2024 Annual Report
Dear Stockholders:
Net income totaled $2,001,000 in 2024 compared with $1,705,000 reported in 2023. Earnings per share totaled $3.85 in 2024 which increased from $3.28 in 2023. Net interest income, which is the bank’s most significant driver of profitability, was slightly lower in 2024 than in 2023. However, the most notable change during 2024 was higher noninterest income.
Comparing 2024 with 2023, earnings on bank-owned life insurance increased $493,000 as a result of new claims paid. Also, gas well royalties increased $188,000 in 2024 from a de minimis amount in 2023 based on recent contracts and associated new drilling production.
Interest income and interest expense were both notably higher in 2024 compared with 2023, but net interest income decreased a slight 0.5%. Loan balances grew just 1.7% during 2024 in a market affected by higher interest rates and lower inventory of real estate available for financing following several years of double-digit growth.
The loan portfolio remains primarily secured by residential real estate, both investment properties and owner-occupied homes. Sound credit policies and flexible but diligent underwriting have continued to serve the bank well while maintaining strong asset quality with few watchlist credits and low delinquency. Additional provision for credit losses occurred in 2024 as the associated accounting standard model was updated with data from a larger peer group.
Deposit balances decreased by $4.9 million, or 3.4%, in 2024 due to increased competition in the banking industry and attractive alternative investment options. More costly borrowings increased $5.7 million in 2024 to replace deposit run-off. Also, existing customers showed increasing preference for higher yielding certificates of deposit. Nevertheless, the net interest margin still exceeded 4.0% in both 2024 and 2023 and compared favorably with industry peers.
Technology advancements included a recent migration from in-house data processing to a service center environment which will position the bank more competitively and lower its operational risk profile. Following reorganization in 2024, information technology and deposit operations staff completed numerous projects with more planned for post-migration. Despite significant technology investment, noninterest expenses increased 3.5% in 2024 compared with a 7.6% increase in 2023 as compensation expense moderated with staffing efficiencies and lower inflation.
The quarterly dividend was increased from $0.56 to $0.57 per share, or 1.8%, in the fourth quarter and represented the fifteenth consecutive annual increase. Dividends remain a priority and increased to $2.25 for a 58% payout ratio in 2024 and approximates a 5.8% current yield. Also, a stock repurchase authorization was recently announced to support the company stock price given long-term earnings prospects.
Consistent earnings and sound lending practices continue to provide attractive shareholder returns. On behalf of the board of directors, your loyalty is deeply appreciated.
Sincerely,
Nelson L. Person
President and CEO