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
2023 ANNUAL REPORT
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”
www.foresightfg.com
OUR SHARED CULTURE • OUR SHARED VALUES
MISSION
Community Building through Community Banking
VISION
Leverage the collective strengths of our
banks to create customer loyalty,
empower employees, and enhance value
for our communities and shareholders
VALUES
Service Excellence, Integrity, Collaboration,
Engagement, Innovation, Agility
FORESIGHT SUBSIDIARIES
www.foresightfg.com
Dear Stockholders,
We are happy to report that 2023 represented a third consecutive year of record earnings despite the significant
challenges we faced during these turbulent economic times. We concluded the year with earnings of $14.5
million, a 6.75% increase over 2022 earnings. Asset quality remains strong and
despite funding cost pressures throughout the year, a result of both Fed policy as
well as an increasingly competitive banking landscape, our Net Interest Margin
continued to drive results that were accretive to our bottom-line success. Year over
year, Loans net of allowance for credit losses increased $115 million or 12.05%,
Deposits increased $63 million or 4.85%, and Total Assets saw an increase of $97
million or 6.58%.
I am also pleased to report that the F2 (Future Forward) initiative, which began back
in 2021 and included a number of significant projects and initiatives, not the least
of which was the implementation of a shared services environment, has come to a
successful conclusion. I would personally like to thank and recognize our amazing staff who have not only
been the catalyst for the successful completion of these projects, but who also put in considerable time and
effort above and beyond their regular duties. The teamwork and dedication exhibited was truly inspiring
and you should all be enormously proud of these folks. That said, we do not plan to rest on our laurels and
have already tagged 2024 for a total of twenty-seven new projects, ten of which are already underway, and
most significantly includes our new digital banking initiative that will take Foresight to the next level of our
overall digital strategy.
The sale of State Bank of Herscher as announced in July of 2022, had been expected to close during the
second half of 2023. As reported in our announcement dated October 5, 2023, the Foresight Board, after
careful consideration, decided to terminate the agreement. Despite best efforts on the part of both Foresight
and the buyer it became increasingly clear that the probability of securing regulatory approval within the
timelines as outlined in the July 19, 2022, agreement was unlikely the longer the process went on and as
such our Board determined that it was in the best financial interests of our shareholders to terminate the
proposed transaction. In retrospect, we continue to be confident this was the correct decision and are happy
that the directors, officers, and staff of State Bank of Herscher will continue to be an important part of the
Foresight bank group as well as a staunch supporter of the communities they serve.
On October 25, 2023, the Board of Directors was also pleased to announce the initiation of a program to
repurchase $2 million in Foresight stock. Due to the success of that initial program, the repurchase of an
additional $2 million was announced on February 20, 2024. These repurchases, in combination with other
efforts to increase the organization’s price per share, continue to be a priority of the Board and management
to increase shareholder value. We are pleased to report that the stock price, which reached a low of $22.80
per share in November of 2023, has rebounded to $28.30 as of month-end February 2024, an increase of
24%. Based on the current market price of Foresight’s common stock, which the Board continues to believe
is significantly undervalued, stock repurchases as well as additional efforts the Board has identified are
expected to provide results that are in the best interests of our shareholders.
Fiscal year 2023 will also serve as the final full year for two of Foresight Financials’ longest serving and
valued executive officers. EVP and CFO Dean Cooke and SVP and Chief Risk Officer Denise Osadjan will be
retiring from their positions in 2024 after serving 27 and 33 years, respectively. The depth and breadth of their
knowledge and experience will be sorely missed. We were incredibly happy to announce in January of 2024
that Brooke Crull joined Foresight as our new SVP and Chief Risk Officer. Brooke comes to us with a wealth
of experience including 16 years with Wipfli LLP in the financial institutions area, most recently as a Senior
Audit Manager. Brooke has already established herself as a valued Foresight team member.
I would be remiss if I failed to mention the loss of Jennifer Blumer who was brought on in September of 2023
to assume the duties of Dean Cooke as Foresight CFO. Jennifer passed away unexpectedly in January of 2024.
Despite her brief time with us, Jennifer left an indelible impression and will be sorely missed. Dean Cooke
has been gracious enough to extend his retirement plans to provide us an opportunity to resume a search for
his replacement. We are all thankful for Dean’s continued support and dedication to the Company.
Looking forward as we move further into 2024, we expect funding costs to continue to drive our Net Interest
Margin, thus making 2024 a challenging year. We will closely monitor credit quality trends both industry
wide as well as within our portfolio and react accordingly. Despite the economic challenges that we anticipate
persisting, we look forward to a positive 2024.
Foresight Financial community banks have a traditional, relationship-based business model that focuses
on safety and soundness and service to the communities in which we reside. Community Building through
Community Banking will continue to be who we are and as such will drive our efforts to achieve that goal
while at the same time acting upon opportunities for increased market share and shareholder value as they
present themselves.
Thank you for being a shareholder of Foresight Financial Group. It is through your support that we continue
to realize the success we have achieved to date, and that which we strive for as we move into the future.
Respectfully,
Peter Q. Morrison
President/Chief Executive Officer
Trends in Assets, Deposits & Loans (000’s)
1,135,478
1,453,784
1,235,444
1,477,460
1,294,707
1,384,600
1,154,460
1,574,728
1,357,557
954,426
1,069,450
1,180,323
1,213,588
980,024
1,020,093
784,393
778,874
818,611
845,847
1,700,000 -
1,500,000 -
1,300,000 -
1,100,000 -
900,000 -
700,000 -
500,000 -
0 -
12.31.18
12.31.19
12.31.20
12.31.21
12.31.22
12.31.23
*Loans held for investment NET of ALLL.
Assets
Deposits
Loans
Trends in Combined Tangible Equity Capital & ACL*
Book Equity Capital & ACL* to Non Performing Assets (000’s)
200,000 -
175,000 -
150,000 -
125,000 -
100,000 -
75,000 -
50,000 -
25,000 -
0 -
0
0
8
3
5
1
,
9
1
7
1
5
1
,
1
9
9
2
4
1
,
4
7
8
9
3
1
,
4
0
5
7
6
1
,
,
5
8
1
1
6
1
,
2
1
2
9
6
1
,
9
6
6
7
6
1
8
6
5
7
8
1
,
8
5
0
5
5
1
,
0
6
7
8
7
1
,
2
7
7
1
4
1
,
5
4
0
0
1
,
4
1
9
4
,
6
8
1
0
1
,
8
1
9
8
,
2
2
8
6
,
5
4
0
6
1
,
**AOCI Gain/(Loss)
12.31.18
(3,117)
12.31.19
2,081
12.31.20
6,319
12.31.21
1,543
12.31.22
(36,988)
12.31.23
(32,510)
*ACL: Allowance for Credit Losses
**Accumulated Other Comprehensive Income
Non-Performing Assets
Tangible Equity Capital & ACL
Book Equity & ACL
6
2023 Annual Report
Net Income (1,000,000’s)
14.50
13.63
11.37
11.02
10.29
11.39
16.0 -
14.0 -
12.0 -
10.0 -
8.0 -
6.0 -
4.0 -
2.0 -
0 -
2018
2019
2020
2021
2022
2023
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
7
3
$
.
0
1
6
3
$
.
9
6
3
3
$
.
5
9
3
3
$
.
4
2
1
4
$
.
8
8
9
2
$
.
3
1
3
4
$
.
7
6
5
3
$
.
0
9
2
3
$
.
8
0
0
4
$
.
0
5
7
2
$
.
0
9
3
2
$
12.31.18
12.31.19
12.31.20
12.31.21
12.31.22
12.31.23
Tangible Book Value
Market Value
7
2023 Annual Report
Plante & Moran, PLLC
10 South Riverside Plaza
9th floor
Chicago, IL 60606
Tel: 312.207.1040
Fax: 312.207.1066
plantemoran.com
Independent Auditor's Report
To the Audit Committee and the Board of Directors
Foresight Financial Group, Inc.
Opinion
We have audited the consolidated financial statements (the "financial statements") of Foresight Financial Group,
Inc. and its subsidiaries (the "Company"), which comprise the consolidated balance sheet as of December 31,
2023 and the related consolidated statements of income, comprehensive income, changes in stockholders' equity,
and cash flows for the year then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2023 and the results of its operations and its cash flows for the year then
ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit 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 the Company and to
meet our ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Emphasis of Matter
As described in Note 1 to the financial statements, the Company adopted the provisions of Financial Accounting
Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit
Losses: Measurement of Credit Losses on Financial Instruments, and ASU No. 2022-02, Troubled Debt
Restructurings and Vintage Disclosures, as of January 1, 2023. Our opinion is not modified with respect to this
matter.
Report on Prior Year Financial Statements
The financial statements of Foresight Financial Group, Inc. and its subsidiaries as of December 31, 2022 and
2021 were audited by other auditors, who expressed an unmodified opinion on those statements on March 8,
2023.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
accounting principles generally accepted in the United States of America and for the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going
concern within one year after the date that the financial statements are issued or available to be issued.
8
2023 Annual Report To the Audit Committee and the Board of Directors
Foresight Financial Group, Inc.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a
guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it
exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control. Misstatements are considered material if there is a substantial likelihood that, individually or in the
aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, and design and perform audit procedures responsive to those risks. Such procedures include examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the
Company's 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 the Company's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we
identified during the audit.
March 12, 2024
9
2023 Annual Report ASSETS
ASSETS
Cash and due from banks
Interest-bearing deposits in banks
Cash and due from banks
Federal funds sold
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
Interest-bearing deposits in banks - term deposits
Total cash and cash equivalents
Debt securities:
Interest-bearing deposits in banks - term deposits
Debt securities available-for-sale (AFS)
Debt securities:
Debt securities held-to-maturity (HTM)
Debt securities available-for-sale (AFS)
Marketable equity securities and other investments
Debt securities held-to-maturity (HTM)
Loans held for sale
Marketable equity securities and other investments
Loans, net of allowance for credit losses of $14,195 and $14,541,
Loans held for sale
respectively
Loans, net of allowance for credit losses of $14,195 and $14,541,
Foreclosed assets and other real estate owned, net
respectively
Premises and equipment, net
Foreclosed assets and other real estate owned, net
Bank owned life insurance
Premises and equipment, net
Other assets
Bank owned life insurance
Total assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Liabilities:
Noninterest-bearing
Deposits:
Interest-bearing
Noninterest-bearing
Interest-bearing
Federal funds purchased
Total deposits
Total deposits
Securities sold under agreements to repurchase
Federal funds purchased
Federal Home Loan Bank (FHLB) and other borrowings
Securities sold under agreements to repurchase
Accrued interest payable and other liabilities
Federal Home Loan Bank (FHLB) and other borrowings
Accrued interest payable and other liabilities
Total liabilities
Total liabilities
Stockholders' equity:
Preferred stock (no par value; authorized 500,000 shares)
Stockholders' equity:
Common stock ($.25 par value; authorized 10,000,000 shares;
Preferred stock (no par value; authorized 500,000 shares)
4,080,304 and 4,071,494 shares issued, respectively)
Common stock ($.25 par value; authorized 10,000,000 shares;
Additional paid-in capital
4,080,304 and 4,071,494 shares issued, respectively)
Retained earnings
Additional paid-in capital
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
Total stockholders' equity
Total liabilities and stockholders' equity
Consolidated Balance Sheets
(000s omitted except share data)
Consolidated Balance Sheets
December 31, 2023 and 2022
(000s omitted except share data)
2023
December 31, 2023 and 2022
2022
2023
$22,168
2022
$28,354
20,828
$22,168
2,722
20,828
45,718
2,722
45,718
4,511
4,511
365,618
3,596
365,618
5,718
3,596
990
5,718
990
1,069,450
-
1,069,450
17,525
-
24,644
17,525
36,958
24,644
$1,574,728
36,958
7,975
$28,354
7,493
7,975
43,822
7,493
43,822
6,058
6,058
391,334
4,076
391,334
3,945
4,076
421
3,945
421
954,426
70
954,426
17,598
70
24,058
17,598
31,652
24,058
$1,477,460
31,652
$1,574,728
$1,477,460
$256,205
1,101,352
$256,205
1,357,557
1,101,352
1,153
1,357,557
31,554
1,153
25,954
31,554
17,647
25,954
1,433,865
17,647
$276,055
1,018,652
$276,055
1,294,707
1,018,652
-
1,294,707
36,298
-
7,366
36,298
11,858
7,366
1,350,229
11,858
1,433,865
1,350,229
-
-
-
1,020
11,432
1,020
174,826
11,432
(13,905)
174,826
(32,510)
(13,905)
140,863
(32,510)
$1,574,728
140,863
-
1,018
11,138
1,018
164,597
11,138
(12,534)
164,597
(36,988)
(12,534)
127,231
(36,988)
$1,477,460
127,231
$1,574,728
$1,477,460
10
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
2023 Annual Report
ASSETS
ASSETS
Cash and due from banks
Interest-bearing deposits in banks
Cash and due from banks
Federal funds sold
Interest-bearing deposits in banks
Total cash and cash equivalents
Federal funds sold
Interest-bearing deposits in banks - term deposits
Total cash and cash equivalents
Debt securities:
Interest-bearing deposits in banks - term deposits
Debt securities available-for-sale (AFS)
Debt securities:
Debt securities held-to-maturity (HTM)
Debt securities available-for-sale (AFS)
Marketable equity securities and other investments
Debt securities held-to-maturity (HTM)
Loans held for sale
Marketable equity securities and other investments
Loans, net of allowance for credit losses of $14,195 and $14,541,
Loans held for sale
respectively
Loans, net of allowance for credit losses of $14,195 and $14,541,
Foreclosed assets and other real estate owned, net
respectively
Premises and equipment, net
Foreclosed assets and other real estate owned, net
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Bank owned life insurance
Premises and equipment, net
Other assets
Bank owned life insurance
Other assets
Total assets
Total assets
Liabilities:
Deposits:
Liabilities:
Noninterest-bearing
Deposits:
Interest-bearing
Noninterest-bearing
Total deposits
Interest-bearing
Federal funds purchased
Total deposits
Securities sold under agreements to repurchase
Federal funds purchased
Federal Home Loan Bank (FHLB) and other borrowings
Securities sold under agreements to repurchase
Accrued interest payable and other liabilities
Federal Home Loan Bank (FHLB) and other borrowings
Accrued interest payable and other liabilities
Total liabilities
Total liabilities
Stockholders' equity:
Preferred stock (no par value; authorized 500,000 shares)
Stockholders' equity:
Common stock ($.25 par value; authorized 10,000,000 shares;
Preferred stock (no par value; authorized 500,000 shares)
4,080,304 and 4,071,494 shares issued, respectively)
Common stock ($.25 par value; authorized 10,000,000 shares;
Additional paid-in capital
4,080,304 and 4,071,494 shares issued, respectively)
Retained earnings
Additional paid-in capital
Retained earnings
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Accumulated other comprehensive loss
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
Total stockholders' equity
Total liabilities and stockholders' equity
20,828
$22,168
2,722
45,718
20,828
2,722
45,718
4,511
4,511
365,618
3,596
365,618
5,718
3,596
990
5,718
990
1,069,450
-
1,069,450
17,525
-
24,644
17,525
36,958
24,644
$1,574,728
36,958
7,975
$28,354
7,493
7,975
43,822
7,493
43,822
6,058
6,058
391,334
4,076
391,334
3,945
4,076
421
3,945
421
954,426
70
954,426
17,598
70
24,058
17,598
31,652
24,058
$1,477,460
31,652
$1,574,728
$1,477,460
$256,205
1,101,352
$256,205
1,357,557
1,101,352
1,153
1,357,557
31,554
1,153
25,954
31,554
17,647
25,954
1,433,865
17,647
$276,055
1,018,652
$276,055
1,294,707
1,018,652
-
1,294,707
36,298
-
7,366
36,298
11,858
7,366
1,350,229
11,858
1,433,865
1,350,229
-
-
-
1,020
11,432
1,020
174,826
11,432
(13,905)
174,826
(32,510)
(13,905)
140,863
(32,510)
$1,574,728
140,863
-
1,018
11,138
1,018
164,597
11,138
(12,534)
164,597
(36,988)
(12,534)
127,231
(36,988)
$1,477,460
127,231
$1,574,728
$1,477,460
Consolidated Balance Sheets
(000s omitted except share data)
Consolidated Balance Sheets
December 31, 2023 and 2022
(000s omitted except share data)
2023
December 31, 2023 and 2022
2022
ASSETS
Consolidated Balance Sheets
(000s omitted except share data)
Consolidated Statements of Income
December 31, 2023 and 2022
(000s omitted except share data)
December 31, 2023, 2022, and 2021
2023
2022
2023
$22,168
2022
$28,354
Cash and due from banks
2023
2022
$22,168
2021
$28,354
Interest and dividend income:
Interest-bearing deposits in banks
Federal funds sold
Loans, including fees
Debt securities:
Total cash and cash equivalents
Taxable
Tax-exempt
Interest-bearing deposits in banks - term deposits
Interest-bearing deposits in banks and other
Debt securities:
Federal funds sold
Debt securities available-for-sale (AFS)
Total interest and dividend income
Debt securities held-to-maturity (HTM)
$59,919
$42,990
20,828
2,722
45,718
6,287
1,935
4,511
6,117
2,518
7,975
7,493
$39,995
43,822
4,276
6,058
2,599
2,198
646
508
188
365,618
190
70,527
3,596
52,461
1
391,334
47,379
4,076
Marketable equity securities and other investments
Interest expense:
5,718
3,945
Deposits
Loans held for sale
Federal funds purchased
Loans, net of allowance for credit losses of $14,195 and $14,541,
Securities sold under agreements to repurchase
respectively
FHLB and other borrowings
Foreclosed assets and other real estate owned, net
Premises and equipment, net
Total interest expense
Bank owned life insurance
Net interest and dividend income
Other assets
Provision for credit losses
Total assets
19,802
990
6,291
5,902
421
78
38
-
668
1,069,450
323
708
-
136
21,256
17,525
6,788
49,271
24,644
45,673
36,958
1,105
552
$1,574,728
36
954,426
211
70
6,149
17,598
24,058
41,230
31,652
756
$1,477,460
Net interest and dividend income,
after provision for credit losses
LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest income:
48,166
45,121
40,474
Customer service fees
Liabilities:
(Loss) gain on sales and calls of AFS securities, net
Deposits:
Gain on sale of loans, net
Noninterest-bearing
Loan servicing fees, net
Interest-bearing
Bank owned life insurance
Total deposits
ATM / interchange fees
Federal funds purchased
Other
Securities sold under agreements to repurchase
Total noninterest income
Federal Home Loan Bank (FHLB) and other borrowings
Noninterest expenses:
Accrued interest payable and other liabilities
Salaries and employee benefits
Occupancy expense of premises, net
Total liabilities
Outside services
Data processing
Stockholders' equity:
Foreclosed assets and other real estate owned, net
Preferred stock (no par value; authorized 500,000 shares)
Other
Common stock ($.25 par value; authorized 10,000,000 shares;
4,080,304 and 4,071,494 shares issued, respectively)
Additional paid-in capital
Income before income taxes
Total noninterest expenses
Retained earnings
Income tax expense
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Accumulated other comprehensive loss
Net income
Total stockholders' equity
Earnings per common share:
Total liabilities and stockholders' equity
Basic
Diluted
1,155
(185)
611
1,055
(246)
969
814
$256,205
1,101,352
1,978
585
2,155
1,357,557
580
2,126
1,947
2,421
1,153
7,556
31,554
8,409
25,954
17,647
22,627
22,627
2,298
1,433,865
2,312
870
126
2,663
$276,055
1,334
1,018,652
554
1,294,707
2,063
-
1,884
36,298
9,494
7,366
11,858
21,433
1,350,229
2,292
1,311
3,025
1,553
3,040
3,031
2,737
(43)
-
(53)
7,384
6,343
36,602
1,020
11,432
35,822
19,120
17,708
174,826
4,574
(13,905)
4,082
$14,546
(32,510)
$13,626
140,863
$1,574,728
$3.83
$4.08
$4.08
(112)
-
5,964
35,345
1,018
11,138
14,623
164,597
(12,534)
3,237
(36,988)
$11,386
127,231
$1,477,460
$3.11
$3.81
$3.09
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
11
2023 Annual Report
Consolidated Balance Sheets
(000s omitted except share data)
Consolidated Statements of Comprehensive Income
December 31, 2023 and 2022
(000s omitted except share data)
ASSETS
Cash and due from banks
Interest-bearing deposits in banks
Net income
Federal funds sold
Total cash and cash equivalents
Other comprehensive income (loss):
Interest-bearing deposits in banks - term deposits
Unrealized holding gains (losses) on securities available for sale,
Debt securities:
net of tax of $1,917, $15,292, & $1,868, respectively
Debt securities available-for-sale (AFS)
Reclassification adjustments for net securities losses (gains)
Debt securities held-to-maturity (HTM)
recognized in income, net of tax of $53, $70, & $36, respectively
Marketable equity securities and other investments
Total other comprehensive income (loss)
Loans held for sale
Loans, net of allowance for credit losses of $14,195 and $14,541,
Total comprehensive income (loss)
respectively
Foreclosed assets and other real estate owned, net
Premises and equipment, net
Bank owned life insurance
Other assets
Total assets
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 other borrowings
Accrued interest payable and other liabilities
Total liabilities
Stockholders' equity:
December 31, 2023, 2022, and 2021
2023
2022
2023
2022
$22,168
2021
$28,354
$14,546
20,828
2,722
45,718
$13,626
7,975
$11,386
7,493
43,822
4,511
6,058
4,346
(38,707)
(4,686)
365,618
391,334
132
3,596
176
5,718
4,478
990
(38,531)
(90)
4,076
3,945
(4,776)
421
$19,024
$(24,905)
1,069,450
$6,610
954,426
-
70
17,525
17,598
24,644
36,958
24,058
31,652
$1,574,728
$1,477,460
$256,205
1,101,352
$276,055
1,018,652
1,357,557
1,294,707
1,153
-
31,554
25,954
17,647
36,298
7,366
11,858
1,433,865
1,350,229
Preferred stock (no par value; authorized 500,000 shares)
-
-
Common stock ($.25 par value; authorized 10,000,000 shares;
4,080,304 and 4,071,494 shares issued, respectively)
Additional paid-in capital
Retained earnings
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
1,020
11,432
1,018
11,138
174,826
164,597
(13,905)
(32,510)
(12,534)
(36,988)
140,863
127,231
$1,574,728
$1,477,460
12
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
2023 Annual Report
ASSETS
December 31, 2023, 2022, and 2021
2023
2022
ASSETS
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
(000s omitted except share data)
December 31, 2023 and 2022
(000s omitted except share data)
Consolidated Statements of Changes in Stockholders’ Equity
(000s omitted except share data)
December 31, 2023 and 2022
Consolidated Balance Sheets
(000s omitted except share data)
December 31, 2023, 2022, and 2021
2023
2022
2023
2022
$22,168
20,828
$14,546
2,722
$13,626
45,718
2021
$28,354
7,975
7,493
$11,386
43,822
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
Additional
Common
Stock
Paid-
in Capital
Retained
Earnings
Accumulated
$22,168
Other
20,828
Treasury Comprehensive
2,722
Income (Loss)
45,718
Stock
$28,354
7,975
7,493
Total
43,822
Debt securities held-to-maturity (HTM)
recognized in income, net of tax of $53, $70, & $36, respectively
132
3,596
176
4,076
(90)
Debt securities held-to-maturity (HTM)
Net income
4,511
6,058
4,346
(38,707)
(4,686)
Balance – January 1, 2021
Interest-bearing deposits in banks - term deposits
Effect of change in accounting principle -
Debt securities:
365,618
391,334
Mortgage servicing rights (net of tax $101)
Debt securities available-for-sale (AFS)
-
-
$1,013
$10,513
$142,807
$(6,830)
$6,319
4,511
$153,822
6,058
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Net income
Total cash and cash equivalents
Other comprehensive income (loss):
Interest-bearing deposits in banks - term deposits
Unrealized holding gains (losses) on securities available for sale,
Debt securities:
net of tax of $1,917, $15,292, & $1,868, respectively
Debt securities available-for-sale (AFS)
Reclassification adjustments for net securities losses (gains)
Marketable equity securities and other investments
Total other comprehensive income (loss)
Loans held for sale
Loans, net of allowance for credit losses of $14,195 and $14,541,
Total comprehensive income (loss)
respectively
Foreclosed assets and other real estate owned, net
LIABILITIES AND STOCKHOLDERS’ EQUITY
Premises and equipment, net
Bank owned life insurance
Other assets
Total assets
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) and other borrowings
Accrued interest payable and other liabilities
Stockholders' equity:
Common stock ($.25 par value; authorized 10,000,000 shares;
4,080,304 and 4,071,494 shares issued, respectively)
Additional paid-in capital
Retained earnings
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
5,718
4,478
990
(38,531)
3,945
(4,776)
421
$19,024
$(24,905)
1,069,450
$6,610
954,426
-
70
17,525
17,598
24,644
36,958
24,058
31,652
$256,205
1,101,352
$276,055
1,018,652
1,357,557
1,294,707
1,153
-
31,554
25,954
17,647
36,298
7,366
11,858
1,020
11,432
1,018
11,138
(13,905)
(32,510)
(12,534)
(36,988)
140,863
127,231
$1,574,728
$1,477,460
Preferred stock (no par value; authorized 500,000 shares)
-
-
$1,574,728
$1,477,460
Total assets
Other comprehensive loss
Other assets
Net income
Cash dividends ($.54 per share)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Purchase of treasury stock (44,760 shares)
Marketable equity securities and other investments
Other comprehensive loss
Loans held for sale
Cash dividends ($.42 per share)
Loans, net of allowance for credit losses of $14,195 and $14,541,
Purchase of treasury stock (131,500 shares)
respectively
Stock-based compensation expense
Foreclosed assets and other real estate owned, net
Restricted stock vested (7,854 shares)
Premises and equipment, net
2
-
-
-
-
-
-
-
-
-
16
239
254
11,386
-
(1,544)
-
-
-
-
365,618
-
391,334
254
3,596
-
4,076
11,386
5,718
(4,776)
990
-
-
-
(4,172)
-
-
1,069,450
-
17,525
3,945
(4,776)
421
(1,544)
(4,172)
954,426
16
70
241
17,598
Balance – December 31, 2021
Bank owned life insurance
1,015
10,768
152,903
(11,002)
24,644
1,543
155,227
24,058
-
-
-
-
-
3
-
-
-
-
25
345
13,626
-
(1,932)
-
-
-
-
-
-
(1,532)
-
-
1,018
11,138
164,597
(12,534)
36,958
-
31,652
13,626
$1,574,728
(38,531)
$1,477,460
(38,531)
-
-
-
-
(1,932)
(1,532)
25
348
-
-
-
-
-
-
-
-
-
-
-
16
278
(2,029)
14,546
-
(2,288)
-
-
-
(36,988)
$256,205
1,101,352
1,357,557
1,153
31,554
-
-
25,954
4,478
17,647
-
-
-
-
(1,371)
1,433,865
-
-
127,231
$276,055
1,018,652
1,294,707
(2,029)
-
14,546
36,298
4,478
7,366
(2,288)
11,858
(1,371)
1,350,229
16
280
$11,432
$174,826 $(13,905)
-
$(32,510)
-
$140,863
Stock-based compensation expense
Liabilities:
Restricted stock vested (11,406 shares)
Deposits:
Balance – December 31, 2022
Noninterest-bearing
Interest-bearing
Effect of change in accounting principle -
Total deposits
Adoption of ASU 2016-13
Federal funds purchased
Net income
Securities sold under agreements to repurchase
Other comprehensive income
Federal Home Loan Bank (FHLB) and other borrowings
Cash dividends ($.64 per share)
Accrued interest payable and other liabilities
Stockholders' equity:
Restricted stock vested (8,810 shares)
Preferred stock (no par value; authorized 500,000 shares)
Balance – December 31, 2023
Common stock ($.25 par value; authorized 10,000,000 shares;
4,080,304 and 4,071,494 shares issued, respectively)
Additional paid-in capital
$1,020
2
-
-
-
-
-
-
-
-
174,826
164,597
Retained earnings
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
1,020
11,432
1,018
11,138
174,826
164,597
(13,905)
(32,510)
(12,534)
(36,988)
140,863
127,231
$1,574,728
$1,477,460
Total liabilities
1,433,865
1,350,229
Purchase of treasury stock (60,000 shares)
Total liabilities
Stock-based compensation expense
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
13
2023 Annual Report
ASSETS
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Net income
Adjustments to reconcile net income to net cash and cash
equivalents provided by operating activities:
Total cash and cash equivalents
Provision for credit losses
Interest-bearing deposits in banks - term deposits
Foreclosed asset valuation losses
Depreciation
Debt securities:
Net amortization of securities premiums
Debt securities available-for-sale (AFS)
Originations of loans held-for-sale
Debt securities held-to-maturity (HTM)
Proceeds from sales of loans held-for-sale
Marketable equity securities and other investments
Net gains on sales of mortgage loans
Loans held for sale
Income on bank owned life insurance
Loans, net of allowance for credit losses of $14,195 and $14,541,
Gain on death benefits
respectively
Deferred income tax expense (benefit)
Foreclosed assets and other real estate owned, net
Stock-based compensation expense
Premises and equipment, net
Restricted stock expense
Bank owned life insurance
Net loss (gain) on the sales and calls of AFS securities
Other assets
Net gain on the sales of foreclosed assets
Change in mortgage servicing rights
Total assets
Net change in:
Other assets
Accrued interest payable and other liabilities
LIABILITIES AND STOCKHOLDERS’ EQUITY
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Liabilities:
Net change in interest-bearing deposits in banks - term deposits
Proceeds from sales of AFS securities
Deposits:
Noninterest-bearing
Interest-bearing
Proceeds from maturities, call, and paydowns of AFS securities
Proceeds from maturities, call, and paydowns of HTM securities
Total deposits
Purchases of AFS securities
Federal funds purchased
Purchases of bank owned life insurance
Securities sold under agreements to repurchase
Proceeds from death benefits of bank owned life insurance
Federal Home Loan Bank (FHLB) and other borrowings
(Purchase) redemption of marketable equity securities, net
Accrued interest payable and other liabilities
Loan originations and principal collections, net
Total liabilities
Proceeds from sale of foreclosed assets
Purchases of premises and equipment, net
Stockholders' equity:
Net cash used in investing activities
Preferred stock (no par value; authorized 500,000 shares)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits
Common stock ($.25 par value; authorized 10,000,000 shares;
Net change in securities sold under agreements to repurchase
4,080,304 and 4,071,494 shares issued, respectively)
Additional paid-in capital
Cash dividends paid
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
(000s omitted except share data)
(000s omitted except share data)
December 31, 2023 and 2022
December 31, 2023, 2022, and 2021
2023
2022
2021
2023
2022
$22,168
$28,354
$14,546
$13,626
20,828
2,722
45,718
1,105
552
-
4,511
64
1,098
2,160
(21,310)
21,184
(443)
(585)
-
1,106
3,019
365,618
(39,073)
3,596
5,718
41,631
(725)
990
(547)
(33)
292
1,069,450
115
16
-
25
7,975
$11,386
7,493
43,822
756
195
6,058
1,053
4,570
391,334
(89,783)
4,076
92,511
3,945
(2,136)
421
(504)
(50)
954,426
(86)
70
16
280
17,525
348
241
17,598
185
24,644
246
(43)
(67)
36,958
(262)
(1,208)
$1,574,728
(126)
24,058
(121)
31,652
(523)
$1,477,460
(6,507)
5,796
$17,707
(270)
1,463
(878)
2,138
$20,077
$18,659
1,547
6,140
3,086
13,501
25,707
10,348
$256,205
1,101,352
45,029
510
(9,604)
345
1,357,557
1,153
(64,023)
-
-
(1,773)
(119,588)
31,554
(930)
662
25,954
(1,678)
17,647
(109,201)
733
1,433,865
237
16,899
$276,055
115,632
1,018,652
340
1,294,707
(219,357)
-
-
36,298
938
7,366
(975)
11,858
(28,059)
1,350,229
266
(1,025)
(89,992)
(1,573)
(455)
(114,644)
(111,685)
-
-
62,843
59,263
80,984
(4,744)
(2,288)
1,020
11,432
(1,932)
1,189
3,960
1,018
11,138
(1,544)
Retained earnings
Net change in federal funds purchased
1,153
174,826
(533)
164,597
(1,591)
Purchase of treasury stock
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Proceeds from FHLB and other borrowings
Accumulated other comprehensive loss
Payments on FHLB and other borrowings
Total stockholders' equity
Net cash provided by financing activities
Total liabilities and stockholders' equity
Net Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(1,371)
(13,905)
(1,532)
64,441
(32,510)
18,950
(45,853)
140,863
(28,660)
46,745
$1,574,728
(47,822)
(4,172)
(12,534)
5,000
(36,988)
(22,712)
127,231
59,925
$1,477,460
(33,101)
91,644
$43,822
124,745
$91,644
74,181
1,896
43,822
$45,718
14
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
2023 Annual Report
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash and due from banks
Interest-bearing deposits in banks
Net income
Federal funds sold
Adjustments to reconcile net income to net cash and cash
equivalents provided by operating activities:
Total cash and cash equivalents
Provision for credit losses
Interest-bearing deposits in banks - term deposits
Foreclosed asset valuation losses
Depreciation
Debt securities:
Net amortization of securities premiums
Debt securities available-for-sale (AFS)
Originations of loans held-for-sale
Debt securities held-to-maturity (HTM)
Proceeds from sales of loans held-for-sale
Marketable equity securities and other investments
Net gains on sales of mortgage loans
Loans held for sale
Income on bank owned life insurance
Loans, net of allowance for credit losses of $14,195 and $14,541,
Gain on death benefits
respectively
Deferred income tax expense (benefit)
Foreclosed assets and other real estate owned, net
Stock-based compensation expense
Premises and equipment, net
Restricted stock expense
Bank owned life insurance
Net loss (gain) on the sales and calls of AFS securities
Other assets
Net gain on the sales of foreclosed assets
Change in mortgage servicing rights
Total assets
Net change in:
Other assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accrued interest payable and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Liabilities:
Net change in interest-bearing deposits in banks - term deposits
Deposits:
Proceeds from sales of AFS securities
Noninterest-bearing
Proceeds from maturities, call, and paydowns of AFS securities
Interest-bearing
Proceeds from maturities, call, and paydowns of HTM securities
Total deposits
Purchases of AFS securities
Federal funds purchased
Purchases of bank owned life insurance
Securities sold under agreements to repurchase
Proceeds from death benefits of bank owned life insurance
Federal Home Loan Bank (FHLB) and other borrowings
(Purchase) redemption of marketable equity securities, net
Accrued interest payable and other liabilities
Loan originations and principal collections, net
Proceeds from sale of foreclosed assets
Total liabilities
Purchases of premises and equipment, net
Stockholders' equity:
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock (no par value; authorized 500,000 shares)
Net change in deposits
Common stock ($.25 par value; authorized 10,000,000 shares;
4,080,304 and 4,071,494 shares issued, respectively)
Net change in securities sold under agreements to repurchase
Additional paid-in capital
Cash dividends paid
Retained earnings
Net change in federal funds purchased
Purchase of treasury stock
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Proceeds from FHLB and other borrowings
Accumulated other comprehensive loss
Payments on FHLB and other borrowings
Total stockholders' equity
Net cash provided by financing activities
Total liabilities and stockholders' equity
Net Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
(000s omitted except share data)
(000s omitted except share data)
December 31, 2023 and 2022
December 31, 2023, 2022, and 2021
2023
2022
2023
2022
2021
$22,168
$28,354
$14,546
20,828
$13,626
2,722
45,718
7,975
$11,386
7,493
43,822
756
1,053
4,570
391,334
(89,783)
4,076
92,511
3,945
(2,136)
421
(504)
(50)
552
64
1,106
3,019
(725)
(547)
(33)
1,105
1,098
2,160
(443)
(585)
-
365,618
(21,310)
21,184
3,596
(39,073)
41,631
5,718
990
(6,507)
5,796
$17,707
1,547
13,501
(270)
1,463
(878)
2,138
$20,077
$18,659
6,140
3,086
$256,205
10,348
16,899
$276,055
25,707
1,101,352
45,029
1,018,652
115,632
510
(9,604)
345
1,357,557
1,153
(64,023)
1,294,707
340
(219,357)
-
-
-
31,554
(930)
662
(1,773)
(119,588)
25,954
(1,678)
17,647
(109,201)
733
1,433,865
237
-
36,298
938
7,366
(975)
11,858
(28,059)
1,350,229
266
(1,025)
(89,992)
(1,573)
(455)
(114,644)
(111,685)
(1,371)
(13,905)
(1,532)
(12,534)
(4,172)
64,441
(32,510)
18,950
(36,988)
5,000
(45,853)
140,863
(28,660)
46,745
$1,574,728
(22,712)
127,231
59,925
$1,477,460
(33,101)
124,745
$91,644
(47,822)
91,644
$43,822
74,181
1,896
43,822
$45,718
ASSETS
ASSETS
Cash and due from banks
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
Interest-bearing deposits in banks
Federal funds sold
INFORMATION:
Cash paid for:
Total cash and cash equivalents
Interest
-
4,511
6,058
195
Interest-bearing deposits in banks - term deposits
Taxes
Debt securities:
Debt securities available-for-sale (AFS)
SUPPLEMENTAL DISCLOSURES OF NONCASH
Debt securities held-to-maturity (HTM)
FINANCING ACTIVITIES:
Marketable equity securities and other investments
Foreclosed assets acquired in settlement of loans
Loans held for sale
Loans, net of allowance for credit losses of $14,195 and $14,541,
292
1,069,450
115
954,426
(86)
16
-
25
70
16
respectively
Foreclosed assets and other real estate owned, net
280
17,525
348
17,598
241
Premises and equipment, net
185
24,644
246
(43)
(67)
36,958
(262)
(1,208)
$1,574,728
24,058
(126)
31,652
(121)
(523)
$1,477,460
Bank owned life insurance
Other assets
Total assets
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 other borrowings
Accrued interest payable and other liabilities
Total liabilities
Stockholders' equity:
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
(000s omitted except share data)
(000s omitted except share data)
December 31, 2023 and 2022
December 31, 2023, 2022, and 2021
2023
2022
2023
2022
2021
$22,168
$28,354
20,828
2,722
45,718
7,975
7,493
43,822
$19,940
$6,505
$6,441
$3,600
4,511
$2,882
6,058
$3,109
$620
365,618
391,334
3,596
4,076
5,718
$70
990
3,945
$67
421
1,069,450
954,426
-
70
17,525
17,598
24,644
36,958
24,058
31,652
$1,574,728
$1,477,460
$256,205
1,101,352
$276,055
1,018,652
1,357,557
1,294,707
1,153
-
31,554
25,954
17,647
36,298
7,366
11,858
1,433,865
1,350,229
-
-
Preferred stock (no par value; authorized 500,000 shares)
-
-
62,843
59,263
80,984
(4,744)
1,020
1,189
1,018
3,960
(2,288)
11,432
(1,932)
11,138
(1,544)
Common stock ($.25 par value; authorized 10,000,000 shares;
4,080,304 and 4,071,494 shares issued, respectively)
Additional paid-in capital
1,153
174,826
(533)
164,597
(1,591)
Retained earnings
Treasury stock, at cost (569,079 and 509,079 shares, respectively)
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
1,020
11,432
1,018
11,138
174,826
164,597
(13,905)
(32,510)
(12,534)
(36,988)
140,863
127,231
$1,574,728
$1,477,460
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
15
2023 Annual Report
(1) Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
(000s omitted except share data)
The accounting and reporting principles 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:
(a) Nature of Operations
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, 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.
(b) Basis of Consolidation
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.
(c) Subsequent Events
The Company has evaluated subsequent events for recognition and disclosure through March 12, 2024,
which is the date the financial statements were available to be issued.
(d) Use of Estimates
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates. The allowance for credit losses, deferred tax
assets, fair values of securities, foreclosed assets and financial instruments are particularly susceptible
to change in the near-term.
(e) Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents include cash and due from
banks, interest-bearing deposits in banks, and federal funds sold, all of which generally mature within
ninety days.
(f) Interest-bearing Deposits in Banks
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.
16
2023 Annual Report
(1) Summary of Significant Accounting Policies
The accounting and reporting principles 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:
(a) Nature of Operations
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, 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.
(b) Basis of Consolidation
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.
(c) Subsequent Events
The Company has evaluated subsequent events for recognition and disclosure through March 12, 2024,
which is the date the financial statements were available to be issued.
(d) Use of Estimates
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates. The allowance for credit losses, deferred tax
assets, fair values of securities, foreclosed assets and financial instruments are particularly susceptible
to change in the near-term.
(e) Cash and Cash Equivalents
ninety days.
(f) Interest-bearing Deposits in Banks
For purposes of the statements of cash flows, cash and cash equivalents include cash and due from
banks, interest-bearing deposits in banks, and federal funds sold, all of which generally mature within
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.
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(g) Debt Securities
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.
Effective January 1, 2023, the Company uses a current expected credit loss ("CECL") model to estimate
the allowance for credit losses on securities held to maturity. The CECL model considers historical loss
rates and other qualitative adjustments, as well as a new forward-looking component that considers
reasonable and supportable forecasts over the expected life.
Management believes the Company will collect all amounts owed on securities held to maturity which
are issued by highly rated municipalities or local municipalities with which the Company holds significant
banking relationships. Management evaluates municipal securities held to maturity using a probability
of default method. The probability of default method estimates the probability a security with a certain
credit rating or issuer characteristics will default during its remaining contractual term (probability of
default) and how much loss is expected to be incurred if a security defaults (loss given default rate).
The Company obtains information from our historical loss rate to estimate the probability of default for
each credit rating based on the remaining term of the security and the loss given default rate with the
exception of certain immaterial held to maturity securities.
The past due status of each security is based on the contractual terms of the security. The accrual of
interest on a security is discontinued when the security becomes 90 days delinquent or whenever
management believes the issuer will be unable to make payments as they become due. When
securities are placed on nonaccrual status, all unpaid accrued interest is reversed against interest
income. The Company excludes accrued interest receivable from the amortized cost basis of securities
held to maturity when estimating credit losses and when presenting required disclosures in the financial
statements. There was $6 and $7 of accrued interest receivable on held to maturity securities as of
December 31, 2023 and 2022, respectively.
The Company conducts periodic reviews of available-for-sale securities with declines in fair value below
their cost to evaluate for potential impairment. In evaluating available-for-sale securities for potential
impairment, management considers (1) the length of time and the extent to which the fair value has
been less than amortized 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. If the Company determines that it is more
likely than not that it will sell the security before recovery of its amortized cost basis, the Company will
record an allowance for credit losses related to securities available-for-sale with an offsetting entry to
the provision for credit losses on securities on the statement of operations.
Prior to the adoption of ASU 2016-13 (CECL) on January 1, 2023, the Company evaluated its available
for sale securities in accordance with the methodology specified in the preceding paragraph except that
the credit portion of the impairment would reduce the amortized cost basis of the security.
17
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(h) Marketable Equity Securities and Other Investments
Notes to Consolidated Financial Statements
(000s omitted except share data)
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 and a participating interest in an energy LLC. The
Company has elected to account for equity securities without readily determinable fair values using the
alternative measurement method. Under this method, those 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.
(i) Loans Held for Sale
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 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.
(j) Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
payoff; generally, are reported at their outstanding unpaid principal balances adjusted for purchase
premiums or discounts, charge-offs, and an allowance for credit 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
principal and interest amounts contractually due are brought current and future payments are reasonably
assured.
Loan-origination fees 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.
18
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(h) Marketable Equity Securities and Other Investments
(k) Allowance for Credit Losses and Unfunded Commitments
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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 and a participating interest in an energy LLC. The
Company has elected to account for equity securities without readily determinable fair values using the
alternative measurement method. Under this method, those 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.
(i) Loans Held for Sale
to income.
(j) Loans
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
Mortgage loans held for sale are generally sold with 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.
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 credit 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
principal and interest amounts contractually due are brought current and future payments are reasonably
assured.
Loan-origination fees 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.
The allowance for credit losses (ACL) on loans is a valuation allowance that is deducted from the loans'
amortized cost basis to present the net amount expected to be collected on the Company's loan
portfolio. The ACL on loans is established through provisions for credit losses charged against earnings.
When available information confirms that specific loans, or portions thereof, are uncollectible, these
amounts are charged against the ACL on loans, and subsequent recoveries, if any, are credited to the
ACL on loans.
Effective January 1, 2023, the Company uses a current expected credit loss ("CECL") model to estimate
the ACL on loans. The CECL model considers historical loss rates and other qualitative adjustments,
as well as a new forward-looking component that considers reasonable and supportable forecasts over
the expected life of each loan. To develop the ACL on loans estimate under the CECL model, the
Company segments the loan portfolio into loan pools based on loan type and similar credit risk
elements; performs an individual evaluation of certain collateral dependent and other credit-
deteriorated loans; calculates the historical loss rates for the segmented loan pools; applies the loss
rates over the calculated life of the collectively evaluated loan pools; adjusts for forecasted macro-level
economic conditions and other anticipated changes in credit quality; and determines qualitative
adjustments based on factors and conditions unique to the Company's loan portfolio.
Management considers the following when assessing the risk in the loan portfolio segments:
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
sufficiency of cash flows 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 sufficiency
of cash flows 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 sufficiency of cash flows to
service debt and is periodically updated during the life of the loan.
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 score.
Under the CECL model, loans that do not share similar risk characteristics with loans in their respective
pools are individually evaluated for expected credit losses and are excluded from the collectively
evaluated loan credit loss estimates.
19
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(k) Allowance for Credit Losses and Unfunded Commitments (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
Management evaluates all collectively evaluated loan pools using the weighted average remaining life
("remaining life") methodology. The remaining life methodology applies calculated quarterly net loss
rates to collectively evaluated loan pools on a periodic basis based on the estimated remaining life of
each pool. The estimated losses under the remaining life methodology are then adjusted for qualitative
factors deemed appropriate by management.
The estimated remaining life of each pool is determined using quarterly, pool-based attrition
measurements using the Company's loan-level historical data. The Company's historical call report
data is utilized for historical loss rate calculations, and the lookback period for each collectively
evaluated loan pool is determined by management based upon the estimated remaining life of the pool.
Forecasted historical loss rates are calculated using the Company's historical data based on the
lookback and forecast period inputs by management.
The quantitative analysis described above is supplemented with other qualitative factors based on the
risks present for each collectively evaluated loan pool. These qualitative factors include: levels of and
trends in delinquencies and nonaccrual 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 other relevant staff; national and local economic trends and conditions; industry
conditions; and effects of changes in credit concentrations.
In addition to the ACL on loans, the Company maintains a reserve for unfunded loan commitments at
a level that management believes is adequate to absorb estimated probable credit losses over the
contractual terms of the Company’s noncancellable loan commitments. The reserve for unfunded loan
commitments, which is included in accrued interest payable and other liabilities on the accompanying
Consolidated Balance Sheets, is established through provisions for credit losses charged against
earnings.
Unfunded loan commitments are segmented into the same pools used for estimating the ACL on loans.
Estimated credit losses on unfunded loan commitments are based on the same methodology, inputs,
and assumptions used to estimate credit losses on collectively evaluated loans, adjusted for estimated
funding probabilities. The estimated funding probabilities represent management's estimate of the
amount of the current unfunded loan commitment that will be funded over the remaining contractual life
of the commitment and is based on historical data.
The Company may modify loans to borrowers experiencing financial difficulty and grant certain
concessions that include principal forgiveness, a term extension, an other-than-insignificant payment
delay, an interest rate reduction, or a combination of these concessions. An assessment of whether the
borrower is experiencing financial difficulty is made at the time of the loan modification.
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been
deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis
of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.
Prior to the implementation of ASU 2016-13 (CECL) on January 1, 2023, the ACL was subject to the
guidance included in ASC 310 and ASC 450. Under that guidance, the Company was required to use
an incurred loss methodology to estimate credit losses that were estimated to be incurred in the loan
portfolio and that could ultimately materialize into confirmed losses in the form of charge-offs. The
incurred loss methodology was a backward-looking approach to loss recognition and based on the
concept of a triggering event having taken place, causing a loss to be inherent within the portfolio.
Additionally, loans that were identified as impaired under the definition of ASC 310, were required to
be assessed on an individual basis. The ACL and resulting provision expense levels for comparative
periods presented were estimated in accordance with these requirements.
20
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(k) Allowance for Credit Losses and Unfunded Commitments (continued)
(k) Allowance for Credit Losses and Unfunded Commitments (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
Management evaluates all collectively evaluated loan pools using the weighted average remaining life
("remaining life") methodology. The remaining life methodology applies calculated quarterly net loss
rates to collectively evaluated loan pools on a periodic basis based on the estimated remaining life of
each pool. The estimated losses under the remaining life methodology are then adjusted for qualitative
factors deemed appropriate by management.
The estimated remaining life of each pool is determined using quarterly, pool-based attrition
measurements using the Company's loan-level historical data. The Company's historical call report
data is utilized for historical loss rate calculations, and the lookback period for each collectively
evaluated loan pool is determined by management based upon the estimated remaining life of the pool.
Forecasted historical loss rates are calculated using the Company's historical data based on the
lookback and forecast period inputs by management.
The quantitative analysis described above is supplemented with other qualitative factors based on the
risks present for each collectively evaluated loan pool. These qualitative factors include: levels of and
trends in delinquencies and nonaccrual 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 other relevant staff; national and local economic trends and conditions; industry
conditions; and effects of changes in credit concentrations.
In addition to the ACL on loans, the Company maintains a reserve for unfunded loan commitments at
a level that management believes is adequate to absorb estimated probable credit losses over the
contractual terms of the Company’s noncancellable loan commitments. The reserve for unfunded loan
commitments, which is included in accrued interest payable and other liabilities on the accompanying
Consolidated Balance Sheets, is established through provisions for credit losses charged against
earnings.
Unfunded loan commitments are segmented into the same pools used for estimating the ACL on loans.
Estimated credit losses on unfunded loan commitments are based on the same methodology, inputs,
and assumptions used to estimate credit losses on collectively evaluated loans, adjusted for estimated
funding probabilities. The estimated funding probabilities represent management's estimate of the
amount of the current unfunded loan commitment that will be funded over the remaining contractual life
of the commitment and is based on historical data.
The Company may modify loans to borrowers experiencing financial difficulty and grant certain
concessions that include principal forgiveness, a term extension, an other-than-insignificant payment
delay, an interest rate reduction, or a combination of these concessions. An assessment of whether the
borrower is experiencing financial difficulty is made at the time of the loan modification.
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been
deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis
of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.
Prior to the implementation of ASU 2016-13 (CECL) on January 1, 2023, the ACL was subject to the
guidance included in ASC 310 and ASC 450. Under that guidance, the Company was required to use
an incurred loss methodology to estimate credit losses that were estimated to be incurred in the loan
portfolio and that could ultimately materialize into confirmed losses in the form of charge-offs. The
incurred loss methodology was a backward-looking approach to loss recognition and based on the
concept of a triggering event having taken place, causing a loss to be inherent within the portfolio.
Additionally, loans that were identified as impaired under the definition of ASC 310, were required to
be assessed on an individual basis. The ACL and resulting provision expense levels for comparative
periods presented were estimated in accordance with these requirements.
Under the incurred loss methodology, the allowance for loan losses was a valuation allowance for
probable incurred credit losses. Loan losses were charged against the allowance when management
believed the uncollectibility of a loan balance was confirmed. Subsequent recoveries, if any, were
credited to the allowance. Management estimated 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 could
be made for specific loans, but the entire allowance was available for any loan that, in management's
judgment, should be charged off.
The allowance consisted of specific and general components. The specific component related to loans
that were individually classified as impaired. A loan was impaired when, based on current information
and events, it was 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 had been modified resulting in
a concession, and for which the borrower is experiencing financial difficulties, were considered troubled
debt restructurings (TDRs) and classified as impaired.
Factors considered by management in determining impairment included payment status, collateral
value, and the probability of collecting scheduled principal and interest payments when due. Loans that
experienced insignificant payment delays and payment shortfalls generally were not classified as
impaired. Management determined 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 were individually evaluated for impairment. If a loan was
impaired, a portion of the allowance was allocated so that the loan was 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 was expected from the collateral.
TDRs were individually evaluated for impairment and included in the separately identified impairment
disclosures. TDRs were measured at the present value of estimated future cash flows using the loan’s
effective rate at inception. If a TDR was considered to be a collateral dependent loan, the loan was
reported, net, at the fair value of the collateral. For TDRs that subsequently defaulted, the Company
determined 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 covered loans that were collectively evaluated for impairment. Large groups of
smaller balance homogeneous loans, such as consumer and residential real estate loans, were
collectively evaluated for impairment, and accordingly, they were not included in the impairment
disclosures. The general allowance component also included loans that were 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 were not considered impaired.
The general component was based on historical loss experience adjusted for current qualitative factors.
The historical loss experience was determined by portfolio segment or loan class and was based on
the actual loss history experienced by the Company. This actual loss experience was supplemented
with other economic factors based on the risks present for each portfolio segment or loan class.
These economic factors included: 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.
21
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(l) Loan Commitments
Notes to Consolidated Financial Statements
(000s omitted except share data)
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.
(m) Loan Servicing
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.
(n) Rate Lock Commitments
Commitments to fund mortgage loans (interest-rate lock) 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.
(o) Foreclosed Assets and Other Real Estate Owned
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.
(p) Premises and Equipment
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 as indicated below:
3 – 5 Years Technology equipment (computers, copiers, etc.), company vehicles
5 – 10 Years Furnishings, building infrastructure and major repairs, security technology
10 – 20 Years Remodeling / updates of existing facilities, parking lots
20 – 40 Years Major facility renovations, building expansions, new facilities
(q) Bank-Owned Life Insurance
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 could be realized upon
immediate liquidation.
22
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(l) Loan Commitments
(r) Significant Group Concentrations of Credit Risk
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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.
(m) Loan Servicing
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.
(n) Rate Lock Commitments
Commitments to fund mortgage loans (interest-rate lock) 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.
(o) Foreclosed Assets and Other Real Estate Owned
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.
(p) Premises and Equipment
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 as indicated below:
3 – 5 Years Technology equipment (computers, copiers, etc.), company vehicles
5 – 10 Years Furnishings, building infrastructure and major repairs, security technology
10 – 20 Years Remodeling / updates of existing facilities, parking lots
20 – 40 Years Major facility renovations, building expansions, new facilities
(q) Bank-Owned Life Insurance
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 could be realized upon
immediate liquidation.
Most of the Company’s activities are with customers located in the area and communities noted above.
Note 3 details the type 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.
(s) Revenue from Contracts with Customers
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 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 performance obligations within the contract; and (5) recognize revenue when
the performance obligations are satisfied.
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 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 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:
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 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 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
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 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.
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 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 subject to a claw-back in future periods.
23
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(s) Revenue from Contracts with Customers (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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 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 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.
(t) Income Taxes
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.
At December 31, 2023 and 2022, the Company evaluated tax positions taken for filing with the Internal
Revenue Service and all state jurisdictions in which it operates. The Company believes that income tax
filing positions will be sustained under examination and does not anticipate any adjustments that would
result in a material adverse effect on the Company's financial condition, results of operations, or cash
flows. Accordingly, the Company has not recorded any reserves or related accruals for interest and
penalties for uncertain tax positions at December 31, 2023 and 2022.
(u) Comprehensive Income (Loss)
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 sheets, net of taxes. Such items, along with net income, are components of
comprehensive income.
(v) Earnings Per Share
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.
(w) Loss Contingencies
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 are such matters that could
have a material effect on the financial statements.
24
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(s) Revenue from Contracts with Customers (continued)
(x) Transfers of Financial Assets
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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 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 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.
(t) Income Taxes
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.
At December 31, 2023 and 2022, the Company evaluated tax positions taken for filing with the Internal
Revenue Service and all state jurisdictions in which it operates. The Company believes that income tax
filing positions will be sustained under examination and does not anticipate any adjustments that would
result in a material adverse effect on the Company's financial condition, results of operations, or cash
flows. Accordingly, the Company has not recorded any reserves or related accruals for interest and
penalties for uncertain tax positions at December 31, 2023 and 2022.
(u) Comprehensive Income (Loss)
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 sheets, net of taxes. Such items, along with net income, are components of
comprehensive income.
(v) Earnings Per Share
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.
(w) Loss Contingencies
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 are such matters that could
have a material effect on the financial statements.
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.
(y) Trust Assets
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.
(z) Securities Sold Under Agreements to Repurchase
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.
(aa) Stock Compensation Plans
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.
(bb) Advertising
Advertising costs are expensed as incurred.
(cc) Reclassifications
Certain amounts in the 2021 and 2022 financial statements have been reclassified to conform to the
2023 presentation.
(dd) New Accounting Pronouncements
ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments - This standard significantly
changes how financial assets measured at amortized cost are presented. Such assets, which include
most loans and securities held to maturity, are presented at the net amount expected to be collected
over their remaining contractual lives. Estimated credit losses are based on relevant information about
historical experience, current conditions, and reasonable and supportable forecasts that affect the
collectability of the reported amounts. The standard also changes 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. As a result of the adoption of the ASU, the Company
recorded a reduction to retained earnings of $2,029 as of January 1, 2023, as a cumulative effect of
change in accounting principle. The transition adjustment included an increase to the ACL on loans of
$2,452, the recording of the unfunded commitment liability of $387, and a corresponding increase in
deferred tax assets of $810. Results for the year ended December 31, 2023, are presented under
Accounting Standards Codification (ASC) 326 while prior period amounts continue to be reported in
accordance with previously applicable accounting standards generally accepted in the United States
(US GAAP).
25
2023 Annual Report
(1) Summary of Significant Accounting Policies (continued)
(dd) New Accounting Pronouncements (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
ASU No. 2022-02, Troubled Debt Restructurings and Vintage Disclosures, Topic 326 (Financial
Instruments-Credit Losses) – This standard eliminates the recognition and measurement guidance for
troubled debt restructurings by creditors under ASC Subtopic 310-40, Receivables-Troubled Debt
Restructurings by Creditors, and, instead, requires the Company to evaluate (consistent with other loan
modification accounting standards) whether a loan modification represents a new loan or a continuation
of an existing loan. The amendments enhance existing disclosure requirements, and introduce new
requirements related to certain modifications of loans made to borrowers experiencing financial
difficulty. ASU 2022-02 also requires that public business entities disclose current-period gross charge-
offs by year of origination for financing receivables and net investments in leases within the scope of
ASC Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost. The
Company adopted ASU No. 2022-02 on January 1, 2023, on a prospective basis. See Note 4 for new
disclosures related to the new accounting standard.
(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. 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, 2023 are as follows:
2024
2025
2026
2027 and thereafter
$2,327
1,437
747
-
$4,511
26
2023 Annual Report
ASU No. 2022-02, Troubled Debt Restructurings and Vintage Disclosures, Topic 326 (Financial
Instruments-Credit Losses) – This standard eliminates the recognition and measurement guidance for
troubled debt restructurings by creditors under ASC Subtopic 310-40, Receivables-Troubled Debt
Restructurings by Creditors, and, instead, requires the Company to evaluate (consistent with other loan
modification accounting standards) whether a loan modification represents a new loan or a continuation
of an existing loan. The amendments enhance existing disclosure requirements, and introduce new
requirements related to certain modifications of loans made to borrowers experiencing financial
difficulty. ASU 2022-02 also requires that public business entities disclose current-period gross charge-
offs by year of origination for financing receivables and net investments in leases within the scope of
ASC Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost. The
Company adopted ASU No. 2022-02 on January 1, 2023, on a prospective basis. See Note 4 for new
disclosures related to the new accounting standard.
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. 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, 2023 are as follows:
2024
2025
2026
2027 and thereafter
$2,327
1,437
747
-
$4,511
(1) Summary of Significant Accounting Policies (continued)
(2)
Debt Securities
(dd) New Accounting Pronouncements (continued)
The following tables reflect the amortized costs and approximate fair values of securities at December 31:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
(2)
Cash Equivalents and Interest-Bearing Deposits
State and municipal
$4,076
$4
$(246)
$3,834
Held-to-Maturity
Gross
Gross
Unrealized
Unrealized
2023
Amortized Cost
Gains
Losses
Estimated
Fair Value
State and municipal
$3,596
$ -
$(231)
$3,365
Held-to-Maturity
Gross
Gross
Unrealized
Unrealized
2022
Amortized Cost
Gains
Losses
Estimated
Fair Value
Available-for-Sale
Gross
Gross
Unrealized
Unrealized
2023
Amortized Cost
Gains
Losses
Estimated
Fair Value
U.S. Government sponsored entities
$129,106
$8
$(12,685)
$116,429
and U.S. agencies
State and municipal
Agency mortgage-backed
Corporate debt securities
110,943
169,542
1,499
130
9
56
(9,600)
(23,390)
-
101,473
146,161
1,555
$411,090
$203
$(45,675)
$365,618
Available-for-Sale
Gross
Gross
Unrealized
Unrealized
2022
Amortized Cost
Gains
Losses
Estimated
Fair Value
U.S. Government sponsored entities
$123,066
$4
$(15,140)
$107,930
and U.S. agencies
State and municipal
Agency mortgage-backed
130,888
189,115
146
-
(12,499)
(24,246)
118,535
164,869
$443,069
$150
$(51,885)
$391,334
27
2023 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(3) Debt Securities (continued)
For the years ended December 31, 2023, 2022 and 2021, proceeds from sales of available-for-sale
securities amounted to $13,501, $10,348 and $16,899, 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
2023
$32
(217)
2022
2021
$170
(416)
$211
(85)
Securities with carrying amounts of approximately $264,449 and $217,957 at December 31, 2023 and 2022,
respectively, were pledged to secure public deposits and for other purposes as required or permitted by
law.
The amortized costs and estimated fair values of securities at December 31, 2023 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
Amortized Cost
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
$356
1,998
1,242
-
Estimated
Fair Value
$346
1,887
1,132
-
$3,596
$3,365
Available-for-Sale
Amortized Cost
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
$11,771
80,066
88,047
61,664
241,548
169,542
Estimated
Fair Value
$11,732
75,472
78,009
54,244
219,457
146,161
$411,090
$365,618
28
2023 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
(3) Debt Securities (continued)
(3) Debt Securities (continued)
For the years ended December 31, 2023, 2022 and 2021, proceeds from sales of available-for-sale
securities amounted to $13,501, $10,348 and $16,899, 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:
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,
2023 and 2022:
2023
$32
(217)
2022
2021
$170
(416)
$211
(85)
Realized gains
Realized losses
law.
Securities with carrying amounts of approximately $264,449 and $217,957 at December 31, 2023 and 2022,
respectively, were pledged to secure public deposits and for other purposes as required or permitted by
The amortized costs and estimated fair values of securities at December 31, 2023 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
Amortized Cost
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
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
Estimated
Fair Value
$346
1,887
1,132
-
Estimated
Fair Value
$11,732
75,472
78,009
54,244
219,457
146,161
$356
1,998
1,242
-
$11,771
80,066
88,047
61,664
241,548
169,542
2023
Held-to-Maturity
Less Than 12 Months
Gross
12 Months or Greater
Gross
Estimated
Unrealized
Fair Value
Loss
Number of
Securities
Estimated
Unrealized
Fair Value
Loss
Number of
Securities
State and municipal
$480
$18
1
$2,885
$213
9
2022
Held-to-Maturity
Less Than 12 Months
Gross
12 Months or Greater
Gross
Estimated
Unrealized
Fair Value
Loss
Number of
Securities
Estimated
Unrealized
Fair Value
Loss
Number of
Securities
State and municipal
$3,201
$246
10
$ -
$ -
-
2023
Available-for-Sale
Less Than 12 Months
12 Months or Greater
Gross
Gross
Estimated
Unrealized
Fair Value
Loss
Number of
Securities
Estimated
Fair Value
Unrealized
Loss
Number of
Securities
U.S. Government sponsored
$6,893
$32
14
$106,026
$12,653
174
Available-for-Sale
Amortized Cost
Total
$12,643
$351
35
$328,952
$45,324
$3,596
$3,365
entities and U.S. agencies
State and municipal
Agency mortgage-backed
5,750
-
319
-
21
-
78,245
144,681
9,281
23,390
293
428
895
$411,090
$365,618
U.S. Government sponsored
$41,193
$2,798
$78
$63,470
$12,342
98
2022
Available-for-Sale
Less Than 12 Months
12 Months or Greater
Gross
Gross
Estimated
Fair Value
Unrealized
Loss
Number of
Securities
Estimated
Fair Value
Unrealized
Loss
Number of
Securities
entities and U.S. agencies
State and municipal
Agency mortgage-backed
75,964
69,899
6,497
6,526
295
248
26,270
94,963
6,002
17,720
Total
$187,056
$15,821
621
$184,703
$36,064
83
187
368
29
2023 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(3) Debt Securities (continued)
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 other market conditions. The issuers continue to
make timely principal and interest payments on the bonds. The fair value is expected to recover as the
bonds approach their maturity dates.
Included in mortgage-backed securities are agency issued and government-sponsored enterprise issued
mortgage-backed securities. Agency-issued securities are generally guaranteed by a U.S. government
agency, such as the Government National Mortgage Association. Government-sponsored enterprises, such
as the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association, have an
implied guarantee by the U.S. government. The municipal bond portfolio consists of highly rated securities
rated A or better, all have made payments as agreed, and there is no other evidence of significant
deterioration in the underlying issuers’ financial positions. The Company evaluated whether the unrealized
losses in the investment portfolio were a result of credit losses or other factors and concluded the unrealized
losses were the result of other market conditions, primarily changes in interest rates, and therefore no credit
losses identified.
(4) Loans
The following table presents total loans at December 31, 2023 and 2022 by portfolio segment and class
of loan:
2023
2022
Commercial
Commercial & industrial
Commercial real estate
Commercial construction
Total commercial
Agriculture
Agriculture real estate
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family first lien
1 - 4 family junior lien
Residential construction
Total residential mortgage
Consumer
Auto
Consumer other
Total consumer
Other loans and leases
Gross loans
Allowance for credit losses
Unamortized deferred fees, net
Net loans
30
$222,760
303,056
51,612
577,428
176,878
112,455
289,333
91,567
29,379
5,193
126,139
58,199
17,857
76,056
15,170
1,084,126
14,195
481
$1,069,450
$212,449
284,826
29,197
526,472
147,486
96,211
243,697
90,108
25,377
12,692
128,177
43,445
13,619
57,064
13,671
969,081
14,541
114
$954,426
2023 Annual Report
(3) Debt Securities (continued)
(4) Loans (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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 other market conditions. The issuers continue to
make timely principal and interest payments on the bonds. The fair value is expected to recover as the
bonds approach their maturity dates.
Included in mortgage-backed securities are agency issued and government-sponsored enterprise issued
mortgage-backed securities. Agency-issued securities are generally guaranteed by a U.S. government
agency, such as the Government National Mortgage Association. Government-sponsored enterprises, such
as the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association, have an
implied guarantee by the U.S. government. The municipal bond portfolio consists of highly rated securities
rated A or better, all have made payments as agreed, and there is no other evidence of significant
deterioration in the underlying issuers’ financial positions. The Company evaluated whether the unrealized
losses in the investment portfolio were a result of credit losses or other factors and concluded the unrealized
losses were the result of other market conditions, primarily changes in interest rates, and therefore no credit
losses identified.
(4) Loans
of loan:
The following table presents total loans at December 31, 2023 and 2022 by portfolio segment and class
2023
2022
Commercial
Commercial & industrial
Commercial real estate
Commercial construction
Total commercial
Agriculture
Agriculture real estate
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family first lien
1 - 4 family junior lien
Residential construction
Consumer
Auto
Consumer other
Total consumer
Other loans and leases
Gross loans
Allowance for credit losses
Unamortized deferred fees, net
Net loans
Total residential mortgage
$222,760
303,056
51,612
577,428
176,878
112,455
289,333
91,567
29,379
5,193
126,139
58,199
17,857
76,056
15,170
1,084,126
14,195
481
$1,069,450
$212,449
284,826
29,197
526,472
147,486
96,211
243,697
90,108
25,377
12,692
128,177
43,445
13,619
57,064
13,671
969,081
14,541
114
$954,426
The Company’s allowance for credit losses on loans information for the year ended December 31, 2023, is
presented under ASC 326. The Company’s allowance for credit losses on loans information for the year
ended December 31, 2022 is presented under the incurred loss impairment model. Refer to the “New
Accounting Pronouncements” section of Note 1 for more information.
The Company’s activity in the allowance for credit losses for the years ended December 31, 2023 and 2022,
by loan segment is summarized below:
2023
Residential
Commercial
Agriculture
Mortgage
Consumer
Other
Total
Balance, beginning of period
$10,425
$2,396
$966
$667
$87
$14,541
Cumulative effect of change
in accounting principal
Provision
Charge-offs
Recoveries collected
2,105
409
4,010
663
264
227
-
-
(149)
32
63
21
80
107
203
17
152
58
61
5
2,452
833
4,337
706
Balance, end of period
$9,592
$2,887
$807
$668
$241
$14,195
2022
Residential
Commercial
Agriculture
Mortgage
Consumer
Other
Total
Balance, beginning of period
Provision
Charge-offs
Recoveries collected
$7,618
2,787
175
195
$4,236
(1,840)
-
-
Balance, end of period
$10,425
$2,396
$1,797
$269
$65
$13,985
(923)
78
170
$966
443
131
86
85
67
4
552
451
455
$667
$87
$14,541
Collateral dependent loans individually evaluated for purposes of the allowance for credit losses by collateral
type were as follows at December 31, 2023:
Commercial
Agriculture
Residential Mortgage
Consumer
Other
Total
$10,930
1,176
1,168
4,369
47
$17,690
31
2023 Annual Report
(4) Loans (continued)
Detailed analysis of loans evaluated for impairment by portfolio segment for the year ended December 31,
2022 follows:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Commercial Agriculture
Mortgage
Consumer Other
Total
Residential
Loans
Individually evaluated for impairment
$13,794
$271
$1,654
$126
$ -
$15,845
Collectively evaluated for impairment
512,678
243,426
126,523
56,938
13,671
953,236
Totals
$526,472
$243,697
$128,177
$57,064 $13,671 $969,081
Detailed information regarding impaired loans by class of loan as of December 31, 2022 follows:
Recorded
Principal
Related
Average
Interest
Investment
Balance
Allowance
Investment Recognized
Loans with no related allowance for loan losses:
Commercial
Agriculture
Residential mortgage
Consumer
Other
Totals
Loans with an allowance for loan losses:
Commercial
Agriculture
Residential mortgage
Consumer
Other
Totals
Grand Totals
$5,611
218
1,507
77
-
$6,229
741
2,303
89
-
N/A
N/A
N/A
N/A
N/A
$5,967
427
1,511
88
-
$271
48
295
5
-
7,414
9,362
7,993
619
8,182
8,199
4,256
9,447
480
53
147
49
-
71
160
49
-
53
19
33
-
56
152
55
-
-
6
6
-
8,431
8,479
4,361
9,710
492
$15,845
$17,841
$4,361
$17,703
$1,111
32
2023 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
The Company regularly evaluates various attributes of loans to determine the appropriateness of the
allowance for credit losses. The Company generally monitors credit quality indicators for all loans using the
following:
‘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.
Internally prepared ratings for business loans are updated at least annually. Residential real estate and
consumer loans are generally evaluated based on whether or not the loan is performing according to the
contractual terms of the loan as of the balance sheet date.
Information regarding the loan portfolio by risk classification and origination year for the year ended
December 31, 2023, follows:
7,414
9,362
7,993
619
Total commercial
87,688
183,275
100,762
37,157
20,648
83,014
64,884
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Amortized
Cost Basis
Commercial
Pass
Special Mention
Substandard
$86,334 $172,051
10,463
761
176
1,178
$99,760 $30,821 $20,024
71
553
1,939
4,397
-
1,002
$80,145
2,440
429
$61,303
130
3,451
(4) Loans (continued)
2022 follows:
Detailed analysis of loans evaluated for impairment by portfolio segment for the year ended December 31,
Commercial Agriculture
Mortgage
Consumer Other
Total
Residential
Loans
Totals
Individually evaluated for impairment
$13,794
$271
$1,654
$126
$ -
$15,845
Collectively evaluated for impairment
512,678
243,426
126,523
56,938
13,671
953,236
$526,472
$243,697
$128,177
$57,064 $13,671 $969,081
Detailed information regarding impaired loans by class of loan as of December 31, 2022 follows:
Loans with no related allowance for loan losses:
Loans with an allowance for loan losses:
Commercial
Agriculture
Residential mortgage
Consumer
Other
Totals
Commercial
Agriculture
Residential mortgage
Consumer
Other
Totals
Grand Totals
Recorded
Principal
Related
Average
Interest
Investment
Balance
Allowance
Investment Recognized
$5,611
218
1,507
77
-
$6,229
741
2,303
89
-
N/A
N/A
N/A
N/A
N/A
$5,967
427
1,511
88
-
$271
48
295
5
-
8,182
8,199
4,256
9,447
480
53
147
49
-
71
160
49
-
53
19
33
-
56
152
55
-
-
6
6
-
8,431
8,479
4,361
9,710
492
$15,845
$17,841
$4,361
$17,703
$1,111
Total
$550,438
15,219
11,771
577,428
281,392
-
7,941
289,333
123,385
954
1,800
92,497
-
-
92,497
25,023
83
67
Agriculture
Pass
Special Mention
Substandard
49,112
-
258
36,952
-
376
32,786
-
2,179
21,128
-
5,082
13,546
-
-
35,371
46
Total agriculture
49,370
37,328
34,965
26,210
13,546
35,417
Residential mortgage
Pass
Special Mention
Substandard
Total residential
mortgage
Consumer
Pass
Special Mention
Substandard
37,801
-
15
23,139
-
48
Total consumer
37,816
23,187
Other loans and leases
Pass
Special Mention
Substandard
Total other loans
and leases
2,650
-
-
2,650
1,130
-
-
1,130
20,141
-
99
26,416
139
179
21,755
175
554
9,044
62
74
6,082
-
79
14,924
495
748
20,240
26,734
22,484
9,180
6,161
16,167
25,173
126,139
9,829
-
9
9,838
5,230
-
-
5,230
2,959
-
10
2,969
1,742
-
14
1,756
906
-
-
906
13
-
-
13
307
-
-
307
5,241
-
-
5,241
183
-
-
183
-
-
-
-
75,960
-
96
76,056
15,170
-
-
15,170
Totals
$197,764 $271,654 $173,279 $76,422 $42,124 $140,146
$182,737
$1,084,126
33
2023 Annual Report
(4) Loans (continued)
The following table presents the amortized cost basis of loans by credit quality indicator, class of financing
receivable, and year of origination for term loans at December 31, 2022 follows:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Commercial
Commercial & industrial
Commercial real estate
Commercial construction
Total commercial
Agriculture
Agriculture real estate
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family first lien
1 - 4 family junior lien
Residential construction
Total residential mortgage
Consumer
Auto
Consumer other
Total consumer
Other loans and leases
Pass
$206,346
275,854
29,197
511,397
142,854
96,012
238,866
88,191
24,989
12,692
125,872
43,318
13,597
56,915
13,671
Special
Mention
Substandard
Doubtful
Total
$3,070
2,654
-
5,724
4,413
146
4,559
564
167
-
731
95
-
95
-
$3,033
6,318
-
9,351
219
53
272
1,353
221
-
1,574
32
22
54
-
$ -
$212,449
-
-
-
-
-
-
-
-
-
-
-
-
-
-
284,826
29,197
526,472
147,486
96,211
243,697
90,108
25,377
12,692
128,177
43,445
13,619
57,064
13,671
Totals
$946,721
$11,109
$11,251
$ -
$969,081
The gross charge-offs by loan type and year of origination for the year ended December 31, 2023 were as
follows:
Current Period Gross Charge-offs
2023
2022
2021
2020
2019
Prior
Total
Commercial
Residential mortgage
Consumer
Other loans and leases
$2
$102
-
-
61
-
120
-
$ -
-
17
-
$965
$1,473
$1,468
$4,010
25
20
-
-
37
-
38
9
-
63
203
61
Totals
$63
$222
$17
$1,010
$1,510
$1,515
$4,337
34
2023 Annual Report
(4) Loans (continued)
(4) Loans (continued)
The following table presents the amortized cost basis of loans by credit quality indicator, class of financing
Loan aging information by class of loans at December 31 follows:
receivable, and year of origination for term loans at December 31, 2022 follows:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
Commercial
Commercial & industrial
Commercial real estate
Commercial construction
Total commercial
Agriculture
Agriculture real estate
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family first lien
1 - 4 family junior lien
Residential construction
Total residential mortgage
Consumer
Auto
Consumer other
Total consumer
Other loans and leases
Pass
$206,346
275,854
29,197
511,397
142,854
96,012
238,866
88,191
24,989
12,692
125,872
43,318
13,597
56,915
13,671
Special
Mention
Substandard
Doubtful
Total
$ -
$212,449
$3,070
2,654
-
5,724
4,413
146
4,559
564
167
-
731
95
-
95
-
$3,033
6,318
-
9,351
219
53
272
1,353
221
-
1,574
32
22
54
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
284,826
29,197
526,472
147,486
96,211
243,697
90,108
25,377
12,692
128,177
43,445
13,619
57,064
13,671
Totals
$946,721
$11,109
$11,251
$ -
$969,081
The gross charge-offs by loan type and year of origination for the year ended December 31, 2023 were as
follows:
Current Period Gross Charge-offs
2023
2022
2021
2020
2019
Prior
Total
Commercial
Residential mortgage
Consumer
Other loans and leases
$2
$102
$ -
$965
$1,473
$1,468
$4,010
-
-
61
120
-
-
17
-
-
25
20
-
37
-
-
38
9
-
63
203
61
Totals
$63
$222
$17
$1,010
$1,510
$1,515
$4,337
As of December 31, 2023
Greater Than
30-89 Days 90 Days Past Total Past
Total
90 or more days past
Past Due
Due
Due
Current
Loans
due and accruing
Commercial
Commercial & industrial
Commercial real estate
Commercial construction
Total commercial
Agriculture
Agriculture real estate
Agriculture production
Total agriculture
Residential mortgage
1 - 4 family first lien
1 - 4 family junior lien
Residential construction
$432
1,563
-
1,995
316
151
467
859
230
-
$121
$553
$222,207
$222,760
-
-
1,563
301,493
303,056
-
51,612
51,612
121
2,116
575,312
577,428
-
84
84
316
235
551
176,562
176,878
112,220
112,455
288,782
289,333
364
1,223
-
-
230
-
90,344
29,149
5,193
91,567
29,379
5,193
Total residential mortgage
1,089
364
1,453
124,686
126,139
Consumer
Auto
Consumer other
Total consumer
Other Loans and Leases
827
196
1,023
-
35
7
42
-
862
203
57,337
17,654
58,199
17,857
1,065
74,991
76,056
-
15,170
15,170
$82
-
-
82
-
-
-
189
-
-
189
25
6
31
-
Totals
$4,574
$611
$5,185 $1,078,941 $1,084,126
$302
35
2023 Annual Report
(4) Loans (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
As of December 31, 2022
Greater Than
30-89 Days
90 Days Past
Total Past
Total
90 or more days past
Past Due
Due
Due
Current
Loans
due and accruing
Commercial
Commercial & industrial
Commercial real estate
Commercial construction
Total commercial
Agriculture
Agriculture real estate
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family first lien
1 - 4 family junior lien
Residential construction
$284
549
-
833
189
11
200
707
373
-
$3,010
$3,294 $209,155 $212,449
2,469
3,018
281,808
284,826
-
-
29,197
29,197
5,479
6,312
520,160
526,472
-
-
-
405
44
-
189
147,297
147,486
11
96,200
96,211
200
243,497
243,697
1,112
88,996
90,108
417
24,960
25,377
-
12,692
12,692
Total residential mortgage
1,080
449
1,529
126,648
128,177
Consumer
Auto
Consumer other
Total consumer
Other loans and leases
Totals
634
189
823
-
90
46
724
42,721
43,445
235
13,384
13,619
136
959
56,105
57,064
-
-
13,671
13,671
$2,936
$6,064
$9,000 $960,081 $969,081
$ -
47
-
47
-
-
-
79
44
-
123
57
46
103
-
$273
36
2023 Annual Report
As of December 31, 2022
Greater Than
Past Due
Due
Due
Current
Loans
due and accruing
$3,010
$3,294 $209,155 $212,449
2,469
3,018
281,808
284,826
-
-
29,197
29,197
5,479
6,312
520,160
526,472
-
-
-
405
44
-
189
147,297
147,486
11
96,200
96,211
200
243,497
243,697
1,112
88,996
90,108
417
24,960
25,377
-
12,692
12,692
Commercial
Commercial & industrial
Commercial real estate
Commercial construction
Total commercial
Agriculture
Agriculture real estate
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family first lien
1 - 4 family junior lien
Residential construction
Consumer
Auto
Consumer other
Total consumer
Other loans and leases
Totals
$284
549
-
833
189
11
200
707
373
-
634
189
823
-
Total residential mortgage
1,080
449
1,529
126,648
128,177
90
46
724
42,721
43,445
235
13,384
13,619
136
959
56,105
57,064
-
-
13,671
13,671
$2,936
$6,064
$9,000 $960,081 $969,081
$ -
47
47
-
-
-
-
79
44
-
123
57
46
103
-
$273
(4) Loans (continued)
(4) Loans (continued)
Information regarding nonaccrual loans during the years ended December 31 follows:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
30-89 Days
90 Days Past
Total Past
Total
90 or more days past
December 31, 2023
December 31, 2022
Nonaccrual
loans
With No
ACL
Total
Nonaccrual
Loans
Interest
Income
Recognized
During the
Period on
Nonaccrual
Loans
Nonaccrual
loans
With No
ACL
Total
Nonaccrual
Loans
Interest
Income
Recognized
During the
Period on
Nonaccrual
Loans
$44
14
-
58
1,175
-
1,175
-
99
-
99
-
-
-
$5,029
2,156
-
7,185
4,703
3,180
7,883
446
137
-
583
66
26
92
-
$ -
-
-
-
-
60
60
-
-
-
-
-
-
-
-
$52
174
-
226
219
-
219
469
28
-
497
-
-
-
-
$3,032
2,549
-
5,581
$160
91
-
251
219
53
272
498
39
-
537
66
23
89
-
57
-
57
46
6
-
52
-
-
6
-
Commercial
Commercial & industrial
Commercial real estate
Commercial construction
Total commercial
Agriculture
Agriculture real estate
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family first lien
1 - 4 family junior lien
Residential construction
Total residential mortgage
Consumer
Auto
Consumer other
Total consumer
Other loans and leases
Totals
$1,332
$15,743
$60
$942
$6,479
$366
Occasionally, the Company modifies loans to borrowers in financial distress by providing principal
forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When
principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit
losses.
As of December 31, 2023, the Company had commitments to lend additional funds of $129 on loans modified
to borrowers experiencing financial difficulty.
37
2023 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
The following presents the amortized cost basis as of December 31, 2023 of loans modified to borrowers
experiencing financial difficulty during the year disaggregated by loan class and by type of concession
granted.
Term Extension
Other-than-Insignificant
Payment Delay
Combination:
Term Extension
and Principal Forgiveness
% of Total
Class of
% of Total
Class of
% of Total
Class of
Amortized
Financing
Amortized
Financing
Amortized
Financing
Cost Basis
Receivable
Cost Basis
Receivable
Cost Basis
Receivable
Commercial
Commercial & industrial
$3,403
Commercial real estate
Total commercial
Agriculture
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family junior lien
Total residential mortgage
194
3,597
2,559
2,559
17
17
1.5%
0.1%
0.6%
0.1%
0.1%
0.1%
0.0%
$6
114
120
-
-
-
-
0.0%
0.0%
0.0%
-
-
-
-
$ -
-
-
-
-
99
99
-
-
-
-
-
0.3%
0.1%
Totals
$6,173
0.6%
$120
0.0%
$99
0.0%
The following table presents the financial effect of the loan modifications presented above to borrowers
experiencing financial difficulty for the year ended December 31, 2023.
Commercial & industrial
Commercial real estate
Agriculture production
1 - 4 family junior lien
Other-than-Insignificant
Payment Delay
Term Extension
Principal Forgiveness
Interest only payments
for 7 months
Extended 5 to 13 months to
the maturity dates
Interest only payments
for 7 months
Extended 1-5 years to
maturity dates
Extended 13 months to
maturity dates
Extended 6 years to
maturity date
Reduced amortized cost
basis between $412M
and $442M dependent on
finalization of the sale of
collateral.
38
2023 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
(4) Loans (continued)
The following presents the amortized cost basis as of December 31, 2023 of loans modified to borrowers
experiencing financial difficulty during the year disaggregated by loan class and by type of concession
granted.
The following table presents the amortized cost basis of loans that had a payment default during the year
ended December 31, 2023 and were modified in the twelve months prior to that default to borrowers
experiencing financial difficulty:
Term Extension
Payment Delay
and Principal Forgiveness
Other-than-Insignificant
Combination:
Term Extension
% of Total
Class of
% of Total
Class of
% of Total
Class of
Amortized
Financing
Amortized
Financing
Amortized
Financing
Cost Basis
Receivable
Cost Basis
Receivable
Cost Basis
Receivable
Commercial
Commercial & industrial
$3,403
Commercial real estate
Total commercial
Agriculture
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family junior lien
Total residential mortgage
194
3,597
2,559
2,559
17
17
1.5%
0.1%
0.6%
0.1%
0.1%
0.1%
0.0%
$6
114
120
-
-
-
-
0.0%
0.0%
0.0%
-
-
-
-
$ -
-
-
-
-
99
99
-
-
-
-
-
0.3%
0.1%
Totals
$6,173
0.6%
$120
0.0%
$99
0.0%
The following table presents the financial effect of the loan modifications presented above to borrowers
experiencing financial difficulty for the year ended December 31, 2023.
Other-than-Insignificant
Interest only payments
Extended 5 to 13 months to
for 7 months
the maturity dates
Interest only payments
Extended 1-5 years to
for 7 months
maturity dates
Commercial
Commercial & industrial
Commercial real estate
Total commercial
Agriculture
Agriculture production
Total agriculture
Totals
Term extension
$29
41
70
2,179
2,179
$2,249
The following table presents the period-end amortized cost basis of loans that have been modified in the
past 12 months to borrowers experiencing financial difficulty by payment status and class of financing
receivable:
Commercial
Commercial & industrial
Commercial real estate
Total commercial
Agriculture
Agriculture production
Total agriculture
Residential Mortgage
1 - 4 family junior lien
Payment Delay
Term Extension
Principal Forgiveness
Total residential mortgage
Current
30-89 days
90 days
Total
Greater than
$3,380
267
3,647
380
380
116
116
$ -
41
41
2,179
2,179
-
-
$29
-
29
-
-
-
-
$3,409
308
3,717
2,559
2,559
116
116
Commercial & industrial
Commercial real estate
Agriculture production
1 - 4 family junior lien
Totals
$4,143
$2,220
$29
$6,392
Extended 13 months to
maturity dates
Extended 6 years to
maturity date
Reduced amortized cost
basis between $412M
and $442M dependent on
finalization of the sale of
collateral.
Prior to the adoption of ASU No. 2022-02, when, for economic or legal reasons related to the borrower's
financial difficulties, the Company granted a concession to a borrower that the Company would not otherwise
consider, the modified loan was classified as a troubled debt restructuring. Loan modifications may have
consisted 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 were classified
as impaired loans.
39
2023 Annual Report
(4) Loans (continued)
The following table presents information regarding modifications of loans that were classified as troubled
debt restructurings by class of loan that occurred during the year ended December 31, 2022:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Real Estate:
Commercial real estate
Commercial:
Commercial & industrial
Total
Number of
Pre-Modification
Post Modification
Loans
Investment
Investment
1
3
4
$3,375
4,408
$7,783
$3,375
4,408
$7,783
The following table summarizes troubled debt restructurings that defaulted within 12 months of their
modification as of December 31, 2022:
Real Estate:
Commercial real estate
Commercial:
Commercial & industrial
Total
(5) Loan Servicing
Number of
Loans
Recorded
Investment
1
3
4
$3,375
4,484
$7,859
Loans serviced for others are not included in the accompanying consolidated balance sheets. Mortgage loans
serviced for others as of December 31, 2023 and 2022, were approximately $275,743 and $286,804,
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
$3,451 and $3,552 at December 31, 2023 and 2022, respectively.
The balances for mortgage servicing rights were $3,303 and $3,236 as of December 31, 2023 and 2022,
respectively.
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
2023
2022
2021
9.75% - 11.75%
9.00% - 11.00%
9.00% - 11.00%
5.29% - 26.25%
6.30% - 26.25%
6.79% - 33.96%
40
2023 Annual Report
(4) Loans (continued)
(6) Mortgage Banking Loan Commitments
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
The following table presents information regarding modifications of loans that were classified as troubled
debt restructurings by class of loan that occurred during the year ended December 31, 2022:
Number of
Pre-Modification
Post Modification
Loans
Investment
Investment
Real Estate:
Commercial:
Commercial real estate
Commercial & industrial
Total
1
3
4
$3,375
4,408
$7,783
The following table summarizes troubled debt restructurings that defaulted within 12 months of their
modification as of December 31, 2022:
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, 2023 and 2022, the Company had approximately $805 and $907, respectively, in interest rate
lock commitments outstanding. As of December 31, 2023 and 2022, the Company had approximately $1,611
and $947, respectively, in mandatory delivery forward commitments outstanding. There were no best effort
forward commitments outstanding at December 31, 2023 and $867 outstanding at December 31, 2022.
These outstanding mortgage loan commitments are considered to be derivatives.
(7) Foreclosed Assets and Other Real Estate Owned
There was no other real estate owned at December 31, 2023 and $70 at December 31, 2022.
Residential real estate loans that are in process of foreclosure totaled $79 at December 31, 2023 and $29 at
December 31, 2022.
Number of
Loans
Recorded
Investment
(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
2023
2022
$2,640
22,700
14,440
39,780
22,255
$2,640
22,186
13,976
38,802
21,204
$17,525
$17,598
Depreciation expense for the years ended December 31, 2023, 2022 and 2021 amounted to $1,098, $1,106,
and $1,053, respectively.
(9) Other Assets
The components of other assets at December 31 are as follows:
2023
2022
2021
Accrued interest receivable
Mortgage servicing rights
Net deferred tax assets
Range of discount rates
Range of prepayment speeds
9.75% - 11.75%
9.00% - 11.00%
9.00% - 11.00%
Qualified affordable housing project investments
5.29% - 26.25%
6.30% - 26.25%
6.79% - 33.96%
Other
2023
2022
$9,763
3,303
16,960
4,818
2,114
$7,255
3,236
18,227
84
2,850
$36,958
$31,652
41
$3,375
4,408
$7,783
$3,375
4,484
$7,859
Real Estate:
Commercial:
Commercial real estate
Commercial & industrial
Total
(5) Loan Servicing
1
3
4
Loans serviced for others are not included in the accompanying consolidated balance sheets. Mortgage loans
serviced for others as of December 31, 2023 and 2022, were approximately $275,743 and $286,804,
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
$3,451 and $3,552 at December 31, 2023 and 2022, respectively.
The balances for mortgage servicing rights were $3,303 and $3,236 as of December 31, 2023 and 2022,
respectively.
at December 31:
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
2023 Annual Report
(10) Deposits
Deposits consist of the following at December 31, 2023 and 2022:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Non-interest-bearing demand
Interest-bearing demand
Money market and savings
Time
2023
2022
$256,205
220,417
408,278
472,657
$276,055
229,577
411,654
377,421
$1,357,557
$1,294,707
The aggregate amount of time deposits with a minimum denomination of $250 was approximately $143,788
and $101,661 at December 31, 2023 and 2022, respectively. Time deposits are included in the interest-
bearing deposits on the consolidated balance sheets.
At December 31, 2023, the scheduled maturities of time deposits are as follows:
2023
2024
2025
2026
2027 and thereafter
$343,920
96,198
24,026
4,867
3,646
$472,657
(11)
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
2023
2022
2021
$2,956
1,326
4,282
195
97
292
$2,700
1,267
3,967
74
41
115
$2,148
1,175
3,323
(61)
(25)
(86)
Total income tax expense
$4,574
$4,082
$3,237
42
2023 Annual Report
(10) Deposits
(11)
Income Taxes (continued)
Deposits consist of the following at December 31, 2023 and 2022:
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:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
The aggregate amount of time deposits with a minimum denomination of $250 was approximately $143,788
and $101,661 at December 31, 2023 and 2022, respectively. Time deposits are included in the interest-
bearing deposits on the consolidated balance sheets.
At December 31, 2023, the scheduled maturities of time deposits are as follows:
(11)
Income Taxes
The components of income tax expense for the years ended December 31 are as follows:
2023
2022
$256,205
220,417
408,278
472,657
$276,055
229,577
411,654
377,421
$1,357,557
$1,294,707
$343,920
96,198
24,026
4,867
3,646
$472,657
2023
2022
2021
$2,956
1,326
4,282
195
97
292
$2,700
1,267
3,967
74
41
115
$2,148
1,175
3,323
(61)
(25)
(86)
Non-interest-bearing demand
Interest-bearing demand
Money market and savings
Time
2023
2024
2025
2026
2027 and thereafter
Current - federal
Current - state
Deferred - federal
Deferred - state
Total income tax expense
$4,574
$4,082
$3,237
2023
2022
2021
% of
Pretax
% of
Pretax
% of
Pretax
Amount
Earnings
Amount
Earnings
Amount
Earnings
Statutory federal tax
$4,015
21.0%
$3,718
21.0%
$3,071
21.0%
(Decrease) increase in taxes
resulting from:
Tax-exempt interest
Bank-owned life insurance
State taxes, net of
federal benefit
Other
(330)
(123)
1,124
(112)
(1.7%)
(0.6%)
5.9%
(0.6%)
(598)
(122)
1,033
51
(3.4%)
(0.7%)
5.8%
0.3%
(619)
(126)
909
2
(4.2%)
(0.9%)
6..2%
0.0%
Effective tax rates
$4,574
24.0%
$4,082
23.0%
$3,237
22.1%
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, 2023 and 2022 are summarized as follows:
Deferred tax assets:
Allowance for credit losses
CECL reserve for unfunded loan commitments
Available-for-sale securities
Deferred compensation and other
2023
2022
$4,046
188
12,962
2,611
$4,144
-
14,747
2,176
Total deferred tax assets
$19,807
$21,067
Deferred tax liabilities:
FHLB stock dividend
Depreciation
Mortgage servicing rights and other
Purchase accounting adjustments
$55
1,299
1,365
128
$55
1,407
1,246
132
Total deferred tax liabilities
2,847
2,840
Net deferred tax assets
$16,960
$18,227
No valuation allowance has been recorded since deferred tax assets are expected to be realized.
43
2023 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(12) 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 stakeholders, principal officers, their immediate
families, and affiliated companies in which they are principal stakeholders (commonly referred to as related
parties). 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
2023
2022
$3,584
2,026
(1,084)
$5,063
594
(2,073)
$4,526
$3,584
Deposit accounts from related parties totaled approximately $21,284 and $18,663 at December 31, 2023
and 2022, respectively.
(13) 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
$267,108
$271,980
Commercial letters of credit
Performance and standby letters of credit
320
3,915
510
3,637
2023
2022
44
2023 Annual Report
(12) Transactions with Related Parties
(13) Financial Instruments with Off-Balance-Sheet Risk and Concentrations
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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 stakeholders, principal officers, their immediate
families, and affiliated companies in which they are principal stakeholders (commonly referred to as related
parties). 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
2023
2022
$3,584
2,026
(1,084)
$5,063
594
(2,073)
$4,526
$3,584
Deposit accounts from related parties totaled approximately $21,284 and $18,663 at December 31, 2023
and 2022, respectively.
(13) 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:
(continued)
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, 2023 and 2022. 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 $539,
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, 2023, 2022 and 2021.
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.
Unused lines of credit and other loan commitments
$267,108
$271,980
Commercial letters of credit
Performance and standby letters of credit
320
3,915
510
3,637
Securities sold under agreements to repurchase amounted to $31,554 and $36,298 at December 31,
2023 and 2022, respectively, and are collateralized by U.S. agencies and mortgage-backed investment
securities with fair values of approximately $61,393 and $59,736. The weighted-average interest rates on
these agreements were 2.00% and 1.11% at December 31, 2023 and 2022, respectively. Securities sold
under agreements to repurchase mature on a daily basis.
2023
2022
(14) Securities Sold Under Agreements to Repurchase
45
2023 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(15) 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 $593, $574, and $561, for 2023, 2022, and 2021,
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
$53,902 and $53,372 as of December 31, 2023 and 2022, respectively. The Banks accrue amounts to be
paid over the participant’s active service life. The accrued benefits were $3,421, $3,329, and $2,888 at
December 31, 2023, 2022 and 2021, respectively. Non-qualified deferred compensation expenses were
$339, $539, and $413 in 2023, 2022 and 2021, respectively.
(16) Federal Home Loan Bank (FHLB) and Other Borrowings
At December 31, the scheduled maturities of FHLB advances and other borrowings are as follows:
FHLB Advances at December 31:
2023
2022
Fixed rate advances with rates ranging from 2.31% to 4.49% and
weighted average rates of 3.96% and 3.79% as of December 31, 2023 and
2022, respectively. Interest is payable monthly with principal due at
maturity.
$20,738
$6,500
Advances are collateralized by 1-4 family mortgage loans, other qualifying loans and securities. The total
amounts of collateral securing FHLB advances were approximately $133,256 and $188,468 as of December
31, 2023 and 2022, respectively. FHLB advances are subject to a prepayment penalty if they are repaid
prior to maturity. FHLB advances are also secured by $1,727 and $1,468 of FHLB stock owned by the
Company at December 31, 2023 and 2022, 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, 2023 was 5.5%. There were no
outstanding advances at December 31, 2023 and 2022. Advances are collateralized by investment securities
pledged totaling approximately $14,200 and $8,867 at December 31, 2023 and 2022, respectively, to the
Federal Reserve Bank.
Additional other borrowings totaled $5,216 and $866 at December 31, 2023 and 2022, respectively, and
mature from 2024 to 2032, at interest rates ranging from 2.00% to 4.85%.
46
2023 Annual Report
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 $593, $574, and $561, for 2023, 2022, and 2021,
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
$53,902 and $53,372 as of December 31, 2023 and 2022, respectively. The Banks accrue amounts to be
paid over the participant’s active service life. The accrued benefits were $3,421, $3,329, and $2,888 at
December 31, 2023, 2022 and 2021, respectively. Non-qualified deferred compensation expenses were
$339, $539, and $413 in 2023, 2022 and 2021, respectively.
(16) Federal Home Loan Bank (FHLB) and Other Borrowings
At December 31, the scheduled maturities of FHLB advances and other borrowings are as follows:
FHLB Advances at December 31:
2023
2022
Fixed rate advances with rates ranging from 2.31% to 4.49% and
weighted average rates of 3.96% and 3.79% as of December 31, 2023 and
2022, respectively. Interest is payable monthly with principal due at
maturity.
$20,738
$6,500
Advances are collateralized by 1-4 family mortgage loans, other qualifying loans and securities. The total
amounts of collateral securing FHLB advances were approximately $133,256 and $188,468 as of December
31, 2023 and 2022, respectively. FHLB advances are subject to a prepayment penalty if they are repaid
prior to maturity. FHLB advances are also secured by $1,727 and $1,468 of FHLB stock owned by the
Company at December 31, 2023 and 2022, 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, 2023 was 5.5%. There were no
outstanding advances at December 31, 2023 and 2022. Advances are collateralized by investment securities
pledged totaling approximately $14,200 and $8,867 at December 31, 2023 and 2022, respectively, to the
Federal Reserve Bank.
Additional other borrowings totaled $5,216 and $866 at December 31, 2023 and 2022, respectively, and
mature from 2024 to 2032, at interest rates ranging from 2.00% to 4.85%.
(15) Employee and Director Benefit Plans
(16) Federal Home Loan Bank (FHLB) and Other Borrowings (continued)
At December 31, the scheduled maturities of FHLB advances and other borrowings are as follows:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
2023
2024
2025
2026
2027
2028
2029 and thereafter
2023
2022
$2,526
6,000
5,000
1,541
6,488
4,399
$4,500
500
798
-
1,568
-
-
$25,954
$7,366
The Company had federal funds purchased with its main correspondent institutions totaling $1,153 at
December 31, 2023 and no federal funds purchased at December 31, 2022. Federal funds purchased
generally mature within one day from transaction date. The weighted average interest rate was 5.75% as of
December 31, 2023.
The Company has a $15,000 line of credit with Bankers’ Bank secured by the stock of the Banks. The line
has a variable interest rate of Wall Street Journal Prime less 0.50 percentage points. As of December 31,
2023, the balance of the line was $0.
(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.
47
2023 Annual Report
(17) Fair Value Measurements (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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 individually evaluated 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 individually evaluated 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.
48
2023 Annual Report
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 individually evaluated 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 individually evaluated 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.
(17) Fair Value Measurements (continued)
(17) Fair Value Measurements (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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, 2023
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
Corporate debt securities
Marketable equity securities
Loans held for sale
Mortgage servicing rights
Assets measured at fair value
on a non-recurring basis:
Assets:
Fair Value Measurements at
Reporting Date Using
Total
(Level 1)
(Level 2)
(Level 3)
$116,429
101,473
146,161
1,555
1,066
990
3,303
$2,345
$116,429
99,128
146,161
1,555
1,066
990
3,303
Collateral-dependent individually evaluated loans
$16,361
$16,361
Collateral-dependent individually evaluated loans, which are measured for impairment using the fair value
of collateral, had a carrying value of $17,690 with specific reserves of $1,329 as of December 31, 2023.
The changes in level 3 items occurring between December 31, 2022 and December 31, 2023 were increases
in collateral-dependent individually evaluated loans and sale of other real estate owned.
As of December 31, 2022
Fair Value Measurements at
Reporting Date Using
Total
(Level 1)
(Level 2)
(Level 3)
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
Loans held for sale
Mortgage servicing rights
Assets measured at fair value
on a non-recurring basis:
Assets:
$107,930
118,535
164,869
996
421
3,236
$107,930
116,190
164,869
996
421
3,236
Collateral-dependent impaired loans
$4,070
Foreclosed assets and other real estate
owned
70
$2,345
$4,070
70
49
2023 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 $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 as of December 31, 2022.
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, 2023 and 2022:
Valuation
Technique
Unobservable
Input
Range
Collateral-dependent individually evaluated loans,
Sales comparison
Appraised values
10% - 20%
net of specific reserves
approach
Foreclosed assets and other real estate owned
Sales comparison
Appraised values
10% - 20%
approach
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.
50
2023 Annual Report
(17) Fair Value Measurements (continued)
(17) Fair Value Measurements (continued)
Collateral-dependent impaired loans, which are measured for impairment using the fair value of collateral,
The estimated fair values of the Company’s financial instruments as of December 31, 2023 are as follows:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
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 as of December 31, 2022.
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, 2023 and 2022:
Valuation
Technique
Unobservable
Input
Range
Collateral-dependent individually evaluated loans,
Sales comparison
Appraised values
10% - 20%
net of specific reserves
Foreclosed assets and other real estate owned
Sales comparison
Appraised values
10% - 20%
approach
approach
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.
Fair Value Measurements at
Reporting Date Using
Carrying
Amount
Fair
Value
(Level 1)
(Level 2)
(Level 3)
Financial Assets:
Cash and cash equivalents
Interest-bearing deposits in other
banks- term deposits
$45,718
$45,718
$45,718
4,511
4,399
4,299
$100
Securities
369,214
368,983
366,638
$2,345
Marketable equity securities and other
Loans held for sale
5,718
990
5,718
990
Loans, net of allowance
1,069,450
1,043,192
Accrued interest receivable
Mortgage servicing rights
Financial liabilities:
9,763
3,303
9,763
3,303
4,639
9,763
1,079
990
3,303
1,043,192
Demand and saving deposits
$884,900
$884,900
$884,900
Time deposits
472,657
468,839
$468,839
Federal Funds Purchased
1,153
1,153
1,153
Securities sold under
agreements to repurchase
FHLB advances and other borrowings
Accrued interest payable
31,554
25,954
2,082
31,234
25,571
2,082
2,082
$31,234
25,571
51
2023 Annual Report
(17) Fair Value Measurements (continued)
Notes to Consolidated Financial Statements
(000s omitted except share data)
The estimated fair values of the Company’s financial instruments as of December 31, 2022 are as follows:
Fair Value Measurements at
Reporting Date Using
Financial Assets:
Cash and cash equivalents
$43,822
$43,822
$43,822
Carrying
Amount
Fair
Value
(Level 1)
(Level 2)
(Level 3)
Interest-bearing deposits in other
banks- term deposits
Securities
Marketable equity securities and other
Loans held for sale
Loans, net of allowance
Accrued interest receivable
Mortgage servicing rights
Financial liabilities:
6,058
5,833
5,733
395,410
395,168
3,945
421
3,945
421
954,426
928,416
7,255
3,236
7,255
3,236
2,947
7,255
Demand and saving deposits
$917,286
$917,286
$917,286
Time deposits
377,421
367,715
Securities sold under
agreements to repurchase
FHLB advances and other borrowings
Accrued interest payable
36,298
7,366
977
35,819
7,225
977
977
$100
392,823
998
421
3,236
$35,819
$2,345
928,416
$367,715
7,225
52
2023 Annual Report
(17) Fair Value Measurements (continued)
(18) Stock Compensation Plans
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
The estimated fair values of the Company’s financial instruments as of December 31, 2022 are as follows:
Fair Value Measurements at
Reporting Date Using
Carrying
Amount
Fair
Value
(Level 1)
(Level 2)
(Level 3)
Financial Assets:
Cash and cash equivalents
$43,822
$43,822
$43,822
Interest-bearing deposits in other
banks- term deposits
6,058
5,833
5,733
Securities
395,410
395,168
Marketable equity securities and other
Loans held for sale
Loans, net of allowance
Accrued interest receivable
Mortgage servicing rights
Financial liabilities:
954,426
928,416
3,945
421
7,255
3,236
3,945
421
7,255
3,236
2,947
7,255
Demand and saving deposits
$917,286
$917,286
$917,286
Time deposits
377,421
367,715
Securities sold under
agreements to repurchase
FHLB advances and other borrowings
Accrued interest payable
36,298
7,366
977
35,819
7,225
977
977
$100
392,823
998
421
3,236
$35,819
$2,345
928,416
$367,715
7,225
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, 2023 and 2021. For the year ended December
31, 2022, 5,000 shares of non-qualified stock options were granted under the 2012 equity incentive plan.
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)
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, 2023, 2022 and 2021, the Company recognized $16, $25, and $16 in
compensation expense for stock options, respectively. No tax benefits were recognized for the three-year
period ended December 31, 2023. The intrinsic value of options exercised during the years ended
December 31, 2023, 2022 and 2021 was $0, $0 and $0, respectively.
53
2023 Annual Report
(18) Stock Compensation Plans (continued)
The following table summarizes the activity of options for the year ended:
Notes to Consolidated Financial Statements
(000s omitted except share data)
December 31,2023
December 31,2022
Weighted
Average
Exercise
Price
$34.60
-
35.55
-
Options
25,000
5,000
(8,334)
-
Weighted
Average
Exercise
Price
$35.55
$31.40
35.55
-
Options
21,666
-
(16,666)
-
Shares under option, beginning of year
Granted during the year
Forfeited and expired during the year
Exercised during the year
Shares under option, end of year
5,000
31.40
21,666
34.60
Options exercisable, end of year
1,000
31.40
16,666
35.55
The following table summarizes information about stock options outstanding at December 31, 2023:
Exercise Price
Number Outstanding
$31.40
5,000
Remaining
Contractual Life
(Years)
8.50
Number Exercisable
1,000
Total shares available for grant under the 2012 equity incentive plan were 0, 0 and 64,603 at December
31, 2023, 2022 and 2021, respectively. Total shares available for grant under the 2022 equity incentive plan
was 139,071 and 150,000 as of December 31, 2023 and 2022, respectively.
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.
54
2023 Annual Report
(18) Stock Compensation Plans (continued)
The following table summarizes the activity of options for the year ended:
(18) Stock Compensation Plans (continued)
The following table summarizes information regarding unvested restricted stock and shares outstanding
during the year ended:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
December 31,2023
December 31,2022
Weighted
Average
Exercise
Price
Options
Options
Weighted
Average
Exercise
Price
Shares under option, beginning of year
21,666
$34.60
Granted during the year
Exercised during the year
Forfeited and expired during the year
(16,666)
-
-
35.55
-
-
25,000
5,000
(8,334)
-
$35.55
$31.40
35.55
-
Shares under option, end of year
5,000
31.40
21,666
34.60
Options exercisable, end of year
1,000
31.40
16,666
35.55
The following table summarizes information about stock options outstanding at December 31, 2023:
Exercise Price
Number Outstanding
Number Exercisable
$31.40
5,000
1,000
Remaining
Contractual Life
(Years)
8.50
Total shares available for grant under the 2012 equity incentive plan were 0, 0 and 64,603 at December
31, 2023, 2022 and 2021, respectively. Total shares available for grant under the 2022 equity incentive plan
was 139,071 and 150,000 as of December 31, 2023 and 2022, respectively.
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.
December 31,2023
December 31,2022
Weighted
Weighted
Unvested
Average
Unvested
Average
Shares
Grant Value
Shares
Grant Value
Restricted stock, beginning of year
Granted during the year
Forfeited during the year
Restricted shares (net for taxes)
Vested during the year
Restricted stock, end of year
14,190
11,426
(812)
(1,887)
(8,650)
14,267
$33.01
26.93
29.77
32.25
32.25
28.88
19,754
$30.86
9,104
34.00
(1,282)
(1,980)
33.03
30.51
(11,406)
30.51
14,190
33.01
During 2023, 2022 and 2021, total accrued compensation expense of $294, $390 and $332 (before tax
benefits of $84, $111 and $95) 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 $173, $41 and $2 for years 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. A new stock repurchase
plan was approved by the Board of Directors as of October 25, 2023 and effective November 1, 2023. The
approved plan sets a maximum repurchase dollar limit, maximum per share price and daily limits. The plan
has an expiration date of June 1, 2024. For the years ended December 31, 2023, 2022 and 2021, the
Company repurchased 60,000, 44,760 and 131,500 shares under the repurchase program, respectively.
The purchase price for the shares of the Company’s stock repurchased is reflected as a reduction to
shareholders’ equity as treasury stock.
55
2023 Annual Report
(20) Earnings Per Common Share
For the years ended December 31, earnings per common share have been computed based on the
following:
Notes to Consolidated Financial Statements
(000s omitted except share data)
2023
2022
2021
Net income
$14,546
$13,626
$11,386
Net income available to common stockholders
14,546
13,626
11,386
Average number of common shares outstanding
Effect of dilutive options
3,562,885
4,723
3,565,548
12,280
3,665,228
15,844
Average number of common shares outstanding used
to calculate diluted earnings per common share
3,567,608
3,577,828
3,681,072
(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. As of December 31, 2023 and 2022, 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, 2023, 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, 2023, which management believes have changed the capital
categories of the Banks.
56
2023 Annual Report
(20) Earnings Per Common Share
(21) Equity and Regulatory Matters (continued)
For the years ended December 31, earnings per common share have been computed based on the
following:
The Company and the Banks actual capital amounts and ratios as of December 31 are presented in the
following tables:
Notes to Consolidated Financial Statements
(000s omitted except share data)
Notes to Consolidated Financial Statements
(000s omitted except share data)
2023
2022
2021
Net income
$14,546
$13,626
$11,386
Net income available to common stockholders
14,546
13,626
11,386
Average number of common shares outstanding
Effect of dilutive options
3,562,885
4,723
3,565,548
12,280
3,665,228
15,844
Average number of common shares outstanding used
to calculate diluted earnings per common share
3,567,608
3,577,828
3,681,072
(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. As of December 31, 2023 and 2022, 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, 2023, 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, 2023, which management believes have changed the capital
categories of the Banks.
Actual
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Amount
In $000s
Ratio
In $000s
Ratio
173,232
39,422
31,592
19,755
38,269
11,469
21,149
10.76%
9.22%
9.37%
10.94%
9.91%
11.49%
11.94%
144,899
38,480
30,337
16,247
34,764
8,986
15,937
9.00%
9.00%
9.00%
9.00%
9.00%
9.00%
9.00%
Actual
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
Amount
In $000s
Ratio
In $000s
Ratio
164,081
36,762
30,249
19,082
35,708
10,994
20,406
10.81%
9.64%
9.11%
10.77%
10.26%
11.23%
11.88%
136,583
34,334
29,892
15,942
31,317
8,811
15,465
9.00%
9.00%
9.00%
9.00%
9.00%
9.00%
9.00%
As of December 31, 2023
Community Bank Leverage Ratio
Company
Northwest
German
Davis
Freeport
Lena
Herscher
As of December 31, 2022
Community Bank Leverage Ratio
Company
Northwest
German
Davis
Freeport
Lena
Herscher
(22) Dividends
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.
57
2023 Annual Report
Plante & Moran, PLLC
10 South Riverside Plaza
9th floor
Chicago, IL 60606
Tel: 312.207.1040
Fax: 312.207.1066
plantemoran.com
Independent Auditor's Report on Supplemental Information
To the Audit Committee and the Board of Directors
Foresight Financial Group, Inc.
We have audited the consolidated financial statements (the "financial statements") of Foresight Financial Group,
Inc. and its subsidiaries as of and for the year ended December 31, 2023 and have issued our report thereon
dated March 12, 2024, which contained an unmodified opinion on those financial statements. Our audit was
performed for the purpose of forming an opinion on the financial statements as a whole. The consolidating
schedule 1 - December 31, 2023 balance sheet and consolidating schedule 2 - December 31, 2023 statement of
income are presented for the purpose of additional analysis and are 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 audit 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.
March 12, 2024
59
2023 Annual Report Consolidating Schedule – Balance Sheet
(000s omitted except share data)
December 31, 2023
ASSETS
German American
State Bank
State Bank
of Davis
Northwest
Bank
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 (AFS)
Debt securities held-to-maturity (HTM)
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
$4,202
5,532
683
1,930
54,200
-
3,519
-
$1,473
1,903
380
-
$5,014
17,824
940
1,245
66,314
71,993
499
290
-
-
964
990
246,476
95,407
303,822
-
2,925
4,014
9,034
-
-
738
2,100
5,375
-
-
6,419
6,486
7,783
-
Total assets
$332,515
174,479
423,480
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 other borrowings
Accrued interest payable and other liabilities
$50,942
246,357
297,299
-
0
2,988
4,620
$18,894
137,374
156,268
-
795
2,000
1,407
$91,344
266,831
358,175
-
16,111
13,940
2,518
Total liabilities
304,907
160,470
390,744
Stockholders' equity:
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive income (loss)
Total stockholders' equity
-
400
3,122
28,070
-
(3,984)
27,608
-
100
1,719
17,935
-
(5,745)
14,009
-
1,450
8,020
29,952
-
(6,686)
32,736
Total liabilities and stockholders' equity
$332,515
$174,479
$423,480
60
2023 Annual Report
December 31, 2023
ASSETS
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 (AFS)
Debt securities held-to-maturity (HTM)
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
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Stockholders' equity:
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive income (loss)
Total stockholders' equity
54,200
66,314
71,993
$4,202
5,532
683
1,930
3,519
-
-
-
2,925
4,014
9,034
-
$50,942
246,357
297,299
-
0
2,988
4,620
-
400
3,122
28,070
-
(3,984)
27,608
$1,473
1,903
380
-
499
290
-
-
738
2,100
5,375
-
$18,894
137,374
156,268
-
795
2,000
1,407
-
100
1,719
17,935
-
(5,745)
14,009
$5,014
17,824
940
1,245
-
964
990
-
6,419
6,486
7,783
-
$91,344
266,831
358,175
-
16,111
13,940
2,518
-
1,450
8,020
29,952
-
(6,686)
32,736
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) and other borrowings
Accrued interest payable and other liabilities
Total liabilities
304,907
160,470
390,744
Consolidating Schedule – Balance Sheet
(000s omitted except share data)
Consolidating Schedule – Balance Sheet
(000s omitted except share data)
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
$6,153
$1,522
303
18
-
74,157
3,097
502
-
53
-
594
$3,804
14,812
701
742
29,305
69,649
-
143
-
-
300
-
246,476
95,407
303,822
292,029
61,711
70,005
-
1,409
1,643
6,558
-
-
260
1,153
3,383
-
-
1,665
5,026
3,722
-
$194
6,592
$(194)
(26,191)
-
-
-
-
-
-
-
-
4,109
4,222
1,103
-
-
-
-
-
-
-
-
-
-
129,145
(129,145)
$22,168
20,828
2,722
4,511
365,618
3,596
5,718
990
1,069,450
-
17,525
24,644
36,958
-
Total assets
$332,515
174,479
423,480
$385,869
$98,124
$170,426
$145,365
$(155,530)
$1,574,728
$43,002
290,476
333,478
-
14,648
4,276
1,969
354,371
-
1,000
4,879
32,390
-
(6,771)
31,498
$8,485
75,463
83,948
1,153
-
2,750
1,606
89,457
-
500
3,803
7,166
-
(2,802)
8,667
$43,732
111,042
154,774
-
-
-
1,025
155,799
-
400
18,005
2,744
-
(6,522)
14,627
$ -
-
-
-
-
-
4,502
4,502
-
1,020
11,432
174,826
(13,905)
(32,510)
140,863
$(194)
(26,191)
(26,385)
-
-
-
-
$256,205
1,101,352
1,357,557
1,153
31,554
25,954
17,647
(26,385)
1,433,865
-
(3,850)
(39,548)
(118,257)
-
32,510
(129,145)
-
1,020
11,432
174,826
(13,905)
(32,510)
140,863
Total liabilities and stockholders' equity
$332,515
$174,479
$423,480
$385,869
$98,124
$170,426
$145,365
$(155,530)
$1,574,728
61
2023 Annual Report
December 31, 2023
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
Consolidating Schedule – Statement of Income
(000s omitted except share data)
German American
State Bank
State Bank
of Davis
Northwest
Bank
$13,734
$5,070
$18,009
865
515
432
44
15,590
1,169
369
173
20
6,801
5,118
1,983
7
-
146
5,271
3
28
68
2,082
1,257
175
734
58
20,233
5,220
16
160
335
5,731
Net interest and dividend income
10,319
4,719
14,502
Provision for credit losses
410
165
472
Net interest and dividend income,
after provision for credit losses
Noninterest income:
Customer service fees
Equity in earnings of subsidiaries
(Loss) gain on sales and calls of AFS securities, net
Gain on sale of loans, net
Loan servicing fees, nett
Bank owned life insurance
ATM / interchange fees
Other
Total noninterest income
Noninterest expense:
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
9,909
4,554
14,030
224
-
(3)
-
-
97
732
697
1,747
4,087
490
930
1,164
(37)
1,907
8,541
3,115
690
59
-
(52)
-
-
48
226
220
501
1,270
132
480
580
-
584
3,046
2,009
437
613
-
(32)
611
804
162
710
660
3,528
5,221
846
1,472
1,236
-
1,752
10,527
7,031
1,828
Net income
$2,425
$1,572
$5,203
62
2023 Annual Report
Consolidating Schedule – Statement of Income
(000s omitted except share data)
Consolidating Schedule – Statement of Income
(000s omitted except share data)
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
$13,734
$5,070
$18,009
$16,179
$3,356
$3,571
1,375
416
168
26
18,164
5,635
43
480
120
6,278
11,886
(42)
478
166
109
17
4,126
1,143
294
904
23
5,935
1,184
1,003
6
-
39
1,229
2,897
100
3
-
-
1,006
4,929
-
9,909
4,554
14,030
11,928
2,797
4,929
Net interest and dividend income
10,319
4,719
14,502
Provision for credit losses
410
165
472
December 31, 2023
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,
after provision for credit losses
Noninterest income:
Customer service fees
Equity in earnings of subsidiaries
(Loss) gain on sales and calls of AFS securities, net
Gain on sale of loans, net
Loan servicing fees, nett
Bank owned life insurance
ATM / interchange fees
Other
Total noninterest income
Noninterest expense:
Salaries and employee benefits
Occupancy expense of premises, net
Outside services
Data processing
Other
Foreclosed assets and other real estate owned, net
Total noninterest expenses
Income before income taxes
Income tax expense
Net income
5,118
1,983
865
515
432
44
15,590
7
-
146
5,271
224
(3)
-
-
-
97
732
697
1,747
4,087
490
930
1,164
(37)
1,907
8,541
3,115
690
1,169
369
173
20
6,801
3
28
68
2,082
59
-
(52)
-
-
48
226
220
501
1,270
132
480
580
-
584
3,046
2,009
437
1,257
175
734
58
20,233
5,220
16
160
335
5,731
613
-
(32)
611
804
162
710
660
3,528
5,221
846
1,472
1,236
-
1,752
10,527
7,031
1,828
92
0
(40)
-
-
41
232
915
1,240
3,287
273
764
965
-
996
6,285
6,883
1,794
$2,425
$1,572
$5,203
$5,089
75
0
(58)
-
-
26
80
58
181
625
83
336
399
(1)
300
1,742
1,236
297
$939
92
0
-
-
10
112
175
146
535
1,699
264
400
611
-
487
3,461
2,003
455
$ -
-
-
19
-
19
-
-
-
-
-
19
-
19
-
$ -
-
-
(341)
-
(341)
$59,919
6,287
1,935
2,198
188
70,527
(341)
19,802
-
-
-
(341)
-
-
-
-
78
668
708
21,256
49,271
1,105
48,166
1,155
-
(185)
611
814
585
2,155
2,421
7,556
22,627
2,298
1,311
3,025
(43)
7,384
36,602
19,120
4,574
16,777
(16,777)
-
-
-
99
-
5,477
22,353
6,438
273
238
451
(5)
1,358
8,753
13,619
(927)
-
-
-
-
-
(5,752)
(22,529)
-
(63)
(3,309)
(2,381)
-
-
(5,753)
(16,776)
-
$1,548
$14,546
$(16,776)
$14,546
63
2023 Annual Report
Board of Directors
Robert W. Stenstrom
Chairman, Board of Directors
Chairman & CEO,
Stenstrom Companies
Peter Q. Morrison
President,
Chief Executive Officer
John W. Collman
Ag Production
Frederick J. Kundert
Retired, Harder Corporation
John J. Morrissey
President, Staff Management
& Market Dimensions
Principal, Morrissey
Family Business
Carolyn S. Sluiter, D.V.M.
Retired Veterinarian
Daniel P. Stein
Owner, President of Young
Bros. Stamp Works, Term-
Lok Inc. and Chairman of
Central Bancshares Inc.
Jeffrey M. Sterling
Retired President/CEO
of German American
State Bank
Judd D. Thruman
Partner, Fishburn,
Whiton, Thruman, LTD.
Executive Officers
Peter Q. Morrison
President,
Chief Executive Officer
Dean E. Cooke
Chief Financial Officer
Brooke Crull
Chief Risk Officer
Rusti Swanson
Chief Credit Officer
Nora Koehler
Director of
Human Resources
Andrew LaPour
Director of
Information Technology
Lori Morgan
Director of
Corporate Operations
K. Denise Osadjan
Senior Vice President
64
2023 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
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
Luke Beggin
Mary Hartman
Vanessa Hughes
Jay Kempel
Fred Kundert
Chris Schneiderman
Brian Stewart
Ken Thompson
65
2023 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
2023 ANNUAL REPORT