2024 ANNUAL REPORT
The Power of One:
Local Leadership and Growth in 2025
ABOUT OUR
COMPANY
We exist to build meaningful connections
that strengthen our communities, empower
our employees, and enrich lives. Our
purpose goes beyond banking—it’s about
providing guidance, stability, and support
to
help
individuals,
businesses,
and
communities plan for a stronger financial
future. By staying rooted in local values and
looking ahead to anticipate opportunities
and challenges, we create lasting success
for the people, partners, and places we
proudly serve.
Consistently perform extraordinarily. Shareholders,
customers, and our staff know that we care,
understand, and are responsive to their needs
through our actions. We actively seek out the needs
of the communities we serve and volunteer our time,
leadership, and expertise.
Be honest and ethical in what we say and do. Our
actions align with our words.
We only succeed as a team, working together toward
a common goal. We leverage our talents to serve our
stakeholders' best interests. We regularly extend
meaningful and sincere acknowledgment to others
for contributing to our success and we celebrate our
accomplishments.
We understand how we contribute; our work and
contributions are meaningful and valued. We actively
participate and are involved. We live our Mission and
Values and strive toward our Vision in our daily work.
OUR SHARED
VALUES
SERVICE EXCELLENCE
INTEGRITY
COLLABORATION
ENGAGEMENT
We are fast-followers to utilize technology. We are
market-leaders in how we serve customers.
We thoughtfully pivot our plan and resources to meet
the needs of our stakeholders.
INNOVATION
AGILITY
Consistently perform extraordinarily. Shareholders,
customers, and our staff know that we care,
understand, and are responsive to their needs
through our actions. We actively seek out the needs
of the communities we serve and volunteer our time,
leadership, and expertise.
Be honest and ethical in what we say and do. Our
actions align with our words.
We only succeed as a team, working together toward
a common goal. We leverage our talents to serve our
stakeholders' best interests. We regularly extend
meaningful and sincere acknowledgment to others
for contributing to our success and we celebrate our
accomplishments.
We understand how we contribute; our work and
contributions are meaningful and valued. We actively
participate and are involved. We live our Mission and
Values and strive toward our Vision in our daily work.
OUR SHARED
VALUES
SERVICE EXCELLENCE
INTEGRITY
COLLABORATION
ENGAGEMENT
We are fast-followers to utilize technology. We are
market-leaders in how we serve customers.
We thoughtfully pivot our plan and resources to meet
the needs of our stakeholders.
INNOVATION
AGILITY
OUR
MISSION & VISION
We are a market driven, people oriented, local banking organization dedicated
to enhancing shareholder value by providing our customers with diversified
financial services that help them to 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.
Our individual markets and brands maintain the independence, flexibility and
sensitivity to meet the needs of the communities that we 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:
MISSION
COMMUNITY BUILDING THROUGH COMMUNITY BANKING.
VISION
Leverage the collective strengths of our talented and market-focused teams to
create customer loyalty, empower employees, and enhance value for our
communities and shareholders.
6
2024 Annual Report
Dear Fellow Shareholder:
We are pleased to report that 2024 was another successful
year as we continue to position ourselves as the bank
of choice in each of the respective markets that we
serve. Earnings of $12.7 million remain strong despite
the investments made during the year related to the
expansion of our Rockford market banking talent,
implementation of our new digital platform, and charter
consolidation efforts. Year over year saw growth in
Stockholder’s Equity of 8.9% or $13 million; Assets of
3.7% or $58 million; Deposits of 3.2% or $43 million; and
Loans of 2.9% or $31 million. Our Common Stock price
per share at 12/31/24 of $33.00 represents a year over year increase of $9.10 per share
or 29.9%. Despite an increase in Non-Performing Loans of $12 million year over
year, this increase continues to be concentrated in a select few credits and is not
representative of negative trends in specific lines of business. We have significantly
strengthened our credit review and oversight processes over the last three years,
and the identification of these credits is largely attributable to those efforts as
well as increased transparency at the individual charter levels associated with the
upcoming consolidation.
As noted in earlier Quarterly Newsletters, our digital banking platform
implementation was completed in 2024 and is now fully functional. This new
platform enables us to compete with any local, regional, or national banking
competitor and enhances our ability to attract new clients and expand services
to current clients, which will contribute to both loan and deposit growth as well
as enhanced non-interest income. The new platform will further enable us to
provide greatly expanded Treasury Management services and as such equip our
Commercial Bankers with a robust array of products to take to market as we seek
to increase market share across our global footprint. As also announced in Q3 of
2024, our charter consolidation efforts are well under way with a targeted legal
consolidation date of May 1, 2025. The consolidation project is a huge effort across
the organization, and our amazingly dedicated staff has risen to the challenge of
making this as seamless as possible for our customers. The full consolidation of
systems will not be complete until early Q4 of 2025, so there is a good deal of work
to be done between now and then, but we have made a significant investment in
systems, support, and human resources to ensure this goes as smoothly as possible.
The teamwork and dedication associated with this immense effort is remarkable.
7
2024 Annual Report
Relative to senior management, we are extremely proud of the highly experienced
and talented team we have assembled this year which began with Brooke Crull
joining us as our Chief Risk Officer. Brooke holds her CPA certification and joins
us following a successful career in the banking and audit division of Wipfli.
Jeff Hultman joins us as President of the Company and was the leader of the team
of talented Commercial Bankers that joined us from Illinois Bank and Trust in
Rockford where he held the title of President & CEO for many years. Included in
the senior management individuals that joined us from Illinois Bank and Trust are
our new head of commercial banking Kyle Logan, and head of consumer banking
Gina Caruana. Longtime Lena State Bank President and CEO Curtis Derrer has
accepted the role of head of ag lending, which further exhibits our commitment
to the agribusiness sector. Lastly, Todd James joined us as Chief Financial Officer.
Todd also carries the CPA designation and joined us following a long career with
Blackhawk Bank in Beloit, Wisconsin where he held the title of President and CEO
of the Holding Company. The addition of these individuals along with the terrific
team already in place has created what I regularly refer to as the “Dream Team”
that will allow us to successfully reach our goal of being the top performing bank
in our markets.
Foresight Financial Group and Foresight Bank will continue to maintain 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 again for being a shareholder of Foresight Financial Group. It is through
your continued support that we realize the success we have achieved to date, and
the success for which we strive as we move into the future.
Respectfully,
Peter Q. Morrison
Chief Executive Officer
8
2024 Annual Report
Common Equity Capital & ACL
Tier One Capital & ACL
Non-Performing Assets
*ACL: Allowance for Credit Losses **Accumulated Other Comprehensive Income
**AOCI Gain/(Loss)
TRENDS IN CAPITAL & ACL* AND NON-PERFORMING ASSETS (in thousands)
12/31/2019
2,081
12/31/2020
6,319
12/31/2021
1,543
12/31/2022
(36,988)
12/31/2023
(32,510)
12/31/2024
(33,097)
4,914
10,186
8,918
6,822
16,045
28,242
153,800
151,719
167,504
161,185
169,212
167,669
141,772
178,760
155,058
187,568
168,092
201,189
TRENDS IN ASSETS, DEPOSITS & LOANS* (in thousands)
Assets
Deposits
Loans*
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
1,020,093
1,213,588
778,874
1,154,460
1,384,600
818,611
1,235,444
1,453,784
845,847
1,294,707
1,477,460
954,426
1,357,557
1,574,728
1,069,450
1,400,703
1,633,219
1,100,657
*Loans held for investment NET of ALLL.
9
2024 Annual Report
NET INCOME (in millions)
2019
2020
2021
2022
2023
2024
11.02
10.29
11.39
13.63
14.50
12.66
COMMON STOCK PER SHARE TANGIBLE BOOK & MARKET VALUE
Tangible Book Value
Market Value
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
$37.69
$36.10
$41.24
$29.88
$43.13
$32.90
$35.67
$27.50
$40.08
$23.90
$42.59
$33.00
10
2024 Annual Report
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 sheets as of December 31,
2024 and 2023 and the related consolidated statements of income, comprehensive income, changes in
stockholders' equity, and cash flows for the years then ended, and the related notes to the 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, 2024 and 2023 and the results of its operations and its cash flows for the
years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities
for the Audits 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 audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Report on Prior Year Financial Statements
The financial statements of Foresight Financial Group, Inc. and its subsidiaries as of December 31, 2022 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.
Auditor’s Responsibilities for the Audits 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 audits 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.
11
2024 Annual Report
In performing audits in accordance with GAAS, we:
•
Exercise professional judgment and maintain professional skepticism throughout the audits.
•
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 audits 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 audits, significant audit findings, and certain internal control-related matters that
we identified during the audits.
March 10, 2025
12
2024 Annual Report
Consolidated Balance Sheets
(000s omitted except share data)
December 31, 2024 and 2023
ASSETS
2024
2023
Cash and due from banks
$16,905
$22,168
Interest-bearing deposits in banks
45,357
20,828
Federal funds sold
1,738
2,722
Total cash and cash equivalents
64,000
45,718
Interest-bearing deposits in banks - term deposits
4,434
4,511
Debt securities:
Debt securities available-for-sale (AFS)
369,945
365,618
Debt securities held-to-maturity (HTM)
3,263
3,596
Marketable equity securities and other investments
7,592
5,718
Loans held for sale
852
990
Loans, net of allowance for credit losses of $14,694 and $14,195,
respectively
1,100,657
1,069,450
Foreclosed assets and other real estate owned, net
-
-
Premises and equipment, net
17,125
17,525
Bank owned life insurance
24,459
24,644
Other assets
40,892
36,958
Total assets
$1,633,219
$1,574,728
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing
$249,076
$256,205
Interest-bearing
1,151,627
1,101,352
Total deposits
1,400,703
1,357,557
Federal funds purchased
5,804
1,153
Securities sold under agreements to repurchase
15,017
31,554
Federal Home Loan Bank (FHLB) and other borrowings
40,911
25,954
Accrued interest payable and other liabilities
17,386
17,647
Total liabilities
1,479,821
1,433,865
Stockholders' equity:
Preferred stock (no par value; authorized 500,000 shares)
-
-
Common stock ($.25 par value; authorized 10,000,000 shares;
4,242,121 and 4,080,304 shares issued, respectively)
1,060
1,020
Additional paid-in capital
16,482
11,432
Retained earnings
184,961
174,826
Treasury stock, at cost (644,079 and 569,079 shares, respectively)
(16,008)
(13,905)
Accumulated other comprehensive loss
(33,097)
(32,510)
Total stockholders' equity
153,398
140,863
Total liabilities and stockholders' equity
$1,633,219
$1,574,728
See Notes to Consolidated Financial Statements
13
2024 Annual Report
See Notes to Consolidated Financial Statements
Consolidated Statements of Income
(000s omitted except share data)
December 31, 2024, 2023, and 2022
2024
2023
2022
Interest and dividend income:
Loans, including fees
$69,284
$59,919
$42,990
Debt securities:
Taxable
7,214
6,287
6,117
Tax-exempt
1,647
1,935
2,518
Interest-bearing deposits in banks and other
2,451
2,198
646
Federal funds sold
108
188
190
Total interest and dividend income
80,704
70,527
52,461
Interest expense:
Deposits
29,855
19,802
6,291
Federal funds purchased
64
78
38
Securities sold under agreements to repurchase
484
668
323
FHLB and other borrowings
1,314
708
136
Total interest expense
31,717
21,256
6,788
Net interest and dividend income
48,987
49,271
45,673
Provision for credit losses
1,052
1,105
552
Net interest and dividend income,
after provision for credit losses
47,935
48,166
45,121
Noninterest income:
Customer service fees
1,421
1,155
1,055
Loss on sales and calls of AFS securities, net
(111)
(185)
(246)
Gain on sale of loans, net
772
611
969
Loan servicing fees, net
249
814
1,978
Bank owned life insurance
1,110
585
580
ATM / interchange fees
2,143
2,155
2,126
Other
1,609
2,421
1,947
Total noninterest income
7,193
7,556
8,409
Noninterest expenses:
Salaries and employee benefits
24,670
22,627
22,627
Occupancy expense of premises, net
2,404
2,298
2,312
Outside services
1,611
1,311
1,553
Data processing
3,188
3,025
3,040
Foreclosed assets and other real estate owned, net
12
(43)
(53)
Other
7,009
7,384
6,343
Total noninterest expenses
38,894
36,602
35,822
Income before income taxes
16,234
19,120
17,708
Income tax expense
3,570
4,574
4,082
Net income
$12,664
$14,546
$13,626
Earnings per common share:
Basic
$3.61
$4.08
$3.83
Diluted
$3.59
$4.08
$3.81
14
2024 Annual Report
Consolidated Statements of Comprehensive Income
(000s omitted except share data)
December 31, 2024, 2023, and 2022
2024
2023
2022
Net income
$12,664
$14,546
$13,626
Other comprehensive (loss) income:
Unrealized holding (losses) gains on securities available for sale,
net of tax of $155, $1,917, & $15,292, respectively
(666)
4,346
(38,707)
Reclassification adjustments for net securities losses
recognized in income, net of tax of $32, $53, & $70, respectively
79
132
176
Total other comprehensive (loss) income
(587)
4,478
(38,531)
Total comprehensive income (loss)
$12,077
$19,024
$(24,905)
See Notes to Consolidated Financial Statements
15
2024 Annual Report
Consolidated Statements of Changes in Stockholders’ Equity
(000s omitted except share data)
December 31, 2024, 2023, and 2022
Accumulated
Additional
Other
Common
Paid-
Retained
Treasury
Comprehensive
Stock
in Capital
Earnings
Stock
Income (Loss)
Total
Balance – January 1, 2022
$1,015
$10,768
$152,903
$(11,002)
$1,543
$15,227
Net income
-
-
13,626
-
-
13,626
Other comprehensive loss
-
-
-
-
(38,531)
(38,531)
Cash dividends ($.54 per share)
-
-
(1,932)
-
-
(1,932)
Purchase of treasury stock (44,760 shares)
-
-
-
(1,532)
-
(1,532)
Stock-based compensation expense
-
25
-
-
-
25
Restricted stock vested (11,406 shares)
3
345
-
-
-
348
Balance – December 31, 2022
1,018
11,138
164,597
(12,534)
(36,988)
127,231
Effect of change in accounting principle -
Adoption of ASU 2016-13
-
-
(2,029)
-
-
(2,029)
Net income
-
-
14,546
-
-
14,546
Other comprehensive income
-
-
-
-
4,478
4,478
Cash dividends ($.64 per share)
-
-
(2,288)
-
-
(2,288)
Purchase of treasury stock (60,000 shares)
-
-
-
(1,371)
-
(1,371)
Stock-based compensation expense
-
16
-
-
-
16
Restricted stock vested (8,810 shares)
2
278
-
-
-
280
Balance – December 31, 2023
1,020
11,432
174,826
(13,905)
(32,510)
140,863
Net income
-
-
12,664
-
-
12,664
Other comprehensive loss
-
-
-
-
(587)
(587)
Cash dividends ($.72 per share)
-
-
(2,529)
-
-
(2,529)
Purchase of treasury stock (75,000 shares)
-
-
-
(2,103)
-
(2,103)
Stock private placement (152,718 shares)
38
4,762
-
-
-
4,800
Stock-based compensation expense
-
16
-
-
-
16
Restricted stock vested (9,099 shares)
2
272
-
-
-
274
Balance – December 31, 2024
$1,060
$16,482
$184,961
$(16,008)
$(33,097)
$153,398
See Notes to Consolidated Financial Statements
16
2024 Annual Report
Consolidated Statements of Cash Flows
(000s omitted except share data)
December 31, 2024, 2023, and 2022
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$12,664
$14,546
$13,626
Adjustments to reconcile net income to net cash and cash
equivalents provided by operating activities:
Provision for credit losses
1,052
1,105
552
Foreclosed asset valuation losses
-
-
64
Depreciation
1,172
1,098
1,106
Net amortization of securities premiums
1,859
2,160
3,019
Change in fair value of equity securities
(59)
(70)
(97)
Originations of loans held-for-sale
(26,911)
(21,310)
(39,073)
Proceeds from sales of loans held-for-sale
27,821
21,352
41,875
Net gains on sales of mortgage loans
(772)
(611)
(969)
Income on bank owned life insurance
(633)
(585)
(547)
Gain on death benefits from bank owned life insurance
(477)
-
(33)
Deferred income tax expense
76
292
115
Stock-based compensation expense
16
16
25
Restricted stock expense
274
280
348
Net loss on the sales and calls of AFS securities
111
185
246
Net gain on the sales of foreclosed assets
(8)
(43)
(262)
Change in mortgage servicing rights
437
(67)
(1,208)
Net change in:
Other assets
(4,213)
(6,507)
(270)
Accrued interest payable and other liabilities
(261)
5,796
1,463
Net cash provided by operating activities
$12,148
$17,637
$19,980
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits in banks - term deposits
77
1,547
6,140
Proceeds from sales of AFS securities
4,857
13,501
10,348
Proceeds from maturities, call, and paydowns of AFS securities
32,077
25,707
45,029
Proceeds from maturities, call, and paydowns of HTM securities
356
510
345
Purchases of AFS securities
(44,075)
(9,604)
(64,023)
Purchases of bank owned life insurance
-
-
(930)
Proceeds from death benefits of bank owned life insurance
1,295
-
662
Purchase of marketable equity securities, net
(1,815)
(1,703)
(1,581)
Loan originations and principal collections, net
(32,327)
(119,588)
(109,201)
Proceeds from sale of foreclosed assets
76
733
237
Purchases of premises and equipment, net
(772)
(1,025)
(1,573)
Net cash used in investing activities
(40,251)
(89,922)
(114,547)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits
43,146
62,843
59,263
Net change in securities sold under agreements to repurchase
(16,537)
(4,744)
1,189
Cash dividends paid
(2,529)
(2,288)
(1,932)
Net change in federal funds purchased
4,651
1,153
(533)
Purchase of treasury stock
(2,103)
(1,371)
(1,532)
Stock private placement
4,800
-
-
Proceeds from FHLB and other borrowings
48,413
64,441
18,950
Payments on FHLB and other borrowings
(33,456)
(45,853)
(28,660)
Net cash provided by financing activities
46,385
74,181
46,745
Net Increase (Decrease) in cash and cash equivalents
18,282
1,896
(47,822)
Cash and cash equivalents at beginning of year
45,718
43,822
91,644
Cash and cash equivalents at end of year
$64,000
$45,718
$43,822
See Notes to Consolidated Financial Statements
17
2024 Annual Report
Consolidated Statements of Cash Flows
(000s omitted except share data)
December 31, 2024, 2023, and 2022
2024
2023
2022
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for:
Interest
$30,840
$19,940
$6,505
Taxes
$4,639
$3,600
$2,882
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING ACTIVITIES:
Foreclosed assets acquired in settlement of loans
$68
$620
$70
See Notes to Consolidated Financial Statements
18
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(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 10, 2025,
which is the date the financial statements were available to be issued. On October 24, 2024, the
Company announced that each of its six bank brands will be consolidating its six bank charters into one
with an expected legal day one of May 1, 2025.
(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, 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.
19
2024 Annual Report
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 $6 of accrued interest receivable on held to maturity securities as of
December 31, 2024 and 2023, 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 income.
20
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(h) Marketable Equity Securities and Other Investments
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.
21
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(k) Allowance for Credit Losses and Unfunded Commitments
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.
22
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(k) Allowance for Credit Losses and Unfunded Commitments (continued)
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.
(l) Loan Commitments
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.
23
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(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. The Company measures
mortgage servicing rights at fair value at each reporting date and reports changes in fair value of
servicing assets in earnings in the period in which changes occur.
(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 accounted
for as derivatives not qualifying for hedge accounting. The fair values of these mortgage derivatives are
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 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.
24
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(r) Significant Group Concentrations of Credit Risk
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.
25
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(s) Revenue from Contracts with Customers (continued)
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, 2024 and 2023, 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, 2024 and 2023.
(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.
26
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(x) Transfers of Financial Assets
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) Operating Segments
While the chief decision-makers monitor the revenue streams of the various products and services,
operations are managed, and financial performance is evaluated on a Company-wide basis. Discrete
financial information is not available other than on a Company-wide basis. Accordingly, all of the
financial service operations are considered by management to be aggregated in one reportable
operating segment. See Note 23 for new disclosure related to the new accounting standard.
(dd) Reclassifications
Certain amounts in the 2022 and 2023 financial statements have been reclassified to conform to the
2024 presentation.
27
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(ee) New Accounting Pronouncements
ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures-
The amendments in this update improve reportable segment disclosure requirements through
enhanced disclosures about significant segment expenses. The amendments clarify circumstances in
which an entity can disclose multiple measures of profit or loss, provide new segment requirements for
entities with a single reportable segment and contain other disclosure requirements. The Company
adopted ASU No. 2023-07 on January 1, 2024, on a prospective basis. The adoption of this standard
did not have a material impact on the Company’s operating results or financial condition.
ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures- The
amendments in this update enhance the transparency and decision usefulness of income tax
disclosures. This update requires the disclosure of specific categories in the rate reconciliation and
provide additional information for reconciling items that meet a quantitative threshold including 1) the
amount of income taxes paid disaggregated by federal, state, and foreign taxes; 2) the amount of
income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or
greater than five percent of total income taxes paid. The amendments also require entities to disclose
income from continuing operations before income tax expense disaggregated between domestic and
foreign and disaggregated by federal, state and foreign. The adoption of this standard is not expected
to have a material effect on the Company’s operating results or financial condition.
ASU No. 2024-02, Codification Improvements-Amendments to Remove References to the Concepts
Statements- The amendments to the Codification remove references to various Concepts Statements.
The adoption of this standard is not expected to have a material effect on the Company’s operating
results or financial condition.
(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, 2024 are as follows:
2025
$3,442
2026
747
2027
245
2028 and thereafter
-
$4,434
28
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(3)
Debt Securities
The following tables reflect the amortized costs and approximate fair values of securities at December 31:
Gross
Gross
Held-to-Maturity
Unrealized
Unrealized
Estimated
2024
Amortized Cost
Gains
Losses
Fair Value
State and municipal
$3,263
$ -
$(213)
$3,050
Gross
Gross
Held-to-Maturity
Unrealized
Unrealized
Estimated
2023
Amortized Cost
Gains
Losses
Fair Value
State and municipal
$3,596
$ -
$(231)
$3,365
Gross
Gross
Available-for-Sale
Unrealized
Unrealized
Estimated
2024
Amortized Cost
Gains
Losses
Fair Value
U.S. Government sponsored entities
$130,397
$11
$(11,109)
$119,299
and U.S. agencies
State and municipal
102,260
18
(11,006)
91,272
Agency mortgage-backed
182,062
61
(24,310)
157,813
Corporate debt securities
1,519
42
-
1,561
$416,238
$132
$(46,425)
$369,945
Gross
Gross
Available-for-Sale
Unrealized
Unrealized
Estimated
2023
Amortized Cost
Gains
Losses
Fair Value
U.S. Government sponsored entities
$129,106
$8
$(12,685)
$116,429
and U.S. agencies
State and municipal
110,943
130
(9,600)
101,473
Agency mortgage-backed
169,542
9
(23,390)
146,161
Corporate debt securities
1,499
56
-
1,555
$411,090
$203
$(45,675)
$365,618
29
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(3) Debt Securities (continued)
For the years ended December 31, 2024, 2023 and 2022, proceeds from sales of available-for-sale
securities amounted to $4,857, $13,501 and $10,348, 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:
2024
2023
2022
Realized gains
$ -
$32
$170
Realized losses
(111)
(217)
(416)
Securities with carrying amounts of approximately $244,667 and $264,449 at December 31, 2024 and 2023,
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, 2024 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.
Estimated
Held-to-Maturity
Amortized Cost
Fair Value
Due in one year or less
$885
$873
Due after one year through five years
1,536
1,433
Due after five years through ten years
842
744
Due after ten years
-
-
$3,263
$3,050
Estimated
Available-for-Sale
Amortized Cost
Fair Value
Due in one year or less
$23,974
$23,798
Due after one year through five years
75,855
70,864
Due after five years through ten years
83,772
74,500
Due after ten years
50,575
42,970
234,176
212,132
Agency mortgage-backed
182,062
157,813
$416,238
$369,945
30
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(3) Debt Securities (continued)
The following tables show the fair values and unrealized losses aggregated by investment category and
length of time that individual securities have been in a continuous unrealized loss position, at December 31,
2024 and 2023:
2024
Held-to-Maturity
Less Than 12 Months
12 Months or Greater
Gross
Gross
Estimated
Unrealized
Number of
Estimated
Unrealized
Number of
Fair Value
Loss
Securities
Fair Value
Loss
Securities
State and municipal
$ -
$ -
-
$3,050
$213
9
2023
Held-to-Maturity
Less Than 12 Months
12 Months or Greater
Gross
Gross
Estimated
Unrealized
Number of
Estimated
Unrealized
Number of
Fair Value
Loss
Securities
Fair Value
Loss
Securities
State and municipal
$480
$18
1
$2,885
$213
9
2024
Available-for-Sale
Less Than 12 Months
12 Months or Greater
Gross
Gross
Estimated
Unrealized
Number of
Estimated
Unrealized
Number of
Fair Value
Loss
Securities
Fair Value
Loss
Securities
U.S. Government sponsored
$10,112
$72
20
$104,252
$11,037
170
entities and U.S. agencies
State and municipal
9,966
195
34
73,456
10,811
281
Agency mortgage-backed
12,463
188
15
124,411
24,122
416
Total
$32,541
$455
69
$302,119
$45,970
867
2023
Available-for-Sale
Less Than 12 Months
12 Months or Greater
Gross
Gross
Estimated
Unrealized
Number of
Estimated
Unrealized
Number of
Fair Value
Loss
Securities
Fair Value
Loss
Securities
U.S. Government sponsored
$6,893
$32
14
$106,026
$12,653
174
entities and U.S. agencies
State and municipal
5,750
319
21
78,245
9,281
293
Agency mortgage-backed
-
-
-
144,681
23,390
428
Total
$12,643
$351
35
$328,952
$45,324
895
31
2024 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, 2024 and 2023 by portfolio segment and class
of loan:
2024
2023
Commercial
Commercial & industrial
$222,676
$222,760
Commercial real estate
323,890
303,056
Commercial construction
43,707
51,612
Total commercial
590,273
577,428
Agriculture
Agriculture real estate
181,899
176,878
Agriculture production
116,142
112,455
Total agriculture
298,041
289,333
Residential Mortgage
1 - 4 family first lien
107,102
91,567
1 - 4 family junior lien
27,436
29,379
Residential construction
4,932
5,193
Total residential mortgage
139,470
126,139
Consumer
Auto
58,345
58,199
Consumer other
14,942
17,857
Total consumer
73,287
76,056
Other loans and leases
14,548
15,170
Gross loans
1,115,619
1,084,126
Allowance for credit losses
14,694
14,195
Unamortized deferred fees, net
268
481
Net loans
$1,100,657
$1,069,450
32
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
The Company’s activity in the allowance for credit losses for the years ended December 31, 2024 and 2023,
by loan segment is summarized below:
2024
Residential
Commercial
Agriculture
Mortgage
Consumer
Other
Total
Balance, beginning of period
$9,592
$2,887
$807
$668
$241
$14,195
Provision
438
218
331
24
69
1,080
Charge-offs
311
36
91
153
67
658
Recoveries collected
33
2
13
21
8
77
Balance, end of period
$9,752
$3,071
$1,060
$560
$251
$14,694
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
2,105
264
(149)
80
152
2,452
Provision
409
227
32
107
58
833
Charge-offs
4,010
-
63
203
61
4,337
Recoveries collected
663
-
21
17
5
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
$7,618
$4,236
$1,797
$269
$65
$13,985
Provision
2,787
(1,840)
(923)
443
85
552
Charge-offs
175
-
78
131
67
451
Recoveries collected
195
-
170
86
4
455
Balance, end of period
$10,425
$2,396
$966
$667
$87
$14,541
33
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
Collateral dependent loans individually evaluated for purposes of the allowance for credit losses by collateral
type were as follows at December 31, 2024 and 2023:
As of December 31, 2024
Commercial
$15,349
Commercial Real Estate
10,544
Agriculture
647
Agriculture Real Estate
2,417
Residential Mortgage
1,989
Residential Construction
1,454
Consumer
6,348
Total
$38,748
As of December 31, 2023
Commercial
$10,930
Agriculture
1,176
Residential Mortgage
1,168
Consumer
4,369
Other
47
Total
$17,690
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, 2024 and 2023, follows:
34
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
Revolving
Loans
Amortized
2024
2023
2022
2021
2020
Prior
Cost Basis
Total
Commercial
Pass
$104,730
$82,800
$132,130
$79,940 $25,896
$73,175
$62,932
$561,603
Special Mention
336
150
1,480
-
1,077
1,317
30
4,390
Substandard
165
1,110
14,285
1,592
4,072
566
2,490
24,280
Total commercial
105,231
84,060
147,895
81,532
31,045
75,058
65,452
590,273
Agriculture
Pass
32,524
43,002
33,091
29,820
19,834
39,911
94,929
293,111
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
282
248
4,144
36
220
4,930
Total agriculture
32,524
43,002
33,373
30,068
23,978
39,947
95,149
298,041
Residential mortgage
Pass
31,789
11,787
22,180
19,823
7,714
16,761
25,191
135,245
Special Mention
-
-
126
164
132
309
30
761
Substandard
1,046
90
389
526
-
455
958
3,464
Total residential
mortgage
32,835
11,877
22,695
20,513
7,846
17,525
26,179
139,470
Consumer
Pass
24,306
26,321
14,647
5,730
1,406
550
1
72,961
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
86
106
110
1
23
-
326
Total consumer
24,306
26,407
14,753
5,840
1,407
573
1
73,287
Other loans and
leases
Pass
1,135
1,783
1,057
4,980
671
4,922
-
14,548
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total other loans
1,135
1,783
1,057
4,980
671
4,922
-
14,548
and leases
Totals
$196,031 $167,129
$219,773 $142,933 $64,947 $138,025
$186,781
$1,115,619
35
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
Revolving
Loans
Amortized
2023
2022
2021
2020
2019
Prior
Cost Basis
Total
Commercial
Pass
$86,334 $172,051
$99,760 $30,821 $20,024
$80,145
$61,303
$550,438
Special Mention
176
10,463
-
1,939
71
2,440
130
15,219
Substandard
1,178
761
1,002
4,397
553
429
3,451
11,771
Total commercial
87,688
183,275
100,762
37,157
20,648
83,014
64,884
577,428
Agriculture
Pass
49,112
36,952
32,786
21,128
13,546
35,371
92,497
281,392
Special Mention
-
-
-
-
-
-
-
Substandard
258
376
2,179
5,082
-
46
-
7,941
Total agriculture
49,370
37,328
34,965
26,210
13,546
35,417
92,497
289,333
Residential mortgage
Pass
20,141
26,416
21,755
9,044
6,082
14,924
25,023
123,385
Special Mention
-
139
175
62
-
495
83
954
Substandard
99
179
554
74
79
748
67
1,800
Total residential
mortgage
20,240
26,734
22,484
9,180
6,161
16,167
25,173
126,139
Consumer
Pass
37,801
23,139
9,829
2,959
1,742
307
183
75,960
Special Mention
-
-
-
-
-
-
-
-
Substandard
15
48
9
10
14
-
-
96
Total consumer
37,816
23,187
9,838
2,969
1,756
307
183
76,056
Other loans and leases
Pass
2,650
1,130
5,230
906
13
5,241
-
15,170
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total other loans
2,650
1,130
5,230
906
13
5,241
-
15,170
and leases
Totals
$197,764 $271,654 $173,279 $76,422 $42,124 $140,146
$182,737
$1,084,126
The gross charge-offs by loan type and year of origination for the year ended December 31, 2024 and 2023
were as follows:
2024
Current Period Gross Charge-offs
2024
2023
2022
2021
2020
Prior
Total
Commercial
$8
$ 4
$ 126
$99
$2
$72
$311
Agriculture
-
-
36
-
-
-
36
Residential mortgage
-
-
-
-
-
91
91
Consumer
-
56
51
36
6
4
153
Other loans and leases
67
-
-
-
-
-
67
Totals
$75
$60
$213
$135
$8
$167
$658
36
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
2023
Current Period Gross Charge-offs
2023
2022
2021
2020
2019
Prior
Total
Commercial
$2
$102
$ -
$965
$1,473
$1,468
$4,010
Residential mortgage
-
-
-
25
-
38
63
Consumer
-
120
17
20
37
9
203
Other loans and leases
61
-
-
-
-
-
61
Totals
$63
$222
$17
$1,010
$1,510
$1,515
$4,337
Loan aging information by class of loans at December 31 follows:
As of December 31, 2024
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
$1,133
$447
$1,580
$221,096
$222,676
$ -
Commercial real estate
-
1,849
1,849
322,041
323,890
-
Commercial construction
-
-
-
43,707
43,707
-
Total commercial
1,133
2,296
3,429
586,844
590,273
-
Agriculture
Agriculture real estate
54
222
276
181,623
181,899
222
Agriculture production
-
220
220
115,922
116,142
-
Total agriculture
54
442
496
297,545
298,041
-
Residential mortgage
1 - 4 family first lien
1,381
487
1,868
105,234
107,102
-
1 - 4 family junior lien
453
47
500
26,936
27,436
-
Residential construction
-
-
-
4,932
4,932
-
Total residential mortgage
1,834
534
2,368
137,102
139,470
-
Consumer
Auto
1,064
235
1,299
57,046
58,345
8
Consumer other
280
23
303
14,639
14,942
-
Total consumer
1,344
258
1,602
71,685
73,287
8
Other Loans and Leases
-
-
-
14,548
14,548
-
Totals
$4,365
$3,530
$7,895 $1,107,724 $1,115,619
$230
37
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
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
$432
$121
$553
$222,207
$222,760
$82
Commercial real estate
1,563
-
1,563
301,493
303,056
-
Commercial construction
-
-
-
51,612
51,612
-
Total commercial
1,995
121
2,116
575,312
577,428
82
Agriculture
Agriculture real estate
316
-
316
176,562
176,878
-
Agriculture production
151
84
235
112,220
112,455
-
Total agriculture
467
84
551
288,782
289,333
-
Residential mortgage
1 - 4 family first lien
859
364
1,223
90,344
91,567
189
1 - 4 family junior lien
230
-
230
29,149
29,379
-
Residential construction
-
-
-
5,193
5,193
-
Total residential mortgage
1,089
364
1,453
124,686
126,139
189
Consumer
Auto
827
35
862
57,337
58,199
25
Consumer other
196
7
203
17,654
17,857
6
Total consumer
1,023
42
1,065
74,991
76,056
31
Other Loans and Leases
-
-
-
15,170
15,170
-
Totals
$4,574
$611
$5,185 $1,078,941 $1,084,126
$302
38
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
Information regarding nonaccrual loans during the years ended December 31 follows:
December 31, 2024
December 31, 2023
Interest
Income
Recognized
Interest
Income
Recognized
Nonaccrual
loans
Total
During the
Period on
Nonaccrual
loans
Total
During the
Period on
With No
ACL
Nonaccrual
Loans
Nonaccrual
Loans
With No
ACL
Nonaccrual
Loans
Nonaccrual
Loans
Commercial
Commercial & industrial
$2,088
$9,922
$ -
$44
$5,029
$ -
Commercial real estate
1,479
10,479
-
14
2,156
-
Commercial construction
-
-
-
-
-
-
Total commercial
3,567
20,401
-
58
7,185
-
Agriculture
Agriculture real estate
1,036
4,144
-
1,175
4,703
-
Agriculture production
-
867
11
-
3,180
60
Total agriculture
1,036
5,011
11
1,175
7,883
60
Residential Mortgage
1 - 4 family first lien
265
756
2
-
446
-
1 - 4 family junior lien
253
293
-
99
137
-
Residential construction
-
1,455
-
-
-
-
Total residential mortgage
518
2,504
-
99
583
-
Consumer
Auto
-
297
-
-
66
-
Consumer other
-
29
-
-
26
-
Total consumer
-
326
-
-
92
-
Other loans and leases
-
-
-
-
-
-
Totals
$5,121
$28,242
$13
$1,332
$15,743
$60
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 January 1, 2023, the Company had $6,479 in nonaccrual loans. As of December 31, 2024 and 2023,
the Company had commitments to lend additional funds of $23 and $129, respectively, on loans modified to
borrowers experiencing financial difficulty.
39
2024 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, 2024 and 2023 of loans modified to
borrowers experiencing financial difficulty during the year disaggregated by loan class and by type of
concession granted.
As of December 31, 2024
Other-than-Insignificant
Combination:
Term Extension
Term Extension
Payment Delay
and Principal Forgiveness
% of Total
% of Total
% of Total
Class of
Class of
Class of
Amortized
Financing
Amortized
Financing
Amortized
Financing
Cost Basis
Receivable
Cost Basis
Receivable
Cost Basis
Receivable
Commercial
Commercial & industrial
$3,633
1.6%
$26
0.0%
$26
0.0%
Commercial real estate
1,538
0.5%
-
-
-
-
Total commercial
5,171
0.9%
26
0.0%
26
0.0%
Agriculture
Agriculture production
365
0.3%
-
-
282
0.2%
Total agriculture
365
0.1%
-
-
282
0.1%
Residential Mortgage
1 - 4 family first lien
121
0.1%
-
-
-
-
1 - 4 family junior lien
140
0.5%
-
-
-
-
Total residential mortgage
261
0.2%
-
-
-
-
Totals
$5,797
0.5%
$26
-
$308
0.0%
40
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
As of December 31, 2023
Other-than-Insignificant
Combination:
Term Extension
Term Extension
Payment Delay
and Principal Forgiveness
% of Total
% of Total
% of Total
Class of
Class of
Class of
Amortized
Financing
Amortized
Financing
Amortized
Financing
Cost Basis
Receivable
Cost Basis
Receivable
Cost Basis
Receivable
Commercial
Commercial & industrial
$3,403
1.5%
$6
0.0%
$ -
-
Commercial real estate
194
0.1%
114
0.0%
-
-
Total commercial
3,597
0.6%
120
0.0%
-
-
Agriculture
Agriculture production
2,559
0.1%
-
-
-
-
Total agriculture
2,559
0.1%
-
-
-
-
Residential Mortgage
1 - 4 family junior lien
17
0.1%
-
-
99
0.3%
Total residential mortgage
17
0.0%
-
-
99
0.1%
Totals
$6,173
0.6%
$120
0.0%
$99
0.0%
The following tables presents the financial effect of the loan modifications presented above to borrowers
experiencing financial difficulty for the year ended December 31, 2024 and 2023.
As of December 31, 2024
Other-than-Insignificant
Term Extension
Payment Delay
Principal
Forgiveness
Commercial & industrial
9 loans extended on a short-term basis
Adjusted to interest only
followed by a single pay
note for borrower to sell
assets
Commercial real estate
Extended one year to encourage capital
injection into the project
Agriculture production
Loans extended on a short-term basis
1 - 4 family first lien
One loan extended to facilitate sale
of collateral
1 - 4 family junior lien
Two loans extended on a short-term
basis
41
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
As of December 31, 2023
Other-than-Insignificant
Term Extensions
Payment Delay
Principal Forgiveness
Commercial & industrial
Extended 5 to 13 months to the
maturity dates
Interest Only payments
for 7 months
Commercial real estate
Extended 1-5 years to maturity dates
Interest only payments
for 7 months
Agriculture production
Extended 13 months to maturity dates
1 - 4 family junior lien
Extended 6 years to maturity date
Reduced amortized
cost basis between
$412M and $442M
dependent on
finalization of the sale
of collateral.
The following table presents the amortized cost basis of loans that had a payment default during the years
ended December 31, 2024 and 2023 and were modified in the twelve months prior to that default to
borrowers experiencing financial difficulty:
As of December 31, 2024
Term extension
Combination: Term
Extension and
Payment Delay
Commercial
Commercial & industrial
$703
$52
Total commercial
703
52
Residential Mortgage
1 - 4 junior lien
140
-
Total residential mortgage
140
-
Totals
$843
$52
As of December 31, 2023
Term extension
Commercial
Commercial & industrial
$29
Commercial real estate
41
Total commercial
70
Agriculture
Agriculture production
2,179
Total agriculture
2,179
Totals
$2,249
42
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(4) Loans (continued)
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:
Greater than
As of December 31, 2024
Current
30-89 days
90 days
Total
Commercial
Commercial & industrial
$2,982
$703
$ -
$3,685
Commercial real estate
1,538
-
-
1,538
Total commercial
4,520
703
-
5,223
Agriculture
Agriculture production
647
-
-
647
Total agriculture
647
-
-
647
Residential Mortgage
1 - 4 family first lien
121
-
-
121
1 - 4 family junior lien
140
-
-
140
Total residential mortgage
261
-
-
261
Totals
$5,428
$703
$ -
$6,131
Greater than
As of December 31, 2023
Current
30-89 days
90 days
Total
Commercial
Commercial & industrial
$3,380
$ -
$29
$3,409
Commercial real estate
267
41
-
308
Total commercial
3,647
41
29
3,717
Agriculture
Agriculture production
380
2,179
-
2,559
Total agriculture
380
2,179
-
2,559
Residential Mortgage
1 - 4 family junior lien
116
-
-
116
Total residential mortgage
116
-
-
116
Totals
$4,143
$2,220
$29
$6,392
43
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(5) Loan Servicing
Loans serviced for others are not included in the accompanying consolidated balance sheets. Mortgage loans
serviced for others as of December 31, 2024 and 2023, were approximately $270,357 and $275,743,
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
$3,508 and $3,451 at December 31, 2024 and 2023, respectively.
The balances for mortgage servicing rights, carried at fair value and included in other assets, were $2,866
and $3,303 as of December 31, 2024 and 2023, 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:
2024
2023
2022
Range of discount rates
9.63% - 11.63%
9.75% - 11.75%
9.00% - 11.00%
Range of prepayment speeds
6.01% - 15.03%
5.29% - 26.25%
6.30% - 26.25%
(6) Mortgage Banking Loan Commitments
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, 2024 and 2023, the Company had approximately $650 and $805, respectively, in interest rate
lock commitments outstanding. As of December 31, 2024 and 2023, the Company had approximately $1,299
and $1,611, respectively, in mandatory delivery forward commitments outstanding. 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, 2024 and December 31, 2023.
Residential real estate loans that are in process of foreclosure totaled $154 at December 31, 2024 and $79
at December 31, 2023.
44
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(8) Premises and Equipment
The components of premises and equipment at December 31 are as follows:
2024
2023
Land
$2,640
$2,640
Buildings and leasehold improvements
22,813
22,700
Furniture, fixtures, and equipment
14,973
14,440
40,426
39,780
Less accumulated depreciation
23,301
22,255
$17,125
$17,525
Depreciation expense for the years ended December 31, 2024, 2023 and 2022 amounted to $1,172, $1,098,
and $1,106, respectively.
(9) Other Assets
The components of other assets at December 31 are as follows:
2024
2023
Accrued interest receivable
$10,856
$9,763
Mortgage servicing rights
2,866
3,303
Net deferred tax assets
17,118
16,960
Qualified affordable housing project investments
4,354
4,818
Other
5,698
2,114
$40,892
$36,958
(10)
Deposits
Deposits consist of the following at December 31, 2024 and 2023:
2024
2023
Non-interest-bearing demand
$249,076
$256,205
Interest-bearing demand
223,977
220,417
Money market and savings
394,292
408,278
Time
533,358
472,657
$1,400,703
$1,357,557
The aggregate amount of time deposits with a minimum denomination of $250 was approximately $171,121
and $143,788 at December 31, 2024 and 2023, respectively. Time deposits are included in the interest-
bearing deposits on the consolidated balance sheets.
45
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(10)
Deposits (continued)
At December 31, 2024, the scheduled maturities of time deposits are as follows:
2025
$447,000
2026
61,727
2027
12,168
2028
8,724
2029 and thereafter
3,739
$533,358
(11)
Income Taxes
The components of income tax expense for the years ended December 31 are as follows:
2024
2023
2022
Current - federal
$2,611
$2,956
$2,700
Current - state
883
1,326
1,267
3,494
4,282
3,967
Deferred - federal
50
195
74
Deferred - state
26
97
41
76
292
115
Total income tax expense
$3,570
$4,574
$4,082
46
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(11)
Income Taxes (continued)
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:
2024
2023
2022
% of
% of
% of
Pretax
Pretax
Pretax
Amount
Earnings
Amount
Earnings
Amount
Earnings
Statutory federal tax
$3,409
21.0%
$4,015
21.0%
$3,718
21.0%
(Decrease) increase in taxes
resulting from:
Tax-exempt interest
(281)
(1.7%)
(330)
(1.7%)
(598)
(3.4%)
Bank-owned life insurance
(315)
(1.9%)
(123)
(0.6%)
(122)
(0.7%)
State taxes, net of
federal benefit
963
5.9%
1,124
5.9%
1,033
5.8%
Low-income housing credits
(181)
(1.2%)
(62)
(0.3%)
-
-
Other
(23)
(0.1%)
(50)
(0.3%)
51
0.3%
Effective tax rates
$3,570
22.0%
$4,574
24.0%
$4,082
23.0%
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, 2024 and 2023 are summarized as follows:
2024
2023
Deferred tax assets:
Allowance for credit losses
$4,152
$4,046
CECL reserve for unfunded loan commitments
180
188
Available-for-sale securities
13,196
12,962
Deferred compensation and other
2,450
2,611
Total deferred tax assets
$19,978
$19,807
Deferred tax liabilities:
FHLB stock dividend
$55
$55
Depreciation
1,381
1,299
Mortgage servicing rights and other
1,289
1,365
Purchase accounting adjustments
135
128
Total deferred tax liabilities
2,860
2,847
Net deferred tax assets
$17,118
$16,960
No valuation allowance has been recorded since deferred tax assets are expected to be realized.
47
2024 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:
2024
2023
Balance at beginning of year
$4,526
$3,584
Effect of changes to related parties
2,648
-
New credits
3,806
2,026
Repayments
(1,986)
(1,084)
Balance at end of year
$8,994
$4,526
Deposit accounts from related parties totaled approximately $25,895 and $21,284 at December 31, 2024
and 2023, 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:
2024
2023
Unused lines of credit and other loan commitments
$268,566
$267,108
Commercial letters of credit
10
320
Performance and standby letters of credit
2,031
3,915
48
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(13)
Financial Instruments with Off-Balance-Sheet Risk and Concentrations
(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, 2024 and 2023. 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 $1,471,
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, 2024, 2023 and 2022.
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.
(14)
Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase amounted to $15,017 and $31,554 at December 31,
2024 and 2023, respectively, and are collateralized by U.S. agencies and mortgage-backed investment
securities with fair values of approximately $48,023 and $61,393. The weighted-average interest rates on
these agreements were 1.36% and 2.00% at December 31, 2024 and 2023, respectively. Securities sold
under agreements to repurchase mature on a daily basis.
49
2024 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 $666, $593, and $574, for 2024, 2023, and 2022,
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
$52,224 and $53,902 as of December 31, 2024 and 2023, respectively. The Banks accrue amounts to be
paid over the participant’s active service life. The accrued benefits were $3,338, $3,421, and $3,329 at
December 31, 2024, 2023 and 2022, respectively. Non-qualified deferred compensation expenses were
$298, $339, and $539 in 2024, 2023 and 2022, respectively.
(16)
Federal Home Loan Bank (FHLB) and Other Borrowings
At December 31, FHLB advances and other borrowings are as follows:
FHLB Advances at December 31:
2024
2023
Fixed rate advances with rates ranging from 0.00% to 4.49% and
weighted average rates of 3.44% and 3.96% as of December 31, 2024 and
2023, respectively. Interest is payable monthly with principal due at
maturity.
$33,667
$20,738
Advances are collateralized by 1-4 family mortgage loans, other qualifying loans and securities. The total
amounts of collateral securing FHLB advances were approximately $292,055 and $133,256 as of December
31, 2024 and 2023, respectively. FHLB advances are subject to a prepayment penalty if they are repaid
prior to maturity. FHLB advances are also secured by $3,542 and $1,727 of FHLB stock owned by the
Company at December 31, 2024 and 2023, 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, 2024 was 4.5%. There were no
outstanding advances at December 31, 2024 and 2023. Advances are collateralized by investment securities
pledged totaling approximately $13,870 and $14,200 at December 31, 2024 and 2023, respectively, to the
Federal Reserve Bank.
Additional other borrowings totaled $7,244 and $5,216 at December 31, 2024 and 2023, respectively, and
mature from 2027 to 2033, at interest rates ranging from 2.00% to 5.00%.
50
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(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:
2024
2023
2024
$2,526
2025
$6,000
6,000
2026
6,000
5,000
2027
7,513
1,541
2028
2,971
6,488
2029
11,992
2030 and thereafter
6,435
4,399
$40,911
$25,594
The Company had federal funds purchased with its main correspondent institutions totaling $5,804 and
$1,153 at December 31, 2024 and 2023, respectively. Federal funds purchased generally mature within one
day from transaction date. The weighted average interest rate was 4.75% as of December 31, 2024.
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,
2024, 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.
51
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(17)
Fair Value Measurements (continued)
Marketable equity securities: Marketable equity securities with a readily determinable fair value are
measured at fair value on a recurring basis. The fair value measurement of equity securities with a readily
determinable fair value are based on the quoted price of the security and is considered a Level 1 fair value
measurement. Equity securities without a readily determinable fair value are measured at fair value on a
nonrecurring basis when transaction prices for identical or similar securities are identified. Fair value
measurements on equity securities without a readily determinable fair value are generally considered a Level
2 fair value measurement.
Collateral-dependent 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.
52
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(17)
Fair Value Measurements (continued)
The following table presents the Company’s approximate fair-value hierarchy for the assets measured at fair
value as of December 31:
As of December 31, 2024
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
$119,299
$6,079
$113,220
State and municipal
91,272
88,927
$2,345
Agency mortgage-backed
157,813
157,813
Corporate debt securities
1,561
1,561
Marketable equity securities
1,066
1,066
Mortgage servicing rights
2,866
2,866
Assets measured at fair value
on a non-recurring basis:
Assets:
Collateral-dependent individually evaluated loans
$35,716
$35,716
Collateral-dependent individually evaluated loans, which are measured for impairment using the fair value
of collateral, had a carrying value of $38,748 with specific reserves of $3,032 as of December 31, 2024.
The changes in level 3 items occurring between December 31, 2023 and December 31, 2024 were increases
in collateral-dependent individually evaluated loans.
53
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(17)
Fair Value Measurements (continued)
As of December 31, 2023
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
$116,429
$8,068
$108,361
State and municipal
101,473
99,128
$2,345
Agency mortgage-backed
146,161
146,161
Corporate debt securities
1,555
1,555
Marketable equity securities
1,066
1,066
Mortgage Servicing Rights
3,303
3,303
Assets measured at fair value
on a non-recurring basis:
Assets:
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 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, 2024 and 2023:
Valuation
Unobservable
Technique
Input
Range
Collateral-dependent individually evaluated loans,
Sales comparison
Appraised values
10% - 20%
net of specific reserves
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.
54
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(17)
Fair Value Measurements (continued)
The estimated fair values of the Company’s financial instruments as of December 31, 2024 are as follows:
Fair Value Measurements at
Reporting Date Using
Carrying
Fair
Amount
Value
(Level 1)
(Level 2)
(Level 3)
Financial Assets:
Cash and cash equivalents
$64,000
$64,000
$64,000
Interest-bearing deposits in other
banks- term deposits
4,434
4,386
4,386
Securities
373,208
372,995
6,079
$364,571
$2,345
Marketable equity securities and other
7,592
7,592
3,542
1,131
2,919
Loans held for sale
852
852
852
Loans, net of allowance
1,100,657
1,092,095
1,092,095
Accrued interest receivable
10,856
10,856
10,856
Financial liabilities:
Demand and saving deposits
$867,345
$867,345
$867,345
Time deposits
533,358
527,249
$527,249
Federal Funds Purchased
5,804
5,804
5,804
Securities sold under
agreements to repurchase
15,017
14,913
14,913
FHLB advances and other borrowings
40,911
39,849
39,849
Accrued interest payable
3,169
3,169
3,169
55
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(17)
Fair Value Measurements (continued)
The estimated fair values of the Company’s financial instruments as of December 31, 2023 are as follows:
Fair Value Measurements at
Reporting Date Using
Carrying
Fair
Amount
Value
(Level 1)
(Level 2)
(Level 3)
Financial Assets:
Cash and cash equivalents
$45,718
$45,718
$45,718
Interest-bearing deposits in other
banks- term deposits
4,511
4,399
4,399
Securities
369,214
368,983
8,068
$358,570
$2,345
Marketable equity securities and other
5,718
5,718
4,639
1,079
Loans held for sale
990
1,012
1,012
Loans, net of allowance
1,069,450
1,043,192
1,043,192
Accrued interest receivable
9,763
9,763
9,763
Financial liabilities:
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
31,554
31,234
$31,234
FHLB advances and other borrowings
25,954
25,571
25,571
Accrued interest payable
2,082
2,082
2,082
56
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(18)
Stock Compensation Plans
During 2012, the Company approved an equity incentive plan to promote the long-term financial success
of the Company through stock-based awards to employees, directors or service providers who contribute
to that success. This equity incentive plan permits Company management to approve and grant a
maximum of 150,000 shares of common stock-based awards in the form of any combination of stock
options, stock appreciation rights, stock awards or cash incentive awards. The 2012 equity incentive
plan expired in September 2022 and a new plan was implemented in October 2022. The 2022 plan mirrors
the expired 2012 plan with the exception of the cash incentive awards which were excluded from the 2022
plan.
Stock Options
The fair value of each option award is estimated on the date of grant using a closed form option valuation
model (Black-Scholes). 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, 2024 and 2023. For the year ended December
31, 2022, 5,000 shares of non-qualified stock options were granted under the 2012 equity incentive plan.
For the years ended December 31, 2024, 2023 and 2022, the Company recognized $16, $16, and $25 in
compensation expense for stock options, respectively. No tax benefits were recognized for the three-year
period ended December 31, 2024. No options were exercised during the years ended December 31, 2024,
2023 and 2022.
The following table summarizes the activity of options for the year ended:
December 31, 2024
December 31, 2023
Weighted
Weighted
Average
Average
Exercise
Exercise
Options
Price
Options
Price
Shares under option, beginning of year
5,000
$31.40
21,666
$34.60
Granted during the year
-
-
-
-
Forfeited and expired during the year
-
-
(16,666)
35.55
Exercised during the year
-
-
-
-
Shares under option, end of year
5,000
31.40
5,000
31.40
Options exercisable, end of year
2,000
31.40
1,000
31.40
57
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(18)
Stock Compensation Plans (continued)
The following table summarizes information about stock options outstanding at December 31, 2024:
Remaining
Contractual Life
Exercise Price
Number Outstanding
(Years)
Number Exercisable
$31.40
5,000
7.50
2,000
Total shares available for grant under the 2022 equity incentive plan was 121,233 and 139,071 as of
December 31, 2024 and 2023, 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.
The following table summarizes information regarding unvested restricted stock and shares outstanding
during the year ended:
December 31, 2024
December 31, 2023
Weighted
Weighted
Unvested
Average
Unvested
Average
Shares
Grant Value
Shares
Grant Value
Restricted stock, beginning of year
14,267
$28.88
14,190
$33.01
Granted during the year
20,374
28.40
11,426
26.93
Forfeited during the year
(1,657)
27.92
(812)
29.77
Vested during the year
(10,600)
29.45
(10,537)
32.25
Restricted stock, end of year
22,384
28.20
14,267
28.88
During 2024, 2023 and 2022, total accrued compensation expense of $355, $294 and $390 (before tax
benefits of $101, $84 and $111) 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 $419.
58
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(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, 2024, 2023 and 2022, the
Company repurchased 75,000, 60,000 and 44,760 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.
(20)
Earnings Per Common Share
For the years ended December 31, earnings per common share have been computed based on the
following:
2024
2023
2022
Net income
$12,664
$14,546
$13,626
Net income available to common stockholders
12,664
14,546
13,626
Average number of common shares outstanding
3,509,509
3,562,885
3,565,548
Effect of dilutive options
19,270
4,723
12,280
Average number of common shares outstanding used
to calculate diluted earnings per common share
3,528,779
3,567,608
3,577,828
(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, 2024 and 2023, 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.
59
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(21)
Equity and Regulatory Matters (continued)
As of December 31, 2024, 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, 2024, which management believes have changed the capital
categories of the Banks.
The Company and the Banks actual capital amounts and ratios as of December 31 are presented in the
following tables:
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Actual
Amount
Amount
In $000s
Ratio
In $000s
Ratio
As of December 31, 2024
Community Bank Leverage Ratio
Company
186,354
11.19%
149,864
9.00%
Northwest
43,820
9.44%
41,765
9.00%
German
33,194
9.65%
30,967
9.00%
Davis
20,832
11.23%
16,695
9.00%
Freeport
40,402
9.91%
35,179
9.00%
Lena
12,016
11.49%
9,250
9.00%
Herscher
21,715
11.94%
15,103
9.00%
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Actual
Amount
Amount
In $000s
Ratio
In $000s
Ratio
As of December 31, 2023
Community Bank Leverage Ratio
Company
173,232
10.76%
144,899
9.00%
Northwest
39,422
9.22%
38,480
9.00%
German
31,592
9.37%
30,337
9.00%
Davis
19,755
10.94%
16,247
9.00%
Freeport
38,269
9.91%
34,764
9.00%
Lena
11,469
11.49%
8,986
9.00%
Herscher
21,149
11.94%
15,937
9.00%
(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.
60
2024 Annual Report
Notes to Consolidated Financial Statements
(000s omitted except share data)
(23)
Segment Information
The Company’s reportable segment is determined by the chief operating decision maker (“CODM”) in
assessing performance and in deciding how to allocate resources. The CODM is the CEO of the company.
The Company provides a variety of banking services to individuals and businesses through its facilities that
are similar in their nature, operations, and economic characteristics. The accounting policies for the services
are described in Note 1 Basis of Presentation and Significant Accounting Policies. Loans, investments, and
deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses, and
payroll provide the significant expenses in the banking operation. The CODM uses consolidated net income
to monitor results, evaluate budget-to-actual variances, perform competitive analyses that benchmark the
Company to competitors, and determine whether to reinvest earnings in the Company or to deploy capital
in other ways to maximize shareholder value. The CODM is regularly provided with the consolidated income
and expenses, as well as assets, as presented on the Consolidated Statements of Income and
Consolidated Balance Sheets, respectively, to assess performance and decide how to allocate resources
on a Company-wide basis. The CODM also uses such information to monitor the level of expense
associated with the various aspects of the Company’s business that supports its clients, generate revenue,
and are associated with the overall administration of the Company’s operations. In addition, internal
financial information is used by the CODM to monitor credit quality and credit loss expense. As a result, the
Company has determined it has only one reportable segment.
61
2024 Annual Report
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 years ended December 31, 2024 and 2023 and have issued our report
thereon dated March 10, 2025, which contained an unmodified opinion on those financial statements. Our audits
were performed for the purpose of forming an opinion on the financial statements as a whole. The consolidating
schedule 1 - December 31, 2024 balance sheet and consolidating schedule 2 - December 31, 2024 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 10, 2025
62
2024 Annual Report
Consolidating Schedule – Statement of Income
(000s omitted except share data)
December 31, 2024
German American
State Bank
Northwest
State Bank
of Davis
Bank
Interest and dividend income:
Loans, including fees
$15,117
$6,109
$21,823
Debt securities:
Taxable
1,194
1,268
1,559
Tax-exempt
466
289
158
Interest-bearing deposits in banks and other
943
112
757
Federal funds sold
52
5
26
Total interest and dividend income
17,772
7,783
24,323
Interest expense:
Deposits
7,100
2,917
8,503
Federal funds purchased
1
7
18
Securities sold under agreements to repurchase
-
32
228
FHLB and other borrowings
186
100
529
Total interest expense
7,287
3,056
9,278
Net interest and dividend income
10,485
4,727
15,045
Provision for credit losses
-
-
812
Net interest and dividend income,
after provision for credit losses
10,485
4,727
14,233
Noninterest income:
Customer service fees
277
87
760
Equity in earnings of subsidiaries
-
-
-
Loss on sales and calls of AFS securities, net
-
(35)
-
Gain on sale of loans, net
-
-
772
Loan servicing fees, net
-
-
241
Bank owned life insurance
112
54
641
ATM / interchange fees
717
223
722
Other
276
208
286
Total noninterest income
1,382
537
3,422
Noninterest expense:
Salaries and employee benefits
4,112
1,283
5,220
Occupancy expense of premises, net
546
147
817
Outside services
925
491
1,559
Data processing
1,144
617
1,467
Foreclosed assets and other real estate owned, net
-
-
10
Other
1,624
538
2,197
Total noninterest expenses
8,351
3,076
11,270
Income before income taxes
3,516
2,188
6,385
Income tax expense
750
491
1,525
Net income
$2,766
$1,697
$4,860
63
2024 Annual Report
Consolidating Schedule – Statement of Income
(000s omitted except share data)
State
Lena
State Bank
Foresight Financial
Consolidated
Bank
State Bank
of Herscher
Group, Inc.
Eliminations
Total
$17,780
$4,192
$4,263
$ -
$ -
$69,284
1,431
464
1,298
-
-
7,214
377
78
279
-
-
1,647
361
75
441
32
(270)
2,451
18
5
9
-
(7)
108
19,967
4,814
6,290
32
(277)
80,704
8,208
1,817
1,580
-
(270)
29,855
29
12
4
-
(7)
64
224
-
-
-
-
484
324
157
18
-
-
1,314
8,785
1,986
1,602
-
(277)
31,717
11,182
2,828
4,688
32
-
48,987
80
10
150
-
-
1,052
11,102
2,818
4,538
32
-
47,935
115
80
101
-
-
1,421
-
-
-
15,870
(15,870)
-
-
(76)
-
-
-
(111)
-
-
-
-
-
772
-
-
9
-
-
249
46
27
119
111
-
1,110
217
79
185
-
-
2,143
1,026
36
98
5,839
(6,160)
1,609
1,404
146
512
21,820
(22,030)
7,193
3,320
579
1,627
8,529
-
24,670
271
87
269
333
(66)
2,404
877
322
511
457
(3,531)
1,611
1,038
405
679
401
(2,563)
3,188
1
-
-
1
-
12
1,105
294
422
829
-
7,009
6,612
1,687
3,508
10,550
(6,160)
38,894
5,894
1,277
1,542
11,302
(15,870)
16,234
1,550
301
315
(1,362)
-
3,570
$4,344
$976
$1,227
$12,664
$(15,870)
$12,664
64
2024 Annual Report
Consolidating Schedule – Statement of Income
(000s omitted except share data)
December 31, 2023
German American
State Bank
Northwest
State Bank
of Davis
Bank
Interest and dividend income:
Loans, including fees
$13,734
$5,070
$18,009
Debt securities:
Taxable
865
1,169
1,257
Tax-exempt
515
369
175
Interest-bearing deposits in banks and other
432
173
734
Federal funds sold
44
20
58
Total interest and dividend income
15,590
6,801
20,233
Interest expense:
Deposits
5,118
1,983
5,220
Federal funds purchased
7
3
16
Securities sold under agreements to repurchase
-
28
160
FHLB and other borrowings
146
68
335
Total interest expense
5,271
2,082
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
9,909
4,554
14,030
Noninterest income:
Customer service fees
224
59
613
Equity in earnings of subsidiaries
-
-
-
(Loss) gain on sales and calls of AFS securities, net
(3)
(52)
(32)
Gain on sale of loans, net
-
-
611
Loan servicing fees, nett
-
-
804
Bank owned life insurance
97
48
162
ATM / interchange fees
732
226
710
Other
697
220
660
Total noninterest income
1,747
501
3,528
Noninterest expense:
Salaries and employee benefits
4,087
1,270
5,221
Occupancy expense of premises, net
490
132
846
Outside services
930
480
1,472
Data processing
1,164
580
1,236
Foreclosed assets and other real estate owned, net
(37)
-
-
Other
1,907
584
1,752
Total noninterest expenses
8,541
3,046
10,527
Income before income taxes
3,115
2,009
7,031
Income tax expense
690
437
1,828
Net income
$2,425
$1,572
$5,203
65
2024 Annual Report
Consolidating Schedule – Statement of Income
(000s omitted except share data)
State
Lena
State Bank
Foresight Financial
Consolidated
Bank
State Bank
of Herscher
Group, Inc.
Eliminations
Total
$16,179
$3,356
$3,571
$ -
$ -
$59,919
1,375
478
1,143
-
-
6,287
416
166
294
-
-
1,935
168
109
904
19
(341)
2,198
26
17
23
-
-
188
18,164
4,126
5,935
19
(341)
70,527
5,635
1,184
1,003
-
(341)
19,802
43
6
3
-
-
78
480
-
-
-
-
668
120
39
-
-
-
708
6,278
1,229
1,006
-
(341)
21,256
11,886
2,897
4,929
19
-
49,271
(42)
100
-
-
-
1,105
11,928
2,797
4,929
19
-
48,166
92
75
92
-
-
1,155
0
0
0
16,777
(16,777)
-
(40)
(58)
-
-
-
(185)
-
-
-
-
-
611
-
-
10
-
-
814
41
26
112
99
-
585
232
80
175
-
-
2,155
915
58
146
5,477
(5,752)
2,421
1,240
181
535
22,353
(22,529)
7,556
3,287
625
1,699
6,438
-
22,627
273
83
264
273
(63)
2,298
764
336
400
238
(3,309)
1,311
965
399
611
451
(2,381)
3,025
-
(1)
-
(5)
-
(43)
996
300
487
1,358
-
7,384
6,285
1,742
3,461
8,753
(5,753)
36,602
6,883
1,236
2,003
13,619
(16,776)
19,120
1,794
297
455
(927)
-
4,574
$5,089
$939
$1,548
$14,546
$(16,776)
$14,546
66
2024 Annual Report
Executive Officers
Board of Directors
Jeffrey M. Sterling
Retired President/CEO
of German American
State Bank
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.
Judd D. Thruman
Partner, Fishburn,
Whiton, Thruman, LTD.
Jeffery S. Hultman
President,
Chief Banking Officer
Lori Morgan
Director of
Corporate Operations
Kyle Logan
Head of
Commercial Banking
Curtis Derrer
Head of Ag Banking
Nora Koehler
Director of
Human Resources
Andrew LaPour
Director of
Information Technology
Gina Caruama
Head of
Consumer Banking
Peter Q. Morrison
Chief Executive Officer
Todd James
Chief Financial Officer
Rusti Swanson
Chief Credit Officer
Robert W. Stenstrom
Chairman, Board of Directors
Chairman & CEO,
Stenstrom Companies
Frederick J. Kundert
Retired, Harder Corporation
William D. LaFever
CEO Bill Coran Company,
Owner of Chicago Foliage,
Skyview of Rockford, Mulli-
gans, Mabel’s and Dandy’s
Peter Q. Morrison
Chief Executive Officer
John W. Collman
Ag Production
Brooke Crull
Chief Risk Officer
67
2024 Annual Report
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:
Computershare Investor Services, LLC
PO Box 43006
Providence, RI 02940-3006
800.368.5948
computershare.com/investor
Market: OTCQX Best Market
Trading symbol: FGFH
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
Jeffrey Hultman
Angela K. Larson
Michael Schirger
Jeffrey M. Sterling
Northwest Bank
of Rockford
Rockford, IL
Linda Heckert
John J. Morrissey
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
Chris Schneiderman
Brian Stewart
Ken Thompson
General Information
Banks’ Board of Directors
809 Cannell-Puri Court, Suite 5 • Winnebago, Illinois 61088 • 815.847.7500 • foresightfg.com
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