Fentura Financial, Inc. Announces Fourth Quarter 2022 Earnings (unaudited)

Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with the December 31, 2022 presentation.

FENTON, Mich., Jan. 31, 2023 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces quarterly and year to date results of net income of $4,364 and $14,933 in 2022.

Ronald L. Justice, President and CEO, stated, "Our 2022 performance reflects another year of strong profitability, record loan growth, and robust asset quality.   Net interest income increased 18.7% to an annual record of $52.5 million as a result of a 30.5% increase in gross loans, and a nine basis point expansion in our net interest margin.   This growth helped partially offset a higher provision for loan losses associated with the significant growth we experienced in our loan portfolio, reduced noninterest income due to a meaningful reduction in the sale of residential mortgages, and higher noninterest expense.   In addition, the growth we experienced in gross loans during 2022 contributed to a 19.6% year-over-year increase in total assets, which ended the year at a record of $1.69 billion.”

Mr. Justice continued, “As we look to 2023, we plan to focus on expanding net interest income by capitalizing on the growth we have produced over the past several years.   In fact, since 2018, we have nearly doubled our loan portfolio, while we have preserved asset quality and maintained a stable net interest margin.   Additionally, we believe we are well positioned to navigate a more uncertain economic period as we focus on sustaining excellent asset quality, controlling operating expenses, and providing superior financial services to our customers and communities.   As a result, we believe 2023 will be another good year for Fentura Financial."

Following is a discussion of our financial performance as of, and for the year ended December 31, 2022. At the end of this document is a list of abbreviations and acronyms.

Results of Operations (unaudited)
The following table outlines our QTD results of operations and provides certain performance measures as of, and for the three months ended:

		12/31/2022				9/30/2022				6/30/2022				3/31/2022				12/31/2021
INCOME STATEMENT DATA
Interest income		$	17,782			$	15,726			$	13,411			$	12,301			$	11,749
Interest expense			3,645				1,738				785				599				645
Net interest income			14,137				13,988				12,626				11,702				11,104
Provision for loan losses			847				1,231				525				502				38
Noninterest income			1,933				2,377				2,778				2,792				3,097
Noninterest expenses			9,765				10,125				10,544				10,151				9,957
Federal income tax expense			1,094				1,000				859				757				864
Net income		$	4,364			$	4,009			$	3,476			$	3,084			$	3,342
PER SHARE
Earnings		$	0.99			$	0.91			$	0.79			$	0.69			$	0.74
Dividends		$	0.09			$	0.09			$	0.09			$	0.09			$	0.08
Tangible book value(1)		$	26.22			$	25.22			$	24.53			$	24.97			$	25.43
Quoted market value
High		$	23.40			$	25.20			$	27.85			$	29.25			$	28.28
Low		$	21.60			$	23.00			$	24.40			$	27.10			$	25.75
Close(1)		$	22.20			$	23.00			$	25.00			$	27.90			$	28.28
PERFORMANCE RATIOS
Return on average assets			1.06	%			1.02	%			0.96	%			0.86	%			0.98	%
Return on average shareholders' equity			14.01	%			12.96	%			11.55	%			10.53	%			10.56	%
Return on average tangible shareholders' equity			15.21	%			14.10	%			12.60	%			11.49	%			10.87	%
Efficiency ratio			60.77	%			61.87	%			68.45	%			70.04	%			70.11	%
Yield on earning assets (FTE)			4.57	%			4.27	%			3.96	%			3.70	%			3.67	%
Rate on interest bearing liabilities			1.42	%			0.75	%			0.38	%			0.29	%			0.33	%
Net interest margin to earning assets (FTE)			3.63	%			3.79	%			3.73	%			3.52	%			3.47	%
BALANCE SHEET DATA(1)
Total investment securities		$	125,049			$	129,886			$	136,725			$	151,579			$	164,942
Gross loans		$	1,436,166			$	1,350,851			$	1,232,892			$	1,139,351			$	1,100,092
Allowance for loan losses		$	13,000			$	12,200			$	11,000			$	11,000			$	10,500
Total assets		$	1,694,999			$	1,595,126			$	1,474,307			$	1,435,501			$	1,417,801
Total deposits		$	1,332,883			$	1,345,209			$	1,231,543			$	1,252,892			$	1,228,298
Borrowed funds		$	222,350			$	116,600			$	111,000			$	52,000			$	50,000
Total shareholders' equity		$	126,087			$	121,630			$	118,566			$	121,346			$	124,455
Net loans to total deposits			106.77	%			99.51	%			99.22	%			90.06	%			88.71	%
Common shares outstanding			4,439,725				4,434,937				4,429,357				4,459,544				4,496,701
QTD BALANCE SHEET AVERAGES
Total assets		$	1,637,191			$	1,558,040			$	1,449,874			$	1,448,545			$	1,353,694
Earning assets		$	1,544,880			$	1,464,233			$	1,360,658			$	1,348,647			$	1,273,650
Interest bearing liabilities		$	1,016,876			$	917,888			$	826,708			$	831,200			$	773,082
Total shareholders' equity		$	123,567			$	122,695			$	120,659			$	118,759			$	125,500
Total tangible shareholders' equity		$	113,810			$	112,829			$	110,686			$	108,862			$	121,933
Earned common shares outstanding			4,413,710				4,408,399				4,417,447				4,451,607				4,520,962
Unvested stock grants			24,460				24,460				24,460				27,466				20,671
Total common shares outstanding			4,438,170				4,432,859				4,441,907				4,479,073				4,541,633
ASSET QUALITY
Nonperforming loans to gross loans (1)			0.16	%			0.12	%			0.16	%			0.20	%			0.18	%
Nonperforming assets to total assets (1)			0.15	%			0.12	%			0.16	%			0.19	%			0.17	%
Allowance for loan losses to gross loans (1)			0.91	%			0.90	%			0.89	%			0.97	%			0.95	%
Allowance for loan losses to gross loans, net of PPP loans (1)			0.91	%			0.90	%			0.89	%			0.97	%			0.96	%
Net charge-offs (recoveries) to QTD average gross loans			—	%			—	%			0.04	%			—	%			—	%
Provision for loan losses to QTD average gross loans			0.06	%			0.10	%			0.04	%			0.05	%			—	%
CAPITAL RATIOS(1)
Total capital to risk weighted assets			10.84	%			10.96	%			11.36	%			12.07	%			12.22	%
Tier 1 capital to risk weighted assets			9.93	%			10.07	%			10.50	%			11.13	%			11.30	%
CET1 capital to risk weighted assets			8.94	%			9.04	%			9.39	%			9.94	%			10.07	%
Tier 1 leverage ratio			8.75	%			8.91	%			9.30	%			9.07	%			9.13	%
(1)At end of period

The following table outlines our YTD results of operations and provides certain performance measures as of, and for the twelve months ended:

		(unaudited)
		12/31/2022				12/31/2021				12/31/2020				12/31/2019				12/31/2018
INCOME STATEMENT DATA
Interest income		$	59,220			$	46,910			$	45,979			$	43,541			$	36,350
Interest expense			6,767				2,736				5,924				8,627				5,827
Net interest income			52,453				44,174				40,055				34,914				30,523
Provision for loan losses			3,105				(180	)			5,634				1,335				1,057
Noninterest income			9,880				14,080				19,640				8,163				8,277
Noninterest expenses			40,585				37,663				34,684				27,223				25,310
Federal income tax expense			3,710				4,192				3,913				2,941				2,319
Net income		$	14,933			$	16,579			$	15,464			$	11,578			$	10,114
PER SHARE
Earnings		$	3.38			$	3.60			$	3.31			$	2.49			$	2.65
Dividends		$	0.36			$	0.32			$	0.30			$	0.28			$	0.24
Tangible book value(1)		$	26.22			$	25.43			$	23.88			$	20.87			$	18.32
Quoted market value
High		$	29.25			$	28.28			$	26.00			$	25.50			$	23.00
Low		$	21.60			$	21.90			$	12.55			$	20.05			$	18.88
Close(1)		$	22.20			$	28.28			$	22.00			$	25.23			$	21.00
PERFORMANCE RATIOS
Return on average assets			0.98	%			1.26	%			1.29	%			1.20	%			1.20	%
Return on average shareholders' equity			12.30	%			13.52	%			14.05	%			12.02	%			15.05	%
Return on average tangible shareholders' equity			13.39	%			13.93	%			14.57	%			12.59	%			16.23	%
Efficiency ratio			65.11	%			64.65	%			58.10	%			63.20	%			65.23	%
Yield on earning assets (FTE)			4.15	%			3.80	%			4.01	%			4.77	%			4.57	%
Rate on interest bearing liabilities			0.75	%			0.36	%			0.82	%			1.41	%			1.07	%
Net interest margin to earning assets (FTE)			3.67	%			3.58	%			3.50	%			3.83	%			3.84	%
BALANCE SHEET DATA(1)
Total investment securities		$	125,049			$	164,942			$	76,111			$	61,621			$	94,721
Gross loans		$	1,436,166			$	1,100,092			$	1,066,562			$	870,555			$	772,227
Allowance for loan losses		$	13,000			$	10,500			$	10,900			$	5,813			$	4,488
Total assets		$	1,694,999			$	1,417,801			$	1,251,446			$	1,034,759			$	926,450
Total deposits		$	1,332,883			$	1,228,298			$	1,071,976			$	863,102			$	763,124
Borrowed funds		$	222,350			$	50,000			$	49,000			$	61,500			$	69,000
Total shareholders' equity		$	126,087			$	124,455			$	115,868			$	101,444			$	89,516
Net loans to total deposits			106.77	%			88.71	%			98.48	%			100.19	%			100.60	%
Common shares outstanding			4,439,725				4,496,701				4,694,275				4,664,369				4,636,455
YTD BALANCE SHEET AVERAGES
Total assets		$	1,523,419			$	1,311,673			$	1,200,605			$	961,586			$	844,673
Earning assets		$	1,429,605			$	1,237,755			$	1,147,570			$	913,574			$	796,283
Interest bearing liabilities		$	898,170			$	754,622			$	726,869			$	612,549			$	544,344
Total shareholders' equity		$	121,422			$	122,629			$	110,094			$	96,358			$	67,192
Total tangible shareholders' equity		$	111,548			$	118,986			$	106,140			$	91,994			$	62,329
Earned common shares outstanding			4,422,791				4,603,259				4,669,979				4,643,955				3,811,677
Unvested stock grants			25,212				20,984				14,027				9,917				756
Total common shares outstanding			4,448,003				4,624,243				4,684,006				4,653,872				3,812,433
ASSET QUALITY
Nonperforming loans to gross loans (1)			0.16	%			0.18	%			0.75	%			0.17	%			0.14	%
Nonperforming assets to total assets (1)			0.15	%			0.17	%			0.64	%			0.14	%			0.12	%
Allowance for loan losses to gross loans (1)			0.91	%			0.95	%			1.02	%			0.67	%			0.58	%
Allowance for loan losses to gross loans, net of PPP loans (1)			0.91	%			0.96	%			1.23	%			0.67	%			0.58	%
Net charge-offs (recoveries) to YTD average gross loans			0.05	%			0.02	%			0.05	%			—	%			0.02	%
Provision for loan losses to YTD average gross loans			0.25	%		(0.02)        %					0.56	%			0.16	%			0.15	%
CAPITAL RATIOS(1)
Total capital to risk weighted assets			10.84	%			12.22	%			15.14	%			14.03	%			14.00	%
Tier 1 capital to risk weighted assets			9.93	%			11.30	%			13.93	%			13.33	%			13.40	%
CET1 capital to risk weighted assets			8.94	%			10.07	%			12.38	%			11.64	%			11.52	%
Tier 1 leverage ratio			8.75	%			9.13	%			9.80	%			11.20	%			10.92	%
(1)At end of period

Income Statement Breakdown and Analysis

		Quarter to Date
		12/31/2022				9/30/2022				6/30/2022				3/31/2022				12/31/2021
Net income		$	4,364			$	4,009			$	3,476			$	3,084			$	3,342
Acquisition related items (net of tax)
Accretion on purchased loans			(20	)			(20	)			(20	)			(20	)			(154	)
Amortization of core deposit intangibles			85				85				85				85				54
Amortization on acquired time deposits			(21	)			(21	)			(21	)			(21	)			2
Other acquisition related expenses			—				—				11				202				178
Total acquisition related items (net of tax)			44				44				55				246				80
Other nonrecurring items (net of tax)
Prepayment penalties collected			(61	)			(119	)			(48	)			(162	)			(91	)
Total other nonrecurring items (net of tax)			(61	)			(119	)			(48	)			(162	)			(91	)
Adjusted net income from operations		$	4,347			$	3,934			$	3,483			$	3,168			$	3,331
Net interest income		$	14,137			$	13,988			$	12,626			$	11,702			$	11,104
Accretion on purchased loans			(25	)			(25	)			(26	)			(25	)			(195	)
Prepayment penalties collected			(77	)			(150	)			(61	)			(205	)			(115	)
Amortization on acquired time deposits			(27	)			(27	)			(26	)			(27	)			3
Adjusted net interest income		$	14,008			$	13,786			$	12,513			$	11,445			$	10,797
PERFORMANCE RATIOS
Based on adjusted net income from operations
Earnings per share		$	0.98			$	0.89			$	0.79			$	0.71			$	0.74
Return on average assets			1.05	%			1.00	%			0.96	%			0.89	%			0.98	%
Return on average shareholders' equity			13.96	%			12.72	%			11.58	%			10.82	%			10.53	%
Return on average tangible shareholders' equity			15.15	%			13.83	%			12.62	%			11.80	%			10.84	%
Efficiency ratio			60.58	%			61.98	%			68.16	%			68.75	%			69.55	%
Based on adjusted net interest income
Yield on earning assets (FTE)			4.54	%			4.22	%			3.93	%			3.63	%			3.57	%
Rate on interest bearing liabilities			1.41	%			0.74	%			0.37	%			0.28	%			0.33	%
Net interest margin to earning assets (FTE)			3.60	%			3.74	%			3.70	%			3.44	%			3.37	%

		Year to Date December 31								Variance
			2022				2021			Amount				%
Net income		$	14,933			$	16,579			$	(1,646	)		(9.93)%
Acquisition related items (net of tax)
Accretion on purchased loans			(80	)			(609	)			529			(86.86)%
Amortization of core deposit intangibles			340				215				125			58.14	%
Amortization on acquired time deposits			(84	)			8				(92	)		(1,150.00)%
Other acquisition related expenses			213				229				(16	)		(6.99)%
Total acquisition related items (net of tax)			389				(157	)			546			(347.77)%
Other nonrecurring items (net of tax)
Prepayment penalties collected			(390	)			(205	)			(185	)		90.24	%
Total other nonrecurring items (net of tax)			(390	)			(205	)			(185	)		90.24	%
Adjusted net income from operations		$	14,932			$	16,217			$	(1,285	)		(7.92)%
Net interest income		$	52,453			$	44,174			$	8,279			18.74	%
Accretion on purchased loans			(101	)			(770	)			669			(86.88)%
Prepayment penalties collected			(493	)			(260	)			(233	)		89.62	%
Amortization on acquired time deposits			(107	)			12				(119	)		(991.67)%
Adjusted net interest income		$	51,752			$	43,156			$	8,596			19.92	%
PERFORMANCE RATIOS
Based on adjusted net income from operations
Earnings per share		$	3.38			$	3.52			$	(0.14	)		(3.98)%
Return on average assets			0.98	%			1.24	%						(0.26)%
Return on average shareholders' equity			12.30	%			13.22	%						(0.92)%
Return on average tangible shareholders' equity			13.39	%			13.63	%						(0.24)%
Efficiency ratio			64.72	%			64.82	%						(0.10)%
Based on adjusted net interest income
Yield on earning assets (FTE)			4.11	%			3.72	%						0.39	%
Rate on interest bearing liabilities			0.74	%			0.36	%						0.38	%
Net interest margin to earning assets (FTE)			3.62	%			3.50	%						0.12	%

Average Balances, Interest Rate, and Net Interest Income

The following tables present the daily average amount outstanding for each major category of interest earning assets, nonearning assets, interest bearing liabilities, and noninterest bearing liabilities. These tables also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a FTE basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances.

Net interest income is the amount by which interest income on earning assets exceeds the interest expenses on interest bearing liabilities. Net interest income, which includes loan fees, is influenced by changes in the balance and mix of assets and liabilities and market interest rates. We exert some control over these factors; however, FRB monetary policy and competition have a significant impact. For analytical purposes, net interest income is adjusted to a FTE basis by adding the income tax savings from interest on tax exempt loans, and nontaxable investment securities, thus making period-to-period comparisons more meaningful.

		Three Months Ended
		December 31, 2022										September 30, 2022										December 31, 2021
		Average Balance				Tax Equivalent Interest			Average Yield / Rate			Average Balance				Tax Equivalent Interest			Average Yield / Rate			Average Balance				Tax Equivalent Interest			Average Yield / Rate
Interest earning assets
Total loans		$	1,397,113			$	17,024		4.83	%		$	1,294,302			$	15,004		4.60	%		$	1,050,383			$	11,235		4.24	%
Taxable investment securities			112,321				443		1.56	%			121,704				443		1.44	%			129,817				389		1.19	%
Nontaxable investment securities			14,326				81		2.24	%			14,517				83		2.27	%			16,876				94		2.21	%
Interest earning cash and cash equivalents			12,261				116		3.75	%			28,384				160		2.24	%			73,022				33		0.18	%
Federal Home Loan Bank stock			8,859				135		6.05	%			5,326				54		4.02	%			3,552				18		2.01	%
Total earning assets			1,544,880				17,799		4.57	%			1,464,233				15,744		4.27	%			1,273,650				11,769		3.67	%
Nonearning assets
Allowance for loan losses			(12,538	)									(11,478	)									(10,773	)
Premises and equipment, net			15,866										16,315										16,568
Accrued income and other assets			88,983										88,970										74,249
Total assets		$	1,637,191									$	1,558,040									$	1,353,694
Interest bearing liabilities
Interest bearing demand deposits		$	320,672			$	1,383		1.71	%		$	318,771			$	818		1.02	%		$	250,327			$	132		0.21	%
Savings deposits			362,250				170		0.19	%			371,020				126		0.13	%			344,180				113		0.13	%
Time deposits			133,166				523		1.56	%			102,472				121		0.47	%			128,574				224		0.69	%
Borrowed funds			200,788				1,569		3.10	%			125,625				673		2.13	%			50,001				176		1.40	%
Total interest bearing liabilities			1,016,876				3,645		1.42	%			917,888				1,738		0.75	%			773,082				645		0.33	%
Noninterest bearing liabilities
Noninterest bearing deposits			484,586										505,435										444,929
Accrued interest and other liabilities			12,162										12,022										10,183
Shareholders' equity			123,567										122,695										125,500
Total liabilities and shareholders' equity		$	1,637,191									$	1,558,040									$	1,353,694
Net interest income (FTE)						$	14,154									$	14,006									$	11,124
Net interest margin to earning assets (FTE)									3.63	%									3.79	%									3.47	%

		Twelve Months Ended
		December 31, 2022										December 31, 2021
		Average Balance				Tax Equivalent Interest			Average Yield / Rate			Average Balance				Tax Equivalent Interest			Average Yield / Rate
Interest earning assets
Total loans		$	1,247,996			$	56,610		4.54	%		$	1,037,189			$	45,129		4.35	%
Taxable investment securities			126,925				1,767		1.39	%			98,002				1,285		1.31	%
Nontaxable investment securities			15,215				342		2.25	%			17,090				394		2.31	%
Interest earning cash and cash equivalents			34,145				345		1.01	%			81,970				112		0.14	%
Federal Home Loan Bank stock			5,324				228		4.28	%			3,504				73		2.08	%
Total earning assets			1,429,605				59,292		4.15	%			1,237,755				46,993		3.80	%
Nonearning assets
Allowance for loan losses			(11,436	)									(11,000	)
Premises and equipment, net			16,455										16,224
Accrued income and other assets			88,795										68,694
Total assets		$	1,523,419									$	1,311,673
Interest bearing liabilities
Interest bearing demand deposits		$	293,039			$	2,523		0.86	%		$	227,114			$	496		0.22	%
Savings deposits			366,503				529		0.14	%			325,043				438		0.13	%
Time deposits			122,032				971		0.80	%			153,057				1,156		0.76	%
Borrowed funds			116,596				2,744		2.35	%			49,408				646		1.31	%
Total interest bearing liabilities			898,170				6,767		0.75	%			754,622				2,736		0.36	%
Noninterest bearing liabilities
Noninterest bearing deposits			488,370										424,273
Accrued interest and other liabilities			15,457										10,149
Shareholders' equity			121,422										122,629
Total liabilities and shareholders' equity		$	1,523,419									$	1,311,673
Net interest income (FTE)						$	52,525									$	44,257
Net interest margin to earning assets (FTE)									3.67	%									3.58	%

Volume and Rate Variance Analysis

The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For the purpose of this table, changes in interest due to volume and rate were determined as follows:

Volume - change in volume multiplied by the previous period's rate.
Rate - change in the FTE rate multiplied by the previous period's volume.

The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

		Three Months Ended												Three Months Ended											Twelve Months Ended
		December 31, 2022												December 31, 2022											December 31, 2022
		Compared To												Compared To											Compared To
		September 30, 2022												December 31, 2021											December 31, 2021
		Increase (Decrease) Due to												Increase (Decrease) Due to											Increase (Decrease) Due to
		Volume				Rate				Net				Volume				Rate			Net				Volume				Rate				Net
Changes in interest income
Total loans		$	1,240			$	780			$	2,020			$	4,072			$	1,717		$	5,789			$	9,450			$	2,031			$	11,481
Taxable investment securities			(140	)			140				—				(274	)			328			54				400				82				482
Nontaxable investment securities			(1	)			(1	)			(2	)			(21	)			8			(13	)			(42	)			(10	)			(52	)
Interest earning cash and cash equivalents			(412	)			368				(44	)			(206	)			289			83				(102	)			335				233
Federal Home Loan Bank stock			46				35				81				50				67			117				51				104				155
Total changes in interest income			733				1,322				2,055				3,621				2,409			6,030				9,757				2,542				12,299
Changes in interest expense
Interest bearing demand deposits			5				560				565				47				1,204			1,251				184				1,843				2,027
Savings deposits			(19	)			63				44				6				51			57				56				35				91
Time deposits			46				356				402				8				291			299				(244	)			59				(185	)
Borrowed funds			509				387				896				993				400			1,393				1,324				774				2,098
Total changes in interest expense			541				1,366				1,907				1,054				1,946			3,000				1,320				2,711				4,031
Net change in net interest income (FTE)		$	192			$	(44	)		$	148			$	2,567			$	463		$	3,030			$	8,437			$	(169	)		$	8,268

		Average Yield/Rate for the Three Months Ended
		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Total earning assets		4.57	%		4.27	%		3.96	%		3.70	%		3.67	%
Total interest bearing liabilities		1.42	%		0.75	%		0.38	%		0.29	%		0.33	%
Net interest margin to earning assets (FTE)		3.63	%		3.79	%		3.73	%		3.52	%		3.47	%

		Quarter to Date Net Interest Income (FTE)
		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Interest income		$	17,782		$	15,726		$	13,411		$	12,301		$	11,749
FTE adjustment			17			18			18			19			20
Total interest income (FTE)			17,799			15,744			13,429			12,320			11,769
Total interest expense			3,645			1,738			785			599			645
Net interest income (FTE)		$	14,154		$	14,006		$	12,644		$	11,721		$	11,124

Noninterest Income

		Three Months Ended
		12/31/2022				9/30/2022				6/30/2022				3/31/2022				12/31/2021
Net gain on sales of loans		$	24			$	36			$	182			$	483			$	838
Service charges and fees
ATM and debit card income			559				553				577				485				496
Trust and investment services			505				546				458				598				399
Service charges on deposit accounts			245				270				246				241				218
Total			1,309				1,369				1,281				1,324				1,113
Changes in the fair value of MSR			(129	)			207				433				319				407
Net gain (loss) on sale of AFS securities			—				—				—				—				(1	)
Change in fair value of equity investments			2				(39	)			(31	)			(48	)			(9	)
Other
Mortgage servicing fees			415				427				435				444				394
Change in cash surrender value of corporate owned life insurance			175				172				168				166				168
PPP referral fees			—				—				—				—				—
Other			137				205				310				104				187
Total			727				804				913				714				749
Total noninterest income		$	1,933			$	2,377			$	2,778			$	2,792			$	3,097
Memo items:
Residential mortgage operations		$	310			$	670			$	1,050			$	1,246			$	1,639

		Twelve Months Ended December 31								Variance
			2022				2021			Amount				%
Net gain on sales of loans		$	725			$	5,032			$	(4,307	)		(85.59)%
Service charges and fees
ATM and debit card income			2,174				1,950				224			11.49	%
Trust and investment services			2,107				1,832				275			15.01	%
Service charges on deposit accounts			1,002				751				251			33.42	%
Total		$	5,283			$	4,533				750			16.55	%
Changes in the fair value of MSR			830				1,595				(765	)		(47.96)%
Net gain (loss) on sale of AFS securities			—				(1	)			1			(100.00)%
Change in fair value of equity investments			(116	)			(30	)			(86	)		286.67	%
Other
Mortgage servicing fees			1,721				1,460				261			17.88	%
Change in cash surrender value of corporate owned life insurance			681				634				47			7.41	%
PPP referral fees			—				431				(431	)		(100.00)%
Other			756				426				330			77.46	%
Total			3,158				2,951				207			7.01	%
Total noninterest income		$	9,880			$	14,080			$	(4,200	)		(29.83)%
Memo items:
Residential mortgage operations		$	3,276			$	8,087				(4,811	)		(59.49)%

Residential Mortgage Operations

Residential mortgage operations includes net gains on sales of loans, net mortgage servicing rights income, and mortgage servicing fees.

Net gain on sales of loans represents the income earned on the sale of residential mortgage loans into the secondary market. Increases in interest rates and limited inventories have significantly driven down the volume of new originations and refinancing activity, which in turn has reduced gains throughout 2022. Additionally, the majority of residential mortgage loans originated during 2022 have been portfolio loans (adjustable rate mortgages, construction loans, etc.) as rates offered for those products are typically more attractive as interest rates increase.

Changes in the fair value of MSR are highly correlated to changes in interest rates. Although a significant portion of the serviced loan portfolio were originated at historically low interest rates, changes in the fair value MSR have trended downward due to a reduction in the size of our servicing portfolio due to reduced levels of secondary market originations. During the fourth quarter, the serviced loan portfolio declined by $13,369. We expect this trend to continue in future periods.

Mortgage servicing fees includes the fees earned for servicing loans that have been sold into the secondary market. The annual increase in mortgage servicing fees is directly related to the size of the serviced portfolio. We expect mortgage servicing fees to trend modestly downward in 2023 due to decreased secondary market originations.

All Other Noninterest Income

ATM and debit card income represents fees earned on ATM and debit card transactions. We expect these fees to increase slightly in 2023.

Trust and investment services includes income earned from contracts with customers to manage assets for investment and/or to transact on their accounts through the wealth management and trust department. The annual increase in income is a direct result of higher customer demand for annuity products. Trust services and wealth management fees are subject to market fluctuations and interest rate changes. We expect these fees to continue to increase in 2023.

Service charges on deposit accounts includes fees earned from deposit customers for transaction-based charges, account maintenance and overdraft services. Revenue from service charges increased throughout 2022 as a result of increased transaction volume as well as more customers utilizing overdraft services. Service charges on deposit accounts are expected to approximate current levels in 2023.

Change in cash surrender value of corporate owned life insurance is expected to modestly increase in 2023.

PPP referral fees earned in 2021 represent fees earned earned from the second round of the PPP loan program through the SBA. As the PPP loan program has ended, we do not anticipate to record any future revenues from PPP.

Other includes miscellaneous other income items, none of which are individually significant.

Noninterest Expenses

		Three Months Ended
		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Compensation and benefits		$	5,329		$	5,320		$	5,453		$	5,347		$	5,054
Furniture and equipment			772			822			805			818			794
Professional services			594			763			777			812			948
Occupancy			566			578			579			604			491
Loan and collection			262			417			584			311			286
Data processing			111			363			665			412			622
Advertising and promotional			580			405			326			278			356
Other
ATM and debit card			254			154			160			143			158
FDIC insurance premiums			149			150			172			150			138
Telephone and communication			110			112			112			105			96
Amortization of core deposit intangibles			107			108			107			108			68
Other acquisition related expenses			—			—			14			256			225
Other general and administrative			931			933			790			807			721
Total			1,551			1,457			1,355			1,569			1,406
Total noninterest expenses		$	9,765		$	10,125		$	10,544		$	10,151		$	9,957

		Twelve Months Ended December 31						Variance
			2022			2021		Amount				%
Compensation and benefits		$	21,449		$	20,059		$	1,390			6.93	%
Furniture and equipment			3,217			2,904			313			10.78	%
Professional services			2,946			3,065			(119	)		(3.88)%
Occupancy			2,327			2,016			311			15.43	%
Loan and collection			1,574			1,293			281			21.73	%
Data processing			1,551			2,271			(720	)		(31.70)%
Advertising and promotional			1,589			1,328			261			19.65	%
Other
ATM and debit card			711			555			156			28.11	%
FDIC insurance premiums			621			525			85			21.96	%
Telephone and communication			439			400			39			9.75	%
Amortization of core deposit intangibles			430			270			160			59.26	%
Other acquisition related expenses			270			289			(19	)		(6.57)%
Other general and administrative			3,461			2,688			773			28.76	%
Total			5,932			4,727			1,205			25.49	%
Total noninterest expenses		$	40,585		$	37,663		$	2,922			7.76	%

Compensation and benefits includes salaries, commissions and incentives, employee benefits, and payroll taxes. Compensation and benefits increased in 2022 due to an increase in the size of the organization, merit increases, and market based adjustments. While there continues to be meaningful wage pressure, we expect a modest increase in overall compensation and benefits as further increases due to merit increases and market based adjustments will be partially offset by declines in commissions as loan originations are expected to decline.

Furniture and equipment and occupancy expenses primarily consist of depreciation, repairs and maintenance, certain service contracts, and other related items. These expenses are expected to approximate current levels in 2023.

Professional services include expenses relating to third-party professional services. These services include, but are not limited to, regulatory, auditing, consulting, and legal. The decline in these expenses during the fourth quarter of 2022 is primarily due to a decrease in audit fees. These expenses are expected to increase slightly into 2023 due to our continued increase size and complexity.

Loan and collection includes expenses related to the origination and collection of loans. These expenses are expected to decline in future periods as loan growth is expected to moderate in 2023.

Data processing primarily includes the expenses relating to our core data processor. These expenses trended downward during the third and fourth quarters of 2022 due to receipt of renewal incentives from our core data processor. Data processing expenses are expected to normalize into 2023 as these renewal incentives wind down.

Advertising and promotional includes media costs and any donations or sponsorships. The annual increase in such expenses is a result of enhanced marketing efforts to attract new and expand existing customer loan and deposit account relationships. Total advertising and promotional expenses are expected to moderately increase into 2023.

ATM and debit card expenses fluctuate based on customer and non-customer utilization of ATMs and customer debit card volumes. The increase in ATM and debit card expenses during the fourth quarter is due to an increase in customer disputes resulting from fraudulent debit card activity. We expect these fees to approximate current levels into 2023.

FDIC insurance premiums typically fluctuate each period based on the size of the balance sheet, capital position and overall risk profile. FDIC insurance premiums are expected to increase in 2023 primarily due to the FDIC increasing its assessment rate for all insured institutions effective January 1, 2023.

Telephone and communication includes expenses relating to our communication systems. These expenses are expected to approximate current levels into 2023.

Amortization of core deposit intangibles relates to the core deposits acquired from Community Bancorp, Inc. on December 31, 2016 and FSB on December 1, 2021. These core deposit intangibles are being amortized using an accelerated sum-of-years-digits method over their estimated useful lives of seven years.

Other acquisition related expenses includes expenses related to the acquisition of FSB. We do not anticipate recording additional expenses related to the acquisition of FSB in future periods.

Other general and administrative includes miscellaneous other expense items, none of which are individually significant. Other general and administrative expenses are expected to increase slightly in future periods.

Balance Sheet Breakdown and Analysis

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
ASSETS
Cash and due from banks		$	57,844		$	43,345		$	38,510		$	80,133		$	83,446
Total investment securities			125,049			129,886			136,725			151,579			164,942
Residential mortgage loans held-for-sale, at fair value			493			62			664			3,038			6,783
Gross loans			1,436,166			1,350,851			1,232,892			1,139,351			1,100,092
Less allowance for loan losses			13,000			12,200			11,000			11,000			10,500
Net loans			1,423,166			1,338,651			1,221,892			1,128,351			1,089,592
All other assets			88,447			83,182			76,516			72,400			73,038
Total assets		$	1,694,999		$	1,595,126		$	1,474,307		$	1,435,501		$	1,417,801
		.
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits		$	1,332,883		$	1,345,209		$	1,231,543		$	1,252,892		$	1,228,298
Total borrowed funds			222,350			116,600			111,000			52,000			50,000
Accrued interest payable and other liabilities			13,679			11,687			13,198			9,263			15,048
Total liabilities			1,568,912			1,473,496			1,355,741			1,314,155			1,293,346
Total shareholders' equity			126,087			121,630			118,566			121,346			124,455
Total liabilities and shareholders' equity		$	1,694,999		$	1,595,126		$	1,474,307		$	1,435,501		$	1,417,801

		12/31/2022 vs 9/30/2022							12/31/2022 vs 12/31/2021
		Variance							Variance
		Amount				%			Amount				%
ASSETS
Cash and due from banks		$	14,499			33.45	%		$	(25,602	)		(30.68)%
Total investment securities			(4,837	)		(3.72)%				(39,893	)		(24.19)%
Residential mortgage loans held-for-sale, at fair value			431			695.16	%			(6,290	)		(92.73)%
Gross loans			85,315			6.32	%			336,074			30.55	%
Less allowance for loan losses			800			6.56	%			2,500			23.81	%
Net loans			84,515			6.31	%			333,574			30.61	%
All other assets			5,265			6.33	%			15,409			21.10	%
Total assets		$	99,873			6.26	%		$	277,198			19.55	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits		$	(12,326	)		(0.92)%			$	104,585			8.51	%
Total borrowed funds			105,750			90.69	%			172,350			344.70	%
Accrued interest payable and other liabilities			1,992			17.04	%			(1,369	)		(9.10)%
Total liabilities			95,416			6.48	%			275,566			21.31	%
Total shareholders' equity			4,457			3.66	%			1,632			1.31	%
Total liabilities and shareholders' equity		$	99,873			6.26	%		$	277,198			19.55	%

Cash and due from banks

		12/31/2022				9/30/2022				6/30/2022			3/31/2022				12/31/2021
Cash and due from banks
Noninterest bearing		$	28,216			$	29,530			$	26,085		$	23,715			$	28,475
Interest bearing			29,628				13,815				12,425			56,418				54,971
Total		$	57,844			$	43,345			$	38,510		$	80,133			$	83,446
		12/31/2022 vs 9/30/2022											12/31/2022 vs 12/31/2021
		Variance											Variance
		Amount				%							Amount				%
Cash and due from banks
Noninterest bearing		$	(1,314	)		(4.45)%							$	(259	)		(0.91)%
Interest bearing			15,813				114.46	%						(25,343	)		(46.10)%
Total		$	14,499				33.45	%					$	(25,602	)		(30.68)%

Cash and due from banks fluctuates from period to period based on loan demand and variances in deposit accounts.

Primary and secondary liquidity sources

The following table outlines our primary and secondary sources of liquidity as of:

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Cash and cash equivalents		$	57,844		$	43,345		$	38,510		$	80,133		$	83,446
Fair value of unpledged investment securities			103,819			109,685			115,586			132,364			143,431
FHLB borrowing availability			144,567			78,000			83,000			140,000			140,000
Unsecured lines of credit			26,500			26,500			26,500			26,500			26,500
Funds available through the Fed Discount Window			113			115			125			125			200
Parent company line of credit			1,650			2,400			3,000			5,000			7,000
PPPLF			—			—			429			583			2,172
Total liquidity sources		$	334,493		$	260,045		$	267,150		$	384,705		$	402,749

The increase in FHLB borrowing availability during the fourth quarter of 2022 is due to approval from the FHLB to allow us to pledge eligible commercial real estate loans.

Investment securities

		12/31/2022				9/30/2022				6/30/2022				3/31/2022				12/31/2021
Available-for-sale
U.S. Government and federal agency		$	24,394			$	26,391			$	27,391			$	28,396			$	30,406
State and municipal			22,709				22,743				22,863				24,949				25,010
Mortgage backed residential			56,293				58,313				60,672				63,532				66,874
Certificates of deposit			7,426				8,166				8,914				9,917				10,172
Collateralized mortgage obligations - agencies			25,925				26,560				27,733				28,968				30,180
Unrealized gain/(loss) on available-for-sale securities			(14,184	)			(14,698	)			(13,509	)			(6,900	)			(468	)
Total available-for-sale			122,563				127,475				134,064				148,862				162,174
Held-to-maturity state and municipal			1,171				1,173				1,386				1,509				1,512
Equity securities			1,315				1,238				1,275				1,208				1,256
Total investment securities		$	125,049			$	129,886			$	136,725			$	151,579			$	164,942
		12/31/2022 vs 9/30/2022												12/31/2022 vs 12/31/2021
		Variance												Variance
		Amount				%								Amount				%
Available-for-sale
U.S. Government and federal agency			(1,997	)		(7.57)%								$	(6,012	)		(19.77)%
State and municipal			(34	)		(0.15)%									(2,301	)		(9.20)%
Mortgage backed residential			(2,020	)		(3.46)%									(10,581	)		(15.82)%
Certificates of deposit			(740	)		(9.06)%									(2,746	)		(27.00)%
Collateralized mortgage obligations - agencies			(635	)		(2.39)%									(4,255	)		(14.10)%
Unrealized gain/(loss) on available-for-sale securities			514			(3.50)%									(13,716	)			2,930.77	%
Total available-for-sale			(4,912	)		(3.85)%									(39,611	)		(24.43)%
Held-to-maturity state and municipal			(2	)		(0.17)%									(341	)		(22.55)%
Equity securities			77				6.22	%							59				4.70	%
Total investment securities		$	(4,837	)		(3.72)%								$	(39,893	)		(24.19)%

The amortized cost and fair value of AFS investment securities as of December 31, 2022 were as follows:

		Maturing
		Due in One Year or Less			After One Year But Within Five Years			After Five Years But Within Ten Years			After Ten Years			Securities with Variable Monthly Payments or Noncontractual Maturities			Total
U.S. Government and federal agency		$	1,988		$	22,406		$	—		$	—		$	—		$	24,394
State and municipal			2,046			10,859			8,222			1,582			—			22,709
Mortgage backed residential			—												56,293			56,293
Certificates of deposit			4,701			2,725			—			—			—			7,426
Collateralized mortgage obligations - agencies			—			—			—			—			25,925			25,925
Total amortized cost		$	8,735		$	35,990		$	8,222		$	1,582		$	82,218		$	136,747
Fair value		$	8,608		$	32,981		$	7,235		$	1,457		$	72,282		$	122,563

The amortized cost and fair value of HTM investment securities as of December 31, 2022 were as follows:

		Maturing
		Due in One Year or Less			After One Year But Within Five Years			After Five Years But Within Ten Years			After Ten Years			Securities with Variable Monthly Payments or Noncontractual Maturities			Total
State and municipal		$	288		$	578		$	305		$	—		$	—		$	1,171
Fair value		$	286		$	567		$	293		$	—		$	—		$	1,146

Due to robust loan demand, there were no purchases of investments in 2022. This strategy, coupled with the increase in the our unrealized loss position due to increases in market interest rates, has led to a reduction of the overall size of the investment portfolio.

Residential mortgage loans held-for-sale, at fair value

Loans HFS represent the fair value of loans that have been committed to be sold to the secondary market, but have not yet been delivered. The level of loans HFS fluctuates based on loan demand as well as the timing of loan deliveries to the secondary market.

Loans and allowance for loan losses

As outlined in the following tables, we have been extremely successful at growing our loan portfolio over the past 12 months while maintaining strong credit quality metrics. We expect loan demand to moderate in future periods.

The following tables outline the composition and changes in the loan portfolio as of:

		12/31/2022				9/30/2022				6/30/2022				3/31/2022				12/31/2021
Commercial, net of PPP loans		$	106,616			$	107,531			$	108,054			$	94,810			$	91,529
PPP loans			—				—				429				583				2,172
Commercial real estate			869,496				820,165				745,416				698,275				656,818
Total commercial loans			976,112				927,696				853,899				793,668				750,519
Residential mortgage			406,408				368,971				327,574				297,940				298,799
Home equity			47,768				47,928				44,648				40,609				42,220
Total residential real estate loans			454,176				416,899				372,222				338,549				341,019
Consumer			5,878				6,256				6,771				7,134				8,554
Gross loans			1,436,166				1,350,851				1,232,892				1,139,351				1,100,092
Allowance for loan and lease losses			(13,000	)			(12,200	)			(11,000	)			(11,000	)			(10,500	)
Loans, net		$	1,423,166			$	1,338,651			$	1,221,892			$	1,128,351			$	1,089,592
Memo items:
Gross loans, net of PPP loans		$	1,436,166			$	1,350,851			$	1,232,463			$	1,138,768			$	1,097,920
Residential mortgage loans serviced for others		$	647,121			$	660,490			$	678,117			$	688,745			$	687,233
		12/31/2022 vs 9/30/2022												12/31/2022 vs 12/31/2021
		Variance												Variance
		Amount				%								Amount				%
Commercial, net of PPP loans		$	(915	)		(0.85)%								$	15,087				16.48	%
PPP loans			—			N/M									(2,172	)		(100.00)%
Commercial real estate			49,331				6.01	%							212,678				32.38	%
Total commercial loans			48,416				5.22	%							225,593				30.06	%
Residential mortgage			37,437				10.15	%							107,609				36.01	%
Home equity			(160	)		(0.33)%									5,548				13.14	%
Total residential real estate loans			37,277				8.94	%							113,157				33.18	%
Consumer			(378	)		(6.04)%									(2,676	)		(31.28)%
Gross loans			85,315				6.32	%							336,074				30.55	%
Allowance for loan and lease losses			(800	)			6.56	%							(2,500	)			23.81	%
Loans, net		$	84,515				6.31	%						$	333,574				30.61	%
Memo items:
Gross loans, net of PPP loans		$	85,315				6.32	%						$	338,246				30.81	%
Residential mortgage loans serviced for others		$	(13,369	)		(2.02)%								$	(40,112	)		(5.84)%

The following table presents historical loan balances by portfolio segment and impairment evaluation as of:

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Loans collectively evaluated for impairment
Commercial and industrial		$	106,616		$	107,531		$	108,483		$	94,899		$	93,207
Commercial real estate			869,313			819,982			745,025			697,818			656,818
Residential mortgage			404,308			367,652			326,481			296,883			297,626
Home equity			47,728			47,887			44,607			40,568			42,138
Consumer			5,871			6,251			6,771			7,134			8,554
Subtotal			1,433,836			1,349,303			1,231,367			1,137,302			1,098,343
Loans individually evaluated for impairment
Commercial and industrial			—			—			—			494			494
Commercial real estate			183			183			391			457			—
Residential mortgage			2,100			1,319			1,093			1,057			1,173
Home equity			40			41			41			41			82
Consumer			7			5			—			—			—
Subtotal			2,330			1,548			1,525			2,049			1,749
Gross Loans		$	1,436,166		$	1,350,851		$	1,232,892		$	1,139,351		$	1,100,092

The following table presents historical allowance for loan losses allocations by portfolio segment and impairment evaluation as of:

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Loans collectively evaluated for impairment
Commercial and industrial		$	1,094		$	1,129		$	1,074		$	837		$	743
Commercial real estate			7,480			7,126			6,437			6,716			6,350
Residential mortgage			3,878			3,458			3,061			3,007			2,940
Home equity			370			370			345			364			379
Consumer			128			90			74			63			77
Subtotal			12,950			12,173			10,991			10,987			10,489
Loans individually evaluated for impairment
Commercial and industrial			—			—			—			—			—
Commercial real estate			—			—			—			—			—
Residential mortgage			43			27			9			13			11
Home equity			—			—			—			—			—
Consumer			7			—			—			—			—
Subtotal			50			27			9			13			11
Allowance for loan losses		$	13,000		$	12,200		$	11,000		$	11,000		$	10,500
Commercial and industrial		$	1,094		$	1,129		$	1,074		$	837		$	743
Commercial real estate			7,480			7,126			6,437			6,716			6,350
Residential mortgage			3,921			3,485			3,070			3,020			2,951
Home equity			370			370			345			364			379
Consumer			135			90			74			63			77
Allowance for loan losses		$	13,000		$	12,200		$	11,000		$	11,000		$	10,500

The following table summarizes our current, past due, and nonaccrual loans as of:

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Accruing interest
Current		$	1,428,691		$	1,346,141		$	1,228,082		$	1,132,961		$	1,094,141
Past due 30-89 days			5,182			3,131			2,802			4,099			3,971
Past due 90 days or more			—			71			525			284			276
Total accruing interest			1,433,873			1,349,343			1,231,409			1,137,344			1,098,388
Nonaccrual			2,293			1,508			1,483			2,007			1,704
Total loans		$	1,436,166		$	1,350,851		$	1,232,892		$	1,139,351		$	1,100,092
Total loans past due and in nonaccrual status		$	7,475		$	4,710		$	4,810		$	6,390		$	5,951

The following table summarizes the our nonperforming assets as of:

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Nonaccrual loans		$	2,293		$	1,508		$	1,483		$	2,007		$	1,704
Accruing loans past due 90 days or more			—			71			525			284			276
Total nonperforming loans			2,293			1,579			2,008			2,291			1,980
Other real estate owned			293			293			383			383			383
Total nonperforming assets		$	2,586		$	1,872		$	2,391		$	2,674		$	2,363

The following table summarizes our charge-offs, recoveries, provision for loan losses and ALLL as of, and for the three-month periods ended:

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Total charge-offs		$	58		$	40		$	533		$	9		$	48
Total recoveries			11			9			8			7			10
Net charge-offs (recoveries)		$	47		$	31		$	525		$	2		$	38
Provision for loan losses		$	847		$	1,231		$	525		$	502		$	38

The following table summarizes the our primary asset quality measures as of:

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Nonperforming loans to gross loans		0.16	%		0.12	%		0.16	%		0.20	%		0.18	%
Nonperforming assets to total assets		0.15	%		0.12	%		0.16	%		0.19	%		0.17	%
Allowance for loan losses to gross loans		0.91	%		0.90	%		0.89	%		0.97	%		0.95	%
Allowance for loan losses to gross loans, net of PPP loans		0.91	%		0.90	%		0.89	%		0.97	%		0.96	%
Net charge-offs (recoveries) to QTD average gross loans		—	%		—	%		0.04	%		—	%		—	%
Provision for loan losses to QTD average gross loans		0.06	%		0.10	%		0.04	%		0.05	%		—	%

The following table summarizes our net unamortized discounts on purchased loans as of:

		12/31/2022			9/30/2022				6/30/2022				3/31/2022				12/31/2021
Net unamortized premium (discount) on purchased loans		$	—		$	(25	)		$	(51	)		$	(76	)		$	(101	)

The following table summarizes the average loan size as of:

		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Commercial and industrial		$	311		$	314		$	309		$	264		$	192
Commercial real estate			890			851			802			756			715
Total commercial loans			740			711			667			618			533
Residential mortgage			225			217			208			193			188
Home equity			52			52			50			46			38
Total residential real estate loans			166			159			151			140			126
Consumer			13			14			14			14			15
Gross loans		$	323		$	311		$	292		$	271		$	235

The tables below summarize total PPP fee income for the periods ended:

		Year to Date December 31								Variance
			2022			2021				Amount				%
PPP fees recognized		$	24		$	3,208				$	(3,184	)		(99.25)%
PPP referral fee income			—			431					(431	)		(100.00)%
Total PPP fees recognized		$	24		$	3,639				$	(3,615	)		(99.34)%

All other assets

The following tables outline the composition and changes in other assets as of:

		12/31/2022				9/30/2022				6/30/2022			3/31/2022				12/31/2021
Premises and equipment, net		$	15,571			$	16,100			$	16,459		$	16,696			$	16,957
Federal Home Loan Bank stock			10,215				5,760				4,140			3,337				3,708
Corporate owned life insurance			26,697				26,522				26,350			26,136				25,970
Mortgage servicing rights			8,666				8,795				8,588			8,155				7,836
Accrued interest receivable			4,002				3,300				2,798			2,784				2,817
Goodwill			8,853				8,853				8,853			8,853				8,853
Other assets
Core deposit intangibles			836				943				1,051			1,158				1,266
Right-of-use assets			1,204				1,065				1,159			1,110				1,150
Other real estate owned			293				293				383			383				383
Other			12,110				11,551				6,735			3,788				4,098
Total			14,443				13,852				9,328			6,439				6,897
All other assets		$	88,447			$	83,182			$	76,516		$	72,400			$	73,038
		12/31/2022 vs 9/30/2022											12/31/2022 vs 12/31/2021
		Variance											Variance
		Amount				%							Amount				%
Premises and equipment, net		$	(529	)		(3.29)%							$	(1,386	)		(8.17)%
Federal Home Loan Bank stock			4,455				77.34	%						6,507				175.49	%
Corporate owned life insurance			175				0.66	%						727				2.80	%
Mortgage servicing rights			(129	)		(1.47)%								830				10.59	%
Accrued interest receivable			702				21.27	%						1,185				42.07	%
Goodwill			—				—	%						—				—	%
Other assets
Core deposit intangibles			(107	)		(11.35)%								(430	)		(33.97)%
Right-of-use assets			139				13.05	%						54				4.70	%
Other real estate owned			—				—	%						(90	)		(23.50)%
Other			559				4.84	%						8,012				195.51	%
Total			591				4.27	%						7,546				109.41	%
All other assets		$	5,265				6.33	%					$	15,409				21.10	%

The increase in FHLB stock throughout 2022 is a direct result of an increase in FHLB borrowings utilized to fund our robust loan growth.

Mortgage servicing rights increased in in the first three quarters of 2022 due to increases in market interest rates, as a significant portion of the our residential mortgage servicing portfolio was booked throughout the past several years at historically low interest rates. However, due to a reduction in loan originations, the value of mortgage servicing rights declined in the fourth quarter as the servicing portfolio has declined. This trend is expected to continue into 2023.

Other assets increased in 2022 primarily due to an increase in deferred tax assets related to unrealized losses in our available-for-sale investment portfolio.

Total deposits

The following tables outline the composition and changes in the deposit portfolio as of:

		12/31/2022				9/30/2022				6/30/2022			3/31/2022				12/31/2021
Noninterest bearing demand		$	461,390			$	500,204			$	493,262		$	480,230			$	459,254
Interest bearing
Savings			351,066				380,118				368,849			377,170				360,204
Money market demand			170,459				213,672				144,606			135,051				125,391
NOW			176,620				148,775				118,707			126,461				141,480
Time deposits			173,348				102,440				106,119			133,980				141,969
Total deposits		$	1,332,883			$	1,345,209			$	1,231,543		$	1,252,892			$	1,228,298
		12/31/2022 vs 9/30/2022											12/31/2022 vs 12/31/2021
		Variance											Variance
		Amount				%							Amount				%
Noninterest bearing demand		$	(38,814	)		(7.76)%							$	2,136				0.47	%
Interest bearing
Savings			(29,052	)		(7.64)%								(9,138	)		(2.54)%
Money market demand			(43,213	)		(20.22)%								45,068				35.94	%
NOW			27,845				18.72	%						35,140				24.84	%
Time deposits			70,908				69.22	%						31,379				22.10	%
Total deposits		$	(12,326	)		(0.92)%							$	104,585				8.51	%

In the fourth quarter of 2022, we (like many financial institutions) experienced significant pressure to remain competitive on retail deposit rates. Despite actively matching market rates when appropriate, this highly competitive environment led to a decline in deposits in the fourth quarter. These declines were partially offset by increases in brokered deposits and borrowed funds (see "Total borrowed funds" and "Wholesale funding sources" below). While overall market liquidity continues to tighten and be extremely competitive, we have strategic initiatives in place to grow core market deposits in 2023.

Total borrowed funds

The following tables outline the composition and changes in borrowed funds as of:

		12/31/22			9/30/22				6/30/22			3/31/22			12/31/21
Federal Home Loan Bank borrowings		$	202,000		$	97,000			$	92,000		$	35,000		$	35,000
Subordinated debentures			14,000			14,000				14,000			14,000			14,000
Other borrowings			6,350			5,600				5,000			3,000			1,000
Total borrowed funds		$	222,350		$	116,600			$	111,000		$	52,000		$	50,000
		12/31/2022 vs 9/30/2022										12/31/2022 vs 12/31/2021
		Variance										Variance
		Amount			%							Amount			%
Federal Home Loan Bank borrowings		$	105,000			108.25	%					$	167,000			477.14	%
Subordinated debentures			—			—	%						—			—	%
Other borrowings			750			13.39	%						5,350			535.00	%
Total borrowed funds		$	105,750			90.69	%					$	172,350			344.70	%

We utilize a mix of borrowed funds and organic deposit growth to fund loan demand. The increase in Federal Home Loan Bank borrowings in 2022 was the result of the highly competitive deposit landscape and the growth of our loan portfolio, which grew $338,246, or 30.81%, net of PPP loans, during the year (see "Wholesale funding sources" below).

Wholesale funding sources

The following tables outline the composition and changes in wholesale funding sources as of:

		12/31/22				9/30/22				6/30/22			3/31/22				12/31/21
Federal Home Loan Bank borrowings		$	202,000			$	97,000			$	92,000		$	35,000			$	35,000
Subordinated debentures			14,000				14,000				14,000			14,000				14,000
Other borrowings			6,350				5,600				5,000			3,000				1,000
Brokered NOW accounts			40,009				—				—			—				—
Brokered time deposits			70,000				20,000				20,000			20,000				20,000
Internet time deposits			990				1,986				1,743			1,743				1,743
Total wholesale funds		$	333,349			$	138,586			$	132,743		$	73,743			$	71,743
		12/31/2022 vs 9/30/2022											12/31/2022 vs 12/31/2021
		Variance											Variance
		Amount				%							Amount				%
Federal Home Loan Bank borrowings		$	105,000				108.25	%						167,000				477.14	%
Subordinated debentures			—				—	%						—				—	%
Other borrowings			750				13.39	%						5,350				535.00	%
Brokered NOW accounts			40,009			N/A								40,009			N/A
Brokered time deposits			50,000				250.00	%						50,000				250.00	%
Internet time deposits			(996	)		(50.15)%								(753	)		(43.20)%
Total wholesale funds		$	194,763				140.54	%					$	261,606				364.64	%

As noted above, the increased competition for deposits in the fourth quarter, coupled with strong loan growth has led to an increased utilization of wholesale funding sources. As loan growth is expected to moderate in 2023, we expect our reliance on wholesale funding to decline.

Accrued interest payable and other liabilities

Accrued interest payable and other liabilities includes accrued interest payable, federal income taxes payable, deferred federal income taxes payable, and all other liabilities (none of which are individually significant).

Total shareholders' equity

The following tables outline the composition and changes in shareholders equity as of:

		12/31/22				9/30/22				6/30/22				3/31/22				12/31/21
Common stock		$	73,569			$	73,460			$	73,324			$	74,132			$	75,366
Retained earnings			63,044				59,080				55,469				52,393				49,714
Accumulated other comprehensive (loss) income			(10,526	)			(10,910	)			(10,227	)			(5,179	)			(625	)
Total shareholders' equity		$	126,087			$	121,630			$	118,566			$	121,346			$	124,455
		12/31/2022 vs 9/30/2022												12/31/2022 vs 12/31/2021
		Variance												Variance
		Amount				%								Amount				%
Common stock		$	109				0.15	%						$	(1,797	)		(2.38)%
Retained earnings			3,964				6.71	%							13,330				26.81	%
Accumulated other comprehensive (loss) income			384			(3.52)%									(9,901	)			1584.16	%
Total shareholders' equity		$	4,457				3.66	%						$	1,632				1.31	%

The Board of Directors has authorized the repurchase up to $10,000 of common stock. As of December 31, 2022, the we had $1,393 of common stock available to repurchase through the program. The following tables outline the number of shares, dollar amount and weighted average share price associated with the common stock repurchase plan for the following periods:

		Three Months Ended
		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Number of Shares Repurchased			—			—			35,000			51,461			78,285
Dollar Amount of Shares Repurchased		$	—		$	—		$	935		$	1,501		$	2,193
Weighted Average Share Price		$	—		$	—		$	26.71		$	29.17		$	28.01

		Twelve Months Ended December 31
			2022			2021
Number of Shares Repurchased			86,461			229,697
Dollar Amount of Shares Repurchased		$	2,436		$	6,061
Weighted Average Share Price		$	28.17		$	26.39

Stock Performance

The following graph compares the cumulative total shareholder return on our common stock for the last five years with the cumulative total return on the ABA NASDAQ Community Bank Index (NASDAQ: ABAQ) over the same period. The graph assumes the value of an investment in our common stock and the ABA NASDAQ Community Bank Index was $100 at December 31, 2017 and all dividends were reinvested.

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/0ce8e0a9-f82d-4c67 ...

Date		FETM			ABAQ Index
12/31/2017		$	100.00		$	100.00
12/31/2018			112.50			83.38
12/31/2019			136.39			100.33
12/31/2020			120.87			85.85
12/31/2021			155.83			113.62
12/31/2022			125.53			102.99

Abbreviations and Acronyms

ABA: American Bankers Association	GAAP: Generally Accepted Accounting Principles
ACH: Automated Clearing House	HFS: Held-for-sale
AFS: Available-for-sale	HTM: Held-to-maturity
AIR: Accrued interest receivable	HFS: Held-for-sale
ALLL: Allowance for loan losses	HTM: Held-to-maturity
AOCI: Accumulated other comprehensive income	IRA: Individual retirement account
ARRC: Alternative Reference Rates Committee	ITM: Interactive Teller Machine
ASC: Accounting Standards Codification	LIBOR: London Interbank Offered Rate
ASU: Accounting Standards Update	MSR: Mortgage servicing rights
ATM: Automated teller machine	N/M: Not meaningful
CARES Act: Coronavirus Aid, Relief, and Economic Security Act	NASDAQ: National Association of Securities Dealers Automated Quotations
CDI: Core deposit intangible	NOW: Negotiable order of withdrawal
CET1: Common equity tier 1	NSF: Non-sufficient funds
COLI: Corporate owned life insurance	OCI: Other comprehensive income
COVID-19: Coronavirus Disease 2019	OIS: Overnight Index Swap
DRIP: Dividend Reinvestment Plan	OREO: Other real estate owned
EPS: Earnings Per Common Share	OTTI: Other-than-temporary impairment
ESOP: Employee Stock Ownership Plan	PPP: Paycheck Protection Program
FASB: Financial Accounting Standards Board	PPPLF: Paycheck Protection Program Liquidity Facility
FDIC: Federal Deposit Insurance Corporation	QTD: Quarter-to-date
FHLB: Federal Home Loan Bank	SAB: Staff Accounting Bulletin
FHLLC: Fentura Holdings LLC	SBA: U.S. Small Business Administration
FHLMC: Federal Home Loan Mortgage Corporation	SEC: Securities and Exchange Commission
FNMA: Federal National Mortgage Association	SERP: Supplemental Executive Retirement Plan
FRB: Federal Reserve Bank	SOFR: Secured Overnight Funding Rate
FSB: Farmers State Bank of Munith	TDR: Troubled debt restructuring
FTE: Fully taxable equivalent

About Fentura Financial, Inc. and The State Bank

Fentura Financial, Inc. is the holding company for The State Bank. It was formed in 1987 and is traded on the OTCQX exchange under the symbol FETM, and has been recognized as one of the Top 50 performing stocks on that exchange.

The State Bank is a full-service, 5-Star Bauer Financial rated commercial, retail and trust bank headquartered in Fenton, Michigan. It currently operates 19 full-service branches located in Genesee, Ingham, Jackson, Livingston, Oakland, Saginaw, and Shiawassee Counties. The State Bank’s commercial department provides a comprehensive array of products including lines of credit, term loans, commercial mortgages, SBA loans and a full-suite of cash management products. The retail department offers personal checking, savings, time and IRA deposit accounts and a wide array of loan products including home equity, auto and personal loans. The residential loan department offers construction, purchase and refinance residential mortgage loans. The wealth management department offers a full-service suite of trust and portfolio management services. More information can be found at www.thestatebank.com or www.fentura.com.

Cautionary Statement: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future growth in earning assets and net income. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

Contacts:	Ronald L. Justice	Aaron D. Wirsing
	President & CEO	Chief Financial Officer
	Fentura Financial, Inc.	Fentura Financial, Inc.
	810.714.3902	810.714.3925
	[e-mail]	[e-mail]