Economic Conditions - The unemployment rate in Lee County was 2.4% at year-end 2023, indicating a strong local labor market[25]. - The local economy is positively influenced by the automotive industry, with potential risks from interest rate increases affecting sales[28]. - The economic conditions and cyclicality, including inflation and interest rates, may adversely affect the industry in 2024[169]. - Inflation is running at levels unseen in decades, well above the Federal Reserve's long-term inflation goal of 2.0% annually[170]. - The Federal Reserve has been raising target federal funds interest rates since March 2022 to combat inflation[170]. Commercial Real Estate (CRE) Loans - The Bank's commercial real estate (CRE) loans totaled 287.3million,representing5266.8 million, included in the total CRE loans[28]. - The Bank's total CRE loans amounted to 293.0million,whichisapproximately2641 million[72]. - The new CRA regulations, finalized on October 24, 2023, will become effective on January 1, 2026, with data reporting requirements starting on January 1, 2027[54]. Financial Performance - Total cash dividends paid by the Bank to the Company during 2023 amounted to approximately 3.8million,withnetprofitsfortheyearandretainedprofitstotaling8.2 million[85]. - Nonperforming loans were 0.16% of total loans as of December 31, 2023, with no other real estate owned due to foreclosures[174]. - The allowance for loan losses may prove inadequate due to unanticipated adverse changes in the economy, including inflation and higher interest rates[176]. - The company has not reported any material weaknesses in its financial reporting controls as of December 31, 2022[82]. - The Company recorded FDIC insurance premiums expenses of 0.5millionin2023,anincreasefrom0.3 million in 2022, reflecting a uniform increase of 2 basis points in the initial base deposit insurance assessment rate schedules[135]. Employee and Management - As of December 31, 2023, the company had 149.5 full-time equivalent employees, including 38 officers, with an average term of service of approximately 10 years[29]. - The company emphasizes competitive compensation and benefits, including employer matches for 401(k) contributions and internal promotions[32]. - The company successfully transitioned management in 2022, with the former CEO becoming Chairman and the CFO succeeding him as President[31]. - The company is committed to maintaining employee health and safety, implementing remote work access during the COVID-19 pandemic[29]. - The company received a federal employee retention tax credit of approximately 1.6millionin2022duetolittleturnoverduringtheCOVID−19pandemic[30].RiskManagement−TheBank′sonlinebankingservicesaresubjecttocybersecurityrisks,highlightingtheimportanceofdatasecuritymeasures[21].−TheBankhasestablishedunderwritingstandardstomanagerisksassociatedwithvarioustypesoflending,includingcommercialandconsumerloans[27].−Thecompanyhasdevelopedriskmanagementandinternalauditpoliciestomitigatematerialrisksandlosses,butacknowledgesthatthesemaynotbecomprehensiveortimelyinidentifyingallrisks[204].−ThenewCECLmodelsusedbythecompanyarebasedonassumptionsandprojectionsthatmaynotoperateproperly,potentiallyleadingtoinaccuratepredictionsoffutureexposures[204].−Thecompanymayfaceincreasedcostsandrisksduetopotentialchangesinmortgageservicingrightsrequirements[182].MarketCompetition−TheBankholdsa20.1580 billion for low- and moderate-income communities[52]. - The new performance evaluation framework for intermediate banks includes two tests: the Retail Lending Test and the Intermediate Bank Community Development Test[56]. - The new CRA rules allow for consideration of community development loans, investments, and services regardless of location, depending on the bank's responsiveness to community needs[59]. - The new regulations exempt small and intermediate banks from certain data requirements that apply to larger banks with assets over $2 billion[61].
