2022 ANNUAL REPORT
C O M M U N I T Y
B U I L D I N G
T H R O U G H
C O M M U N I T Y
B A N K I N G
809 Cannell-Puri Court, Suite 5 • Winnebago, Illinois 61088 • 815.847.7500 • foresightfg.com
VISION
Magnify the collective
strengths of our
banks to
satisfy customers,
empower
employees, and
enhance value for our
communities and
shareholders.
FORESIGHT SUBSIDIARIES
Freeport, IL
www.foresightfg.com
we are
a market driven, people oriented
community banking organization dedicated to enhancing
shareholder value by providing our customers with
diversified financial services that help them achieve
economic success and financial security.
we will
pursue these goals while balancing shareholder
and customer interests with the ongoing welfare
of our employees and local communities.
The member banks of our group maintain
a high degree of independence and
sensitivity to the concerns of the local communities
and markets that we choose to serve.
we will
seek to expand sensibly into new markets
when we believe that our business model and
community banking philosophy can be successfully extended.
In summary:
“Community Building through Community Banking”
FORESIGHT SUBSIDIARIES
www.foresightfg.com
Dear Stockholders,
2022 proved to be not only a year of great success, but one of great progress and change, the result of both
external factors as well as internal decisions. Financially we ended 2022 with another successful year for
the company and shareholders, reporting record earnings of $13.6 million, a 19.7%
increase over 2021 earnings. The unparalleled pace of increase in interest rates
experienced in 2022 significantly drove growth in Net Interest Income while credit
quality remained consistently high allowing reduced year over year Loan Loss
Provision expense.
The F2 (Future Forward) initiative continues to progress, and we remain on target to
complete the majority of the most significant projects associated with this initiative
in 2023. Part of the F2 project includes the implementation of a shared services
environment which will position the organization with a platform for growth in
future periods. That, coupled with our new digital banking initiative will help
lead us into the next phase of our digital strategy, and be the catalyst to carry us forward into the digital
banking future.
The sale of State Bank of Herscher as announced in July of 2022, is expected to close during the second half
of 2023 and will further strengthen our already strong capital position. The Board of Directors anticipate
additional stock repurchases in 2023 combined with other efforts to increase the organization’s price per
share which has seen a dip in recent months due to restrictions in our ability to remain active in the market
as a result of the pending sale of Herscher. Based on the current market price of Foresight’s common stock,
which the Board believes is significantly undervalued, stock repurchases as well as additional efforts the
Board has identified will provide results that are in the best interests of our shareholders
Lastly, mid-year 2022, we welcomed Ryan Miller as President & CEO at Northwest Bank of Rockford replacing
Tom Walsh, at his retirement. Ryan brings a wealth of experience and enthusiasm and the changes he has
thus far put in place at Northwest Bank are already reaping tangible results.
Looking forward, as we have all seen, banking experiences credit cycles every eight to fifteen years. We all
recall the crash of 2008, prior to that 1991, and prior to that the savings & loan meltdown of the 1980’s. Being
able to thrive during these periods of uncertainty is dependent on our ability to maintain a consistently
conservative approach which focuses on the fundamentals regardless of market conditions. The ability to
quickly identify a negative cycle should be met with a strategy that enables us to survive and thrive throughout
those cycles. It is imperative that we pay attention to the current economic signals of continued inflationary
pressures and adjust our actions accordingly. The last few weeks have been an unprecedented time relative
to banking activities, the likes of which we have not seen in years, and in many ways have never seen in past
periods of financial stress in the banking community. The failure of Silicon Valley Bank and Signature Bank
in particular has had the effect of raising the concern of additional bank failures among the general public. It
has understandably also raised legitimate questions among our Banking teams and the customers we serve
as to how this will impact our Company and the safety of the funds our customers entrust us with. While
we do expect elevated regulatory scrutiny around liquidity planning, we have not had any direct signs of a
negative impact to us as a banking group.
4
Community banks have a traditional, relationship-based business model, focused on safety and soundness,
a very different business model than that of the large banks such as Silicon Valley and Signature Bank.
Foresight Financial Group is no exception to this and feel very comfortable in who we are and how we
will continue to be the trusted financial partner and employer for our staff, customers, communities, and
shareholders. Rest assured we will continue to closely monitor this matter as it evolves and take the necessary
measures to protect the interests of you, our shareholders, and of equal importance the clients that we serve.
While I do believe we are entering the beginning of a very challenging time that warrants prudent and
highly conservative actions to maintain our deposit base, asset quality, and sufficient capital to stay profitable
with modest growth expectations, I also believe we are well positioned to weather any oncoming storm and
emerge unscathed.
In closing let me thank you for being a shareholder of Foresight Financial Group. Without your ongoing
support we would not have been able to recognize the accomplishments we achieved in 2022. We will
continue building Communities through Community Banking. We appreciate the past support and look
forward to continuing to build greater value for all our shareholders.
Respectfully,
Peter Q. Morrison
President/Chief Executive Officer
5
Trends in Assets, Deposits & Loans (000’s)
1,135,478
1,500,000 -
1,300,000 -
1,384,600
1,453,784
1,100,000 -
1,163,933
1,180,323
1,213,588
1,235,444
1,154,460
900,000 -
961,659
980,024
1,020,093
700,000 -
777,920
784,393
778,874
818,611
845,847
1,477,460
1,294,707
954,426
500,000 -
0 -
2017
2018
2019
2020
2021
2022
Assets
Deposits
Loans
Trends in Combined Equity Capital & ALLL* to Non Performing Assets (000’s)
130,546
139,874
153,800
167,504
169,212
141,772
200,000 -
150,000 -
100,000 -
50,000 -
10,000 -
15,958
10,045
10,186
4,914
8,918
6,822
0 -
66
2017
2018
2019
2020
2021
2022
*ALLL: Allowance for loan and lease losses
Equity Capital & ALLL
Non-Performing Assets
2022 Annual Report
Net Income (1,000,000,000’s)
14.0 -
12.0 -
10.0 -
8.0 -
6.0 -
4.0 -
2.0 -
0 -
11.37
11.02
11.39
10.29
9.25
13.63
2017
2018
2019
2020
2021
2022
Common Stock Per Share Tangible Book & Market Value - 12/31
$45.00 -
$40.00 -
$35.00 -
$30.00 -
$25.00 -
$20.00 -
$15.00 -
0 -
9
6
.
3
3
$
5
9
.
3
3
$
2
7
.
1
3
$
0
4
.
2
3
$
9
6
.
7
3
$
0
1
.
6
3
$
4
2
.
1
4
$
8
8
.
9
2
$
3
1
.
3
4
$
7
6
.
5
3
$
0
9
.
2
3
$
0
5
.
7
2
$
2017
2018
2019
2020
2021
2022
Tangible Book Value
Market Value
77
2022 Annual Report
INDEPENDENT AUDITOR’S REPORT
Audit Committee
Foresight Financial Group, Inc. and Subsidiaries
OOppiinniioonn
We have audited the consolidated financial statements (the financial statements'') of Foresight Financial Group, Inc.
and Subsidiaries (the "Company"), which comprise the consolidated balance sheets as of December 31, 2022 and
2021, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity,
and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes to the
financial statements.
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the
financial position of Foresight Financial Group, Inc. and Subsidiaries as of December 31, 2022 and 2021, and the
results of its operations and their cash flows for each of the years in the three-year period ended December 31, 2022,
in accordance with accounting principles generally accepted in the United States of America (''GAAP'').
BBaassiiss ffoorr OOppiinniioonn
We conducted our audits in accordance with auditing standards generally accepted in the United States of America
("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 Foresight Financial
Group, Inc. and Subsidiaries 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.
RReessppoonnssiibbiilliittiieess ooff MMaannaaggeemmeenntt ffoorr tthhee FFiinnaanncciiaall SSttaatteemmeennttss
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 Foresight Financial Group, Inc. and Subsidiaries’
ability to continue as a going concern for one year after the date the financial statements are available to be issued.
8
2022 Annual Report
AAuuddiittoorr''ss RReessppoonnssiibbiilliittyy ffoorr tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall SSttaatteemmeennttss
Our objectives are to obtain reasonable assurance 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, but not for the purpose of expressing an opinion on the
effectiveness of Foresight Financial Group, Inc. and Subsidiaries’ internal control. Accordingly, no such
opinion is expressed.
• 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 Foresight Financial Group, Inc. and Subsidiaries’ 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.
SSuupppplleemmeennttaarryy IInnffoorrmmaattiioonn
Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The
consolidating information included in Schedules 1 and 2, is presented for purposes of additional analysis and is not a
required part of the financial statements. Such information is the responsibility of management and was derived
from and relates directly to the underlying accounting and other records used to prepare the financial statements. The
information has been subjected to the auditing procedures applied in the audits of the financial statements and
certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the financial statements or to the financial statements themselves, and
other additional procedures in accordance with auditing standards generally accepted in the United States of America.
In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a
whole.
Sterling, Illinois
March 8, 2023
9
2022 Annual Report A S S E T S
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
Interest-bearing deposits in banks - term deposits
Debt securities:
Debt securities available-for-sale (AFS)
Debt securities held-to-maturity (HTM)
Marketable equity securities and other investments
Loans held for sale
Loans, net of allowance for loan losses of $14,541 and $13,985,
respectively
Foreclosed assets and other real estate owned, net
Premises and equipment, net
Bank owned life insurance
Other assets
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
2022
$28,354
7,975
7,493
43,822
6,058
391,334
4,076
3,943
421
954,426
70
17,598
24,058
31,654
2021
$42,942
45,353
3,349
91,644
12,198
439,878
4,389
2,265
2,254
845,847
39
17,131
23,210
14,929
Total assets
$1,477,460
$1,453,784
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) and Federal Reserve advances
and other borrowings
Accrued interest payable and other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares)
Common stock ($.25 par value; authorized 10,000,000 shares;
4,071,494 and 4,060,088 shares issued, respectively)
Additional paid-in capital
Retained earnings
Treasury stock, at cost (509,079 and 464,319 shares, respectively)
Accumulated other comprehensive income (loss)
Total stockholders’ equity
$276,055
1,018,652
1,294,707
0
36,298
7,366
11,858
1,350,229
0
1,018
11,138
164,597
(12,534)
(36,988)
127,231
$266,526
968,918
1,235,444
533
35,109
17,076
10,395
1,298,557
0
1,015
10,768
152,903
(11,002)
1,543
155,227
Total liabilities and stockholders’ equity
$1,477,460
$1,453,784
10
See Notes to Consolidated Financial Statements.
2022 Annual Report CONSOLIDATED STATEMENTS OF INCOME
(000s omitted except share data)
For the years ended December 31,
Interest and dividend income:
Loans, including fees
Debt securities:
Taxable
Tax-exempt
Interest-bearing deposits in banks and other
Federal funds sold
Total interest and dividend income
Interest expense:
Deposits
Federal funds purchased
Securities sold under agreements to repurchase
FHLB and other borrowings
Total interest expense
Net interest and dividend income
Provision for loan losses
Net interest and dividend income,
after provision for loan losses
Noninterest income:
Customer service fees
(Loss) gain on sales and calls of AFS securities, net
Gain on sales of loans, net
Loan servicing fees, net
Other
Total noninterest income
Noninterest expenses:
Salaries and employee benefits
Occupancy expense of premises, net
Outside services
Data processing
Foreclosed assets and other real estate owned, net
Other
Total noninterest expenses
Income before income taxes
Income tax expense
Net income
Earnings per common share:
Basic
Diluted
2022
2021
2020
$42,990
$39,995
$41,545
6,117
2,518
646
190
52,461
6,291
38
323
136
6,788
45,673
552
4,276
2,599
508
1
47,379
5,902
0
36
211
6,149
4,506
2,437
648
38
49,174
8,941
0
155
240
9,336
41,230
39,838
756
3,785
45,121
40,474
36,053
1,055
(246)
969
1,978
4,653
8,409
22,627
2,312
1,553
3,040
(53)
6,343
35,822
17,708
4,082
870
126
2,663
1,334
4,501
9,494
21,433
2,292
3,031
2,737
(112)
5,964
35,345
14,623
3,237
837
382
3,386
967
3,615
9,187
20,016
2,536
953
2,903
97
5,679
32,184
13,056
2,766
$13,626
$11,386
$10,290
$3.83
$3.81
$3.11
$3.09
$2.76
$2.75
See Notes to Consolidated Financial Statements.
11
2022 Annual Report CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(000s omitted except share data)
For the years ended December 31,
Net income
Other comprehensive (loss) income:
Unrealized holding gains (losses) on securities available for sale,
net of tax of $15,292, $1,868, & $1,798, respectively
Reclassification adjustments for net securities losses (gains)
recognized in income, net of tax of $70, $36, & $109, respectively
2022
2021
2020
$13,626
$11,386
$10,290
(38,707)
(4,686)
4,511
176
(90)
(273)
Total other comprehensive (loss) income
(38,531)
(4,776)
4,238
Total comprehensive (loss) income
($24,905)
$6,610
$14,528
12
See Notes to Consolidated Financial Statements.
2022 Annual Report
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(000s omitted except share data)
For the years ended December 31,
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted except share data)
For the years ended December 31,
2020
2019
2021
Retained
Earnings
Treasury
Stock
$133,861
($6,320)
Additional
Paid-In
Capital
$10,132
Net income
Common
Stock
Other comprehensive income
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses
Foreclosed asset valuation (gains) losses in
Balance, January 1, 2020
$1,007
Depreciation
Net amortization of securities premiums
Income on bank owned life insurance
Gain on death benefits
Deferred income tax (benefit) expense
Stock-based compensation expense
Restricted stock expense
Net (gain) on the sales and calls of AFS securities
Net (gain) on the sales of foreclosed assets
Net change in:
Stock options exercised (16,844 shares)
Loans held for sale
Other assets
Accrued interest payable and other liabilities
Net cash provided by operating activities
1
Purchase of treasury stock (17,900 shares)
Restricted stock vested (5,509 shares)
Stock-based compensation expense
Cash dividends ($.36 per share)
5
169
19
193
Balance, December 31, 2020
Effect of change in accounting principle -
Mortgage servicing rights (net of tax $101)
1,013
10,513
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits in banks - term deposits
Proceeds from sales of AFS and HTM securities
Proceeds from maturities, calls, and paydowns of AFS securities
Purchases of AFS and HTM securities
Purchases of bank owned life insurance
Proceeds from death benefits of bank owned life insurance
(Purchases) redemption of marketable equity securities, net
Loan originations and principal collections, net
Proceeds from sales of foreclosed assets
Purchases of premises and equipment, net
Net cash used in investing activities
Cash dividends ($.42 per share)
Other comprehensive loss
Net income
Purchase of treasury stock (131,500 shares)
10,290
(1,344)
142,807
254
11,386
(1,544)
16
Stock-based compensation expense
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits
Net change is securities sold under agreements to repurchase
Restricted stock vested (7,854 shares)
Cash dividends paid
Net change in federal funds purchased
Stock options exercised
Purchase of treasury stock
13,626
Proceeds from FHLB and Federal Reserve advances and other borrowings
Payments on FHLB and Federal Reserve advances and other borrowings
Net cash provided by financing activities
Balance, December 31, 2021
Other comprehensive loss
Net income
152,903
10,768
1,015
239
2
(11,002)
80,984
3,960
(1,544)
(1,591)
0
(4,172)
5,000
(22,712)
59,925
$11,386
$11,022
$2,081
$10,290
Accumulated
Other
Comprehensive
Income (Loss)
756
195
1,053
4,570
(504)
(50)
(86)
16
241
(126)
(121)
3,785
(134)
1,217
2,936
(598)
0
(486)
19
194
(382)
(91)
4,238
Total
$140,761
10,290
4,238
(1,344)
(510)
1,125
(533)
1,463
1,300
(600)
0
443
18
150
(260)
(22)
(510)
592
(1,401)
2,138
18,659
(839)
2,773
(466)
18,218
174
(285)
2,624
850
17,295
19
194
(6,830)
3,086
16,899
115,972
(219,357)
0
938
(975)
(28,059)
266
(455)
(111,685)
(4,172)
6,319
(755)
1,750
134,445
(200,144)
0
0
(73)
(43,650)
234
(445)
(108,638)
(4,776)
153,822
(4,561)
981
75,210
(78,019)
(919)
0
(217)
3,850
1,421
(961)
(3,215)
254
11,386
(4,776)
(1,544)
(4,172)
1,543
155,227
134,367
4,555
(1,344)
(255)
174
(510)
24,576
(4,826)
156,737
16
241
40,069
(1,160)
(1,229)
(3,634)
159
0
71,000
(89,178)
16,027
13,626
(38,531)
(38,531)
Cash dividends ($.54 per share)
Net increase (decrease) in cash and cash equivalents
(1,932)
Purchase of treasury stock (44,760 shares)
Cash and cash equivalents at beginning of year
Stock-based compensation expense
Cash and cash equivalents at end of year
Restricted stock vested (11,406 shares)
3
25
345
(33,101)
66,317
(1,532)
124,745
58,428
$91,644
$124,745
(1,932)
30,107
(1,532)
28,321
25
$58,428
348
Balance, December 31, 2022
$1,018
$11,138
$164,597
($12,534)
($36,988)
$127,231
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
13
2022 Annual Report CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted except share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
(000s omitted except share data)
2019
2020
For the years ended December 31,
2021
$10,290
2020
$11,022
2022
$11,386
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income to net cash
Net income
provided by operating activities:
Adjustments to reconcile net income to net cash
Provision for loan losses
provided by operating activities:
Foreclosed asset valuation (gains) losses in
Provision for loan losses
Depreciation
Foreclosed asset valuation (gains) losses
Net amortization of securities premiums
Depreciation
Income on bank owned life insurance
Net amortization of securities premiums
Gain on death benefits
Income on bank owned life insurance
Deferred income tax (benefit) expense
Gain on death benefits
Stock-based compensation expense
Deferred income tax (benefit) expense
Restricted stock expense
Stock-based compensation expense
Net (gain) on the sales and calls of AFS securities
Restricted stock expense
Net (gain) on the sales of foreclosed assets
Net (gain) loss on the sales and calls of AFS securities
Net change in:
Net (gain) on the sales of foreclosed assets
Change in mortgage servicing rights
Loans held for sale
Net change in:
Other assets
Loans held for sale
Accrued interest payable and other liabilities
Other assets
Net cash provided by operating activities
Accrued interest payable and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits in banks - term deposits
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS and HTM securities
Net change in interest-bearing deposits in banks - term deposits
Proceeds from maturities, calls, and paydowns of AFS securities
Proceeds from sales of AFS securities
Purchases of AFS and HTM securities
Proceeds from maturities, calls, and paydowns of AFS securities
Purchases of bank owned life insurance
Proceeds from maturities, calls and paydowns of HTM securities
Proceeds from death benefits of bank owned life insurance
Purchases of AFS securities
(Purchases) redemption of marketable equity securities, net
Purchases of HTM securities
Loan originations and principal collections, net
Purchases of bank owned life insurance
Proceeds from sales of foreclosed assets
Proceeds from death benefits of bank owned life insurance
Purchases of premises and equipment, net
(Purchases) redemption of marketable equity securities, net
Net cash used in investing activities
Loan originations and principal collections, net
Proceeds from sales of foreclosed assets
Purchases of premises and equipment, net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits
Net change is securities sold under agreements to repurchase
Cash dividends paid
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in federal funds purchased
Net change in deposits
Net change is securities sold under agreements to repurchase
Stock options exercised
Cash dividends paid
Purchase of treasury stock
Net change in federal funds purchased
Proceeds from FHLB and Federal Reserve advances and other borrowings
Stock options exercised
Payments on FHLB and Federal Reserve advances and other borrowings
Purchase of treasury stock
Net cash provided by financing activities
Proceeds from FHLB and Federal Reserve advances and other borrowings
Payments on FHLB and Federal Reserve advances and other borrowings
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at end of year
Cash and cash equivalents at beginning of year
$13,626
$11,386
$10,290
756
195
552
1,053
64
4,570
1,106
(504)
3,019
(50)
(547)
(86)
(33)
16
115
241
25
(126)
348
(121)
246
(262)
(1,208)
592
(1,401)
1,833
2,138
(270)
18,659
1,463
20,077
3,086
16,899
6,140
115,972
10,348
(219,357)
45,029
0
345
938
(64,023)
(975)
0
(28,059)
(930)
266
662
(455)
(1,678)
(111,685)
(109,201)
237
(1,573)
80,984
(114,644)
3,960
(1,544)
(1,591)
59,263
1,189
0
(1,932)
(4,172)
(533)
5,000
0
(22,712)
(1,532)
59,925
18,950
(28,660)
(33,101)
46,745
124,745
(47,822)
$91,644
91,644
3,785
(134)
756
1,217
195
2,936
1,053
(598)
4,570
0
(504)
(486)
(50)
19
(86)
194
16
(382)
241
(91)
(126)
(121)
(523)
(839)
2,773
592
(466)
(878)
18,218
2,138
18,659
(755)
1,750
3,086
134,445
16,899
(200,144)
115,632
0
340
0
(219,357)
(73)
0
(43,650)
0
234
938
(445)
(975)
(108,638)
(28,059)
266
(455)
134,367
(111,685)
4,555
(1,344)
(255)
80,984
3,960
174
(1,544)
(510)
(1,591)
24,576
0
(4,826)
(4,172)
156,737
5,000
(22,712)
66,317
59,925
58,428
(33,101)
$124,745
124,745
1,125
(533)
3,785
1,463
(134)
1,300
1,217
(600)
2,936
0
(598)
443
0
18
(486)
150
19
(260)
194
(22)
(382)
(91)
(157)
(285)
2,624
(839)
850
2,930
17,295
(466)
18,218
(4,561)
981
(755)
75,210
1,750
(78,019)
134,445
(919)
0
0
(196,012)
(217)
(4,132)
3,850
0
1,421
0
(961)
(73)
(3,215)
(43,650)
234
(445)
40,069
(108,638)
(1,160)
(1,229)
(3,634)
134,367
4,555
159
(1,344)
0
(255)
71,000
174
(89,178)
(510)
16,027
24,576
(4,826)
30,107
156,737
28,321
66,317
$58,428
58,428
Cash and cash equivalents at end of year
$43,822
$91,644
$124,745
14
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
2022 Annual Report CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(000s omitted except share data)
For the years ended December 31,
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted except share data)
For the years ended December 31,
2020
2019
2021
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses
Foreclosed asset valuation (gains) losses in
Depreciation
Net amortization of securities premiums
Income on bank owned life insurance
Gain on death benefits
Deferred income tax (benefit) expense
Stock-based compensation expense
Restricted stock expense
Net (gain) on the sales and calls of AFS securities
Net (gain) on the sales of foreclosed assets
Net change in:
SUPPLEMENTAL SCHEDULE OF NONCASH
Loans held for sale
FINANCING ACTIVITIES:
Other assets
Foreclosed assets acquired in settlement of loans
Accrued interest payable and other liabilities
Net cash provided by operating activities
Income taxes
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits in banks - term deposits
Proceeds from sales of AFS and HTM securities
Proceeds from maturities, calls, and paydowns of AFS securities
Purchases of AFS and HTM securities
Purchases of bank owned life insurance
Proceeds from death benefits of bank owned life insurance
(Purchases) redemption of marketable equity securities, net
Loan originations and principal collections, net
Proceeds from sales of foreclosed assets
Purchases of premises and equipment, net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits
Net change is securities sold under agreements to repurchase
Cash dividends paid
Net change in federal funds purchased
Stock options exercised
Purchase of treasury stock
Proceeds from FHLB and Federal Reserve advances and other borrowings
Payments on FHLB and Federal Reserve advances and other borrowings
Net cash provided by financing activities
$11,386
$10,290
$11,022
2022
2021
756
195
1,053
4,570
(504)
(50)
(86)
16
241
(126)
(121)
$6,505
$2,882
3,785
(134)
1,217
2,936
(598)
0
(486)
19
194
(382)
(91)
$6,441
$3,109
$70
592
(1,401)
2,138
18,659
3,086
16,899
115,972
(219,357)
0
938
(975)
(28,059)
266
(455)
(111,685)
80,984
3,960
(1,544)
(1,591)
0
(4,172)
5,000
(22,712)
59,925
(839)
2,773
$67
(466)
18,218
(755)
1,750
134,445
(200,144)
0
0
(73)
(43,650)
234
(445)
(108,638)
134,367
4,555
(1,344)
(255)
174
(510)
24,576
(4,826)
156,737
2020
1,125
(533)
1,463
1,300
(600)
0
$9,701
443
18
$2,325
150
(260)
(22)
(285)
2,624
$128
850
17,295
(4,561)
981
75,210
(78,019)
(919)
0
(217)
3,850
1,421
(961)
(3,215)
40,069
(1,160)
(1,229)
(3,634)
159
0
71,000
(89,178)
16,027
Net increase (decrease) in cash and cash equivalents
(33,101)
66,317
30,107
Cash and cash equivalents at beginning of year
124,745
58,428
28,321
Cash and cash equivalents at end of year
$91,644
$124,745
$58,428
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
15
2022 Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Foresight Financial Group, Inc. (Company) and its wholly-owned
subsidiaries (Banks) conform to accounting principles generally accepted in the United States of America and
to general practices within the banking industry. The following is a description of the more significant
accounting policies:
((aa)) NNaattuurree ooff OOppeerraattiioonnss
The Company provides a variety of banking services to individuals and businesses through its facilities in
the Rockford, Freeport, German Valley, Davis, Lena, Winnebago, Pecatonica, Seward, Bradley, Kankakee,
Loves Park, Machesney Park, Belvidere, and Herscher, Illinois areas. Its primary deposit products are
demand deposits and certificates of deposit and its primary lending products are agriculture, agribusiness,
commercial, real estate, and installment loans.
((bb)) BBaassiiss ooff CCoonnssoolliiddaattiioonn
The financial statements include the accounts and results of operations of the Company and its wholly-
owned subsidiaries: German-American State Bank (German), State Bank of Davis (Davis), State Bank
(Freeport), Northwest Bank of Rockford (Northwest), Lena State Bank (Lena), and State Bank of
Herscher (Herscher) (collectively the “Banks”). All significant intercompany accounts and transactions
have been eliminated in consolidation.
((cc)) SSuubbsseeqquueenntt EEvveennttss
The Company has evaluated subsequent events for recognition and disclosure through March 8, 2023,
which is the date the financial statements were available to be issued.
((dd)) UUssee ooff EEssttiimmaatteess
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the
reported amounts 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, deferred tax assets, fair
values of securities, foreclosed assets and financial instruments are particularly susceptible to change in the
near-term.
((ee)) CCaasshh aanndd CCaasshh EEqquuiivvaalleennttss
For purposes of the statements of cash flows, cash and cash equivalents include cash and balances due
from banks, interest-bearing deposits in banks, and federal funds sold, all of which generally mature within
ninety days.
16
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies
((ff)) IInntteerreesstt--bbeeaarriinngg DDeeppoossiittss iinn BBaannkkss
Interest-bearing deposits in banks are comprised of liquid non-maturing deposits but also include some
balances in time deposits with the maturity being the determining factor for inclusion in cash and cash
equivalents with the non-maturing interest-bearing deposits. Interest-bearing deposits in banks are carried
at cost.
((gg)) DDeebbtt SSeeccuurriittiieess
Debt securities that management has the positive intent and ability to hold to maturity are classified as held
to maturity (HTM) and recorded at amortized cost. Securities not classified as HTM are classified as
available for sale (AFS) and recorded at fair value, with unrealized gains or losses excluded from earnings
and reported in other comprehensive income or loss. Amortization of premiums and accretion of
discounts are recognized in interest income using the interest method. Premiums that exceed the amount
repayable by the issuer at the next call date are amortized to the next call date. Other premiums and
discounts are amortized (accreted) over the estimated lives of the securities. Gains and losses on the sale
of securities are recorded on the trade date and determined using the specific-identification method.
In estimating other-than-temporary impairment losses, management considers (1) the length of time and
the extent to which the fair value has been less than cost, (2) the financial condition and near-term
prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer
for a period of time sufficient to allow for any anticipated recovery in fair value.
((hh)) MMaarrkkeettaabbllee EEqquuiittyy SSeeccuurriittiieess aanndd OOtthheerr IInnvveessttmmeennttss
Marketable equity securities have a readily determinable fair value and are measured at fair value with
changes in fair value reported in net income. Gains and losses on the sale of marketable equity securities
are recorded on the trade date and determined using the specific-identification method.
Other investments include equity securities without a readily determinable fair value which consists
primarily of Federal Home Loan Bank (FHLB) stock. The Company has elected to account for equity
securities without readily determinable fair values using the alternative measurement method. Under this
method, these securities are carried at cost, minus impairment, if any, plus or minus changes resulting from
observable price changes in orderly transactions for the identical or a similar investment. The Company is
required to hold FHLB stock as a member of the FHLB and transfer of the stock is substantially restricted.
The FHLB stock is pledged as collateral for outstanding FHLB advances. FHLB stock is evaluated for
impairment on an annual basis.
((ii)) LLooaannss HHeelldd ffoorr SSaallee
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market in
the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to
income.
Mortgage loans held for sale are generally sold with mortgage servicing rights retained by the Company.
The carrying value of mortgage loans sold is reduced by the cost allocated to the associated mortgage
servicing rights. Realized gains or losses on sales of mortgage loans are recognized based on the difference
between the selling price and the carrying value of the related mortgage loans sold.
17
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
((jj)) LLooaannss aanndd AAlllloowwaannccee ffoorr LLooaann LLoosssseess
Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or
payoff; generally, are reported at their outstanding unpaid principal balances adjusted for purchase
premiums or discounts, charge-offs, and an allowance for loan losses. Interest on loans is accrued daily
based on the unpaid principal balance.
A loan is considered to be delinquent when payments have not been made according to contractual terms,
typically evidenced by nonpayment of a monthly installment by the due date. The accrual of interest on a
loan is generally discontinued when the loan becomes 90 days delinquent unless the credit is well-secured
and in the process of collection. Credit card loans and other personal loans are typically charged off at an
earlier date if collection of principal or interest is considered doubtful. Generally, interest accrued but not
collected for loans that are placed on nonaccrual status or charged off is reversed against interest income.
The interest on these loans is accounted for on the cash basis or cost-recovery method, until qualifying for
return to accrual. Loans are returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably assured.
Loan-origination fees with the exception of the Paycheck Protection Program (PPP) fees received in 2020
and 2021 and direct origination costs are generally recognized as income or expense when received or
incurred since capitalization of these fees and costs would not have a significant impact on the financial
statements. Fees received as part of PPP were capitalized and amortized to income over the contractual
life of the PPP loans.
The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are
charged against the allowance when management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the
allowance balance required using past loan loss experience, the nature and volume of the portfolio,
information about specific borrower situations and estimated collateral values, economic conditions, and
other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is
available for any loan that, in management's judgment, should be charged off.
The allowance consists of specific and general components. The specific component relates to loans that
are individually classified as impaired. A loan is impaired when, based on current information and events,
it is probable that the Company will be unable to collect all amounts due according to the contractual
terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and
for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings
(TDRs) and classified as impaired.
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.
All problem loans meeting Company criteria are individually evaluated for impairment. If a loan is
impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of
estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is
expected from the collateral.
18
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
((jj)) LLooaannss aanndd AAlllloowwaannccee ffoorr LLooaann LLoosssseess ((ccoonnttiinnuueedd))
TDRs are individually evaluated for impairment and included in the separately identified impairment
disclosures. TDRs are measured at the present value of estimated future cash flows using the loan’s
effective rate at inception. If a TDR is considered to be a collateral dependent loan, the loan is reported,
net, at the fair value of the collateral. For TDRs that subsequently default, the Company determines the
amount of the allowance on that loan in accordance with the accounting policy for the allowance for loan
losses on loans individually identified as impaired.
The general component covers loans that are collectively evaluated for impairment. Large groups of
smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively
evaluated for impairment, and accordingly, they are not included in the impairment disclosures. The
general allowance component also includes loans that are not individually identified for impairment
evaluation, such as commercial loans below the individual evaluation threshold, as well as those loans that
are individually evaluated but are not considered impaired.
The general component is based on historical loss experience adjusted for current qualitative factors. The
historical loss experience is determined by portfolio segment or loan class and is based on the actual loss
history experienced by the Company. This actual loss experience is supplemented with other economic
factors based on the risks present for each portfolio segment or loan class. These economic factors
include: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and
recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting
standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of
lending management and employees; national and economic trends and conditions; industry conditions;
and effects of changes in credit concentrations.
Management considers the following when assessing the risk in the loan portfolio:
• Residential real estate loans are affected by the local residential real estate market, the local
economy, and, for variable rate mortgages, movement in indices tied to these loans. At the time
of origination, the Company evaluates the borrower's repayment ability through a review of debt-
to-income and credit scores. Appraisals are generally obtained to support the loan amount.
Financial information is obtained from the borrowers and/or the individual project to evaluate
cash flows sufficiency to service debt at the time of origination.
• Agricultural and commercial real estate loans are dependent on the industries tied to these loans.
Agricultural real estate loans are primarily for land acquisition. Commercial real estate loans are
primarily secured by office and industrial buildings, warehouses, retail shopping facilities and
various special purpose properties, including hotels and restaurants. Financial information is
obtained from the borrowers and/or the individual project to evaluate cash flows sufficiency to
service debt; and is periodically updated during the life of the loan. Loan performance may be
adversely affected by factors impacting the general economy or conditions specific to the real
estate market, such as geographic location and/or property type.
• Commercial and agricultural loans are primarily for working capital, physical asset expansion,
asset acquisition loans and other. These loans are made based primarily on historical and
projected cash flow of the borrower and secondarily on the underlying collateral provided by the
borrower. The cash flows of borrowers, however, may not behave as forecasted and collateral
securing loans may fluctuate in value due to economic or individual performance factors.
Financial information is obtained from the borrowers to evaluate cash flows sufficiency to service
debt and is periodically updated during the life of the loan.
19
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
((jj)) LLooaannss aanndd AAlllloowwaannccee ffoorr LLooaann LLoosssseess ((ccoonnttiinnuueedd))
• Consumer and other loans may take the form of installment loans, demand loans, or single
payment loans and are extended to individuals for household, family, and other personal
expenditures. At the time of origination, the Company evaluates the borrower's repayment ability
through a review of debt-to-income and credit scores.
((kk)) LLooaann CCoommmmiittmmeennttss
The Company enters into off-balance-sheet financial instruments consisting of commitments to extend
credit and letters of credit issued to meet customer-financing needs. Loan commitments are recorded
when they are funded. Standby or performance letters of credit are considered financial guarantees in
accordance with Generally Accepted Accounting Standards and are recorded at fair value, if material.
((ll)) LLooaann SSeerrvviicciinngg aanndd CChhaannggee iinn AAccccoouunnttiinngg PPrriinncciippllee
The Company services mortgage loans it sells to third-party institutions. Servicing loans includes collecting
monthly principal and interest payments from borrowers, passing such payments through to the third-
party investors, and maintaining escrow accounts for taxes and insurance. When necessary, the Company
also performs collection functions for delinquent loan payments, handles loan foreclosure proceedings,
and disposes of foreclosed property. The Company generally earns a servicing fee of 25 basis points on the
outstanding loan balance for performing these services as well as fees and interest income from ancillary
sources, such as late fees and float.
Mortgage servicing rights are recognized as separate assets when rights are acquired through a sale of loans
and are reported in other assets. Effective January 1, 2021, the Company elected fair value accounting for
all of its mortgage servicing rights previously accounted for using the amortization method. This
irrevocable election applies to all subsequently acquired or originated servicing assets and liabilities that
have characteristics consistent with this class. A cumulative-effect adjustment of $254 (net of tax) was
recorded to retained earnings as of January 1, 2021, to reflect the excess of the fair value of mortgage
servicing rights over their carrying amount.
Prior to January 1, 2021, when the originating mortgage loans were sold into the secondary market, the
Company allocated the total cost of the mortgage loans between mortgage servicing rights and the loans,
based on their relative fair values. The cost of originated mortgage-servicing rights was amortized in
proportion to, and over the period of, estimated net servicing revenues. Impairment of mortgage-servicing
rights was assessed based on the fair value of those rights. The amount of impairment was the amount by
which the capitalized mortgage servicing rights exceeded their fair value. Fair value was determined using
prices for similar assets with similar characteristics, when available, or based upon discounted cash flows
using market-based assumptions. Effective January 2021, mortgage servicing rights recognized when
mortgage loans are sold are included as a component of loan servicing fees and are measured at fair value
at acquisition and at each subsequent reporting date. The fair value of mortgage servicing rights is
estimated using market prices for comparable contracts, when available, or a valuation model that
calculates the present value of estimated future net servicing income. The valuation model incorporates
assumptions that market participants would use in estimating future net servicing income, such as costs to
service, a discount rate, custodial earnings rate, ancillary income, default rates and losses, and prepayment
speeds. The fair value of mortgage servicing rights may change due to changes in discount rates,
prepayment expectations, default rates, and other factors. Changes in fair value are recognized each period
and reported in the Statements of Income as a component of loan servicing fees.
20
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
((ll)) LLooaann SSeerrvviicciinngg aanndd CChhaannggee iinn AAccccoouunnttiinngg PPrriinncciippllee ((ccoonnttiinnuueedd))
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual
percentage of the outstanding principal and are recorded as income when earned. The amortization of
mortgage servicing rights prior to the change in accounting principle was offset against loan servicing fee
income.
((mm)) RRaattee LLoocckk CCoommmmiittmmeennttss
Commitments to fund mortgage loans (interest-rate locks) to be sold into the secondary market and
mandatory delivery forward commitments for the future delivery of these mortgage loans are to be
accounted for as derivatives not qualifying for hedge accounting. The fair values of these mortgage
derivatives are to be estimated based on the net future cash flows related to the associated servicing of the
loans and on changes in mortgage interest rates from the date of the commitments. Changes in fair values
on these derivatives are to be included in net gains on sales of loans. The Company has deemed the effect
of these derivatives to be immaterial to the financial statements and, accordingly, has elected not to record
fair values associated with these derivatives.
((nn)) FFoorreecclloosseedd AAsssseettss aanndd OOtthheerr RReeaall EEssttaattee OOwwnneedd
Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated cost
of disposal when acquired. Subsequent to foreclosure and transfer to other real estate owned, valuations
are periodically performed by management and the assets are carried at the lower of carrying amount or
fair value less cost to sell. Revenues and expenses from operations and changes in the valuation allowance
are included in net expenses from foreclosed assets and other real estate owned.
((oo)) PPrreemmiisseess aanndd EEqquuiippmmeenntt
Premises and equipment are carried at cost less accumulated depreciation, based on the estimated useful
lives of the assets. Depreciation is generally computed on the straight-line method over estimated useful
lives ranging from 3 to 40 years.
((pp)) BBaannkk--OOwwnneedd LLiiffee IInnssuurraannccee
The Company has purchased life insurance policies on certain key employees and directors. Bank-owned
life insurance is recorded at its cash surrender value, or the amount that can be realized.
((qq)) SSiiggnniiffiiccaanntt GGrroouupp CCoonncceennttrraattiioonnss ooff CCrreeddiitt RRiisskk
Most of the Company’s activities are with customers located in the area and communities noted above.
Note 3 details the types of securities in which the Company invests. Note 4 details the types of lending in
which the Company engages. The Company does not have any significant concentrations with any one
industry or customer.
21
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
((rr)) RReevveennuuee ffrroomm CCoonnttrraaccttss wwiitthh CCuussttoommeerrss
((rr)) RReevveennuuee ffrroomm CCoonnttrraaccttss wwiitthh CCuussttoommeerrss
((rr)) RReevveennuuee ffrroomm CCoonnttrraaccttss wwiitthh CCuussttoommeerrss
The core revenue recognition principle requires the Company to recognize revenue to depict the transfer
The core revenue recognition principle requires the Company to recognize revenue to depict the transfer
of services or products to customers in an amount that reflects the consideration to which the Company
The core revenue recognition principle requires the Company to recognize revenue to depict the transfer
of services or products to customers in an amount that reflects the consideration to which the Company
expects to be entitled to receive in exchange for those services or products recognized as performance
of services or products to customers in an amount that reflects the consideration to which the Company
expects to be entitled to receive in exchange for those services or products recognized as performance
obligations are satisfied. The guidance includes a five-step model to apply to revenue recognition,
expects to be entitled to receive in exchange for those services or products recognized as performance
obligations are satisfied. The guidance includes a five-step model to apply to revenue recognition,
consisting of the following: (1) identify the contract with a customer; (2) identify the performance
obligations are satisfied. The guidance includes a five-step model to apply to revenue recognition,
consisting of the following: (1) identify the contract with a customer; (2) identify the performance
obligations within the contract; (3) determine the transaction price; (4) allocate the transaction price to the
consisting of the following: (1) identify the contract with a customer; (2) identify the performance
obligations within the contract; (3) determine the transaction price; (4) allocate the transaction price to the
performance obligations within the contract; and (5) recognize revenue when the performance obligations
obligations within the contract; (3) determine the transaction price; (4) allocate the transaction price to the
performance obligations within the contract; and (5) recognize revenue when the performance obligations
are satisfied.
performance obligations within the contract; and (5) recognize revenue when the performance obligations
are satisfied.
are satisfied.
The Company generally fully satisfies its performance obligations on its contracts with customers as
The Company generally fully satisfies its performance obligations on its contracts with customers as
services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or
The Company generally fully satisfies its performance obligations on its contracts with customers as
services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or
based on activity. Since performance obligations are satisfied as services are rendered and the transaction
services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or
based on activity. Since performance obligations are satisfied as services are rendered and the transaction
prices are fixed, there is little judgment involved in applying revenue recognition that significantly affects
based on activity. Since performance obligations are satisfied as services are rendered and the transaction
prices are fixed, there is little judgment involved in applying revenue recognition that significantly affects
the determination of the amount and timing of revenue from contracts with customers.
prices are fixed, there is little judgment involved in applying revenue recognition that significantly affects
the determination of the amount and timing of revenue from contracts with customers.
the determination of the amount and timing of revenue from contracts with customers.
The following significant revenue-generating transactions are within the scope of revenue recognition,
The following significant revenue-generating transactions are within the scope of revenue recognition,
which are presented in the statements of income as components of noninterest income:
The following significant revenue-generating transactions are within the scope of revenue recognition,
which are presented in the statements of income as components of noninterest income:
which are presented in the statements of income as components of noninterest income:
Customer service fees – The Company earns fees from its deposit customers for transaction-based,
Customer service fees – The Company earns fees from its deposit customers for transaction-based,
account maintenance, and overdraft services. Transaction-based fees, such as statement rendering and
Customer service fees – The Company earns fees from its deposit customers for transaction-based,
account maintenance, and overdraft services. Transaction-based fees, such as statement rendering and
ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company
account maintenance, and overdraft services. Transaction-based fees, such as statement rendering and
ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company
fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly service
ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company
fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly service
charges and maintenance fees, are earned over the course of a month, representing the period over which
fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly service
charges and maintenance fees, are earned over the course of a month, representing the period over which
the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that
charges and maintenance fees, are earned over the course of a month, representing the period over which
the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that
the overdraft occurs as this corresponds with the Company’s performance obligation.
the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that
the overdraft occurs as this corresponds with the Company’s performance obligation.
the overdraft occurs as this corresponds with the Company’s performance obligation.
Interchange fees – Customers use a bank-issued debit card to purchase goods and services, and the
Interchange fees – Customers use a bank-issued debit card to purchase goods and services, and the
Company earns interchange fees on those transactions, typically a percentage of the sale amount of the
Interchange fees – Customers use a bank-issued debit card to purchase goods and services, and the
Company earns interchange fees on those transactions, typically a percentage of the sale amount of the
transaction. The Company is considered an agent with respect to these transactions. Interchange fee
Company earns interchange fees on those transactions, typically a percentage of the sale amount of the
transaction. The Company is considered an agent with respect to these transactions. Interchange fee
payments received included in other noninterest income, net of related expense, are recognized as income
transaction. The Company is considered an agent with respect to these transactions. Interchange fee
payments received included in other noninterest income, net of related expense, are recognized as income
daily, concurrently with the transaction processing services provided to the cardholder through the
payments received included in other noninterest income, net of related expense, are recognized as income
daily, concurrently with the transaction processing services provided to the cardholder through the
payment networks. There are no contingent debit card interchange fees recorded by the Company that
daily, concurrently with the transaction processing services provided to the cardholder through the
payment networks. There are no contingent debit card interchange fees recorded by the Company that
could be subject to a claw-back in future periods.
payment networks. There are no contingent debit card interchange fees recorded by the Company that
could be subject to a claw-back in future periods.
could be subject to a claw-back in future periods.
Trust fees – The Company earns trust fees, included in other noninterest income, from its contracts with
Trust fees – The Company earns trust fees, included in other noninterest income, from its contracts with
trust customers for providing investment management and/or transaction-based services on their
Trust fees – The Company earns trust fees, included in other noninterest income, from its contracts with
trust customers for providing investment management and/or transaction-based services on their
accounts. These fees are primarily earned over time as the Company provides the contracted monthly or
trust customers for providing investment management and/or transaction-based services on their
accounts. These fees are primarily earned over time as the Company provides the contracted monthly or
quarterly services and are assessed based on the total investable assets of the customer’s trust account. A
accounts. These fees are primarily earned over time as the Company provides the contracted monthly or
quarterly services and are assessed based on the total investable assets of the customer’s trust account. A
signed contract between the Company and the customer is maintained for all customer trust accounts with
quarterly services and are assessed based on the total investable assets of the customer’s trust account. A
signed contract between the Company and the customer is maintained for all customer trust accounts with
payment terms identified. There are no contingent incentive fees recorded by the Company that could be
signed contract between the Company and the customer is maintained for all customer trust accounts with
payment terms identified. There are no contingent incentive fees recorded by the Company that could be
subject to a claw-back in future periods.
payment terms identified. There are no contingent incentive fees recorded by the Company that could be
subject to a claw-back in future periods.
subject to a claw-back in future periods.
Insurance commissions – Insurance agency commissions, included in other noninterest income, are
Insurance commissions – Insurance agency commissions, included in other noninterest income, are
received from insurance carriers for the agency’s share of commissions from customer premium payments.
Insurance commissions – Insurance agency commissions, included in other noninterest income, are
received from insurance carriers for the agency’s share of commissions from customer premium payments.
These commissions are recorded into income when checks are received from the insurance carriers, and
received from insurance carriers for the agency’s share of commissions from customer premium payments.
These commissions are recorded into income when checks are received from the insurance carriers, and
there is no contingent portion associated with these commission checks that may be clawed back by the
These commissions are recorded into income when checks are received from the insurance carriers, and
there is no contingent portion associated with these commission checks that may be clawed back by the
carrier in the future. There may be a short time-lag in recording revenue when cash is received instead of
there is no contingent portion associated with these commission checks that may be clawed back by the
carrier in the future. There may be a short time-lag in recording revenue when cash is received instead of
recording the revenue when the policy is signed by the customer, but the time lag is insignificant and does
carrier in the future. There may be a short time-lag in recording revenue when cash is received instead of
recording the revenue when the policy is signed by the customer, but the time lag is insignificant and does
not impact the revenue recognition process. The Company has evaluated the potential amount of premium
recording the revenue when the policy is signed by the customer, but the time lag is insignificant and does
not impact the revenue recognition process. The Company has evaluated the potential amount of premium
refunds due to customers when policies are cancelled and has determined such amounts are insignificant.
not impact the revenue recognition process. The Company has evaluated the potential amount of premium
refunds due to customers when policies are cancelled and has determined such amounts are insignificant.
refunds due to customers when policies are cancelled and has determined such amounts are insignificant.
22
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
((rr)) RReevveennuuee ffrroomm CCoonnttrraaccttss wwiitthh CCuussttoommeerrss ((ccoonnttiinnuueedd))
Wealth management fees – Wealth management income, included in other noninterest income, is primarily
comprised of fees from the management and administration of trusts and other customer assets. These
fees are primarily earned over time as the Company provides the services and are recognized quarterly,
based upon the quarter-end market value of the assets under management and the applicable fee rate.
Payment of these fees is generally received in the month following quarter-ends through a direct charge to
customers’ accounts. Other related services provided include financial planning and the fees the Company
earns, which are based on a fixed fee schedule, are recognized when the services are rendered.
Net gain (loss) on sales of foreclosed assets and other real estate owned – The Company records a gain or
loss from the sale of foreclosed assets and other real estate owned when control of the property transfers
to the buyer, which generally occurs at the time of an executed deed and transfer of control is completed.
When the Company finances the sale to the buyer, the Company assesses whether the buyer is committed
to perform their obligations under the contract and whether the Company expects to collect substantially
all of the transaction price. Once these criteria are met, the asset is derecognized and the gain or loss on
the sale is recognized. In determining the gain or loss on the sale, the Company adjusts the transaction
price and related gain (loss) on sale if the financing does not include market terms.
((ss)) IInnccoommee TTaaxxeess
Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method.
Under this method, the net deferred tax asset or liability is determined based on the tax effects of the
temporary differences between the book and tax bases of the various balance sheet assets and liabilities and
gives current recognition to changes in tax rates and laws. The Company files consolidated Federal and
State income tax returns.
The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions.
Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken
in a tax return and the benefit recognized and measured in the financial statements. Interest and penalties
related to unrecognized tax benefits are classified as income taxes, if applicable. No liabilities for
unrecognized tax benefits from uncertain tax positions have been recorded.
((tt)) CCoommpprreehheennssiivvee IInnccoommee ((LLoossss))
Accounting principles generally require the Company to include in net income recognized revenue,
expenses, gains and losses. Certain changes in assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, are reported as a separate component of the equity section of the consolidated
balance sheet, net of taxes. Such items, along with net income, are components of comprehensive income.
((uu)) EEaarrnniinnggss PPeerr SShhaarree
Basic earnings per share (EPS) represent income available to common stockholders divided by the
weighted-average number of common shares outstanding during the period. Diluted EPS reflects
additional common shares that would have been outstanding if dilutive potential common shares had been
issued, as well as any adjustment to income that would result from the assumed issuance. Potential
common shares that may be issued by the Company relate solely to outstanding stock options and are
determined using the treasury stock method.
23
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
((vv)) LLoossss CCoonnttiinnggeenncciieess
Loss contingencies, including claims and legal actions arising from time to time in the ordinary course of
business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss
can be reasonably estimated. Management does not believe there now are such matters that could have a
material effect on the financial statements.
((ww)) TTrraannssffeerrss ooff FFiinnaanncciiaall AAsssseettss
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from
the Company, (2) the transferee obtains the right to pledge or exchange the transferred assets, and (3) the
Company does not maintain effective control over the transferred assets through an agreement to
repurchase them before their maturity.
((xx)) TTrruusstt AAsssseettss
Assets of the trust departments of State Bank and State Bank of Herscher, other than trust cash on deposit
at the Banks, are not included in these financial statements because they are not assets of the Company.
((yy)) GGooooddwwiillll aanndd IInnttaannggiibbllee AAsssseettss
Intangible assets attributable to the value of core deposits are stated at cost less accumulated amortization.
Intangible assets are amortized on a straight-line basis over the estimated lives of the assets. The excess of
purchase price over fair value of net assets acquired (goodwill) is not amortized.
The Company evaluates whether goodwill and other intangible assets may be impaired at least annually; and
whenever events or changes in circumstances indicate it is more likely than not the fair value of the
reporting unit or asset is less than its carrying amount.
((zz)) SSeeccuurriittiieess SSoolldd UUnnddeerr AAggrreeeemmeennttss ttoo RReeppuurrcchhaassee
Securities sold under agreements to repurchase liabilities represent amounts advanced by various
customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit
insurance.
((aaaa)) SSttoocckk CCoommppeennssaattiioonn PPllaannss
The Company records the cost of stock-based employee compensation using the fair-value method.
Compensation expense for share-based awards is recorded over the vesting period at the fair value of the
award at the time of grant. The Company has historically assumed no projected forfeitures on its stock
based compensation, since forfeitures have not been significant.
((bbbb)) AAddvveerrttiissiinngg
Advertising costs are expensed as incurred.
24
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
((cccc)) RReeccllaassssiiffiiccaattiioonnss
Certain amounts in the 2020 and 2021 financial statements have been reclassified to conform to the 2022
presentation.
((dddd)) NNeewwllyy IIssssuueedd NNoott YYeett EEffffeeccttiivvee AAccccoouunnttiinngg SSttaannddaarrdd
The following ASU has been issued by FASB and may impact the Company’s financial statements in
future reporting periods.
ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. This standard will significantly
change how financial assets measured at amortized cost are presented. Such assets, which include most
loans and securities held to maturity, will be presented at the net amount expected to be collected over
their remaining contractual lives. Estimated credit losses will be based on relevant information about
historical experience, current conditions, and reasonable and supportable forecasts that affect the
collectability of the reported amounts. The standard will also change the accounting for credit losses
related to securities available-for-sale and purchased financial assets with a more-than-insignificant amount
of credit deterioration since origination. This new accounting standard is effective for financial statements
issued for annual periods beginning after December 15, 2022. The Company has been evaluating the
impacts this new standard will have on its financial statements, and based on its methodologies that are
anticipated to be implemented at adoption, the Company is estimating an overall increase in its allowance
for credit losses ranging between $2,350 and $2,650. The actual amount determined from the adoption of
this accounting standard will be recognized as a cumulative effect adjustment to the January 1, 2023
retained earnings balance, net of taxes.
(2) Cash Equivalents and Interest-Bearing Deposits
Effective March 12, 2021, the Federal Reserve's board of directors approved the final rule reducing the
required reserve requirement ratios to zero percent, effectively eliminating the requirement to maintain reserve
balances in cash or on deposit with the Federal Reserve Bank. This reduction in the required reserves does not
have a defined timeframe and may be revised by the Federal Reserve's board in the future.
In the normal course of business, the Company maintains cash and due from bank balances in accounts with
correspondent banks. Balances in these accounts may exceed the Federal Deposit Insurance Corporation’s
(FDIC) insured limit of $250. Management believes these financial institutions have strong credit ratings and
that credit risk related to these deposits is not material.
Interest-bearing deposits consist of certificates of deposit at other financial institutions. Certificates of deposit
are in denominations of $250 or less and are fully insured by the FDIC.
Maturities of certificates of deposits at other financial institutions as of December 31, 2022 are as follows:
2023
2024
2025
2026
2027 and thereafter
$1,843
2,480
988
747
0
$6,058
25
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3) Debt Securities
The following tables reflect the amortized costs and approximate fair values of securities at December 31:
Held-to-Maturity
2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
State and municipal
$4,076
$4
($246)
$3,834
Held-to-Maturity
2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
State and municipal
$4,389
$172
($0)
$4,561
Available-for-Sale
2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. Government sponsored entities and U.S.
agencies
State and municipal
Agency mortgage-backed
$123,066
130,888
189,115
$4
146
0
($15,140)
$107,930
(12,499)
(24,246)
118,535
164,869
$443,069
$150
($51,885)
$391,334
Available-for-Sale
2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. Government sponsored entities and U.S.
agencies
State and municipal
Agency mortgage-backed
$86,211
147,392
204,118
$135
4,587
1,764
($1,240)
$85,106
(493)
(2,596)
151,486
203,286
$437,721
$6,486
($4,329)
$439,878
26
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3) Debt Securities (continued)
For the years ended December 31, 2022, 2021 and 2020, proceeds from sales of available-for-sale securities
amounted to $10,348, $16,899 and $1,750, respectively. Gross realized gains and losses from the sales and calls
of available-for-sale securities for the years ended December 31 are as follows:
Realized gains
Realized losses
2022
$170
($416)
2021
2020
$211
($85)
$386
($4)
Securities with carrying amounts of approximately $217,957 and $198,944 at December 31, 2022 and 2021,
respectively, were pledged to secure public deposits and for other purposes as required or permitted by law.
The amortized costs and fair values of securities at December 31, 2022 are shown below by contractual
maturities, except for U.S. agencies which are shown by contractual maturities or their expected call dates if the
call dates are considered likely to occur based on present market conditions. Expected maturities may differ
from contractual maturities on mortgage-backed securities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Held-to-Maturity
Due in one year or less
Due after one year through five years
Due after five years through ten years
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
Agency mortgage-backed
Amortized
Cost
$505
1,943
1,628
Fair
Value
$496
1,849
1,489
$4,076
$3,834
Amortized
Cost
Fair
Value
$7,171
66,146
109,515
71,122
253,954
189,115
$7,145
62,608
95,420
61,292
226,465
164,869
$443,069
$391,334
27
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3) Debt Securities (continued)
The following tables show the fair values and unrealized losses aggregated by investment category and length
of time that individual securities have been in a continuous unrealized loss position, at December 31, 2022 and
2021:
2022
Available-for-Sale
Less than 12 Months
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
12 Months or More
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
U.S. Government sponsored
entities and U.S. agencies
State and municipal
Agency mortgage-backed
$41,193
$2,798
75,964
69,899
6,497
6,526
Total
$187,056
$15,821
78
295
248
621
$63,470
$12,342
26,270
94,963
6,002
17,720
$184,703
$36,064
98
83
187
368
2021
Available-for-Sale
Less than 12 Months
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
12 Months or More
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
U.S. Government sponsored
entities and U.S. agencies
State and municipal
Agency mortgage-backed
$71,316
25,908
100,636
$1,119
329
2,025
Total
$197,860
$3,473
92
66
152
310
$4,379
6,312
20,683
$31,374
$121
164
571
$856
7
17
33
57
2022
Held-to-Maturity
Less than 12 Months
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
12 Months or More
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
State and municipal
Total
$3,201
$3,201
$246
$246
10
10
$0
$0
$0
$0
0
0
There were no held-to-maturity securities in an unrealized loss position as of December 31, 2021.
Unrealized losses on securities have not been recognized into income because the bonds are of high credit
quality, management has the intent and ability to hold for the foreseeable future and the decline in fair value is
largely due to market interest rate fluctuations and current bond markets. The fair value is expected to recover
as the bonds approach their maturity dates and/or market rates.
28
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans
The following table presents total loans at December 31 by portfolio segment and class of loan:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial and industrial
Agricultural production
Consumer and other
Allowance for loan losses
Totals
2022
2021
$325,812
115,044
147,878
214,315
96,270
69,648
968,967
(14,541)
$273,077
102,935
140,165
208,967
79,476
55,212
859,832
(13,985)
$954,426
$845,847
The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, is an economic
stimulus bill signed into law on March 27, 2020, in response to the economic fallout of the CV-19 pandemic in
the United States. The creation of the Paycheck Protection Program (PPP) enacted under the CARES Act
provides forgivable loans to small businesses for payroll obligations, emergency grants to cover immediate
operating costs, and a mechanism for loan forgiveness by the Small Business Administration should all criteria
be met. Included in commercial loans are approximately $896 and $8,805 of loans granted under the Paycheck
Protection Program as of December 31, 2022 and 2021, respectively. These loans are fully guaranteed by the
Small Business Administration.
Detailed analysis of the allowance for loan losses by portfolio segments at December 31 are as follows:
Balance at beginning of year
Provision charged to operations
Recoveries on loans previously charged-off
Less loans charged-off
Balance at end of year
Allowance for loan losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Totals
Real Estate
Commercial
Consumer
Total
2022
$8,914
(1,248)
291
7,957
(189)
$4,832
1,280
73
6,185
(64)
$239
520
90
849
(197)
$13,985
552
454
14,991
(450)
$7,768
$6,121
$652
$14,541
$1,562
6,206
$7,768
$2,766
3,355
$6,121
$33
619
$4,361
10,180
$652
$14,541
29
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Balance at beginning of year
Provision charged to operations, net
Recoveries on loans previously charged-off
Less loans charged-off
Balance at end of year
Allowance for loan losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Real Estate
Commercial
Consumer
Total
2021
$8,282
738
390
9,410
(496)
$5,102
0
41
5,143
(311)
$298
18
20
336
(97)
$13,682
756
451
14,889
(904)
$8,914
$4,832
$239
$13,985
$911
8,003
$370
4,462
$23
216
$1,304
12,681
Totals
$8,914
$4,832
$239
$13,985
Balance at beginning of year
Provision charged to operations, net
Recoveries on loans previously charged-off
Less loans charged-off
Balance at end of year
Allowance for loan losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Real Estate
Commercial
Consumer
Total
2020
$8,313
956
136
9,405
(1,123)
$4,521
2,684
73
7,278
(2,176)
$205
145
14
364
(66)
$13,039
3,785
223
17,047
(3,365)
$8,282
$5,102
$298
$13,682
$946
7,336
$869
4,233
$25
273
$1,840
11,842
Totals
$8,282
$5,102
$298
$13,682
30
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Detailed analysis of loans evaluated for impairment by portfolio segment for the year ended December 31
follows:
Real Estate
Commercial
Consumer
Total
2022
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
$9,837
578,897
$5,882
304,703
$126
69,522
$15,845
953,122
Totals
$588,734
$310,585
$69,648
$968,967
Real Estate
Commercial
Consumer
Total
2021
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
$16,877
499,300
$5,367
283,076
$79
55,133
$22,323
837,509
Totals
$516,177
$288,443
$55,212
$859,832
31
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Detailed information regarding impaired loans by class of loan as of December 31 follows:
Recorded
Investment
Principal
Balance
Related
Allowance
Average
Investment
Interest
Recognized
2022
Loans with no related
allowance for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Consumer and other
$5,541
1,508
219
68
78
$6,018
2,303
741
211
89
Totals
7,414
9,362
N/A
N/A
N/A
N/A
N/A
1,543
19
2,713
53
33
4,361
$5,809
1,511
427
158
88
7,993
3,110
152
6,337
56
55
9,710
$221
295
48
50
5
619
90
6
390
0
6
492
2,422
147
5,762
52
48
2,431
160
5,768
71
49
8,431
8,479
$15,845
$17,841
$4,361
$17,703
$1,111
Loans with an allowance
for loan losses:
Real estate:
Commercial real estate
Residential real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Totals
Grand Totals
32
2022 Annual Report
(4) Loans (continued)
Loans with no related
allowance for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
Recorded
Investment
Principal
Balance
2021
Related
Allowance
Average
Investment
Interest
Recognized
$11,026
1,286
476
4,947
0
0
$11,724
2,174
805
5,405
2
10
N/A
N/A
N/A
N/A
N/A
N/A
$12,512
1,711
841
9,986
1
12
$375
98
244
511
0
1
Totals
17,744
20,120
25,063
1,229
Loans with an allowance
for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Totals
Grand Totals
3,662
427
0
198
222
70
3,777
464
0
229
257
70
748
163
0
194
176
23
3,822
463
0
274
275
79
4,579
4,797
1,304
4,913
220
30
0
18
28
3
299
$22,323
$24,917
$1,304
$29,976
$1,528
33
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Recorded
Investment
Principal
Balance
2020
Related
Allowance
Average
Investment
Interest
Recognized
Loans with no related
allowance for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
$9,941
2,410
4,811
1,530
1,814
23
$10,656
3,369
5,034
1,629
1,814
46
Total
20,529
22,548
Loans with an allowance
for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Total
Grand Total
5,585
1,299
0
649
293
25
5,585
1,374
0
678
300
25
N/A
N/A
N/A
N/A
N/A
N/A
637
309
0
576
293
25
$10,158
2,761
4,710
1,462
2,698
26
21,815
5,650
1,327
0
726
348
25
$108
52
52
18
0
0
230
67
16
0
0
0
0
83
7,851
7,962
1,840
8,076
$28,380
$30,510
$1,840
$29,891
$313
The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance
for loan losses. The Company generally monitors credit quality indicators for all loans using the following
internally prepared ratings:
'Pass' ratings are assigned to loans with adequate collateral and debt service ability; such that collectability of
the contractual loan payments is highly probable.
'Special Mention' ratings are assigned to loans where management has some concern that the collateral or debt
service ability may not be adequate, though the collectability of the contractual loan payments is still probable.
'Substandard' ratings are assigned to loans that do not have adequate collateral and/or debt service ability; such
that collectability of the contractual loan payments is no longer probable.
'Doubtful' ratings are assigned to loans that do not have adequate collateral and/or debt service ability, and
collectability of the contractual loan payments is unlikely.
34
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Information regarding the credit quality indicators most closely monitored by class of loan at December 31
follows:
Pass
Special
Mention
Substandard Doubtful
Totals
2022
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
$316,840
112,740
143,246
208,212
96,071
69,498
$2,654
731
4,413
3,070
146
95
$6,318
1,573
219
3,033
53
55
Total
$946,607
$11,109
$11,251
$0
0
0
0
0
0
$0
$325,812
115,044
147,878
214,315
96,270
69,648
$968,967
Pass
Special
Mention
Substandard Doubtful
Totals
2021
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
$239,071
100,486
130,170
199,960
77,751
55,093
$20,439
928
9,519
504
1,503
40
$13,567
1,521
476
8,503
222
79
Total
$802,531
$32,932
$24,368
Loan aging information by class of loan at December 31 follows:
$0
0
0
0
0
0
$0
$273,077
102,935
140,165
208,967
79,476
55,212
$859,832
As of December 31, 2022
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Total
Loans Past Due
30-89 Days
Loans Past Due
90+ Days
Total
Past Due
$29
1,602
188
285
11
821
$2,936
$2,469
475
0
2,963
0
157
$6,064
$2,498
2,077
188
3,248
11
978
$9,000
35
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
As of December 31, 2022
Total Past
Due
Total
Current
Total
Loans
90+ Days
Due and
Accruing Interest
Total
Non-accrual
Loans
Real Estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
$2,498
2,077
188
3,248
11
978
$323,314
112,967
147,690
211,067
96,259
68,670
$325,812
115,044
147,878
214,315
96,270
69,648
$47
123
0
0
0
103
Total
$9,000
$959,967
$968,967
$273
$2,549
537
219
3,033
53
88
$6,479
As of December 31, 2021
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Loans Past Due
30-89 Days
Loans Past Due
90+ Days
Total
Past Due
$700
980
73
181
12
263
$2,117
201
205
443
0
39
$2,817
1,181
278
624
12
302
Total
$2,209
$3,005
$5,214
As of December 31, 2021
Total Past
Due
Total
Current
Total
Loans
90+ Days
Due and
Accruing Interest
Total
Non-accrual
Loans
Real Estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
$2,817
1,181
278
624
12
302
$270,260
101,754
139,887
208,343
79,464
54,910
$273,077
102,935
140,165
208,967
79,476
55,212
$1,117
11
205
0
0
0
$5,886
870
0
489
222
79
Total
$5,214
$854,618
$859,832
$1,333
$7,546
When, for economic or legal reasons related to the borrower's financial difficulties, the Company grants a
concession to the borrower that the Company would not otherwise consider the modified loan is classified as a
troubled debt restructuring. Loan modifications may consist of forgiveness of interest and/or principal, a
reduction of the interest rate, interest only payments for a period of time, and/or extending amortization
terms. All troubled debt restructurings are classified as impaired loans.
36
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
The following table presents information regarding modifications of loans that are classified as troubled debt
restructurings by class of loan that occurred during the year ended December 31, 2022:
Real Estate:
Commercial real estate
Commercial:
Commercial & industrial
Total
Number of
Loans
Pre-Modification
Investment
Post-Modification
Investment
1
3
4
$3,375
$4,408
$7,783
$3,375
$4,408
$7,783
There were no modifications of loans that are classified as troubled debt restructurings that occurred during
the year ended of December 31, 2021.
The following table summarizes troubled debt restructurings that defaulted within 12 months of their
modification date as of December 31, 2022:
Real Estate:
Commercial real estate
Commercial:
Commercial & industrial
Total
Number of
Loans
Recorded
Investment
1
3
4
$3,375
$4,484
$8,219
There were no troubled debt restructurings that defaulted during the year, within 12 months of their
modification as of December 31, 2021.
(5) Loan Servicing
Loans serviced for others are not included in the accompanying consolidated balance sheets. Mortgage loans
serviced for others as of December 31, 2022 and 2021, were approximately $286,804 and $303,768,
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
$3,552 and $3,859 at December 31, 2022 and 2021, respectively.
Effective January 1, 2021, due to the election of a change in accounting principle by the Company, the
following is a summary of changes in the balance of mortgage servicing rights, included in other assets, for the
year ended December 31, 2021:
Balance at December 31, 2020
Effect of change in accounting principle
Balance at January 1, 2021
Change in fair value
Additions
Balance at December 31, 2021
$1,150
355
1,505
466
57
$2,028
37
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(5) Loan Servicing (continued)
Prior to the election in 2021, the following summarizes the activity pertaining to mortgage servicing rights,
included in other assets, for the year ended December 31, 2020:
Balance at beginning of year
Mortgage servicing rights capitalized
Mortgage servicing rights amortized
Balance at end of year
2020
$993
813
(656)
$1,150
No impairment of mortgage servicing rights existed and no valuation allowance was recognized for 2020.
The following is a summary of changes in the balance of mortgage servicing rights for the years ended
December 31, 2022 and 2021:
Beginning Balance
Ending Balance
2022
2021
$2,028
$3,236
$1,505
$2,028
The estimated fair value of mortgage servicing rights is determined using a valuation model that calculates the
present value of expected future servicing and ancillary income, net of expected servicing costs. The model
incorporates various assumptions, such as discount rates and prepayment speeds based on market data from
independent organizations. Information about the estimated fair value of mortgage servicing rights at
December 31:
Range of discount rates
Range of prepayment speeds
Weighted average default rate
(6) Mortgage Banking Loan Commitments
2022
2021
2020
9.00% - 11.00%
6.30% - 26.25%
9.00%
9.00% - 11.00%
6.79% - 33.96%
9.01%
9.00% - 11.00%
6.59% - 34.37%
9.01%
The Company enters into commitments to fund residential mortgage loans (interest rate locks) at specified
times in the future, with the intention that these loans will be subsequently sold to third-party investors. A
mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest
rate and within a specified period of time, generally up to 60 days after inception of the rate lock. It is the
Company’s practice to enter into best efforts and mandatory delivery forward commitments for the future
delivery of residential mortgage loans to third-party investors when an interest rate lock commitment is
granted. Best efforts forward commitments bind the Company to deliver a mortgage loan to a third-party
investor only if the underlying loan is funded. Mandatory delivery forward commitments bind the Company to
deliver a residential mortgage loan to a third-party investor even if the underlying loan never funds. As of
December 31, 2022 and 2021, the Company had approximately $907 and $6,559 in interest rate lock
commitments outstanding. As of December 31, 2022 and 2021, the Company had approximately $947 and
$110,261 in mandatory delivery forward commitments outstanding and approximately $867 and $2,857 in best
effort forward commitments outstanding. These outstanding mortgage loan commitments are considered to
be derivatives. The approximate fair values associated with these derivatives were considered to be immaterial
as of December 31, 2022 and 2021.
38
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(7) Foreclosed Assets and Other Real Estate Owned
Foreclosed assets and other real estate owned net of valuation allowance consist of the following at December
31:
Residential real estate
Commercial real estate
Non-farm non-residential properties
Construction, land development and other land
Balance at end of year
2022
2021
$70
0
0
0
$70
$0
39
0
0
$39
Residential real estate loans that are in process of foreclosure totaled $29 at December 31, 2022 and $99 at
December 31, 2021.
(8) Premises and Equipment
The components of premises and equipment at December 31 are as follows:
Land
Buildings and leasehold improvements
Furniture, fixtures, and equipment
Less accumulated depreciation
2022
2021
$2,644
22,182
13,976
38,802
21,204
$2,644
21,757
13,426
37,827
20,696
$17,598
$17,131
Depreciation expense for the years ended December 31, 2022, 2021 and 2020 amounted to $1,106, $1,053 and
$1,217, respectively.
(9) Other Assets
The components of other assets at December 31 are as follows:
Accrued interest receivable
Mortgage servicing rights
Net deferred tax assets
Qualified affordable housing project investments
Other
2022
2021
$7,255
3,236
18,227
84
2,852
$5,535
2,028
2,980
439
3,947
$31,654
$14,929
39
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(10) Time Deposits
The aggregate amount of time deposits with a minimum denomination of $250 was approximately $101,661
and $68,880 at December 31, 2022 and 2021, respectively. Time deposits are included in the interest-bearing
deposits on the consolidated balance sheet.
At December 31, 2022, the scheduled maturities of time deposits are as follows:
2023
2024
2025
2026
2027 and thereafter
$165,817
112,752
77,466
14,775
6,611
$377,421
(11) Employee and Director Benefit Plans
The Company and the Banks maintain a 401(k) plan with profit sharing features covering substantially all
employees under which the Company has historically provided a discretionary match of eligible employee
contributions. Total 401(k) expense was approximately $574, $561, and $549, for 2022, 2021, and 2020,
respectively. Each plan participant elects how the employer contributions are invested; whereby the
participants choose between purchasing the Company’s common stock or investing in the plan’s investment
funds.
In addition, the Company and the Banks maintain non-qualified deferred compensation plans whereby certain
directors and officers are provided with guaranteed annual payments for periods ranging from 10 to 15 years
after reaching a variation of retirement ages pending participant plan. The compensation plans are funded by
bank-owned life insurance policies which had an aggregate death benefit of approximately $53,372 and $53,114
as of December 31, 2022 and 2021, respectively. The Banks accrue amounts to be paid over the participant’s
active service life. The accrued benefits were $3,329, $2,888, and $2,547 at December 31, 2022, 2021 and 2020,
respectively. Non-qualified deferred compensation expenses were $539, $413, and $476 in 2022, 2021 and
2020, respectively.
40
2022 Annual Report
The aggregate amount of time deposits with a minimum denomination of $250 was approximately $101,661
and $68,880 at December 31, 2022 and 2021, respectively. Time deposits are included in the interest-bearing
deposits on the consolidated balance sheet.
At December 31, 2022, the scheduled maturities of time deposits are as follows:
2023
2024
2025
2026
2027 and thereafter
$165,817
112,752
77,466
14,775
6,611
$377,421
(11) Employee and Director Benefit Plans
The Company and the Banks maintain a 401(k) plan with profit sharing features covering substantially all
employees under which the Company has historically provided a discretionary match of eligible employee
contributions. Total 401(k) expense was approximately $574, $561, and $549, for 2022, 2021, and 2020,
respectively. Each plan participant elects how the employer contributions are invested; whereby the
participants choose between purchasing the Company’s common stock or investing in the plan’s investment
funds.
In addition, the Company and the Banks maintain non-qualified deferred compensation plans whereby certain
directors and officers are provided with guaranteed annual payments for periods ranging from 10 to 15 years
after reaching a variation of retirement ages pending participant plan. The compensation plans are funded by
bank-owned life insurance policies which had an aggregate death benefit of approximately $53,372 and $53,114
as of December 31, 2022 and 2021, respectively. The Banks accrue amounts to be paid over the participant’s
active service life. The accrued benefits were $3,329, $2,888, and $2,547 at December 31, 2022, 2021 and 2020,
respectively. Non-qualified deferred compensation expenses were $539, $413, and $476 in 2022, 2021 and
2020, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(10) Time Deposits
(12) Income Taxes
The components of income tax expense for the years ended December 31 are as follows:
Current – federal
Current – state
Deferred – federal
Deferred – state
2022
$2,700
1,267
3,967
74
41
115
2021
2020
$2,148
1,175
3,323
(61)
(25)
(86)
$2,074
1,178
3,252
(330)
(156)
(486)
Total income tax expense
$4,082
$3,237
$2,766
A reconciliation of the differences between the statutory federal income tax rate and the effective federal
income tax rate with the resulting dollar amounts is shown in the following table:
2022
2021
2020
% of
Pretax
Earnings
% of
Pretax
Earnings
Amount
% of
Pretax
Earnings
Amount
Amount
$3,718
21.0%
$3,071
21.0%
$2,741
21.0%
(598)
(122)
(3.4%)
(0.7%)
1,033
51
5.8%
0.3%
(619)
(126)
909
2
(4.2%)
(0.9%)
6.2%
0.0%
(593)
(124)
807
(65)
(4.5%)
(1.0%)
6.2%
0.5%
Statutory federal tax
Increase (decrease) in taxes
resulting from:
Tax-exempt interest
Bank-owned life insurance
State taxes, net of
federal benefit
Other
Effective tax rates
$4,082
22.6%
$3,237
22.1%
$2,766
21.2%
41
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(12) Income Taxes (continued)
The tax effects of existing temporary differences that give rise to significant portions of the deferred tax
liabilities and deferred tax assets at December 31, 2022 and 2021 are summarized as follows:
Deferred tax assets:
Allowance for loan losses
Allowance for losses on foreclosed assets and other real estate owned
Available-for-sale securities
Deferred compensation and other
Total deferred tax assets
Deferred tax liabilities:
FHLB stock dividend
Depreciation
Mortgage servicing rights and other
Available-for-sale securities
Purchase accounting adjustments
Total deferred tax liabilities
Net deferred tax assets
2022
2021
$4,144
0
14,747
2,176
21,067
55
1,407
1,246
132
2,840
$3,986
74
2,022
6,082
55
1,549
746
615
137
3,102
$18,227
$2,980
No valuation allowance has been recorded since deferred tax assets are expected to be realized.
With few exceptions, the Company is no longer subject to federal or state examinations by tax authorities for
years before 2018.
(13) Transactions with Related Parties
The Company had, and may be expected to have in the future, loans or other banking transactions in the
ordinary course of business with directors, significant stockholders, principal officers, their immediate families,
and affiliated companies in which they are principal stockholders (commonly referred to as related parties). In
management’s opinion, these loans and transactions were on the same terms as those for comparable loans and
transactions with non-related parties.
Activity for related party loans for the years ending December 31, is as follows:
Balance at beginning of year
New credits
Repayments
Balance at end of year
2022
$6,128
573
(2,131)
$4,570
2021
$8,671
2,231
(4,774)
$6,128
Deposit accounts from related parties totaled approximately $18,663 and $19,075 at December 31, 2022 and
2021, respectively.
42
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(14) Financial Instruments with Off-Balance-Sheet Risk and Concentrations
Financial instruments with off-balance-sheet risk:
The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to
meet the financing needs of their customers. These financial instruments include commitments to extend
credit, credit lines, letters of credit, and overdraft protection. They involve, to varying degrees, elements of
credit risk in excess of amounts recognized on the consolidated balance sheets.
The Company’s exposure to credit losses in the event of nonperformance by the other parties to the financial
instruments, for commitments to extend credit, and letters of credit are represented by the contractual amounts
of those instruments. The Banks use the same credit policies in making commitments and issuing letters of
credit as they do for on-balance-sheet instruments.
A summary of the contractual amounts of the Banks’ exposures to off-balance-sheet risk as of December 31 is
as follows:
Unused lines of credit and other loan commitments
Commercial letters of credits
Performance and standby letters of credit
2022
$271,980
510
3,637
2021
$211,776
887
4,554
Commitments to extend credit are agreements to lend to customers as long as there are no violations of any
conditions established in the contracts. Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily represent future cash
requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. The Banks evaluate each customer’s credit worthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Banks upon extension of credit, is based
on management’s credit evaluation of the counterparty. Collateral held varies; but may include accounts
receivable, inventory, crops, livestock, property and equipment, residential real estate, and income-producing
commercial properties.
Standby, performance and commercial letters of credit are conditional commitments issued by the Banks to
guarantee the performance of a customer to a third party. They are considered financial guarantees under
FASB guidance. The fair value of these financial guarantees is considered immaterial.
The Company participates in the FHLB Mortgage Partnership Finance Program (the "Program"). In addition
to entering into forward commitments to sell mortgage loans to a secondary market agency, the Company
enters into firm commitments to deliver loans to the FHLB through the Program. Under the Program, loans
are funded by the FHLB, and the Company receives an agency fee reported as a component of gain on sale of
loans. The Company had no firm commitments outstanding to deliver loans through the Program at
December 31, 2022 and 2021. Once delivered to the Program, the Company provides a contractually agreed-
upon credit enhancement and performs servicing of the loans. Under the credit enhancement, the Company is
liable for losses on loans delivered to the Program after application of any mortgage insurance and a
contractually agreed-upon credit enhancement provided by the Program subject to an agreed-upon maximum.
The agreed-upon accumulated credit enhancement provided by the Program totaled $38, subject to an agreed-
upon maximum. The fee the Company received for this credit enhancement was not material in each of the
years ended December 31, 2022, 2021 and 2020.
43
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(14) Financial Instruments with Off-Balance-Sheet Risk and Concentrations (continued)
Concentration of credit risk:
The Company provides several types of loans to customers including real estate, agricultural, commercial, and
installment loans. The largest component of loans is secured by residential real estate, commercial real estate,
or other interest in real property. Lending activities are conducted with customers in a wide variety of
industries as well as with individuals with a wide variety of credit requirements. The Company does not have a
concentration of loans in any specific industry. Credit risk, as it relates to the Company’s business activities,
tends to be geographically concentrated in that the majority of the customer base lies within the surrounding
communities served by its subsidiary banks.
(15) Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase amounted to $36,298 and $35,109 at December 31, 2022 and
2021, respectively, and are collateralized by U.S. agencies, state and municipal and mortgage-backed investment
securities with fair values of approximately $59,736 and $61,560. The weighted-average interest rates on these
agreements were 1.11% and 0.10% at December 31, 2022 and 2021, respectively. Securities sold under
agreements to repurchase mature on a daily basis.
(16) Federal Home Loan Bank (FHLB) and Federal Reserve Advances and Other Borrowings
FHLB Advances at December 31:
2022
2021
Fixed-rate advances with rates ranging from 2.31% to 4,14% and
weighted average rates of 3.79% and 1.06% as of December 31, 2022 and
2021, respectively. Interest is payable monthly with principal due at
maturity.
$6,500
$16,000
Advances are collateralized by 1-4 family mortgage loans, other qualifying loans and securities. The total
amounts of collateral securing FHLB advances were approximately $188,468 and $93,767 as of December 31,
2022 and 2021, respectively. FHLB advances are subject to a prepayment penalty if they are repaid prior to
maturity. FHLB advances are also secured by $1,468 and $1,360 of FHLB stock owned by the Company at
December 31, 2022 and 2021, respectively.
The Company participates in the Federal Reserve Bank of Chicago’s Discount Window Lending Program.
Primary advances generally mature daily and bear interest at a generally approved rate in relation to the federal
funds rate. The primary advance interest rate at December 31, 2022 was 4.5%. Outstanding advances were $0
at December 31, 2022 and 2021. Advances are collateralized by investment securities pledged totaling
approximately $8,867 and $9,578 at December 31, 2022 and 2021, respectively, to the Federal Reserve Bank.
Additional other borrowings totaled $866 and $1,076 at December 31, 2022 and 2021, respectively, and mature
from 2024 to 2027, at interest rates ranging from 2.00% to 2.38%.
44
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(16) Federal Home Loan Bank (FHLB) and Federal Reserve Advances and Other Borrowings (continued)
At December 31, the scheduled maturities of FHLB advances and other borrowings are as follows:
2023
2024
2025
2026
2027
2028 and thereafter
2022
2021
$4,500
500
798
0
1,568
0
$7,366
$0
5,163
500
5,818
5,595
0
$17,076
The Company had federal funds purchased with its main correspondent institutions totaling $0 and $533 as of
December 31, 2022 and 2021, respectively. Federal funds purchased generally mature within one day from
transaction date. The weighted average interest rate was 0.25% as of December 31, 2021.
(17) Fair Value Measurements
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. The standard describes three levels of inputs that may be used to
measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company 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 the Company’s own assumptions about the
assumptions that market participants would use in pricing an asset or liability.
The following is a description of valuation methodologies used for assets recorded at fair value:
Securities available-for-sale: The fair values of the Company’s securities available-for-sale are primarily determined
by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities
without relying exclusively on quoted prices for specific securities, but rather by relying on the securities’
relationship to other benchmark quoted securities. The values determined by matrix pricing are considered
Level 2 fair value measurements.
45
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(17) Fair Value Measurements (continued)
Marketable equity securities – Marketable equity securities with a readily determinable fair value are measured at
fair value on a recurring basis. The fair value measurement of equity securities with a readily determinable fair
value are based on the quoted price of the security and is considered a Level 1 fair value measurement. Equity
securities without a readily determinable fair value are measured at fair value on a nonrecurring basis when
transaction prices for identical or similar securities are identified. Fair value measurements on equity securities
without a readily determinable fair value are generally considered a Level 2 fair value measurement.
Collateral-dependent impaired loans: The Company does not record loans at fair value on a recurring basis.
However, from time to time, fair value adjustments are recorded on these loans to reflect (1) partial write-
downs, through charge-offs or specific reserve allowances, that are based on the current appraised or market-
quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value. The fair value of
collateral dependent impaired loans is generally based on recent real estate appraisals. Adjustments are
routinely made in the appraisal process by independent appraisers to adjust for differences between the
comparable sales and income data available. Such adjustments are usually significant and typically result in a
Level 3 classification. Non-real estate collateral may be valued using an appraisal, net book value of the
borrower’s financial statements or aging reports, adjusted or discounted based on management’s expertise and
knowledge of the borrower and borrower’s business. Fair value measurements prepared internally are based on
management's comparisons to sales of comparable assets, but include significant unobservable data and are
therefore considered Level 3 measurements.
Foreclosed assets and other real estate owned: Real estate acquired through or in lieu of loan foreclosure is not
measured at fair value on a recurring basis. However, other real estate is initially measured at fair value (less
estimated costs to sell) when it is acquired and may also be measured at fair value (less estimated costs to sell) if
it becomes subsequently impaired. The fair value measurement for each property may be obtained from an
independent appraiser or prepared internally. Fair value measurements obtained from independent appraisers
generally utilize a market approach based on sales of comparable assets and/or an income approach. Such
measurements are usually considered Level 2 measurements. However, management routinely evaluates fair
value measurements of independent appraisers by comparing actual selling prices to the most recent appraisals.
If management determines significant adjustments should be made to the independent appraisals based on
these evaluations, these measurements are considered Level 3 measurements. Fair value measurements
prepared internally are based on management's comparisons to sales of comparable assets, but include
significant unobservable data and are therefore considered Level 3 measurements.
Mortgage servicing rights - Mortgage servicing rights are measured at fair value on a recurring basis. Serviced loan
pools are stratified by year of origination, and a fair value measurement is obtained for each stratum from an
independent firm. The measurement is based on recent sales of mortgage servicing rights with similar
characteristics. Since the fair value measurement is based on observable market data, it is considered a Level 2
measurement.
46
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(17) Fair Value Measurements (continued)
The following table presents the Company’s approximate fair-value hierarchy for the assets measured at fair
value as of December 31:
As of December 31, 2022
Assets measured at fair value
on a recurring basis:
Assets:
Securities available-for-sale
U.S. Government sponsored entities
and U.S. agencies
State and municipal
Agency mortgage-backed
Marketable equity securities
Mortgage servicing rights
Assets measured at fair value
on a non-recurring basis:
Assets:
Collateral-dependent impaired loans
Foreclosed assets and other real estate
owned
Total
$107,930
$118,535
$164,869
$996
$3,236
$4,070
$70
Fair Value Measurements at
Reporting Date Using
(Level 2)
(Level 1)
(Level 3)
$107,930
$118,535
$164,869
$996
$3,236
$4,070
$70
Collateral-dependent impaired loans, which are measured for impairment using the fair value of collateral, had a
carrying value of $8,431 with specific reserves of $4,361 as of December 31, 2022.
Foreclosed assets and other real estate owned, which are measured at the lower of carrying or fair value less
costs to sell, were carried at their fair value of $70, which is comprised of the outstanding balance of $70, net of
an allowance for losses of $0 as of December 31, 2022.
As of December 31, 2021
Assets measured at fair value
on a recurring basis:
Assets:
Securities available-for-sale
U.S. Government sponsored entities
and U.S. agencies
State and municipal
Agency mortgage-backed
Marketable equity securities
Mortgage servicing rights
Assets measured at fair value
on a non-recurring basis:
Assets:
Collateral-dependent impaired loans
Foreclosed assets and other real estate
owned
Total
$85,106
$151,486
$203,286
$900
$2,028
$3,275
$39
Fair Value Measurements at
Reporting Date Using
(Level 2)
(Level 1)
(Level 3)
$85,106
$151,486
$203,286
$900
$2,028
$3,275
$39
47
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(17) Fair Value Measurements (continued)
Collateral-dependent impaired loans, which are measured for impairment using the fair value of collateral, had a
carrying value of $4,579 with specific reserves of $1,304 as of December 31, 2021.
Foreclosed assets and other real estate owned, which are measured at the lower of carrying or fair value less
costs to sell, were carried at their fair value of $39, which is comprised of the outstanding balance of $297, net
of an allowance for losses of $258 as of December 31, 2021.
The following table presents quantitative information about level 3 fair value measurements for financial
instruments measured at fair value on a non-recurring basis at December 31, 2022 and 2021:
Collateral-dependent impaired loans,
net of specific reserves
Foreclosed assets and other real estate owned
Valuation
Technique
Unobservable
Input
Range
Sales comparison
approach
Sales comparison
approach
Appraised values
10% - 20%
Appraised values
10% - 20%
FASB guidance 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. In cases where quoted market
prices are not available, fair values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including the discount rate and estimates
of future cash flows. In that regard, the derived fair value estimates may not be realized in immediate
settlement of the instrument. Accounting guidance excludes certain financial instruments and certain
nonfinancial instruments from its disclosure requirements. These fair value disclosures may not represent the
fair value of the Company.
The estimated fair values of the Company’s financial instruments as of December 31, 2022 are as follows:
Carrying
Amount
Fair
Value
Fair Value Hierarchy
Level 2
Level 1
Level 3
Financial assets:
Cash and cash equivalents
Interest-bearing deposits in other banks-
term deposits
Securities
Marketable equity securities
Loans held for sale
Loans, net of allowance
Accrued interest receivable
Cash surrender value of bank-owned
life insurance
Mortgage servicing rights
Financial liabilities:
Demand and saving deposits
Time deposits
Securities sold under
agreements to repurchase
FHLB advances and other borrowings
Accrued interest payable
$43,822
$43,822
$43,822
6,058
395,410
3,943
421
954,426
7,255
5,833
395,168
3,943
421
928,416
7,255
5,733
2,947
7,255
24,058
3,236
24,058
3,236
$917,286
377,421
$917,286
367,715
$917,286
36,298
7,366
977
35,819
7,225
977
977
$100
395,168
996
421
3,236
$35,819
$928,416
24,058
$367,715
7,225
48
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(17) Fair Value Measurements (continued)
The estimated fair values of the Company’s financial instruments as of December 31, 2021 are as follows:
Carrying
Amount
Fair
Value
Fair Value Hierarchy
Level 2
Level 3
Level 1
Financial assets:
Cash and cash equivalents
Interest-bearing deposits in other banks-
term deposits
Securities
Marketable equity securities
Loans held for sale
Loans, net of allowance
Accrued interest receivable
Cash surrender value of bank-owned
life insurance
Mortgage servicing rights
Financial liabilities:
Demand and saving deposits
Time deposits
Federal funds purchased
Securities sold under
agreements to repurchase
FHLB advances and other borrowings
Accrued interest payable
$91,644
$91,644
$91,644
12,198
444,267
2,265
2,254
845,847
5,535
12,472
444,439
2,265
2,254
844,952
5,535
12,372
1,365
5,535
23,210
2,028
23,210
2,028
$882,299
353,145
533
$882,299
353,939
533
35,109
17,076
694
35,111
17,355
694
$882,299
533
694
$100
444,439
900
2,254
2,028
$844,952
23,210
$353,939
$35,111
17,355
(18) Stock-Compensation Plans
During 2012, the Company approved an equity incentive plan to promote the long-term financial success of
the Company through stock-based awards to employees, directors or service providers who contribute to that
success. This equity incentive plan permits Company management to approve and grant a maximum of
150,000 shares of common stock-based awards in the form of any combination of stock options, stock
appreciation rights, stock awards or cash incentive awards. The 2012 equity incentive plan expired in
September 2022 and a new plan was implemented in October 2022. The 2022 plan mirrors the expired 2012
plan with the exception of the cash incentive awards which were excluded from the 2022 plan.
Stock Options
The fair value of each option award is estimated on the date of grant using a closed form option valuation
model (Black-Scholes) based on the assumptions noted in the table below. Expected volatilities are based on
historical volatilities of the Company’s common stock. The Company uses historical data to estimate option
exercise and post-vesting termination behavior. The expected term of options granted is based on historical
data and represents the period of time that options granted are expected to be outstanding, which takes into
account that the options are not transferable. The risk-free interest rate for the expected term of the option is
based on the U.S. Treasury yield in effect at the time of the grant. The Company’s accounting policy is to
recognize forfeitures as they occur.
No options were granted for the year ended December 31, 2021 and 2020. For the year ended December 31,
2022, 5,000 shares of non-qualified stock options were granted under the 2012 equity incentive plan.
49
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(18) Stock-Compensation Plans (continued)
Stock Options (continued)
The following assumptions were used in estimating the fair value of options granted during the year ended
December 31, 2022:
Expected volatility
Expected dividend yield
Expected term (in years over vesting period)
Risk free rate
2022
64.09%
1.40%
5.00
3.03%
Based on these assumptions the estimated weighted average grant date fair value of options granted was $15.96
during 2022.
For the years ended December 31, 2022, 2021 and 2020, the Company recognized $25, $16, and $19 in
compensation expense for stock options, respectively. No tax benefits were recognized for the three-year
period ended December 31, 2022. The intrinsic value of options exercised during the years ended December
31, 2022, 2021 and 2020 was $0, $0 and $276, respectively.
The following table summarizes the activity of options for the year ended:
Shares under option, beginning of year
Granted during the year
Forfeited and expired during the year
Exercised during the year
December 31, 2022
December 31, 2021
Weighted
Average
Exercise
Price
$35.55
31.40
35.55
0
Options
25,000
5,000
(8,334)
0
Weighted
Average
Exercise
Price
$35.55
0
0
0
Options
25,000
0
0
0
Shares under option, end of year
21,666
$34.60
25,000
$35.55
Options exercisable, end of year
16,666
$35.55
12,500
$35.55
The following table summarizes information about stock options outstanding at December 31, 2022:
Exercise Price
$35.55
31.40
Number Outstanding
16,666
5,000
21,666
Remaining
Contractual Life
(Years)
0.25
9.50
Number Exercisable
16,666
0
16,666
Total shares available for grant under the 2012 equity incentive plan were 0, 64,603 and 78,727 at December
31, 2022, 2021 and 2020, respectively. Total shares available for grant under the 2022 equity incentive plan was
150,000 as of December 31, 2022.
50
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(18) Stock-Compensation Plans (continued)
Stock Awards
Stock awards are granted in the form of restricted stock awards (RSA’s) and restricted stock units (RSU’s)
which typically vest equally over a two-year period; however, there were RSAs and RSUs issued in 2021 that
vest over a five-year period. RSA’s share in dividends and have voting rights throughout the vesting period.
RSU’s are paid a dividend equivalent during the vesting period but have no voting rights.
The following table summarizes information regarding unvested restricted stock and shares outstanding during
the year ended:
December 31, 2022
December 31, 2021
Unvested
Shares
Weighted
Average
Grant Value
Unvested
Shares
Restricted stock, beginning of year
Granted during the year
Forfeited during the year
Restricted shares (net for taxes)
Vested during the year
19,754
9,104
(1,282)
(1,980)
(11,406)
$30.86
34.00
33.03
30.51
30.51
13,301
16,403
(863)
(1,233)
(7,854)
Weighted
Average
Grant Value
$29.41
31.79
29.93
30.51
30.51
Restricted stock, end of year
14,190
$33.01
19,754
$30.86
During 2022, 2021 and 2020, total accrued compensation expense of $390, $332 and $246 (before tax benefits
of $111, $95 and $70) was recorded from amortization of restricted shares expected to vest, respectively.
Future projected compensation expense (before tax benefits); assuming all restricted shares eventually vest to
employees; would be $179, $38, $7 and $2 for years 2023, 2024, 2025 and 2026 respectively.
(19) Stock Repurchase Program
In November 2020, the Company’s Board of Directors adopted a stock repurchase plan. The plan provided a
maximum dollar threshold of aggregate cost of repurchases under the plan, set a limit on the daily number of
shares that could be repurchased and provided a maximum per share price. This plan, scheduled to expire on
November 30, 2021, was subsequently extended to November 30, 2022 with modification of maximum per
share price and daily purchase limits. A revised repurchase plan was approved by the Board of Directors as of
December 30, 2021 and effective January 1, 2022, replacing the prior active plan. The revised stock
repurchase plan provided additional funding, updated maximum per share price and adjusted daily limits and
expired June 1, 2022 with no further extensions approved in 2022. For the years ended December 31, 2022,
2021 and 2020, the Company repurchased 44,760, 131,500 and 17,900 shares under the repurchase program.
The purchase price for the shares of the Company’s stock repurchased is reflected as a reduction to
shareholders’ equity as treasury stock.
51
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(20) Earnings Per Common Share
For the years ended December 31, earnings per common share have been computed based on the following:
Net income
Net income available to common stockholders
2022
2021
2020
$13,626
$13,626
$11,386
$10,290
$11,386
$10,290
Average number of common shares outstanding
Effect of dilutive options
3,565,548
12,280
3,665,228
15,844
3,726,475
10,799
Average number of common shares outstanding used
to calculate diluted earnings per common share
3,577,828
3,681,072
3,737,274
(21) Equity and Regulatory Matters
The Company and Banks are subject to various regulatory capital requirements administered by the federal and
state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on
the Company’s financial statements.
In September 2019, the FDIC finalized a rule that introduced an optional simplified measure of capital
adequacy known as the community bank leverage ratio (CBLR) framework. In order to qualify for the CBLR
framework, the Company and Banks must have a Tier 1 leverage ratio of greater than 9%, less than $10 billion
in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and
liabilities. The Coronavirus Aid, Relief, and Economic Security Act lowered the CBLR to 8% through
December 31, 2020. Beginning in 2021, the CBLR will increase to 8.5% for the calendar year, before increasing
back to 9% beginning January 1, 2022. As of December 31, 2022 and 2021, the Company and Banks qualified
for and elected to use the CBLR framework. An institution opting into the CBLR framework and meeting all
requirements under the framework will be considered to have met the well-capitalized ratio requirements under
the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital.
As of December 31, 2022, the most recent notification from the regulatory agencies categorized all six Banks as
well capitalized under the regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Banks must maintain minimum regulatory capital ratios as set forth in the table. There
are no conditions or events since December 31, 2022, which management believes have changed the capital
categories of the Banks.
52
2022 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(21) Equity and Regulatory Matters (continued)
The Company and the Banks actual capital amounts and ratios as of December 31 are presented in the
following tables:
As of December 31, 2022:
Community Bank Leverage Ratio:
Company
Northwest
German
Davis
Freeport
Lena
Herscher
As of December 31, 2021:
Community Bank Leverage Ratio:
Company
Northwest
German
Davis
Freeport
Lena
Herscher
(22) Dividends
Actual
Amount
In $000s
$164,081
36,762
30,249
19,082
35,708
10,994
20,406
Actual
Amount
In $000s
$153,543
33,922
28,252
19,575
33,006
11,324
20,130
Ratio
10.81%
9.64%
9.11%
10.77%
10.26%
11.23%
11.88%
Ratio
10.50%
8.83%
9.30%
11.43%
10.07%
11.99%
11.75%
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
In $000s
$136,583
34,334
29,892
15,942
31,317
8,811
15,465
Ratio
9.00%
9.00%
9.00%
9.00%
9.00%
9.00%
9.00%
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
In $000s
$124,246
32,670
25,827
14,552
27,849
8,026
14,562
Ratio
8.50%
8.50%
8.50%
8.50%
8.50%
8.50%
8.50%
State banking regulations restrict the amount of dividends that a bank may pay to its stockholders. The
regulations provide that dividends are limited to the balance of undivided profits, subject to capital-adequacy
requirements, plus an additional amount equal to the Bank’s current-year earnings through the date of any
declaration of dividends. The payment of dividends would also be restricted if a Bank does not meet the
minimum capital conservation buffer as defined by Basel III regulatory capital guidelines.
(23) Subsequent Event
In July 2022, the Company entered into a definitive agreement to sell 100% of the common shares of State
Bank of Herscher. The consummation of the transaction is contingent upon regulatory approval and is
expected to occur in 2023. As part of the terms of the proposed transaction, the Company would sell a wholly
owned subsidiary along with certain intangible assets and assets and liabilities of the sold bank.
53
2022 Annual Report
CONSOLIDATING SCHEDULE 1 - BALANCE SHEET
(000s omitted except share data)
December 31, 2022
A S S E T S
German-American
State Bank
State Bank
of Davis
Northwest
Bank
State
Bank
Lena
State Bank
Foresight Financial
Consolidated
State Bank
of Herscher
Group, Inc.
Eliminations
Total
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Interest-bearing deposits in banks - term deposits
Debt securities:
Debt securities available-for-sale
Debt securities held-to-maturity
Marketable equity securities and other investments
Loans held for sale
Loans, net
Foreclosed assets and other real estate owned, net
Premises and equipment, net
Bank owned life insurance
Other assets
Investment in subsidiary banks
$4,286
2,096
1,624
747
56,782
0
2,020
0
247,344
70
2,615
3,917
5,626
0
$2,220
514
467
0
72,934
629
277
0
84,511
0
705
2,052
4,842
0
Total assets
$327,127
$169,151
$361,146
$352,015
$94,654
$164,098
$131,109
($121,840)
$1,477,460
LIABILITIES AND STOCKHOLDLERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing
Interest-bearing
Total deposits
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) and Federal Reserve advances
and other borrowings
Accrued interest payable and other liabilities
$64,593
232,094
296,687
2,500
2,343
$22,888
130,339
153,227
922
2,000
510
Total liabilities
301,530
156,659
331,946
323,902
(5,626)
1,350,229
Stockholders’ equity:
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive income (loss)
Total stockholders’ equity
0
400
3,075
26,774
0
(4,652)
25,597
0
100
1,693
17,289
0
(6,590)
12,492
Total liabilities and stockholders’ equity
$327,127
$169,151
$361,146
$352,015
$94,654
$164,098
$131,109
($121,840)
$1,477,460
54
254,132
243,510
$5,910
1,037
1,081
1,245
75,990
0
893
421
6,612
6,324
7,501
0
0
$81,402
243,778
325,180
4,270
568
1,928
1,450
7,967
27,345
0
0
(7,562)
29,200
$10,078
2,474
2,603
1,240
79,349
3,447
322
0
0
0
1,424
1,601
5,967
$56,308
234,506
290,814
31,106
298
1,684
1,000
4,835
29,874
0
0
(7,596)
28,113
$1,153
693
650
1,835
31,935
139
54,436
275
1,127
2,411
0
0
0
0
$6,914
77,365
84,279
0
2,000
535
86,814
500
3,786
6,708
0
0
(3,154)
7,840
$4,707
1,161
1,068
991
74,344
292
70,493
1,746
4,915
4,381
0
0
0
0
$44,285
105,861
150,146
0
0
980
151,126
0
400
17,986
2,020
0
(7,434)
12,972
$335
5,291
0
0
0
0
0
0
0
0
4,221
4,122
926
116,214
$0
0
$0
0
0
3,878
3,878
0
1,018
11,135
164,600
(12,534)
(36,988)
($335)
(5,291)
0
(116,214)
($335)
(5,291)
(5,626)
(3,850)
(39,339)
(110,013)
36,988
$28,354
$7,975
7,493
6,058
391,334
4,076
3,943
421
954,426
70
17,598
24,058
31,654
$276,055
1,018,652
1,294,707
36,298
7,366
11,858
0
1,018
11,138
164,597
(12,534)
(36,988)
127,231
(116,214)
127,231
2022 Annual Report CONSOLIDATING SCHEDULE 1 - BALANCE SHEET
(000s omitted except share data)
December 31, 2022
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Debt securities:
Debt securities available-for-sale
Debt securities held-to-maturity
Interest-bearing deposits in banks - term deposits
Marketable equity securities and other investments
Foreclosed assets and other real estate owned, net
Loans held for sale
Loans, net
Premises and equipment, net
Bank owned life insurance
Other assets
Investment in subsidiary banks
Total assets
LIABILITIES AND STOCKHOLDLERS' EQUITY
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) and Federal Reserve advances
and other borrowings
Accrued interest payable and other liabilities
Liabilities:
Deposits:
Noninterest bearing
Interest-bearing
Total deposits
Total liabilities
Stockholders’ equity:
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive income (loss)
Total stockholders’ equity
A S S E T S
German-American
State Bank
State Bank
of Davis
Northwest
Bank
State
Bank
Lena
State Bank
State Bank
of Herscher
Foresight Financial
Group, Inc.
Eliminations
Consolidated
Total
$5,910
1,037
1,081
1,245
75,990
0
893
421
254,132
0
6,612
6,324
7,501
0
$10,078
2,474
2,603
1,240
79,349
3,447
322
0
243,510
0
1,424
1,601
5,967
0
$1,153
693
650
1,835
31,935
0
139
0
54,436
0
275
1,127
2,411
0
$4,707
1,161
1,068
991
74,344
0
292
0
70,493
0
1,746
4,915
4,381
0
$335
5,291
0
0
0
0
0
0
0
0
4,221
4,122
926
116,214
($335)
(5,291)
0
(116,214)
$28,354
$7,975
7,493
6,058
391,334
4,076
3,943
421
954,426
70
17,598
24,058
31,654
$327,127
$169,151
$361,146
$352,015
$94,654
$164,098
$131,109
($121,840)
$1,477,460
$81,402
243,778
325,180
4,270
568
1,928
$56,308
234,506
290,814
31,106
298
1,684
301,530
156,659
331,946
323,902
0
1,450
7,967
27,345
0
(7,562)
29,200
0
1,000
4,835
29,874
0
(7,596)
28,113
$6,914
77,365
84,279
0
2,000
535
86,814
0
500
3,786
6,708
0
(3,154)
7,840
$44,285
105,861
150,146
0
0
980
151,126
0
400
17,986
2,020
0
(7,434)
12,972
$0
0
$0
0
0
3,878
3,878
0
1,018
11,135
164,600
(12,534)
(36,988)
($335)
(5,291)
(5,626)
$276,055
1,018,652
1,294,707
36,298
7,366
11,858
(5,626)
1,350,229
(3,850)
(39,339)
(110,013)
36,988
0
1,018
11,138
164,597
(12,534)
(36,988)
127,231
(116,214)
127,231
$4,286
2,096
1,624
747
56,782
2,020
0
0
247,344
70
2,615
3,917
5,626
0
$64,593
232,094
296,687
2,500
2,343
0
400
3,075
26,774
0
(4,652)
25,597
$2,220
514
467
0
72,934
629
277
84,511
705
2,052
4,842
0
0
0
$22,888
130,339
153,227
922
2,000
510
0
100
1,693
17,289
0
(6,590)
12,492
Total liabilities and stockholders’ equity
$327,127
$169,151
$361,146
$352,015
$94,654
$164,098
$131,109
($121,840)
$1,477,460
55
2022 Annual Report For the year ended December 31, 2022
Interest and dividend income:
Loans, including fees
Debt securities:
Taxable
Tax-exempt
Interest-bearing deposits in banks and other
Federal funds sold
Total interest and dividend income
Interest expense:
Deposits
Federal funds purchased
Securities sold under agreements to repurchase
FHLB and other borrowings
Total interest expense
Net interest and dividend income
Provision for loan losses
Net interest and dividend income,
after provision for loan losses
Noninterest income:
Customer service fees
Equity in earnings of subsidiaries
Gain (loss) on sales and calls of AFS securuties, net
Gain on sales of loans, net
Loan-servicing fees, net
Other
Total noninterest income
Noninterest expenses:
Salaries and employee benefits
Occupancy expense of premises, net
Outside services
Data processing
Foreclosed assets and other real estate owned, net
Other
Total noninterest expenses
Income before income taxes
Income tax expense (benefit)
Net income
56
CONSOLIDATING SCHEDULE 2 - STATEMENT OF INCOME
(000s omitted except share data)
German-American
State Bank
State Bank
of Davis
Northwest
Bank
State
Bank
Lena
State Bank
Foresight Financial
Consolidated
State Bank
of Herscher
Group, Inc.
Eliminations
Total
$11,212
$3,406
$12,187
$10,603
$2,430
$3,152
$42,990
710
573
112
29
12,636
2,115
7
0
62
2,184
10,452
210
1,190
520
83
21
5,220
781
5
8
5
799
4,421
604
10,242
3,817
12,087
11,584
2,716
4,669
207
0
0
0
1,314
1,521
4,155
396
927
897
(53)
1,565
7,887
3,876
937
68
(15)
0
0
331
384
1,276
139
440
437
0
514
2,806
1,395
163
$2,939
$1,232
$5,230
$1,498
$13,626
($15,890)
$13,626
1,336
382
153
67
14,125
1,278
13
12
49
1,352
12,773
686
527
(225)
969
1,964
1,193
4,428
5,865
937
1,156
1,284
0
1,962
11,204
5,311
1,310
$4,001
1,303
477
122
43
12,548
1,336
303
7
0
1,646
10,902
(682)
98
0
0
0
1,244
1,342
3,325
241
599
798
0
848
5,811
7,115
1,885
418
257
68
8
3,181
519
2
0
18
539
2,642
(74)
65
(6)
0
0
146
205
652
80
348
279
0
265
1,624
1,297
307
$990
0
0
0
8
0
8
0
0
0
2
2
6
0
6
4,614
20,504
5,643
281
891
317
0
692
7,824
12,686
(940)
1,160
309
118
22
4,761
280
4
0
0
284
4,477
(192)
90
0
0
14
605
709
1,711
300
411
541
0
497
3,460
1,918
420
($18)
(18)
($18)
(18)
0
0
$0
$0
(4,794)
(20,684)
(62)
(3,219)
(1,513)
(4,794)
(15,890)
6,117
2,518
646
190
52,461
6,291
38
323
136
6,788
45,673
552
45,121
1,055
0
(246)
969
1,978
4,653
8,409
22,627
2,312
1,553
3,040
(53)
6,343
35,822
17,708
4,082
$15,890
($15,890)
2022 Annual Report
German-American
State Bank
State Bank
of Davis
Northwest
Bank
State
Bank
Lena
State Bank
State Bank
of Herscher
Foresight Financial
Group, Inc.
Eliminations
Consolidated
Total
CONSOLIDATING SCHEDULE 2 - STATEMENT OF INCOME
(000s omitted except share data)
For the year ended December 31, 2022
Interest and dividend income:
Loans, including fees
Debt securities:
Taxable
Tax-exempt
Interest-bearing deposits in banks and other
Federal funds sold
Total interest and dividend income
Interest expense:
Deposits
Federal funds purchased
Securities sold under agreements to repurchase
FHLB and other borrowings
Total interest expense
Net interest and dividend income
Provision for loan losses
Net interest and dividend income,
after provision for loan losses
Noninterest income:
Customer service fees
Equity in earnings of subsidiaries
Gain (loss) on sales and calls of AFS securuties, net
Gain on sales of loans, net
Loan-servicing fees, net
Other
Total noninterest income
Noninterest expenses:
Salaries and employee benefits
Occupancy expense of premises, net
Outside services
Data processing
Foreclosed assets and other real estate owned, net
Other
Total noninterest expenses
Income before income taxes
Income tax expense (benefit)
Net income
710
573
112
29
12,636
2,115
7
0
62
2,184
10,452
210
207
0
0
0
1,314
1,521
4,155
396
927
897
(53)
1,565
7,887
3,876
937
$11,212
$3,406
$12,187
$10,603
$2,430
$3,152
1,190
520
83
21
5,220
781
5
8
5
799
4,421
604
1,336
382
153
67
14,125
1,278
13
12
49
1,352
12,773
686
1,303
477
122
43
12,548
1,336
7
303
0
1,646
10,902
(682)
418
257
68
8
3,181
519
2
0
18
539
2,642
(74)
1,160
309
118
22
4,761
280
4
0
0
284
4,477
(192)
10,242
3,817
12,087
11,584
2,716
4,669
68
(15)
0
0
331
384
1,276
139
440
437
0
514
2,806
1,395
163
$2,939
$1,232
527
(225)
969
1,964
1,193
4,428
5,865
937
1,156
1,284
0
1,962
11,204
5,311
1,310
$4,001
98
0
0
0
1,244
1,342
3,325
241
599
798
0
848
5,811
7,115
1,885
$5,230
65
(6)
0
0
146
205
652
80
348
279
0
265
1,624
1,297
307
$990
90
0
0
14
605
709
1,711
300
411
541
0
497
3,460
1,918
420
0
0
0
8
0
8
0
0
0
2
2
6
0
6
$15,890
4,614
20,504
5,643
281
891
317
0
692
7,824
12,686
(940)
($18)
(18)
($18)
(18)
0
0
($15,890)
$0
$0
(4,794)
(20,684)
(62)
(3,219)
(1,513)
(4,794)
(15,890)
$42,990
6,117
2,518
646
190
52,461
6,291
38
323
136
6,788
45,673
552
45,121
1,055
0
(246)
969
1,978
4,653
8,409
22,627
2,312
1,553
3,040
(53)
6,343
35,822
17,708
4,082
$1,498
$13,626
($15,890)
$13,626
57
2022 Annual Report
Board of Directors
Robert W. Stenstrom
Chairman, Board of Directors
Chairman & CEO,
Stenstrom Companies
Peter Q. Morrison
President,
Chief Executive Officer
Judd D. Thruman
Partner, Fishburn,
Whiton, Thruman, LTD.
Carolyn S. Sluiter, D.V.M.
Retired Veterinarian
Douglas A. Wagner
Owner, Floor to Ceiling
Jeffrey M. Sterling
Retired President/CEO
of German American
State Bank
Frederick J. Kundert
Retired, Harder Corporation
John J. Morrissey
President, Staff Management
& Market Dimensions
Principal, Morrissey
Family Business
John W. Collman
Ag Production
Executive Officers
Peter Q. Morrison
President,
Chief Executive Officer
Dean E. Cooke
Chief Financial Officer
K. Denise Osadjan
Chief Risk Officer
Rusti Swanson
Chief Credit Officer
5858
Andrew LaPour
Director of
Information Technology
Lori Morgan
Director of
Corporate Operations
Nora Koehler
Director of
Human Resources
2022 Annual Report General Information
Foresight Financial Group, Inc.
P.O. Box 339
809 Cannell-Puri Court, Suite 5
Winnebago, IL 61088
815.847.7500
investor.relations@ffgbank.net
Registrar, transfer agent and
change of address:
Market: OTCQX Best Market
Trading symbol: FGFH
Computershare Investor Services, LLC
PO Box 43006
Providence, RI 02940-3006
800.368.5948
computershare.com/investor
Banks’ Board of Directors
State Bank of Davis
Davis, IL
Dan Dietmeier
Andrew Garnhart
Linda Heckert
Jed Kempel
Thomas Olsen
Carolyn Sluiter
Richard Stenzinger
Judd Thruman
Lena State Bank
Lena, IL
Todd Bussian
Curtis Derrer
James Moest
Steven Rothschadl
Judd Thruman
German-American
State Bank
German Valley, IL
John Collman
Guy Cunningham
Robert Ebbesmeyer
Kerry L. Hoops
Angela K. Larson
Warren Laube
Michael Schirger
Jeffrey M. Sterling
Northwest Bank
of Rockford
Rockford, IL
Stephen P. McKeever
John J. Morrissey
Ryan Miller
Amy M. Ott
Jon Reidy
Robert W. Stenstrom
State Bank of Herscher
Herscher, IL
Randall Chaplinski
Troy Coffman
Wayne Koelling
Fred Kundert
Dana Masching
Brian Scott
State Bank
Freeport, IL
Mary Hartman
Jay Kempel
Fred Kundert
Peter Q. Morrison
Chris Schneiderman
Marilyn Smit
Brian Stewart
Ken Thompson
Douglas Wagner
5959
2022 Annual Report 2022 ANNUAL REPORT
C O M M U N I T Y
B U I L D I N G
T H R O U G H
C O M M U N I T Y
B A N K I N G
809 Cannell-Puri Court, Suite 5 • Winnebago, Illinois 61088 • 815.847.7500 • foresightfg.com