First Quarter Report March 31, 2023

Dear Shareholders:

Net income totaled $408,000, or $0.78 per share, for the quarter ended March 31, 2023 compared with net income of $411,000, or $0.79 per share, reported for the first quarter of 2022. The minimal change was primarily a result of a $192,000 increase in noninterest expense attributed to high inflation and a competitive labor market, but it was offset by a $189,000 increase in net interest income, which is the core driver of earnings.

Comparing the first quarter of 2023 with 2022, interest and fees on loans increased $256,000 while interest expense increased $71,000, mostly due to higher costing borrowings which funded solid loan growth of $3.0 million, or 1.9%. Annualized return on average assets was 0.88%, and return on average equity was 7.3% for the first quarter of 2023.

Deposit balances totaled $155.6 million and decreased $1.2 million, or 0.8%, during the first quarter. Stable core deposit relationships as well as strong liquidity, capital, and asset quality provided consistent operating results despite the banking industry’s recent volatility.

A dividend of $0.55 per share was paid April 1, and the 2023 annual meeting was held on April 11. If you have any questions, please do not hesitate to contact me.

Sincerely,

Nelson L. Person

President & CEO