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Dear Shareholder:

In June of 2021 we were carrying close to $50 million in extra liquidity from the pandemic stimulus money. At that time, we had three choices. We could hold on to the cash, work to increase loans, or add the funds to our investment portfolio. At the time, there was little return on holding cash and loans were difficult to find without increasing our risk, so we chose to invest the funds. This seemed very prudent at the time.

In hindsight, we wish we would have held onto the cash until rates had increased, but that is now water under the bridge. The good news is that the Fed is signaling an end to the interest rate hikes. In addition, our most recent projections indicate our margins will begin to improve by the middle of next year. Other than the current margin compression, the company remains strong in every respect.

During the first quarter we recorded earnings of $964,176, compared to $1,040,845 last quarter and $1,308,456 for the second quarter of 2022. Earnings per share were $0.72 for the period versus $0.78 for last quarter and $0.98 for the same quarter last year. As mentioned above, the lower earnings are due to margin compression. We do expect higher fee income and insurance revenue during the second half of the year.

Year-to-date the bank had a ROA of 0.72%, compared to our local peer group of 0.95%. Our net interest margin (NIM) was at 2.96% versus, 3.33% for our peers. Our Leverage (Capital) Ratio was at 9.14%, versus 10.13% for the group.

Average loans were up for the quarter and stood at $364.8 million, versus $355.5 million for the prior quarter and $323.9 million for the same period last year. We had another excellent quarter for loan growth, which will have a positive impact as the year progresses.

Investments were down with an average of $227.3 million, versus $233.2 million for the prior quarter. The decrease is due to cashflow from the portfolio not being reinvested and an increase in the unrealized loss on the portfolio. We continue our strategy to use the future cashflows from our portfolio to fund loan growth.

Average deposits were down at $533.5 million, compared to $542.9 million last quarter, but still up from the $528.2 million for the same period last year. Our team continues to work diligently in both competing for local deposits and managing our overall cash position. This has included the use of multiple funding sources that help control funding costs and reduce interest rate risk.

Credit quality remains strong and metrics are in line with our goals. Non-accrual Loans to Loans were at 0.38%, and below peer of 0.60%. Charge-offs to Loans were at 0.08% for the quarter, versus peer of -0.02%. Loan loss reserve balance was at 1.17% of total loans, compared with our peers at 1.40%.

Our subsidiary, Porter-Hay Insurance, recently announced the purchase of two new agencies. The first is Insurance Exchange that was previously owned by Farmers State Bank of Western Illinois. Their operation will be moved to our Seminary Street offices in Galesburg. The second is the Ted Blaser Agency in Moline, Illinois. Ted will be moving into our bank’s Moline facility. We are excited for both of these opportunities.

We had a large volume of 20,300 shares trade during the quarter. The range of sales were $39.00 to $41.50 per share. As always if you have an interest in selling or buying, please contact Brooke Robinson (309-457-6284 / brooke.robinson@mbwi.com) or Chris (309-457-6227 / cgavin@mbwi.com) with the number of shares and the selling or offering price.

Best Regards,


Chris Gavin & Gus Hart

 





 

   
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