HCB Financial : 2nd Qtr 2023 Financial Report

HCB Locations:

150 W Court St Hastings, MI 49058 269.945.2401

1.888.442.4221

435 Arlington St Middleville, MI 49333 269.795.3338

310 N Main St Nashville, MI 49073 517.852.0790

9265 Cherry Valley Caledonia, MI 49316 616.891.0010

156 W Superior Wayland, MI 49348 269.792.6201

124 W Michigan Ave Marshall, MI 49068 269.558.0994

259 E Michigan Ave Kalamazoo, MI 49007 269.366.3300

highpointcommunitybank.com

Transfer Agent HCB Financial Corp

Continental Stock Transfer & Trust Company 1 State St Plaza, 30th Floor

New York, NY 10004-1561

Email [e-mail]

Toll Free 1.800.509.5586 or 1.212.845.3206

Second

Quarter

Financial

Report

2023

July 27, 2023

To Our Shareholders:

Enclosed is the regular quarterly cash dividend of $.21 per share on your HCB Financial Corp. common stock. It is payable today to shareholders of record at the close of business on July 6, 2023.

Net income for the six months ended June 30, 2023 was $2,333,000 or $2.25 per share. This represents a 105% improvement from the first half of 2022 with earnings of $1,140,000 or $1.10 per share. The largest contributing factor to our increased year-over-year earnings comes from a 39% improvement in our net interest income. During the twelve months ended June 30, 2023, total assets increased 15% to $543,406,000. Total deposits increased by 19% to now stand at $493,740,000. Total loans increased 34%, standing at $322,128,000 at the end of June. The increase in our loan loss provision expense relates directly to our loan growth. Credit quality has remained strong with delinquencies at historically low levels. Shareholders' equity reached $34,289,000, 7% more than it was one year ago, and brought the book value of our common shares to $33.08 per share.

Overall, our performance for the first half of the year has exceeded our expectations. Net income for the first half of the year stands at a record high. Rising interest rates, a larger commercial loan portfolio and a significant increase in non-interest-bearing deposits all played a role in our improved earnings. Most notably, we are beginning to see the benefits of expanding our presence in Kent County and entering the Kalamazoo market in both our balance sheet and income statement.

While bank liquidity and shrinking deposits have captured the headlines since March of this year, I am pleased to report that we have not experienced difficulties in either of these areas. When measuring and testing our liquidity position, we have always taken a conservative approach. We recognize that deposit balances can vary greatly, and we account for this when determining our liquidity needs. More importantly, our core deposits have remained intact and the feedback we have received from customers has been extraordinarily positive during a difficult period for our industry.

If you have any comments, questions or suggestions, we hope that you will contact any director or senior officer to discuss them. We are always pleased to hear from you.

Yours truly,

Mark A. Kolanowski

President and CEO

H C B F I N A N C I A L C O R P :

(Unaudited) Dollars in thousands, except per share data.

Financial Highlights	Year-to-Date	Year-to-Date
June 2023	June 2022	% Change
Interest Income (inc. loan fees)	$9,690	$6,235	55%
Interest Expense	1,318		480	175%
Loan Loss Provision		425			30	1317%
Net Interest Income		$7,947	$5,725	39%
Non-Interest Income	1,383		1,392		-1%
Other Non-Interest Expense	6,768		5,939		14%
Federal Income Tax Provision		229			38			503%
Net Income after Tax	$2,333		$1,140	105%
Per Share Data
Average Outstanding Shares	1,036,600	1,036,600
Net Income per Average Outstanding Shares	2.25		1.10		105%
Dividends per Average Outstanding Shares	.42		.38	11%
Book Value per Outstanding Shares End of Period	33.08	30.94	7%
Balance Sheet Highlights
(Unaudited) Dollars in thousands, except per share data.
Assets	$543,406		$472,410		15%
Loans (gross)	$322,128	$241,160		34%
Deposits	$493,740	$415,113	19%
Interest Earning Assets	$526,742		$453,699	16%
Shareholders Equity	$34,289	$32,076		7%