
95
-
8,170
-
-
-
-
(8,852)
-
-
-
-
73
(478)
8,170
(8,852)
168
(478)
-
3,606
$
-
1,543
$
(2,252)
105,626
$
-
2,617
$
-
(7,561)
$
(2,252)
105,831
$
-
-
-
-
-
-
142
-
8,823
-
-
-
-
(52,869)
-
-
-
-
121
8,823
(52,869)
263
(3,128)
(3,128)
-
3,606
$
-
1,685
$
(2,328)
112,121
$
-
(50,252)
$
-
(10,568)
$
(2,328)
56,592
$
See Notes to Consolidated Financial Statements.
20
Consolidated Financial Statements
Year Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES
2022
2021
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
8,823
$
8,170
(500)
799
13
263
5,238
643
(247)
(50,715)
51,082
(578)
27
(867)
(277)
2,075
15,779
(92,481)
(5,421)
118,149
83,151
625
(72,894)
1,066
(271)
31,924
(65,073)
(2,316)
(3,128)
(34,472)
599,500
(560,823)
(66,312)
(18,609)
(580)
968
33
168
9,233
(857)
435
(55,508)
56,332
(824)
270
(645)
(487)
(145)
16,563
(363,147)
-
93,687
123,715
-
6,432
5,619
(573)
(134,267)
125,322
(2,223)
(478)
(12,631)
5,000
(4,000)
110,990
(6,714)
45,966
52,680
$
27,357
$
45,966
(Recovery) provision for loan losses
Depreciation
Amortization of intangibles
Restricted stock award
Amortization/accretion of premiums/discounts on securities, net
Investment securities losses/(gains), net
(Gain)/Loss on write down of other real estate
Loans originated for sale
Proceeds from loans sold
Gain on sale of loans
Deferred income taxes
(Increase) in accrued interest receivable and other assets
(Increase) in cash surrender value of life insurance contracts
Increase (decrease) in accrued interest payable and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities portfolio:
Purchases of securities available for sale
Purchases of securities held to maturity
Proceeds from sales of securities available for sale
Proceeds from calls, maturities and paydowns of securities available for sale
Proceeds from calls, maturities and paydowns of securities held to maturity
(Increase) decrease in loans, net
Decrease in federal funds sold, net
Purchases of premises, furniture and equipment
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease (increase) in deposits, net
Cash dividends paid to common shareholders
Cash paid to purchase treasury stock
Increase in securities sold under agreement to repurchase, net
Proceeds FHLB advances
Repayments of FHLB Advances
Net cash (used in) provided by financing activities
Net (decrease) in cash and due from banks
CASH AND DUE FROM BANKS
Beginning cash
Ending cash
(Continued)
21
Consolidated Financial Statements
Consolidated Statements of Cash Flows (Continued)
(Amounts in Thousands of Dollars)
Year Ended December 31,
2022
2021
Supplemental disclosure of cash flow information, cash payments for:
Interest
Income taxes
$
3,176
$
2,965
2,250
2,127
Supplemental schedule of non-cash investing and financing activities:
Net change in accumulated other comprehensive (loss) income
Transfer of securities available for sale to held to maturity, net of amortization
Transfer of loans to other real estate owned
Transfer of property to other real estate owned
Effects of common dividends payable
(52,869)
(23,290)
119
-
12
(8,852)
-
195
835
29
22
1. Nature of Business and Summary of Significant
Accounting Policies
Nature of Business
First Bankers Trustshares, Inc. (Company) is a bank holding company which
owns 100% of the outstanding common stock of First Bankers Trust Company,
N.A. (Bank), FBIL Statutory Trust II (Trust II) and FBIL Statutory Trust III (Trust
III). The Bank is engaged in banking and bank related services and serves a
market area consisting primarily of Adams, McDonough, Schuyler, Hancock
and Sangamon counties in west central Illinois and a loan production office
in St. Clair county, Illinois.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
allowance for loan losses is inherently subjective as it requires material
estimates that are susceptible to significant change. The fair value disclosure
of financial instruments is an estimate that can be computed within a range.
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
First Bankers Trustshares, Inc. and its wholly-owned subsidiaries, except
Trusts II and III, which do not meet the criteria for consolidation. All significant
intercompany accounts and
in
consolidation.
transactions have been eliminated
Presentation of Cash Flows
For purposes of reporting cash flows, cash and due from banks includes cash
on hand and amounts due from banks, including cash items in process of
clearing. Cash flows from federal funds sold, loans to customers, deposits and
securities sold under agreements to repurchase are reported net.
Securities
Securities held to maturity are those for which the Company has the ability
and intent to hold to maturity. Securities meeting such criteria at the date of
purchase and as of the balance sheet date are carried at amortized cost,
adjusted for amortization of premiums and accretion of discounts, computed
by the interest method over their contracted lives.
Securities available for sale are accounted for at fair value and the unrealized
holding gains or losses, net of their deferred income tax effect, are presented
as increases or decreases in accumulated other comprehensive income
(loss), as a separate component of stockholders’ equity.
Realized gains and losses on sales of securities are based upon the adjusted
book value of the specific securities sold and are included in earnings.
Transfers of debt securities into the held-to-maturity classification from the
available-for-sale classification are made at fair value on the date of transfer.
The unrealized holding gain or loss on the date of transfer is retained in the
the separate component of stockholders’ equity and in the carrying value of
the held-to-maturity securities. Such amounts are amortized over the
remaining contractual lives of the securities by the interest method.
There were no trading securities as of December 31, 2022 and 2021.
All securities are evaluated to determine whether declines in fair value below
their amortized cost are other-than-temporary. In estimating other-than-
23
Notes to Consolidated Financial Statements
temporary impairment losses on debt securities, management considers a
number of factors including, but not limited to (1) the length of time and extent
to which the fair value has been less than amortized cost, (2) the financial
condition and near-term prospects of the issuer, (3) the current market
conditions and (4) the intent of the Company to not sell the security prior to
recovery and whether it is not more likely than not that it will be required to
sell the security prior to recovery. If the Company does not intend to sell the
security, and it is unlikely the entity will be required to sell the security before
recovery of its amortized cost basis, the Company will recognize the credit
component of an other-than-temporary impairment of a debt security in
earnings and the remaining portion in other comprehensive income. For held
to maturity debt securities, the amount of an other-than-temporary
impairment recorded in other comprehensive income for the noncredit portion
would be amortized prospectively over the remaining life of the security on the
basis of the timing of future estimated cash flows of the security.
Federal Funds Sold
Federal funds sold consist of excess bank reserves lent in the federal funds
market. The Company’s consolidated balance sheets include federal funds
sold of $697,000 and $1,763,000 at December 31, 2022 and 2021,
respectively.
Loans and Allowance for Loan Losses
Loans held for sale: Residential real estate and agricultural loans, which are
originated and intended for resale in the secondary market in the foreseeable
future, are classified as held for sale. These loans are carried at the lower of
cost or estimated market value in the aggregate. As assets specifically
acquired for resale, the origination of, disposition of, and gain/loss on these
loans are classified as operating activities in the consolidated statements of
cash flows.
Loans held for investment: Loans that management has the intent and ability
to hold for the foreseeable future, or until pay-off or maturity occurs, are
classified as held for investment. These loans are stated at the amount of
unpaid principal adjusted for charge-offs, the allowance for estimated losses
on loans, and any deferred fees and/or costs on originated loans. Interest is
credited to earnings as earned based on the principal amount outstanding.
Deferred direct loan origination fees and/or costs are amortized as an
adjustment of the related loan’s yield. As assets held for and used in the
production of services, the origination and collection of these loans is
classified as an investing activity in the consolidated statements of cash flows.
Allowance for credit losses and fair value are disclosed by portfolio segment,
while credit quality information, impaired financing receivables, nonaccrual
status and troubled debt restructurings are presented by class of financing
receivable. A portfolio segment is defined as the level at which an entity
develops and documents a systematic methodology to determine its
allowance for credit losses. A class of financing receivable is defined as a
further disaggregation of a portfolio segment based on risk characteristics
and the entity’s method for monitoring and assessing credit risk. The
disclosures are presented at the level of disaggregation that management
uses when assessing and monitoring the portfolio’s risk and performance.
The Company’s portfolio segments are as follows:
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Consumer
Notes to Consolidated Financial Statements
Given the risk characteristics and the Company’s method for monitoring and
assessing credit risk, further disaggregation of the loan portfolio is not
warranted, and therefore, the Company’s classes equal their segments.
Generally, for all classes of loans, loans are considered past due when
contractual payments are delinquent for 31 days or greater.
For all classes of loans, loans will generally be placed on nonaccrual status
when the loan has become 90 days past due (unless the loan is well secured
and in the process of collection); or if any of the following conditions exist:
It becomes evident that the borrower will not make payments, or will
not or cannot meet the terms for renewal of a matured loan,
When full repayment of principal and interest is not expected,
When the loan is graded “substandard” and the future accrual of
interest is not protected by sound collateral values,
When the loan is graded “doubtful”,
When the borrower files bankruptcy and an approved plan of
reorganization or liquidation is not anticipated in the near future, or
When foreclosure action is initiated.
When a loan is placed on nonaccrual status, payments received will be applied
to the principal balance. However, interest may be taken on a cash basis in
the event the loan is fully secured and the risk of loss is minimal. Previously
recorded but uncollected interest on a loan placed in nonaccrual status is
accounted for as follows: if the previously accrued but uncollected interest
and the principal amount of the loan is protected by sound collateral value
based upon a current, independent qualified appraisal, such interest may
remain on the Company’s books. If such interest is not protected, it is
considered a loss with the amount thereof recorded in the current year being
reversed against current earnings, and the amount recorded in the prior year
being charged against the allowance for possible loan losses.
For all classes of loans, nonaccrual loans may be restored to accrual status
provided the following criteria are met:
The loan is current, and all principal and interest amounts
contractually due have been made,
The loan is well secured and in the process of collection, and
Prospects for future principal and interest payments are not in
doubt.
Troubled debt restructures: Troubled debt restructuring exists when the
Company, for economic or legal reasons related to the borrower’s financial
difficulties, grants a concession (either imposed by court order, law or
agreement between the borrower and the Company) to the borrower that it
would not otherwise consider. These concessions could include forgiveness
of principal, extension of maturity dates and reduction of stated interest rates
or accrued interest. The Company is attempting to maximize its recovery of
the balances of the loans through these various concessionary restructurings.
See Note 3 for disclosure of the Company’s troubled debt restructurings.
Allowance for loan losses: For all portfolio segments, the allowance for loan
losses is maintained at the level considered adequate by management to
provide for losses that are probable. The allowance is increased by provisions
charged to expense and reduced by net charge-offs.
In determining the adequacy of the allowance balance, the Company makes
continuous evaluations of the loan portfolio and related off-balance sheet
commitments, considered current economic conditions, historical loan loss
experience, reviews of specific problem loans and other factors.
A discussion of the risk characteristics and the allowance for loan losses by
each portfolio segment follows:
For commercial operating loans, the Company focuses on small and mid-sized
businesses with primary operations in transportation, warehousing and
manufacturing, as well as serving as building contractors, business services
companies, health care providers, financial organizations and retailers. The
24
Company provides a wide range of commercial loans, including lines of credit
for working capital and operational purposes, and term loans for the
acquisition of real estate, facilities, equipment and other purposes. Approval
is generally based on the following factors:
Sufficient cash flow to support debt repayment;
Ability and stability of current management of the borrower;
Positive earnings and financial trends;
Earnings projections based on reasonable assumptions;
Financial strength of the industry and business; and
Value and marketability of collateral.
Collateral for commercial loans generally includes accounts receivable,
inventory, equipment and real estate. The lending policy specifies approved
collateral types and corresponding maximum advance percentages. The value
of collateral pledged on loans typically exceeds the loan amount by a margin
sufficient to absorb potential erosion of its value in the event of foreclosure
and cover the loan amount plus costs incurred to convert it to cash.
The lending policy specifies maximum term limits for commercial operating
loans. For term loans, the maximum term is 7 years. Where the purpose of
the loan is to finance depreciable equipment, the term loan generally does not
exceed the estimated useful life of the asset. For lines of credit, the typical
maximum term is 365 days. However, longer maturities may be approved if
the loan is secured by readily marketable collateral.
In addition, the Company often takes personal guarantees to help assure
repayment. Loans may be made on an unsecured basis if warranted by the
overall financial condition of the borrower.
Commercial real estate loans, construction and land development loans and
real estate secured by multi-family loans are subject to underwriting
standards and processes similar to commercial operating loans and to real
estate loans including the factors regarding approval of the loan noted
previously.
Collateral for these loans generally includes the underlying real estate and
improvements, and may include additional assets of the borrower. The lending
policy specifies maximum loan-to-value limits based on the category of
commercial real estate (commercial real estate loans on improved property,
raw land, land development and commercial construction). In addition, the
Company often takes personal guarantees to help assure repayment.
Agricultural operating and real estate loans are subject to underwriting
standards and processes similar to commercial loans including the approval
factors noted previously. The Company provides a wide range of agriculture
loans, including lines of credit for working capital and operational purposes,
and term loans for the acquisition of real estate, facilities, equipment and
other purposes.
Collateral for agricultural loans generally includes accounts receivable,
inventory (typically grain or livestock), equipment and real estate. The lending
policy specifies approved collateral types and corresponding maximum
advance percentages. The value of collateral pledged on loans typically
exceeds the loan amount by a margin sufficient to absorb potential erosion of
its value in the event of foreclosure and cover the loan amount plus costs
incurred to convert it to cash.
The lending policy specifies maximum term limits for agricultural loans. For
term loans, the maximum term is 7 years. Where the purpose of the loan is to
finance depreciable equipment, the term loan generally does not exceed the
estimated useful life of the asset. For lines of credit, the typical maximum term
is 365 days. However, longer maturities may be approved if the loan is
secured by readily marketable collateral.
In addition, the Company often takes personal guarantees to help assure
repayment. Loans may be made on an unsecured basis if warranted by the
overall financial condition of the borrower.
In some instances for all loans, it may be appropriate to originate or purchase
loans that are exceptions to the guidelines and limits established within the
lending policy described above and below. In general, exceptions to the
lending policy do not significantly deviate from the guidelines and limits
established within the lending policy and, if there are exceptions, they are
clearly noted as such and specifically identified in loan approval documents.
The Company generally retains short-term residential mortgage loans that are
originated for its own portfolio but sells most long-term loans to other parties
while retaining servicing rights on the majority of those loans. The market
value of real estate securing residential real estate loans can fluctuate as a
result of market conditions in the geographic area in which the real estate is
located. Adverse developments affecting real estate values in one or more of
the Company’s markets could increase the credit risk associated with its loan
portfolio. Additionally, the repayment of the loans generally is dependent, in
large part, on the borrower’s continuing financial stability, and is therefore
more likely to be affected by adverse personal circumstances.
Consumer loans typically have shorter terms, lower balances, higher yields
and higher risks of default than real estate-related loans. Consumer loan
collections are dependent on the borrower’s continuing financial stability, and
are therefore more likely to be affected by adverse personal circumstances.
Collateral for these loans generally includes automobiles, boats, recreational
vehicles and real estate. However, depending on the overall financial
condition of the borrower, some loans are made on an unsecured basis. The
collateral securing these loans may depreciate over time, may be difficult to
recover and may fluctuate in value based on condition. In addition, a decline
in the United States economy could result in reduced employment, impacting
the ability of customers to repay their obligations.
For loans categorized as “commercial,” which would include the following
segments: commercial operating, commercial real estate, agricultural real
estate, agricultural operating, construction and land development and real
estate secured by multi-family, the allowance for estimated losses on loans
consist of specific and general components. The specific component relates
to loans that are classified as impaired, as defined below. For those loans that
are classified as impaired, an allowance is established when the collateral
value (or discounted cash flows or observable market price) of the impaired
loan is lower than the carrying value of that loan.
These loans are considered impaired when, based on current information and
events, it is probable that the Company will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms
of the loan agreement. Factors considered by management in determining
impairment include payment status, collateral value, and the probability of
collecting scheduled principal and interest payments when due. Loans that
experience insignificant payment delays and payment shortfalls generally are
not classified as impaired. Management determines the significance of
payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower’s
prior payment record and the amount of the shortfall in relation to the
principal and interest owed. Impairment is measured on a case-by-case basis
by either the present value of the expected future cash flows discounted at
the loan’s effective interest rate, the loan’s obtainable market price, or the
fair value of the collateral if the loan is collateral dependent.
The general components consist of quantitative and qualitative factors and
covers non-impaired loans. The quantitative factors are based on historical
charge-offs experience and expected loss given default derived from the
Notes to Consolidated Financial Statements
Company’s internal risk rating process. See below for a detailed description
of the Company’s internal risk rating scale. The qualitative factors are
determined based on an assessment of internal and/or external influences
on credit quality that are not fully reflected in the historical loss or risk rating
data.
The Company utilizes the following internal risk rating scale:
Type 1 (Substantially Risk Free)
General Statement: This rating should be assigned to loans with virtually no
credit risk, such as loans fully secured by certificates of deposit and other
deposit accounts. It may be assigned to other loans to businesses or
individuals with little or no risk.
Business Loans: A loan to a business may be rated 1 if it exhibits enough of
these characteristics to make it substantially risk free:
Bank has a high regard for the character, competence and diligence
of management.
Earnings are strong and well-assured.
There is ample liquidity.
Loans have paid as agreed.
Abundant collateral which is liquid and has well-defined market
value.
Capital position well above industry averages.
Loan structure is appropriate and documentation complete.
No adverse trends.
Loans to Individuals: Loans to individuals may be assigned a 1 rating if the
following conditions are met:
The primary source of repayment is strong and is considered likely
to remain strong throughout the life of the loan.
The loan is secured by collateral with a loan to value (LTV) of less
than 50% provided that the collateral must have well-defined
market-value, must have satisfactory liquidity and should retain
most of its value if the primary source of repayment falters.
The individual has significant liquidity and is considered likely to
remain liquid over the life of the loan.
Type 2 (Low Risk)
General Statement: This rating should be assigned to loans that have little
credit risk. Borrowers in this category have strong earnings and capital and a
secondary source of repayment that is sufficient to fully repay the loan. The
business is considered to be highly resistant to adverse changes in economic
or industry conditions.
Business Loans: Following are some characteristics of loans that should be
rated 2. A 2 loan may not exhibit all of the following characteristics, but its
strengths -- primarily the sufficiency/reliability of the sources of repayment --
result in a loan with little credit risk. To the extent that a loan is not
characterized by one or more of the factors listed below, the deficiency is not
considered to adversely affect the likelihood of repayment in any material way.
Bank has a high regard for the character, competence and diligence
of management.
Consistent record of earnings; the earnings stream is considered
resistant to changes in economic conditions.
Liquidity at or above industry norms.
Loans have paid as agreed.
Collateral margin is well within policy guidelines with satisfactory
liquidity and well-defined market value.
Capital position above industry averages.
Loan structure appropriate and documentation complete.
No adverse trends.
Loans to Individuals: Loans to individuals may be rated 2 if the individual’s
earnings stream is considered strong and reliable and the individual
maintains a conservative financial posture. The income may be from any
source, including business income, passive income, or professional income.
25
Notes to Consolidated Financial Statements
Individuals are considered to maintain a conservative financial posture if they
consistently leave themselves a wide margin of safety in terms of their ability
to repay debt. This margin typically manifests itself in the form of significant
liquidity, strong debt service coverage (DSC) ratios and/or quick repayment of
loans.
Type 3 (Normal Risk)
General Statement: Borrowers in this category have satisfactory earnings and
net worth. In most cases, there is collateral or guarantor support which
provides a satisfactory secondary source of repayment. The business is
considered to be capable of operating profitably throughout the normal
business cycle.
Business Loans: Loans to businesses should be rated 3 if financial strength
is typical for the industry and there is no significant adverse trends. Following
are some characteristics of 3 loans. A loan may not exhibit all of the following
characteristics, but its strengths -- primarily the sufficiency/reliability of the
sources of repayment -- result in a loan with normal levels of risk.
Management is considered to be capable and diligent.
The earnings stream is satisfactory under present conditions and
is considered likely to continue.
Satisfactory liquidity.
Loans have paid as agreed.
Collateral is considered sufficient to repay the loan in full within a
reasonable marketing time.
Capital position within a reasonable range above or below industry
average.
No material deficiencies in loan structure or documentation.
Trends typically flat or positive. No material adverse trends.
Loans to Individuals: Loans may be unsecured and still rated 3 if the
individual’s earnings stream is both strong and reliable. If earnings are not as
strong, loans should be rated 3 if the Bank’s collateral is considered sufficient
to repay the loans.
Type 4 (Above Average Risk)
General Statement: Borrowers in this category are not as strong financially as
the typical business in the same industry. There may be discernible weakness
in management, earnings, capital or the Bank’s secondary sources of
repayment. The business is considered to be susceptible to adverse changes
in economic or industry conditions.
Business Loans: Loans to businesses should be rated 4 if financial strength
is somewhat below industry averages, but the loans are expected to repay as
agreed if the company’s current financial conditions stay the same or
strengthen. Following are some examples of weaknesses which may cause a
loan to have above average levels of risk. A 4 loan will not have all of these
weaknesses, but will have one or more:
There is some question as to the strength of management.
The company is profitable in most years, but earnings are typically
below industry averages.
Liquidity may be limited as evidenced by occasional delinquencies.
There may be a less than desirable margin in collateral; the
collateral may be difficult to market; or the value of collateral may
vary significantly depending on economic conditions.
Capital position is below industry average.
May have deficiencies
loan structure,
documentation or missing financial information.
in
incomplete
legal
May have an adverse trend in sales or earnings; may be capital
account withdrawals in excess of earnings.
Loans to Individuals: Loans to individuals should be rated 4 if the bank
appears to have a satisfactory source of repayment for the loan, but there is
concern about the individual’s earnings stream, leverage or tolerance for risk.
26
Type 5 (Watch Loan)
General Statement: Borrowers in this category have readily apparent
weaknesses in their financial condition. There may be weak earnings, thin
capital or an adverse trend that is expected to continue. The borrower
currently has the capacity to repay, but is of marginal strength and is
considered to have little ability to overcome economic events that would
adversely affect the business. Loans with material documentation or
structural deficiencies may also be rated Watch at the discretion of bank or
loan review personnel.
Business Loans: Following are examples of weaknesses which may warrant
a Watch rating. Loans rated Watch will typically have several of the following
weaknesses:
There is often a question about the ability of management to operate
the business successfully over time.
The earnings stream is weak, with possible periods of loss.
Liquidity may be a problem as evidenced by delinquencies or
amortization periods longer than is typical for the type of collateral
securing the loan.
There may be reasonable doubt as to whether the loan would be
repaid in full from the sale of collateral. Possible issues include:
third-party claims to the collateral, difficulty in obtaining possession,
condition, marketing time and value under current market
conditions.
Capital position less than half of industry average.
Common to have deficiencies in loan structure, incomplete legal
documentation or missing financial information. Trends are flat or
negative. It is common for there to be a decline in sales, earnings
and/or capital.
Loans to Individuals: See “General Statement” for Watch loans.
Type 6 (Substandard)
General Statement: These loans have one or more pronounced weaknesses
which jeopardize their timely liquidation. Neither the earnings of the business
nor its realistic net worth adequately protect the Bank from possible loss.
There is a distinct possibility that the Bank will sustain some loss if the
deficiencies are not corrected.
Business Loans: Following are examples of weaknesses which may warrant
a substandard rating. Loans rated Substandard will typically have several of
the following weaknesses:
Management often considered to have made incorrect strategic
decisions or to be weak or inattentive.
Earnings stream is insufficient to repay loans on a timely basis.
Business normally has periods of loss, sometimes large.
Liquidity usually strained by operating losses.
Loans usually renegotiated or past-due.
It may be unlikely that the loan would be repaid in full from the sale
of collateral. Possible issues include: third party claims to the
collateral; difficulty in obtaining possession, condition, marketing
time and value under current market conditions.
Typical reliance upon guarantors or other secondary sources of
repayment that was not originally anticipated.
Documentation deficiencies – including lack of important financial
information – are common.
In most cases there are negative trends, such as declines in sales,
earnings and/or capital.
Loans to Individuals: Loans to individual borrowers should be rated
Substandard if there is a pronounced weakness in income, liquidity or
collateral that is likely to affect the ability of the bank to collect the debt in full.
Debt levels may be significantly above accepted guidelines relative to income.
Type 7 (Doubtful)
General Statement: Loans with well-defined weaknesses that make collection
or liquidation of the debt in full improbable based on current information.
Troubled debt restructures are considered impaired loans and are subject to
the same allowance methodology as described above for impaired loans by
portfolio segment.
Notes to Consolidated Financial Statements
Business Loans: Typical characteristics of a doubtful loan include the
following:
Large operating losses.
Collateral insufficient to repay loan.
Typical to have little or no capital. Continued viability of business is
doubtful.
Unreliable or no alternative sources of repayment.
Loss anticipated, exact loss figure cannot be determined at present.
Loans to Individuals: Borrower’s ability or willingness to repay makes
collection of the debt in full unlikely. Loans may be unsecured or have an
obvious collateral deficiency.
Type 8 (Loss)
General Statement: Loans with pervasive weaknesses so great that principal
is considered uncollectible under current circumstances. This classification
does not mean that the loan has absolutely no recovery value, but simply that
it is no longer practical to defer writing it off. Recovery is dependent on
favorable future events.
Normal characteristics:
Business has failed or is near failure.
No reliable source of repayment.
For these loans categorized as commercial or credit relationships with
aggregate exposure greater than $500,000, a loan review will be required
within 12 months of the most recent credit review. The reviews shall be
completed in enough detail to, at a minimum, validate the risk rating.
Additionally, the reviews shall determine whether any documentation
exceptions exist, appropriate written analysis is included in the loan file and
whether credit policies have been properly adhered to.
An ongoing independent review is conducted of a sampling of residential real
estate as well to assess underwriting quality and adherence to policy.
Many of the residential real estate loans underwritten by the Company
conform to the underwriting requirements of Mortgage Partnership Finance
(MPF), Fannie Mae or other secondary market aggregators to allow the bank
to resell loans in the secondary market.
Servicing rights are retained on many, but not all, of the residential real estate
loans sold in the secondary market. Mortgage servicing rights are not
considered significant as of December 31, 2022 and 2021.
The Company provides many types of consumer and other loans including
motor vehicle, home improvement, home equity, signature loans and small
personal credit lines. The lending policy addresses specific credit guidelines
by consumer loan type.
As of December 31, 2022 and 2021, the Bank had loan concentrations in
agribusiness of 19.57% and 18.26%, respectively, of outstanding loans. The
Bank had no additional industry loan concentrations which, in management’s
judgment, were considered to be significant. The Bank had no foreign loans
outstanding as of December 31, 2022 and 2021.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, only 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 to pledge or exchange the assets
it received, and no condition both constrains the transferee from taking
advantage of its right to pledge or exchange and provides more than a modest
benefit to the transferor and (3) the Company does not maintain effective
control over the transferred assets through an agreement to repurchase them
before their maturity or the ability to unilaterally cause the holder to return
specific assets.
Credit Related Financial Instruments
In the ordinary course of business, the Bank has entered into commitments
to extend credit, including commitments under lines of credit and standby
letters of credit. Such financial instruments are recorded when they are
funded.
Premises, Furniture and Equipment
Premises, furniture and equipment are stated at cost less accumulated
depreciation. Depreciation is determined using the straight-line method over
the estimated useful lives of the assets. During the year ended December 31,
2022, the Company sold a building at a gain of $247,000 which is included
in other income. The building was previously a branch of the bank that was
closed during the year ended December 31, 2021. A loss of approximately
$435,000 was recorded on the building when the branch was closed and is
included in other expenses on the consolidated statements of income.
Other Real Estate Owned
Other real estate owned (OREO), which is included with other assets,
represents properties acquired through foreclosure, in-substance foreclosure
or other proceedings. Property is recorded at fair value less cost to sell when
acquired. Property is evaluated regularly to ensure that the recorded amount
is supported by the current fair value. Subsequent write-downs to fair value
are charged to earnings.
Life Insurance Contracts
Bank-owned life insurance is carried at cash surrender value, net of surrender
and other charges, with increases/decreases reflected as income/expense in
the consolidated statements of income.
For residential real estate loans and consumer loans, these large groups of
smaller balance homogenous loans are collectively evaluated for impairment.
The Company applies a quantitative factor based on historical charge-off
experience in total for each of these segments. Accordingly, the Company
generally does not separately identify individual residential real estate loans
and/or consumer loans for impairment disclosures, unless such loans are the
subject of a restructuring agreement due to financial difficulties of the
borrower or it has been identified for another specific reason.
Goodwill
Goodwill represents the excess of cost over fair value of net assets acquired
in connection with business combinations. Goodwill is evaluated for
impairment annually or whenever events or changes in circumstances
indicate that it is more likely than not that an impairment loss has occurred.
The Company has completed its annual goodwill impairment test and has
determined that goodwill was not impaired at December 31, 2022 and 2021.
See Note 5.
27
Notes to Consolidated Financial Statements
Repurchase Agreements
Securities sold under agreements to repurchase, which are classified as
secured borrowings, generally mature either daily or within one year from the
transaction date. Securities sold under agreements to repurchase are
reflected at the amount of cash received in connection with the transaction.
The underlying securities are held by the Company’s safekeeping agent. The
Company may be required to provide additional collateral based on the fair
value of the underlying securities.
Earnings Per Share of Common Stock
Basic earnings per share of common stock is computed by dividing net income
by the weighted average number of shares outstanding during each reporting
period. Diluted earnings per share of common stock assume the conversion,
exercise or issuance of all potential common stock equivalents unless the
effect is to reduce the loss or increase the income per common share from
continuing operations. The Company had no common stock equivalents as of
and for the years ended December 31, 2022 and 2021. During the years
ended December 31, 2022 and 2021, the Company resolved to repurchase
up to $4,000,000 of its common stock pursuant to a Stock Repurchase Plan.
During the years ended December 31, 2022 and 2021, the Company
purchased 106,818 and 15,111 shares, respectively, at a cost of $3,127,973
and $478,939, respectively.
Service Charge Income
Service charges on deposit accounts consist of account analysis fees (i.e., net
fees earned on analyzed business and public checking accounts), monthly
service fees, check orders, and other deposit account related fees. The
Company’s performance obligation for account analysis fees and monthly
service fees is generally satisfied, and the revenue recognized, over the period
in which the service is provided. Check orders, and other deposit account
related fees are largely transactional-based, and therefore, the Company’s
performance obligation is satisfied and related revenue recognized, at a point
in time. Payment for service charges on deposit accounts is primarily received
immediately or in the following month through a direct charge to customers’
accounts.
Other Income
Other noninterest income consists of other recurring revenue streams such
as commissions from sales of mutual funds and other investments,
investment advisor fees from the Company’s wealth management products,
safe deposit box rental fees and other miscellaneous revenue streams.
Commissions from sales of mutual funds and other investments and
investment advisor fees are recognized monthly as the sales occur. Safe
deposit box rental fees are charged to the customer on an annual basis and
recognized upon receipt of payment. The Company determined that since
rentals and renewals occur fairly consistently over time, revenue is recognized
on a basis consistent with the duration of the performance obligation.
Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and
tax credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in the tax laws and rates on the date of
enactment.
When the tax returns are filed, it is highly certain that some positions taken
would be sustained upon examinations by the taxing authorities, while others
could be subject to uncertainty about the merits of the position taken.
The Company may recognize the tax benefit from an uncertain tax-position
only if it is more likely than not that the tax position will be sustained on
examination by taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a
position are measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate settlement. Management
evaluated the Company’s tax positions and concluded that the Company had
taken no uncertain tax positions that require adjustment to the consolidated
financial statements.
The Company recognizes interest and penalties on income taxes as a
component of income tax expense.
Comprehensive Income
Comprehensive income is defined as the change in equity during a period from
transactions and other events from non-owner sources. Comprehensive
income is the total of net income and other comprehensive income, which for
the Company, is comprised of unrealized gains and losses on securities
available for sale and unrealized losses on debt securities transferred from
available for sale to held to maturity.
Subsequent Events
The Company has evaluated all subsequent events through March 10, 2023,
the date the financial statements were available to be issued.
Current Accounting Developments
In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
The underlying premise of the ASU 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. This is in contrast to existing
guidance whereby credit losses generally are not recognized until they are
incurred. Under the standard, impairment of the Company’s loans will be
measured using the current expected credit loss model, which will entail day-
one recognition of life-of-asset expected losses. The standard will be effective
for the Company for the fiscal year beginning after December 15, 2022. The
Company is currently evaluating the impact of adopting the new guidance on
the consolidated financial statements.
28
2. Securities
The amortized cost and fair values of securities as of December 31, 2022 and 2021 are as follows. (Amounts in Thousands of Dollars):
Notes to Consolidated Financial Statements
2022
SECURITIES HELD TO MATURITY
U.S. treasuries
U.S. government agency bonds
State and political subdivisions
Amortized Cost
$
5,493
81,773
32,332
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair Value
$
-
-
$
(9)
(4,738)
$
5,484
77,035
$
119,598
$
37
37
(1,256)
31,113
$
(6,003)
$
113,632
SECURITIES AVAILABLE FOR SALE
U.S. treasuries
U.S. government agency bonds
U.S. government agency mortgage backed securities
State and political subdivisions
Collateralized mortgage obligations
2021
SECURITIES HELD TO MATURITY
State and political subdivisions
SECURITIES AVAILABLE FOR SALE
U.S. government agency bonds
U.S. government agency mortgage backed securities
State and political subdivisions
Collateralized mortgage obligations
$
$
14,950
117,551
180,851
33,150
64,187
410,689
$
-
-
$
(288)
(16,220)
$
14,662
101,331
31
177
-
208
(19,858)
(4,692)
(6,126)
(47,184)
$
161,024
28,635
58,061
363,713
$
$
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair Value
$
1,899
$
167
$
-
$
2,066
$
$
303,935
253,773
80,108
23,782
661,598
$
$
2,546
5,008
1,162
135
8,851
$
$
(2,143)
(1,837)
(1,054)
(157)
(5,191)
$
304,338
256,944
80,216
23,760
665,258
$
During the year ended December 31, 2022, the Bank transferred securities classified as Available for Sale to the Held To Maturity classification. The impact of
this transfer was to move the unrealized losses of those securities from fair value to amortized cost. The amortized cost of securities at date of transfer was
$136,116,000 with unrealized losses of $23,801,000 of which $511,000 has been amortized as of December 31, 2022.
29
Notes to Consolidated Financial Statements
Fair value and unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss
position, as of December 31, 2022 and 2021 are summarized as follows. (Amounts in Thousands of Dollars):
2022
SECURITIES HELD TO MATURITY:
U.S. treasuries
U.S. government agency bonds
State and political subdivisions
SECURITIES AVAILABLE FOR SALE
U.S. treasuries
U.S. government agency bonds
Less than 12 Months
12 Months or More
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
$ 5,484 $ (9) $ - $ - $ 5,484 $ (9)
77,035 (4,738) - - 77,035 (4,738)
30,681 (1,256) - - 30,681 (1,256)
$113,200 $ (6,003) $ - $ -
$113,200 $ (6,003)
$ 14,662 $ (288) $ - $ - $ 14,662 $ (288)
15,890 (705) 85,448 (15,515) 101,338 (16,220)
U.S. government agency mortgage backed securities
55,411 (4,374) 102,960 (15,484) 158,371 (19,858)
State and political subdivisions
Collateralized mortgage obligations
2021
SECURITIES AVAILABLE FOR SALE
U.S. government agency bonds
8,630 (1,112) 15,981 (3,580) 24,611 (4,692)
44,961 (3,415) 13,100 (2,711) 58,061 (6,126)
$139,554 $ (9,894)
$217,489 $(37,290)
$357,043 $(47,184)
Less than 12 Months
12 Months or More
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
$ 173,697 $ (2,143)
$ - $ - $ 173,697 $ (2,143)
U.S. government agency mortgage backed securities
141,060 (1,830) 663 (7)
141,723 (1,837)
State and political subdivisions
Collateralized mortgage obligations
56,636 (1,054)
17,646 (157)
- - 56,636 (1,054)
- - 17,646 (157)
$ 389,039 $ (5,184) $ 663 $ (7)
$ 389,702 $ (5,191)
As of December 31, 2022, the investment portfolio included 305 securities. Of this number, 273 securities have current unrealized losses and 97 of them have
current unrealized losses which have existed for longer than one year. All of the debt securities with unrealized losses are considered to be acceptable credit risks.
Based upon an evaluation of the available evidence, including recent changes in market rates, credit rating information and information obtained from regulatory
filings, management believes the declines in fair value of these debt securities are temporary.
The amortized cost and fair value of securities as of December 31, 2022 by contractual maturity are shown below. Expected maturities may differ from contractual
maturities because the mortgages underlying the collateralized mortgage obligations may be called or prepaid without penalties. Therefore, these securities are
not included in the maturity categories in the following summary. (Amounts in Thousands of Dollars):
SECURITIES HELD TO MATURITY
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
SECURITIES AVAILABLE FOR SALE
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Collateralized mortgage obligations
Amortized Cost
Fair Value
$
5,973
$
5,963
158
73,386
40,081
169
69,481
38,019
$
119,598
$
113,632
$
10,596
$
10,495
58,743
79,249
55,435
66,590
197,914
173,132
$
346,502
$
305,652
64,187
58,061
$
410,689
$
363,713
30
Information on sales, including calls and maturities, of securities available for sale during the years ended December 31, 2022 and 2021 follows, (Amounts in
Thousands of Dollars):
Notes to Consolidated Financial Statements
Gross gains
Gross losses
2022
2021
$
316
$
857
$
(959)
$
-
As of December 31, 2022 and 2021, securities with a carrying value of approximately $390,796,000 and $475,322,000, respectively, were pledged to
collateralize deposits and securities sold under agreements to repurchase and for other purposes as required or permitted by law.
3. Loans
The composition of net loans outstanding as of December 31, 2022 and 2021 are as follows. (Amounts in Thousands of Dollars):
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Consumer
Less allowance for loan losses
Net Loans
2022
2021
$
71,428
$
71,512
195,857
32,963
74,936
12,278
119,221
44,586
178,262
28,878
58,454
9,003
93,422
38,867
$
551,269
$
478,398
(10,807)
(11,449)
$
540,462
$
466,949
31
Notes to Consolidated Financial Statements
The aging of the loan portfolio, by classes of loans, as of December 31, 2022 and 2021 is summarized as follows. (Amounts in Thousands of Dollars):
2022
CLASSES OF LOANS
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Consumer
2021
CLASSES OF LOANS
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Consumer
Current
30-59 Days
Past Due
60-89 Days
Past Due
Accruing
Past Due
90 Days
or More
Nonaccrual
Loans
Total
$
71,316
$
28
$
-
$
-
$
84
$
71,428
189,638
32,963
74,864
11,751
117,464
44,353
24
-
72
-
651
146
9
-
-
-
228
86
41
6,145
195,857
-
-
-
-
1
-
-
527
878
-
32,963
74,936
12,278
119,221
44,586
$
542,349
$
921
$
323
$
42
$
7,634
$
551,269
Current
30-59 Days
Past Due
60-89 Days
Past Due
Accruing
Past Due
90 Days
or More
Nonaccrual
Loans
Total
$
71,382
$
24
$
-
$
-
$
106
$
71,512
172,210
28,425
58,006
8,556
91,540
38,729
-
-
-
-
754
99
-
-
-
-
-
36
-
-
-
-
-
3
6,052
178,262
453
448
447
1,128
-
28,878
58,454
9,003
93,422
38,867
$
468,848
$
877
$
36
$
3
$
8,634
$
478,398
Nonperforming loans, by classes of loans as of December 31, 2022 and 2021 are summarized as follows. (Amounts in Thousands of Dollars):
2022
CLASSES OF LOANS
Commercial operating
Commercial real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Consumer
2021
CLASSES OF LOANS
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Consumer
Accruing Past Due
90 Days or More
Nonaccrual
Loans **
Troubled Debt
Restructures-
Accruing
Total
Nonperforming
Loans
$
-
$
84
$
-
$
84
41
-
-
1
6,145
527
878
-
994
26
-
-
7,180
553
878
1
$
42
$
7,634
$
1,020
$
8,696
Accruing Past Due
90 Days or More
Nonaccrual
Loans **
Troubled Debt
Restructures-
Accruing
Total
Nonperforming
Loans
$
-
$
106
$
-
$
106
-
-
-
-
-
3
6,052
453
448
447
1,128
-
1,087
-
-
-
-
-
7,139
453
448
447
1,128
3
$
3
$
8,634
$
1,087
$
9,724
** Nonaccrual loans as of December 31, 2022 and 2021 include $5,403,000 and $5,405,000, respectively, of troubled debt restructures which are included
in commercial real estate, real estate secured by 1-4 and multi-family, and commercial operating.
32
Notes to Consolidated Financial Statements
Changes in the allowance for loan losses, by portfolio segment, during the years ended December 31, 2022 and 2021 are summarized as follows. (Amounts in
Thousands of Dollars):
2022
Commercial
Operating
Commercial
Real Estate
Agricultural
Operating
Real Estate
Secured
Construction
Agricultural
by 1-4 and
and Land
Real Estate Development Multi-Family
Consumer
Total
Balance, beginning
$
1,010
$
6,708
$
397
$
736
$
629
$
1,336
$
633
$
11,449
Provision for loan
losses/(recovery)
Recoveries of loans
charged off
Loans charged off
(173)
(415)
68
259
(426)
66
121
(500)
9
846
-
5
6,298
-
5
470
-
-
995
-
-
203
-
33
1,435
(106)
56
810
108
11,057
(144)
(250)
Balance, ending
$
846
$
6,298
$
470
$
995
$
203
$
1,329
$
666
$
10,807
2021
Commercial
Operating
Commercial
Real Estate
Agricultural
Operating
Real Estate
Secured
Construction
Agricultural
by 1-4 and
and Land
Real Estate Development Multi-Family
Consumer
Total
Balance, beginning
$
1,389
$
6,025
$
517
$
634
$
1,945
$
1,023
$
624
$
12,157
Provision for loan
losses/(recovery)
Recoveries of loans
charged off
Loans charged off
(359)
728
(125)
102
(1,316)
283
107
(580)
8
1,038
(28)
10
6,763
(55)
5
397
-
-
736
-
-
629
-
56
1,362
(26)
34
765
(132)
113
11,690
(241)
Balance, ending
$
1,010
$
6,708
$
397
$
736
$
629
$
1,336
$
633
$
11,449
33
Notes to Consolidated Financial Statements
The allowance for loan losses, by impairment evaluation and by portfolio segment, as of December 31, 2022 and 2021 are summarized as follows.
(Amounts in Thousands of Dollars):
2022
Allowance for loans
individually evaluated
for impairment
Allowance for loans
collectively evaluated
for impairment
Loans individually
evaluated for
impairment
Loans collectively
evaluated for
impairment
2021
Allowance for loans
individually evaluated
for impairment
Allowance for loans
collectively evaluated
for impairment
Loans individually
evaluated for
impairment
Loans collectively
evaluated for
impairment
Commercial
Operating
Commercial
Real Estate
Agricultural
Operating
Agricultural
Real Estate
Real Estate
Secured
by 1-4 and
Development Multi-Family
Construction
and Land
Consumer
Total
$
14
$
2,413
$
-
$
-
$
118
$
227
$
-
$
2,772
$
832
846
3,885
6,298
$
470
470
$
995
995
$
85
203
$
1,102
1,329
$
666
666
$
8,035
10,807
$
$
70
$
7,139
$
-
$
-
$
527
$
878
$
-
$
8,614
71,358
71,428
$
188,718
195,857
$
32,963
32,963
$
74,936
74,936
$
11,751
12,278
$
118,343
119,221
$
44,586
44,586
$
542,655
551,269
$
Commercial
Operating
Commercial
Real Estate
Agricultural
Operating
Agricultural
Real Estate
Real Estate
Secured
by 1-4 and
Development Multi-Family
Construction
and Land
Consumer
Total
$
16
$
2,622
$
-
$
-
$
118
$
290
$
-
$
3,046
994
1,010
$
4,086
6,708
$
397
397
$
736
736
$
$
511
629
1,046
1,336
$
633
633
$
8,403
11,449
$
$
106
$
6,052
$
453
$
448
$
447
$
1,128
$
-
$
8,634
71,406
71,512
$
172,210
178,262
$
28,425
28,878
$
58,006
58,454
$
8,556
9,003
$
92,294
93,422
$
38,867
38,867
$
469,764
478,398
$
34
Loans, by classes of loans, considered to be impaired as of December 31, 2022 and 2021 are summarized as follows. (Amounts in Thousands of Dollars):
Notes to Consolidated Financial Statements
2022
CLASSES OF LOANS
Impaired loans with no specific allowance recorded:
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Impaired loans with specific allowance recorded:
Commercial operating
Commercial real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Total impaired loans:
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Construction and land development
Real estate secured by 1-4 and multi-family
2021
CLASSES OF LOANS
Impaired loans with no specific allowance recorded:
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
$
56
1,943
-
-
$
56
1,943
-
-
-
$
-
-
-
$
73
1,295
226
224
80
547
80
547
-
-
40
623
$
2,626
$
2,626
$
-
$
2,481
$
14
5,196
$
14
5,196
$
14
2,413
$
15
5,300
447
331
447
331
118
227
447
380
$
5,988
$
5,988
$
2,772
$
6,142
$
70
7,139
$
70
7,139
$
14
2,413
$
88
6,595
-
-
527
878
-
-
527
878
-
-
118
227
226
224
487
1,003
$
8,614
$
8,614
$
2,772
$
8,623
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
$
90
647
453
448
$
90
647
453
448
-
$
-
-
-
$
106
699
651
451
Real estate secured by 1-4 and multi-family
699
699
-
558
$
2,337
$
2,337
$
-
$
2,465
Impaired loans with specific allowance recorded:
Commercial operating
Commercial real estate
Construction and land development
Real estate secured by 1-4 and multi-family
Total impaired loans:
Commercial operating
Commercial real estate
Agricultural operating
Agricultural real estate
Construction and land development
Real estate secured by 1-4 and multi-family
$
16
5,405
$
16
5,405
$
16
2,622
$
18
5,810
447
429
447
429
118
290
1,274
781
$
6,297
$
6,297
$
3,046
$
7,883
$
106
6,052
$
106
6,052
$
16
2,622
$
124
6,509
453
448
447
1,128
453
448
447
1,128
-
-
118
290
651
451
1,274
1,339
$
8,634
$
8,634
$
3,046
$
10,348
35
Notes to Consolidated Financial Statements
Interest income and cash basis interest income recognized on impaired loans during the years ended December 31, 2022 and 2021 was not significant.
Impaired loans, for which no allowance has been provided, as of December 31, 2022 and 2021, have adequate collateral, based on management’s current
estimates.
For each class of loans, the following summarizes the recorded investment by credit quality indicator as of December 31, 2022 and 2021. (Amounts in Thousands
of Dollars):
2022
Internally assigned risk rating:
Pass (ratings 1 through 4)
Special mention (rating 5)
Substandard (rating 6)
Doubtful (rating 7)
Delinquency status:*
Performing
Nonperforming
2021
Internally assigned risk rating:
Pass (ratings 1 through 4)
Special mention (rating 5)
Substandard (rating 6)
Doubtful (rating 7)
Delinquency status:*
Performing
Nonperforming
Commercial
Operating
Commercial
Real Estate
Agricultural
Operating
Agricultural
Real Estate
Construction
and Land
Real Estate
Secured
by 1-4 and
Development Multi-Family
Total
$
61,011
$
184,243
$
30,662
$
73,706
$
11,725
$
27,021
$
388,368
9,158
1,259
-
4,129
7,485
-
-
2,301
-
1,230
-
-
-
106
447
814
1,033
-
15,331
12,184
447
$
71,428
$
195,857
$
32,963
$
74,936
$
12,278
$
28,868
$
416,330
Construction
and Land
Development
Real Estate
Secured
by 1-4 and
Multi-Family
Consumer
Total
$
-
$
90,353
$
44,586
$
134,939
-
-
-
-
$
-
$
90,353
$
44,586
$
134,939
Commercial
Operating
Commercial
Real Estate
Agricultural
Operating
Agricultural
Real Estate
Construction
and Land
Real Estate
Secured
by 1-4 and
Development Multi-Family
Total
$
59,858
$
162,982
$
25,745
$
56,042
$
8,267
$
12,706
$
325,600
10,803
851
5,453
9,827
154
2,979
716
1,696
-
27
1,281
1,333
18,407
16,713
-
71,512
$
-
178,262
$
-
28,878
$
-
58,454
$
447
8,741
$
67
15,387
$
514
361,234
$
Construction
and Land
Development
Real Estate
Secured
by 1-4 and
Multi-Family
Consumer
Total
$
262
$
78,035
$
38,867
$
117,164
-
-
-
-
$
262
$
78,035
$
38,867
$
117,164
*Performing loans are those which are accruing and less than 90 days past due. Nonperforming loans are those on nonaccrual, accruing loans that are
greater than or equal to 90 days past due, and accruing TDRs.
For commercial operating, commercial real estate, agricultural operating, agricultural real estate, real estate secured by multifamily and construction and land
development loans, the Company’s credit quality indicator is internally assigned risk ratings. Each of these loans is assigned a risk rating upon origination. The
risk rating is reviewed every 12 months, at a minimum, and on an as needed basis depending on the specific circumstances of the loan. Some classes of loans
contain loans that are risk rated and loans that are not, as loans of a more homogeneous nature are not risk rated. See Note 1 for further discussion on the
Company’s risk ratings.
36
Notes to Consolidated Financial Statements
For residential real estate loans, consumer loans and a portion of the construction and land development loans, the Company’s credit quality indicator is
performance determined by delinquency status. Delinquency status is updated daily by the Company’s loan system.
As of December 31, 2022 and 2021, TDRs total $6,423,000 and $6,758,000, respectively. There was one TDRs restructured during the year ended December
31, 2022. The following summarizes the number and investment in troubled debt restructurings, by type of concession, that were restructured during the year
ended December 31, 2022. (Amounts in Thousands of Dollars):
2022
CONCESSION-SIGNIFICANT PAYMENT DELAY
Construction and land development
2021
CONCESSION-SIGNIFICANT PAYMENT DELAY
Commercial real estate
Number
of TDRs
Pre-Modification
Recorded
Investment
Post-Modification
Recorded
Investment
1
$
26
$
26
Number
of TDRs
Pre-Modification
Recorded
Investment
Post-Modification
Recorded
Investment
0
$
-
$
-
There was no financial impact for charge-offs, principal forgiveness or foregone interest for the troubled debt restructurings.
For the years ended December 31, 2022 and 2021, none of the Company’s TDRs have re-defaulted subsequent to restructure, where a default is defined as a
delinquency of 90 days or more and/or placement on nonaccrual status.
Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of these loans totaled
$197,820,000 and $203,219,000 as of December 31, 2022 and 2021, respectively.
In the ordinary course of business, the Bank has granted loans to directors, principal officers, and affiliated companies in which they are principal stockholders
amounting to $10,478,000 and $11,153,000 as of December 31, 2022 and 2021, respectively.
4. Premises, Furniture and Equipment
The cost, accumulated depreciation and net book value of premises, furniture and equipment as of December 31, 2022 and 2021 is summarized as follows.
(Amounts in Thousands of Dollars):
Land
Building and improvements
Furniture and equipment
Less accumulated depreciation
2022
2021
$
4,101
$
4,101
14,834
11,332
30,267
14,690
11,383
30,174
(18,793)
(18,172)
$
11,474
$
12,002
37
Notes to Consolidated Financial Statements
5. Goodwill and Intangibles
Goodwill and intangible assets are summarized as follows. (Amounts in Thousands of Dollars):
As of December 31,
Goodwill
Other intangible assets:
Core deposit intangible
Other intangible assets
Less accumulated amortization on certain intangible assets
2022
2021
$
3,050
$
3,050
1,380
1,855
3,235
(3,196)
39
1,380
1,855
3,235
(3,184)
51
Total goodwill and intangible assets
$
3,088
$
3,101
ESTIMATED FUTURE AMORTIZATION EXPENSE
For the years ending December 31 (Amounts in thousands of dollars):
2023
2024
2025
2026
6. Time Deposits
$
12
12
12
3
$
39
The aggregate amount of time deposits, each with a minimum denomination of $250,000, was approximately $53,806,000 and $24,977,000 as of December 31,
2022 and 2021, respectively.
Brokered deposits were $7,530,000 and $12,178,000 at December 31, 2022 and 2021, respectively.
A major customer is defined as one with deposits comprising greater than 5% of the Company’s total deposits. As of December 31, 2022, there were three
customers that held approximately $173,293,000 in deposits and, as of December 31, 2021, there were two customers that held approximately $156,000,000
in deposits.
At December 31, 2022, the scheduled maturities of time deposits are as follows. (Amounts in Thousands of Dollars):
$
$
123,260
15,740
1,354
657
212
4,815
146,038
2023
2024
2025
2026
2027
Thereafter
38
Notes to Consolidated Financial Statements
Those instruments involve, to varying degrees, elements of credit and market risk
in excess of the amount recognized in the consolidated balance sheets.
The Bank’s exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for unused lines of credit and standby letters of
credit is represented by the contractual amounts of those instruments. The Bank
uses the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments.
A summary of the Bank’s commitments as of December 31, 2022 and 2021 is as
follows. (Amounts in Thousands of Dollars):
2022
2021
Commitments to extend credit:
Unused lines of credit
Standby letters of credit
$
105,111
412
$
102,412
498
Unused lines of credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. The agreements generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. Since many of the agreements are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer’s credit worthiness on a case-
by-case basis. The amount of collateral obtained, if deemed necessary by the Bank
upon extension of credit, is based upon management’s credit evaluation of the
counter-party. Collateral varies but may include accounts receivable, inventory,
property, equipment and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements and,
generally, have terms of one year, or less. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan facilities
to customers. The Bank holds collateral, as detailed above, supporting those
commitments if deemed necessary. In the event the customer does not perform in
accordance with the terms of the agreement with the third party, the Bank would
be required to fund the commitment. The maximum potential amount of future
payments the Bank could be required to make is represented by the contractual
amount shown in the previous summary. If the commitment is funded, the Bank
would be entitled to seek recovery from the customer. As of December 31, 2021
and 2020, no amounts have been recorded as liabilities for the Bank’s potential
obligations under these guarantees.
The Company has executed contracts for the sale of mortgage loans in the
secondary market in the amount of $838,000 and $1,205,000 as of December 31,
2022 and 2021, respectively. These amounts are included in loan commitments,
included in the summary of this Note, as of December 31, 2022 and 2021.
A portion of residential mortgage loans sold to investors in the secondary market
are sold with recourse. Specifically, certain loan sales agreements provide that if
the borrower becomes 60 days or more delinquent during the first six months
following the first payment due, and subsequently becomes 90 days or more
delinquent during the first 12 months of the loan, the Bank must repurchase the
loan from the subject investor. The Bank did not repurchase any loans from
secondary market investors under the terms of these loan sales agreements during
the years ended December 31, 2022 and 2021. In the opinion of management, the
risk of recourse to the Bank is not significant and, accordingly, no liability has
been established.
7. Federal Home Loan Bank Advances and Letters of Credit
The Bank advances funds from and repays them to the Federal Home Loan Bank
(FHLB) as considered necessary for liquidity purposes. Outstanding advances as
of December 31, 2022 and 2021 were $45,000,000 and $6,323,000, respectively.
As of December 31, 2022, the full $45,000,000 outstanding is due in 2023.
8. Junior Subordinated Debentures and Company Obligated
Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely Subordinated
Debentures
Junior subordinated debentures are due to FBIL Statutory Trusts II and III, which
are both 100% owned, non-consolidated subsidiaries of the Company. The
debentures were issued in 2003 and 2004, respectively, in conjunction with each
Trust’s issuance of 5,000 shares of Company Obligated Mandatorily Redeemable
Preferred Securities. The debentures all bear the same interest rate and terms as
the preferred securities, detailed following.
The debentures are included on the consolidated balance sheets as liabilities;
however, in accordance with Federal Reserve Board regulations in effect at
December 31, 2022 and 2021, the Company is allowed, for regulatory purposes,
to include the entire $10,000,000 of the capital securities issued by the Trusts in
Tier I capital.
During 2004, FBIL Statutory Trust III issued 5,000 shares of Company Obligated
Mandatorily Redeemable (COMR) Preferred Securities. Distributions are paid
quarterly. Cumulative cash distributions are calculated at a variable annual rate
that is 265 basis points above the three-month LIBOR rate (7.42% and 2.85% as
of December 31, 2022 and 2021, respectively). The Trust may, at one or more
times, defer interest payments on the capital securities for up to 20 consecutive
quarterly periods, but not beyond September 15, 2034. At the end of the deferral
period, all accumulated and unpaid distributions will be paid. The capital
securities will be redeemed on September 15, 2034 at par plus any accrued and
unpaid distributions to the date of the redemption; however, the Trust has the
option to redeem at any time at par. The redemption may be in whole or in part,
but in all cases in a principal amount with integral multiples of $1,000.
During 2003 the Company issued 5,000 shares of Company Obligated
Mandatorily Redeemable (COMR) Preferred Securities of FBIL Statutory Trust
II Holding Solely Subordinated Debentures. Distributions are paid quarterly.
Cumulative cash distributions are calculated at a variable annual rate that is 295
basis points above the three-month LIBOR rate (7.69% and 3.17% as of
December 31, 2022 and 2021, respectively). The Company may, at one or more
times, defer interest payments on the capital securities for up to 20 consecutive
quarterly periods, but not beyond September 17, 2033. At the end of the deferral
period, all accumulated and unpaid distributions will be paid. The capital
securities will be redeemed on September 17, 2033 at par plus any accrued and
unpaid distributions to the date of the redemption; however, the Company has the
option to redeem at any time at par. The redemption may be in whole or in part,
but in all cases in a principal amount with integral multiples of $1,000.
Holders of the capital securities have no voting rights, are unsecured and rank
junior in priority of payment to all of the Trust’s indebtedness and senior to the
Trust’s capital stock.
9. Commitments and Contingencies
Financial Instruments with Off-Balance Sheet Risk
The Bank, in the normal course of business, is a party to financial instruments
with off-balance sheet risk to meet the financing needs of its customers. These
financial instruments include unused lines of credit and standby letters of credit.
39
Notes to Consolidated Financial Statements
Concentration of Credit Risk
Aside from cash on hand and in-vault, the Company’s cash is maintained at
various correspondent banks. The total amount of cash on deposit and federal
funds sold exceeded federal insurance limits at five institutions by a total of
approximately $4,270,000 and $4,965,000 as of December 31, 2022 and 2021,
respectively. In the opinion of management, no material risk of loss exists due to
the financial condition of the institutions.
Contingencies
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on these consolidated
financial statements.
10. Benefits
The Company has a 401(k) plan, which is a tax qualified savings plan, to
encourage its employees to save for retirement purposes or other contingencies.
All employees, working over 1,000 hours per year, of the Company and its
subsidiaries are eligible to participate in the Plan after completion of one year of
service and attaining the age of 21. The employee may elect to contribute a
percentage of their compensation before taxes in a traditional 401(k) and/or a
percentage of their compensation after taxes using the subsidiaries’ Roth 401(k)
option. Based upon profits, as determined by the subsidiaries, a contribution may
be made by the subsidiaries. Employees are 100% vested in the subsidiaries’
contribution to the plan after five years of service. Employee contributions and
vested subsidiaries contributions may be withdrawn only on termination of
employment, retirement, death or hardship withdrawal.
Under the various Employee Incentive Compensation Plans, the Bank is
authorized at its discretion, pursuant to the provisions of the plan, to establish on
an annual basis, a bonus fund, which will be distributed to certain employees,
based on their performance. The Employee Incentive Compensation Plan does not
become effective unless the Bank exceeds established income levels and goals.
For the years ended December 31, 2022 and 2021, the bank met those goals. One
plan, a Deferred Incentive Compensation Plan, maintained by the Bank has been
discontinued.
The financial statements include expense related to the 401(k) Plan of $570,000
and $529,000 for the years ended December 31, 2022 and 2021, respectively. The
financial statements include expense related to the incentive compensation plans
of $1,103,000 and $899,000 for the years ended December 31, 2022 and 2021,
respectively.
11. Dividends and Regulatory Capital
The Company’s stockholders are entitled to receive such dividends as are declared
by the Board of Directors. The ability of the Company to pay dividends in the
future is dependent upon its receipt of dividends from its subsidiaries. The
subsidiaries’ ability to pay dividends is regulated by financial regulatory statutes.
The timing and amount of dividends will depend on earnings, capital requirements
and financial condition of the Company and its subsidiaries as well as general
economic conditions and other relevant factors affecting the Company and the
subsidiary. Under the provisions of the National Bank Act, the Bank may not,
without prior approval of the Comptroller of the Currency, declare dividends in
excess of the total of the current and past two year’s earnings less any dividends
already paid from those earnings.
The Company and its subsidiaries are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional, discretionary action by regulators that, if undertaken, could have a
direct material effect on the Company’s financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and Bank must meet specific capital guidelines that involve
quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices. The Company and
Bank’s capital amounts and classification are also subject to qualitative judgments
by the regulators and components, risk weightings and other factors. Prompt
corrective action provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and Bank to maintain minimum amounts and ratios (set forth
in the following table) of total, Tier I, and common equity Tier I capital (as defined
in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as
defined) to average assets (as defined). The Bank would be subject to limitations
on certain activities including payment of dividends and discretionary bonuses to
executive officers if its capital level is below the buffered ratio. Management
believes, as of December 31, 2022, that the Company and Bank meet all capital
adequacy requirements to which they are subject.
The most recent notification from the Office of the Comptroller of the Currency
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as adequately or well capitalized, the
Bank must maintain minimum total risk-based, Tier I risk-based, common equity
Tier I, and Tier I leverage ratios as set forth in the table. There are no conditions
or events since that notification that management believes have changed the
Bank’s categories.
40
Notes to Consolidated Financial Statements
The Company and Bank’s actual capital amounts and ratios are also presented in the table. (Amounts in Thousands of Dollars):
As of December 31, 2022
Actual
Minimum Regulatory
Requirement
Minimum Regulatory
Requirement With Capital
Conservation Buffer
To Be Well
Capitalized under Prompt
Corrective Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total Capital (to Risk-Weighted Assets)
$
Company
$
Bank
122,312
114,565
Tier I Capital (to Risk-Weighted Assets)
$
Company
$
Bank
113,792
106,053
18.01%
16.88%
$
$
54,345
54,296
> 8.00%
> 8.00%
$
$
71,328
71,264
> 10.500%
> 10.500%
N/A
67,870
$
N/A
> 10.00%
16.75%
15.63%
$
$
40,759
40,722
> 6.00%
> 6.00%
$
$
57,741
57,690
> 8.500%
> 8.500%
N/A
54,296
$
N/A
> 8.00%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Company
Bank
103,792
106,053
$
$
15.28%
15.63%
$
$
30,569
30,542
> 4.50%
> 4.50%
$
$
47,552
47,509
> 7.000%
> 7.000%
N/A
44,116
$
N/A
> 6.50%
Tier I Capital (to Average Assets)
Company
Bank
$
$
113,792
106,053
9.89%
9.23%
$
$
46,042
45,953
> 4.00%
> 4.00%
$
$
46,042
45,953
> 4.000%
> 4.000%
As of December 31, 2021
Actual
Minimum Regulatory
Requirement
Minimum Regulatory
Requirement With Capital
Conservation Buffer
N/A
57,442
$
N/A
> 5.00%
To Be Well
Capitalized under Prompt
Corrective Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total Capital (to Risk-Weighted Assets)
Company
Bank
$
$
117,953
106,716
Tier I Capital (to Risk-Weighted Assets)
Company
Bank
$
$
110,153
98,917
19.01%
17.21%
$
$
49,631
49,614
17.76%
15.95%
$
$
37,223
37,211
Common Equity Tier I Capital (to Risk-Weighted Assets)
Company
Bank
100,153
98,917
$
$
16.14%
15.95%
$
$
27,917
27,908
Tier I Capital (to Average Assets)
Company
Bank
$
110,153
8.62%
$
51,124
$
98,917
7.81%
$
50,672
>
>
>
>
>
>
>
>
8.00%
8.00%
$
$
65,141
65,118
> 10.500%
> 10.500%
N/A
62,018
$
N/A
> 10.00%
6.00%
6.00%
$
$
52,733
52,715
4.50%
4.50%
$
$
43,427
43,412
4.00%
$
51,124
4.00%
$
50,672
>
>
>
>
>
>
8.500%
8.500%
N/A
49,614
$
7.000%
7.000%
N/A
40,311
$
N/A
8.00%
N/A
6.50%
>
>
4.000%
N/A
N/A
4.000%
$
63,340
>
5.00%
41
Notes to Consolidated Financial Statements
12. Income Tax Matters
The components of income tax expense are as follows for the years ended December 31, 2022 and 2021. (Amounts in Thousands of Dollars):
Year Ended December 31,
Current
Deferred
2022
2021
$
2,215
$
1,833
27
270
$
2,242
$
2,103
A reconciliation between income tax expense in the statements of income and the amount computed by applying the statutory federal income tax rate to income
before income taxes is as follows. (Amounts in Thousands of Dollars):
Year Ended December 31,
2022
% of Pretax
Income
2021
% of Pretax
Income
Federal income tax at statutory rate
$
2,324
21.0%
$
2,157
21.0%
Changes from statutory rate resulting from:
State tax, net of federal benefit
Tax exempt interest income, net
Increase in cash surrender value
Other, net
Income tax expense
418
(415)
(97)
12
3.8
(3.8)
(0.9)
0.1
374
(346)
(95)
13
$
2,242
20.2%
$
2,103
3.6
(3.3)
(0.9)
0.1
20.5%
Net deferred tax assets (liabilities) consist of the following components as of December 31, 2022 and 2021. (Amounts in Thousands of Dollars):
Year Ended December 31,
Year Ended December 31,
Deferred tax assets:
Allowance for loan losses
Accrued expenses
Unrealized losses on securities available for sale, net
Other
Deferred tax liabilities:
Premises, furniture and equipment
Stock dividends
Prepaid expenses
Unrealized gains on securities available for sale, net
Intangibles
Net Deferred Tax Assets (Liabilities)
2022
2021
$
2,918
$
3,026
626
20,030
4
602
-
23
$
23,578
$
3,651
$
(421)
$
(557)
(12)
(136)
-
(573)
(12)
(118)
(1,043)
(531)
$
(1,142)
$
(2,261)
$
22,436
$
1,390
Net deferred tax assets as of December 31, 2022 and 2021 are included in other assets on the accompanying consolidated balance sheets.
The net change in deferred income taxes is reflected in the financial statements as follows. (Amounts in Thousands of Dollars):
Year Ended December 31,
Provision for income taxes
Statement of changes in stockholders' equity, accumulated other comprehensive
income (loss), unrealized (losses) on securities available for sale, net
2022
2021
$
27
$
270
(21,073)
(3,530)
$
(21,046)
$
(3,260)
42
Notes to Consolidated Financial Statements
13. Fair Value Measurements
The Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification defines fair value, establishes a framework for measuring
fair value using a hierarchy system, and requires disclosure of fair value measurements. The hierarchy is intended to maximize the use of observable inputs and
minimize the use of unobservable inputs and includes three levels based upon the valuation techniques used. The three levels are as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing
an asset or liability.
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments
pursuant to the valuation hierarchy, is set forth below.
Investment securities available for sale: Where quoted prices are available in an active market, securities are classified within level 1 of the valuation hierarchy.
Level 1 securities would include highly liquid government bonds and exchange traded equities. If quoted market prices are not available, then fair values are
estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency
securities, mortgage-backed agency securities, obligations of state and political subdivisions and certain corporate, asset based and other securities. In certain
cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the valuation hierarchy.
Impaired loans: The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance
for loan losses is established. Loan impairment may be measured based upon the present value of expected future cash flows discounted at the
loan’s effective interest rate or the fair value of the collateral, if the loan is collateral dependent. Collateral may be real estate and/or business assets including
equipment, inventory and/or accounts receivable. Fair value is determined based upon appraisals by qualified licensed appraisers hired by the Company, and
are, generally, considered level 2 measurements. In some cases, adjustments are made to the appraised values due to various factors including age of the
appraisal, age of comparable included in the appraisal, and known changes in the market and in the collateral. When significant adjustments are based on
unobservable inputs, the resulting fair value measurement has been categorized as a level 3 measurement.
Other real estate owned: Other real estate owned is carried at the estimated fair value of the property, less disposal costs at the time of acquisition. The fair
value of the property is determined based upon appraisals or internal evaluations. Subsequent write-downs are bases on the lower of carrying value or fair value,
less disposal costs.
There have been no changes in valuation techniques used for any assets or liabilities measured at fair value during the years ended December 31, 2022 and
2021.
43
Notes to Consolidated Financial Statements
ASSETS AND LIABILITES RECORDED AT FAIR VALUE ON A RECURRING BASIS
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021, segregated by the level of
the valuation inputs within the fair value hierarchy utilized to measure fair value. (Amounts in Thousands of Dollars):
Fair Value Measurements
as of December 31, 2022 Using:
Investment securities available for sale:
U.S. treasuries
U.S. government agency bonds
U.S. government agency mortgage backed securities
State and political subdivisions
Collateralized mortgage obligations
Fair Value Measurements
as of December 31, 2021 Using:
Investment securities available for sale:
U.S. government agency bonds
U.S. government agency mortgage backed securities
State and political subdivisions
Collateralized mortgage obligations
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Fair Value
$
$
14,662
101,331
161,024
28,635
58,061
363,713
-
$
-
-
-
-
$
-
14,662
101,331
161,024
28,635
58,061
363,713
$
$
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Fair Value
$
$
304,338
256,944
80,216
23,760
665,258
-
$
-
-
-
$
-
304,338
256,944
80,216
23,760
665,258
$
$
Significant
Unobservable
Inputs
(Level 3)
-
$
-
-
-
-
$
-
Significant
Unobservable
Inputs
(Level 3)
-
$
-
-
-
$
-
There were no transfers of assets or liabilities between levels 1, 2 and 3 of the fair value hierarchy during the years ended December 31, 2022 and 2021.
ASSETS AND LIABILITIES RECORDED AT FAIR VALUE ON A NONRECURRING BASIS
The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis such as when there is evidence
of impairment. Assets measured at fair value on a nonrecurring basis are included in the table below. (Amounts in Thousands of Dollars):
Fair Value Measurements
as of December 31, 2022 Using:
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value
Impaired loans
$
3,441
$
-
$
-
$
3,441
Fair Value Measurements
as of December 31, 2021 Using:
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value
Impaired loans
Other real estate owned
$
3,480
$
-
$
-
$
3,480
$
400
$
-
$
-
$
400
The Financial Instruments Topic of the FASB Accounting Standards Codification requires disclosure of fair value information about financial instruments, whether
or not recognized in the balance sheet, for which it is practicable to estimate that value. Certain financial instruments and all non-financial instruments are
excluded from these disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.
44
Notes to Consolidated Financial Statements
The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Cash and due from banks and federal funds sold: The carrying amounts reported in the balance sheets for cash and due from banks and federal funds sold equal
their fair values.
Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
Loans and loans held for sale: For variable rate loans, fair values are equal to carrying values. The fair values for all other types of loans are estimated using
discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value of
loans held for sale is based on quoted market prices of similar loans sold in the secondary market.
Impaired loans, net: Impaired loans fair value is equal to book value minus the related allowance plus estimated selling costs.
Accrued interest receivable and payable: The fair value of accrued interest receivable and payable is equal to its carrying value.
Deposits: The fair values for demand and savings deposits equal their carrying amounts, which represent the amount payable on demand. Fair values for time
deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on time deposits to a schedule of aggregated
expected monthly maturities on time deposits.
Securities sold under agreements to repurchase: The fair value of securities sold under agreements to repurchase is considered to be equal to the carrying value
due to the borrowings’ short-term nature.
FHLB Advances: The fair value of FHLB Advances approximates the carrying value.
Junior subordinated debentures: It is not practicable to estimate the fair value of junior subordinated debentures as instruments with similar terms are not
available in the market place.
Commitments to extend credit: The fair value of these commitments is not material.
The carrying values and estimated fair values of the Company’s financial instruments as of December 31, 2022 and 2021 are as follows. (Amounts in Thousands
of Dollars):
Financial assets:
Cash and due from banks
Securities held to maturity
Securities available for sale
Federal funds sold
Loans, net
Impaired loans, net
Other real estate owned
Accrued interest receivable
Financial liabilities:
Non-interest bearing demand deposits
Interest bearing demand deposits
Savings deposits
Time deposits
Securities sold under agreements to repurchase
FHLB Advances
Accrued interest payable
Fair Value
Hierarchy
Level
Carrying Value
Fair Value
2022
2021
2022
2021
1
2
2
1
2
3
3
1
1
1
1
2
1
2
1
$
27,357
$
45,966
$
27,357
$
45,966
119,598
363,713
697
1,899
665,258
1,763
113,632
363,713
697
2,066
665,258
1,763
537,457
463,697
477,796
461,871
3,216
-
4,622
3,252
400
4,553
3,441
-
4,622
3,480
400
4,553
$
160,010
$
235,087
$
160,010
$
235,087
500,843
106,660
146,038
85,478
45,000
428
497,621
115,967
129,949
119,950
6,323
126
500,843
106,660
146,310
85,478
45,000
428
497,621
115,967
129,995
119,950
6,323
126
45
Board of Directors
First Bankers Trustshares, Inc.
William D. Daniels
Chairman of the Board
Member, Harborstone Group, LLC
Allen W. Shafer
President/CEO
Carl W. Adams, Jr.
Illinois Ayers Oil Company, Chairman
TI-Trust, Director
Scott A. Cisel
Former President/Chairman/CEO Ameren Illinois
Strategic Adviser to Energy Internet Corporation
President of Cisel Consulting, Inc.
Charles M. Gnuse
President/CEO, United State Bank
Lewistown, Missouri
Arthur E. Greenbank
Former President/CEO
First Bankers Trustshares, Inc.
Mark E. Freiburg
Freiburg Insurance Agency & Freiburg Development,
Owner
Diamond Construction
Maxamillion, Inc.
Phyllis J. Hofmeister
Robert Hofmeister Inc., Secretary
TI-Trust, Director
Blessing Health System Foundation Director
Kemia M. Sarraf, M.D., M.P.H.
CEO Lodestar Consulting and Executive Coaching
Southern Illinois University School of Medicine
Richard W. Schulte
Wright & Schulte, LLC
Attorney At Law
Steven E. Siebers
Schmiedeskamp, Robertson, Neu & Mitchell,
Attorney at Law
TI-Trust, Director
46
First Bankers Trust Company, N. A.
William D. Daniels
Chairman of the Board
Member, Harborstone Group, LLC
Allen W. Shafer
President/CEO
Carl W. Adams, Jr.
Illinois Ayers Oil Company, Chairman
TI-Trust, Director
Board of Directors
Mark E. Freiburg
Freiburg Insurance Agency & Freiburg Development,
Owner
Diamond Construction
Maxamillion, Inc.
Phyllis J. Hofmeister
Robert Hofmeister Inc., Secretary
TI-Trust, Director
Blessing Health System Foundation Director
Scott A. Cisel
Former President/Chairman/CEO Ameren Illinois
Strategic Adviser to Energy Internet Corporation
President of Cisel Consulting, Inc.
Kemia M. Sarraf, M.D., M.P.H.
CEO, Lodestar Consulting and Executive Coaching
Southern Illinois University School of Medicine
Charles M. Gnuse
President/CEO, United State Bank
Lewistown, Missouri
Arthur E. Greenbank
Former President/CEO, First Bankers Trust
Company, N. A.
Richard W. Schulte
Wright & Schulte, LLC
Attorney At Law
Steven E. Siebers
Schmiedeskamp, Robertson, Neu & Mitchell,
Attorney at Law
TI-Trust, Director
47
Officers
First Bankers Trust Company, N.A.
Allen W. Shafer, President/Chief Executive Officer
Joseph J. Davis, Chief Credit Officer
Seth H. Runkle, Chief Financial Officer
Jason L. Duncan, Region President
David J. Rakers, Region President
Nicole R. Allen-Cain, Senior Vice President (ISO)
Melinda K. Boyer, Senior Vice President
Nathan J. Frese, Senior Vice President
Douglas R. Reed, Senior Vice President
Dominic M. Siepp, Market President
James D. Whitaker, Senior Vice President
John T. Armstrong, Vice President
Jennifer M. Gilker, Vice President
Tony R. Gross, Vice President
Jana Hattey, Vice President
Devan D. Hitt, Vice President
Ashley J. Meadows, Vice President
Emilie Moody, Vice President
James R. Obert, Vice President
Sherry R. Schaffnit, Vice President
Brenda S. Seals, Vice President
Michelle M. Shortridge, Vice President
Nicholas A. Smith, Vice President
Scott L. Thoele, Vice President
Bernie J. Venvertloh, Vice President (Treasurer)
Brooke C. Venvertloh, Vice President (Controller)
Michele M. Walgren, Vice President
Leslie A. Westen, Vice President
Randal S. Westerman, Vice President
David A. Young, Vice President
Lyndsey Dow, Assistant Vice President
James M. Farmer, Assistant Vice President
David J. Garner, Assistant Vice President
Lisa K. Hoffman, Assistant Vice President
Andrew Jansen, Assistant Vice President
Karen J. Koehn, Assistant Vice President
Ryne R. Lubben, Assistant Vice President
Laura J. Maas, Assistant Vice President
Andrew Marner, Assistant Vice President
John K. Predmore, Assistant Vice President
Zachary W. Reed, Assistant Vice President
Kelly R. Seifert, Assistant Vice President
Joan M. Whitlow, Assistant Vice President
April D. Willey, Assistant Vice President
Jay Behrends, Officer
Stephanie M. Dickens, Retail Officer
W. Kay Divan, Retail Officer
Bailey Gasparovic, Officer
Ronald W. Fairley, IT Officer
Kelly Freeman, Retail Officer
Kelli N. Gooding, Retail Officer
Terry J. Hanks, IT Officer
Leigh A. Holstein, Retail Officer
Brian Johnson, Officer
Krystal N. Jackson, Retail Officer
Michelle Matticks, Officer
Kara Mester, Officer
Shannon M. Orris, Retail Officer
Rachel E. Sisay, Retail Officer
Kristel E. Williams, Retail Officer
Lisa M. Palmer, Officer
April C. Griffin, Collections Officer
Hannah L. Muegge, Credit Officer
Dalton R. Leebold, Digital Banking Officer
Alex L. Brown, Jr., Loan Officer
Megan M. Cheek, Loan Officer
Shawn P. Ryan, Loan Officer
Kyle W. Beckman, Marketing Officer
Melisa G. Heimann, Operations Officer
Kim M. Neal, Operations Officer
Matt Wyatt, Officer
48
Notes